U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
2U ONLINE.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-2132622
- -------- ------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1288 Alberni Street, Suite 806, Vancouver, British Columbia, Canada V6E 4N5
- --------------------------------------------------------------------------------
(Address of registrant's principal executive offices) (Zip Code)
604.664.0484
(Registrant's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which
to be so Registered: Each Class is to be Registered:
-------------------- -------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $.0001
- ------------------------------
(Title of Class)
Copies to:
Thomas E. Stepp, Jr.
Stepp & Beauchamp, LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile: 949.660.9010
Page 1 of 25
Exhibit Index is specified on Page 23
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2U ONLINE.COM, INC.,
a Delaware corporation
Index to Amendment No. 3 to Registration Statement on Form 10-SB
<TABLE>
<CAPTION>
Item Number and Caption Page
<S> <C> <C>
1. Description of Business 3
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
3. Description of Property 14
4. Security Ownership of Certain Beneficial Owners and Management 14
5. Directors, Executive Officers, Promoters and Control Persons 15
6. Executive Compensation - Remuneration of Directors and Officers 17
7. Certain Relationships and Related Transactions 17
8. Description of Securities 18
PART II
1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters 18
2. Legal Proceedings 20
3. Changes in and Disagreements with Accountants 20
4. Recent Sales of Unregistered Securities 20
5. Indemnification of Directors and Officers 22
PART F/S
Financial Statements F-1 through F-10
PART III
1(a). Index to Exhibits 23
1(b). Exhibits E-1 through E-50
Signatures 25
</TABLE>
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Item 1. Description of Business.
2U Online.com, Inc., formerly Power Direct, Inc., (the "Company") was
incorporated in the State of Delaware on September 13, 1993, and maintains its
principal executive offices at 1288 Alberni Street, Suite 806, Vancouver, BC V6E
4N5. The Company's offices in the United States are located at 4291 Meridian
Street, Suite 29, Bellingham, WA 98226. The Company changed its name from Power
Direct, Inc., to 2U Online.com, Inc., and its trading symbol from "PWDR" to
"TWOU" in order to reflect management's decision to shift the Company's focus
from oil and gas production to Internet-related activities (more particularly
described within this Amendment No. 3 to the Company's Registration Statement on
Form 10-SB). The Company was originally incorporated to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware. The Company was inactive from September 13, 1993,
through November, 1998, when the Company began the process of identifying
potential business interests including, but not necessarily limited to,
interests in oil and natural gas producing properties. The Company is currently
listed on the Over-the-Counter Bulletin Board Quotation Service ("OTCBB") under
the symbol "TWOU". As discussed above, the Company's former symbol was "PWDR".
The Company is filing this Registration Statement on Form 10-SB in order to
continue to be quoted on the OTCBB maintained by the National Association of
Securities Dealers, Inc.
For purposes of clarification, anytime that "US$" appears in this Registration
Statement, it means the currency of the United States of America, unless
otherwise stated. Anytime that "CDN$" appears, it means the currency of Canada,
in Canadian dollars.
The Wyoming Property. On January 15, 1999, the Company entered into a letter of
intent with Rising Phoenix Development Group Ltd., a Canadian corporation,
located in Vancouver, British Columbia, Canada ("Rising Phoenix"), to acquire
all the assets of Rising Phoenix, including that corporation's interest in the
oil and natural gas rights on 6,360 acres located in the Powder River Basin of
eastern Wyoming (the "Wyoming Property"). That letter of intent specifies that
the Company must, among other things, pay Rising Phoenix seventy-five thousand
dollars (US$75,000) and, further, issue 3,800,000 shares of its common stock to
Rising Phoenix to complete the acquisition of the assets of Rising Phoenix. The
letter of intent also provides that the Company will appoint no more than three
directors from Rising Phoenix's board of directors to the Company's board of
directors. As of September 30, 1999, the Company had not appointed any
representatives from Rising Phoenix to the Company's Board of Directors because
Rising Phoenix had not yet assigned to the Company all of its rights under the
joint venture contract with Derek Resources Corporation ("Derek Resources"). The
Company paid Rising Phoenix a prepayment advance of Twenty-Five Thousand Dollars
(US$25,000) on January 27, 1999. On or about February 24, 1999, the Company made
a second prepayment advance to Rising Phoenix of Ten Thousand Dollars
(US$10,000). On or about March 29, 1999, the Company made the third repayment
advance of Ten Thousand Dollars (US$10,000). On or about April 7, 1999, the
fourth prepayment advance of Ten Thousand Dollars (US$10,000) was made by the
Company. The Company made the fifth payment of Ten Thousand Dollars (US$10,000)
and the final payment of Ten Thousand Dollars (US$10,000) on or about April 26,
1999, and on or about May 26, 1999, respectively. According to the letter of
intent, the Company is to assume all of Rising Phoenix's financial obligations
pertaining to the Wyoming Property as of January 31, 1999. In return, Rising
Phoenix agreed to deliver the Wyoming Property in good title and assign to the
Company its rights under the joint venture agreement with Derek Resources. As
discussed above, as of September 30, 1999, Rising Phoenix had not assigned to
the Company its rights under the joint venture contract with Derek Resources.
Pursuant to that joint venture agreement, Derek Resources agreed to provide up
to a maximum of Three Million Five Hundred Thousand Dollars (US$3,500,000) of
improvements on or before December 31, 2000, on the Wyoming Property in exchange
for a 75% working interest in the Wyoming Property. Derek Resources is in the
process of securing the necessary funding in order to meet its obligations under
the joint venture agreement. The Company anticipates that the site construction
will commence sometime early in the year 2000. Derek Resources has begun
negotiating with Bateman Engineering, Inc. and its associate company, Silvertip
Project Partners, Inc., to provide development, financing and construction of a
pilot production facility. If Derek Resources and its partners successfully meet
their obligations under the joint venture agreement, the Company will own a 25%
working interest in the Wyoming Property. If Derek Resources and its partners
fail to meet their obligations under the joint venture agreement, the Company
will obtain a 100% working interest in the Wyoming Property, including all of
the improvements financed by Derek Resources and its partners. There are no
proven oil or gas reserves on the Wyoming Property. Except for those
relationships described herein, there are no other affiliation's between the
Company and Rising Phoenix or the Company and Derek Resources.
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On or about November 15, 1999, the Company and Rising Phoenix entered into a
definitive asset purchase and sale agreement (attached hereto and filed as an
exhibit to this Amendment No. 3 to the Company's Registration Statement on Form
10SB) that memorializes the terms and conditions contained in the letter of
intent described in the immediately proceeding paragraph. Moreover, the Company,
by letter dated February 24, 2000, instructed the Company's transfer agent to
issue to Rising Phoenix the 3,800,000 shares of the Company's $.0001 par value
common stock provided for under the agreement between the Company and Rising
Phoenix with the understanding that Rising Phoenix would prepare a formal
assignment assigning all of its interest in its joint venture agreement with
Derek Resources.
Plan of Operation-Wyoming Property. As discussed earlier, Derek Resources is
solely responsible for the capital expenditures on the Wyoming Property. At this
time, the Company cannot guarantee or predict the timetable for completion of
the material steps to get the Wyoming Property producing oil, if any. As
discussed earlier, Derek Resources has until December 31, 2000 to meet its
financial obligations. The Company anticipates that if the Wyoming Property
produces oil, it will be sometime before December 31, 2000. As of September 30,
1999, Derek Resources had expended approximately $1,000,000 on the Wyoming
Property. The Company is not involved in the exploration of the Wyoming
Property. The Company believes that Derek Resources is attempting to raise the
necessary funds to construct a pilot plant designed to test a new technology
call Steam Assisted Gravity Drainage ("SAGD"). SAGD is designed to extract oil
from the ground. However, Derek Resources has not yet begun construction on the
pilot plant nor do we believe that Derek Resources has the funds necessary for
such a construction. The Wyoming Property does not contain proved oil and gas
reserves at this time.
The Alberta Property. On January 26, 1999, the Company signed a letter of
agreement with Vertizontal Energy Resources, Inc., formerly I.T.A. Enterprises,
Inc. ("I.T.A."), a Canadian company, to acquire and own a 42% working interest
in a natural gas project in west central Alberta (the "Alberta Property"). This
letter of agreement requires the Company to provide 42% of the costs for the
three-phase project, which are estimated in the letter of agreement to be Two
Hundred Thousand Dollars (CDN$200,000). As of September 30, 1999, the Company
had advanced I.T.A. a total of Twenty Thousand Three Hundred Ninety Three
Dollars (US$20,393) toward costs on the Alberta Property project. The working
interest acquired will be subject to a 10% gross overriding royalty (that is,
4.2% of the 42% working interest shall be payable directly to Nicholas Baiton,
the royalty holder). The Company had paid a deposit of eight thousand four
hundred dollars (CDN$8,400) to I.T.A. pursuant to the terms of the agreement. It
was agreed between I.T.A. and the Company that the $8,400 deposit would be used
for prospect fees and that the Company will receive a refund of any unused
portion of that deposit. Within ten (10) days of I.T.A. providing the Company
with an "Authority for Expenditures" and a cash call for Phases I and II of the
development of the Alberta Property, the Company will be required to advance
Seventy Five Thousand Six Hundred Dollars (CDN$75,600) to I.T.A.. There can be
no assurance that the Company will have sufficient funds available to meet this
obligation in the time frame required by the letter of agreement. Exploration
has begun on the Alberta Property. However, there are no proven oil or gas
reserves on the Alberta Property.
Plan of Operation-Alberta Property. The Company anticipates that the Alberta
Property will produce mainly methane gas. The development of the Alberta
Property project has proceeded as follows: (1) On September 24, 1999, Liberty
Oil & Gas Ltd ("Liberty") received approval from the Alberta Energy and
Utilities Board for the Alberta Property project; (2) On or about October 13,
1999, the testing and evaluation of the well began; and (3) On or about November
26, 1999, gas flow test readings from the re-opened well-head showed minimal to
no gas flow. The Company is not directly involved in the exploration or
development of the Alberta Property. Liberty is the operator of the project. The
joint venture partners are currently considering whether to drill another test
well-head. The Company will have a working interest in the Alberta Property but
Liberty will physically operate the facility. The Alberta Property does not
contain proved oil or gas reserves at this time.
The material risks include, but are not necessarily limited to, the danger that
an economically recoverable quantity of gas may not exist and there may be a
fire or explosion. Liberty has assured the Company it has taken all necessary
precautions to prevent the latter from occurring. The project will proceed into
the production stage only if it is determined that there are enough gas reserves
to justify the additional capital expense. If actual gas production occurs,
Liberty will issue joint venture billings and revenue statements on a monthly
basis. Liberty will also market the gas production for all interest owners
unless it gets notification of intent to take in kind. Liberty is solely
responsible for meeting any and all regulatory requirements.
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Marketing. The Company anticipates any future production will be marketed to
third parties consistent with industry practices. Typically, oil is sold at the
wellhead at field-posted prices plus a bonus and natural gas is sold by contract
at a negotiated price based upon factors normally considered in the industry,
such as distance from the well to the pipeline, well pressure, estimated
reserves, quality of natural gas and prevailing supply/demand conditions. The
Company's marketing objective is to receive the highest possible wellhead price
for its product. There are a variety of factors which affect the market for oil
and natural gas, including the extent of domestic production and imports of oil
and natural gas, the proximity and capacity of natural gas pipelines and other
transportation facilities, demand for oil and natural gas, the marketing of
competitive fuels and the effects of state and federal regulations on oil and
natural gas production and sales. The Company does not anticipate significant
difficulties in marketing any oil and natural gas eventually produced, if any.
The oil and natural gas industry also competes with other industries in
supplying the energy and fuel requirements of industrial, commercial and
individual customers. The availability of a ready market for any oil and natural
gas production depends on the proximity of reserves to, and the capacity of, oil
and natural gas gathering systems, pipelines and trucking or terminal
facilities. The Company anticipates that it will deliver natural gas through gas
gathering systems and gas pipelines that it does not own. Federal and state
regulation of natural gas and oil production and transportation, tax and energy
policies, changes in supply and demand and general economic conditions all could
adversely affect the Company's ability to produce and market oil and natural
gas. The Company anticipates it will take the necessary steps to attempt to
control price risk. Even if the Company takes the proper steps, it will remain
subject to price fluctuations for natural gas sold in the spot market due
primarily to seasonality of demand and other factors beyond the Company's
control. Domestic oil prices generally follow worldwide oil prices, which are
subject to price fluctuations resulting from changes in world supply and demand.
The Company believes that it will be able to reduce these risks by entering
into, and expects to enter into, hedge transactions in future years.
On February 15, 1999, the Company signed a letter of intent to acquire and own
up to a 51% ownership interest in LANSource Technologies, Inc., a Canadian
company ("LANSource"). LANSource is a developer of fax and data communications
software. LANSource's primary products are WINport, a modem-sharing application
and FAXport, a group of software products which allows users to send and receive
faxes from their desktop computer or through their e-mail system. WINport,
FAXport, and other LANSource products are distributed through Tech Data US, Tech
Data Canada, Ingram Micro Canada, Ingram USA, Ingram UK, Ingram Italy, EMJ Date
Systems Canada, EMJ USA, Merisel US and Micro Central. WINport is currently
available in 12 languages and is distributed worldwide. In order to purchase the
first 12.5% ownership interest in LANSource, the Company was required to make,
on or before March 1, 1999, a total non-refundable deposit of Three Hundred
Thousand Dollars (CDN$300,000), which payment was timely made to LANSource by
the Company. The letter of intent contemplated that, on or before March 31,
1999, the Company and LANSource would enter into a formal Purchase and Sale
Agreement. Upon the execution of that agreement, the Company would be required
to make an additional non-refundable deposit of Two Hundred Thousand dollars
(CDN$200,000). The letter of intent also stated that in the event that the
parties, for whatever reason, were unable to finalize the Purchase and Sale
Agreement by March 31, 1999, than the whole transaction between the Company and
LANSource would be considered null and void and LANSource would be entitled to
retain all deposits. Because of delays by LANSource in preparing the formal
Purchase and Sale Agreement, as of April 8, 1999, the Company and LANSource had
not finalized a formal agreement. On or about April 15, 1999, a Statement of
Claim, on behalf of the Company as Plaintiff, was issued by the Ontario Court,
General Division. Also on or about April 15, 1999, that Statement of Claim was
served on Defendant LANSource. The Company alleges that LANSource agreed that
its counsel would draft the final agreement in an expeditious manner. The
Company further alleges that counsel for LANSource did not produce an agreement
for review by the Company until March 25, 1999. Moreover, the Company alleges
that, prior to its receipt of the proposed final agreement from counsel for
LANSource, the proposed agreement had not been read or approved by LANSource,
the agreement was incomplete and in need of substantial revisions, and that
LANSource failed and neglected to provide the essential information necessary
for a meaningful review of the proposed final agreement.
The Company had alleged that it had been damaged in the amount of $1,000,000 in
that LANSource breached its agreement with the Company, breached its fiduciary
duty to the Company and breached its duty of good faith. In the alternative, the
Company had asked that the Court to either: (i) compel LANSource to perform its
obligations under the agreement; (ii) order LANSource to pay into the Court a
total of $300,000 representing the deposit money paid to LANSource by the
Company, declare that the agreement between the Company and LANSource is
rescinded and return the deposit amount to the Company; (iii) declare that
LANSource has breached the agreement and proceed to trial to determine the
Company's damages; or (iv) issue an order requiring LANSource to disgorge to the
Company any and all profits earned by LANSource as a result of its breach.
Moreover, the Company alleged punitive damages in the amount of $1,000,000.00.
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In or about December, 1999, the Company and LANSource reached an out-of-court
settlement. Except for the relationships described herein, there are no other
affiliations between the Company and LANSource.
On or about April 28, 1999, the Company entered into a licensing agreement
("Compte Agreement") with Compte De Sierge Accomodative Corp., a corporation
incorporated in Panama City, Panama ("Compte De Sierge"). Compte De Sierge
worked in association with a group of programmers doing business as E-Card. The
Compte Agreement specifies, among other things, that the Company will have the
worldwide right to utilize and commercially exploit certain software systems and
related proprietary technology relating to the operation of the Greeting Card
Lotto, hereinafter referred to as "CardStakes.com". The CardStakes.com
technology was developed and designed by Mr. Conrado Beckerman, a director of
Compte De Sierge, and a team of programmers hired by CardStakes.com.
CardStakes.com has not produced any historical revenue upon which an estimate of
potential revenue can be determined.
The Compte Agreement also provides for three equal cash payments of CDN$100,000
to Compte by the Company as partial consideration pursuant to the Compte
Agreement. The first such payment was due upon execution of the Compte
Agreement; the second payment was due upon completion of the first phase of
testing; and the third payment is due upon completion of the second phase of
testing. The Compte Agreement also provides that the Company shall issue
6,000,000 shares of its $.0001 par value common stock in two separate issuance
transactions, each of 3,000,000 shares. All such shares shall be "restricted
shares" subject to the limitations and restrictions regarding resale and
distribution specified by Rule 144. The first issuance was to occur upon
execution of the Compte Agreement, and the second issuance was to occur upon the
commencement of operations of CardStakes.com, as specified in the Compte
Agreement. As of May 13, 1999, the Company had paid CDN$100,000 and issued
3,000,000 shares of the Company's $.0001 par value common stock as per the
Compte Agreement. On July 6, 1999, with the completion of the first phase of
testing, the Company made the second payment of CDN$100,000 pursuant to the
Compte Agreement. On or about August 16, 1999, with the completion of the second
phase of testing, the Company requested that Compte De Sierge provide the
Company with duplicate copies of all Compact Discs and files necessary for the
operation of CardStakes.com. E-Card had custody and control of those items
requested by the Company. On or about August 23, 1999, Compte De Sierge denied
the Company's request stating that a conflict among its programmers and E-Card
prevented delivery of such items. This denial by Compte De Sierge effectively
negated any and all contractual obligations the Company had to Compte De Sierge
under the Compte Agreement. On or about August 30, 1999, a meeting between the
principals of Compte De Sierge and the Company was held, whereby Compte De
Sierge agreed to discontinue any further association or involvement with E-Card.
Compte De Sierge also agreed to (i) assist CardStakes.com in retaining new
programmers to complete the CardStakes.com website; (ii) revise and amend the
April 28, 1999 agreement to reflect the above change; (iii) allow the Company to
retain final CDN$100,000.00 payment unter the Compte Agreement; and (iv) change
the title of the agreement to the "Proprietary Technology Usage - License
Agreement". On or about November 9, 1999, the Company issued the remaining
3,000,000 shares of the Company's $.0001 par value common stock to Compte De
Sierge. With the final issuance of stock, the Company has met all of its
financial obligations pursuant to the Compte Agreement. Except for the
contractual relationship between the Company and Compte De Sierge memorialized
in the Compte Agreement, and the consulting services provided to CardStakes.com
by Mr. Beckerman, there are no other affiliations or relationships between
either the Company and Compte De Sierge or CardStakes.com and Compte De Sierge.
On or about May 5, 1999, the Company agreed to enter into an Asset Purchase
Agreement ("On-line Agreement") with On-line Asset Courtesy Inc., a corporation
incorporated in Panama City, Panama ("On-line"). Pursuant to the On-line
Agreement, The Company agreed to purchase from On-Line, and On-line agreed to
sell, an Universal Resource Locator (URL) registered as "GREETINGCARDLOTTO.COM",
as well as associated URLs registered as "E-CARDLOTTO.COM" and "CARDLOTTO.COM".
An URL is the address of a page on the World Wide Web. Every web page has an URL
that identifies it uniquely, and which provides enough information for any
computer connected to the Internet to locate it. In exchange for the three (3)
URL's, the Company agreed to issue to On-line 2,000,000 warrants to purchase the
Company's $.0001 par value common stock at a purchase price of US$0.25 per
share. The warrants were to be exercisable for a period of two (2) years from
the date of issuance and all common stock purchased pursuant to those warrants
will be "restricted securities" subject to the limitations and restrictions
regarding resale and distribution specified
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by Rule 144. However, because the On-line Agreement was never executed by all
parties, the 2,000,000 warrants were never issued, and the On-Line never
delivered the right to the 3 URL's. The Company and On-line have since mutually
agreed to terminate their relationship due to On-line's nonperformance. Except
for the proposed contractual relationship between the Company and On-line, there
are no other relationships or affiliations between either the Company and
On-line or CardStakes.com and On-line. Compte De Sierge and On-line do not have
any affiliation.
On or about June 18, 1999, the Company entered into an Asset Purchase Agreement
("J&S Agreement") with J&S Overseas Holdings, of Grand Cayman, Cayman Islands
("J&S Overseas"). Pursuant to the J&S Agreement, the Company agreed to purchase
from J&S Overseas, and J&S Overseas agreed to sell, an URL registered as
"CardStakes.com". In exchange for the URL, the Company agreed to pay US$240,000
and grant to J&S Overseas the rights to purchase 1,000,000 shares of the
Company's $.0001 par value common stock. These rights are exercisable at a
purchase price of US$0.30 per share, and all shares purchased will be
"restricted securities" subject to the limitations and restrictions regarding
resale and distribution specified by Rule 144. As of September 30, 1999, The
Company had met all of its financial obligations under the J&S Agreement. Except
for the relationships described herein, there are no other relationships between
the Company and J&S Overseas. The URL, Cardstakes.com
(http://www.cardstakes.com), is a website featuring electronic greeting cards
and retail merchandise link. The electronic Greeting Card is sent to the
recipient via e-mail enabling the recipient to play a "Scratch and Win" ticket
for cash coupons and discounts. The retail merchandise links allow the sender to
purchase a gift if the sender so desires.
On or about September 1, 1999, the Company entered into an Asset Purchase
Agreement ("Holm Agreement") with Holm Investment Ltd., a Canadian corporation
("Holm"). Pursuant to the Holm Agreement, the Company agreed to purchase from
Holm, and Holm agreed to sell to the Company, three (3) Universal Resource
Locators ("URL's") registered as "GREETINGCARDLOTTO.NET", "E-CARDLOTTO.NET" and
"CARDLOTTO.NET". In exchange for the 3 URL's, the Company agreed to issue Holm
1,000,000 warrants to purchase the Company's $.0001 par value common stock at a
purchase price of US$0.25 per share. The warrants are exercisable for a period
of two (2) years from the date of issuance and all common stock purchased
pursuant to those warrants will be "restricted securities" subject to the
limitations and restrictions regarding resale and distribution specified by Rule
144. The 1,000,000 warrants have been issued and Holm has transferred the three
URL's to the Company. Holm also provided promotional services to the Company for
which the Company issued to Holm 600,000 shares of the Company's $.0001 par
value common stock. The Company also leases office space from Holm (more
particularly described in Item 3 of this Amendment No. 3 to the Company's Form
10-SB).
On or about November 19, 1999, the Company and May Joan Liu ("MJLiu") entered
into an Asset Purchase Agreement ("MJLiu Agreement"). Pursuant to the MJLiu
Agreement, the Company agreed to purchase from MJLiu, and MJLiu agreed to sell
to the Company, three (3) Universal Resource Locators ("URL's") registered as
"Thankyou2u.com", "Homeaccents2u.com" and "Necessities2u.com". In exchange for
the 3 URL's, the Company agreed to issue MJLiu six hundred fifty thousand
(650,000) shares of the Company's $.0001 par value common stock. All common
stock issued pursuant to the MJLiu Agreement were issued as "restricted
securities" subject to the limitations and restrictions regarding resale and
distribution specified by Rule 144. The shares have been issued and MJLiu has
transferred the three URL's to the Company. Except for the relationships
described herein, there are no affiliations between MJLiu and the Company.
On or about November 24, 1999, the Company and CardTek (International) Holdings
Ltd., a Gibraltar corporation ("CTek"), entered into an Asset Purchase Agreement
("CTek Agreement"). Pursuant to the CTek Agreement, the Company agreed to
purchase from CTek, and CTek agreed to sell to the Company, four (4) Universal
Resource Locators ("URL's") registered as "Gaming2u.com", "Weddings2u.com",
"Essentials2u.com" and "Theorient2u.com". In exchange for the 4 URL's, the
Company agreed to issue to CTek eight hundred thousand (800,000) shares of the
Company's $.0001 par value common stock. All common stock issued pursuant to the
CTek Agreement were issued as "restricted securities" subject to the limitations
and restrictions regarding resale and distribution specified by Rule 144. The
shares have been issued and CTek has transferred the four URL's to the Company.
Except for the relationships described herein, there are no affiliations between
CTek and the Company.
On or about November 25, 1999, the Company and Richard Angelo Holmes
("RAHolmes") entered into an Asset Purchase Agreement ("RAH Agreement").
Pursuant to the RAH Agreement, the Company agreed to purchase from RAHolmes, and
RAHolmes agreed to sell to the Company, two (2) Universal Resource Locators
("URL's") registered as "Things2u.com" and "Arrangements2u.com". In exchange for
the 2 URL's, the Company agreed to issue RAHolmes two hundred fifty thousand
(250,000) shares of the Company's $.0001 par value common stock. All common
stock issued pursuant to the RAH Agreement have been issued and were issued as
"restricted securities" subject to the limitations and restrictions regarding
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resale and distribution specified by Rule 144. The shares have been issued and
RAHolmes has transferred the two URL's to the Company. Except for the
relationships described herein, there are no affiliations between RAHolmes and
the Company.
On or about November 25, 1999, the Company and Cybermall Consulting Services
Ltd., a Bahamian corporation ("Cybermall"), entered into an Asset Purchase
Agreement ("Cybermall Agreement"). Pursuant to the Cybermall Agreement, the
Company agreed to purchase from Cybermall, and Cybermall agreed to sell to the
Company, two (2) Universal Resource Locators ("URL's") registered as
"Website2u.com" and "Gourmet2u.com". In exchange for the 2 URL's, the Company
agreed to issue to Cybermall five hundred thousand (500,000) shares of the
Company's $.0001 par value common stock. All common stock issued pursuant to the
Cybermall Agreement were issued as "restricted securities" subject to the
limitations and restrictions regarding resale and distribution specified by Rule
144. The shares have been issued and Cybermall has transferred the four URL's to
the Company. Except for the relationships described herein, there are no
affiliations between Cybermall and the Company.
Competition in Oil and Natural Gas Production. Competition in the oil and
natural gas production industry is intense. If the interests owned by the
Company produce any oil or gas, the Company will encounter intense competition
from other companies and entities in virtually all phases of the oil and gas
industry. Many of these competitors have greater financial and other resources,
and more experience in the oil and gas industry, than the Company. The Company
will compete directly with other companies and businesses that have developed,
and are in the process of developing, exploration and drilling technologies
which may provide those competitors with an advantage over the Company. The
Company believes it will encounter competition from other oil and natural gas
companies in all areas of its operations, including the acquisition of
exploratory prospects and proven properties.
Should the Wyoming Property or the Alberta Property produce oil or gas, the
Company's competitors will include major integrated oil and natural gas
companies and numerous independent oil and natural gas companies, individuals,
and drilling and income programs. Many of its competitors will be large,
well-established companies with substantially larger operating staffs and
greater capital resources than those of the Company and which, in many
instances, have been engaged in the oil and natural gas business for a much
longer time than the Company. Such companies may be able to pay more for
exploratory prospects and productive oil and natural gas properties and may be
able to identify, evaluate, bid for and purchase a greater number of properties
and prospects than the Company's financial or human resources permit.
Alberta Regulation. The Alberta Ministry of Energy ("Ministry") is responsible
for regulating the production, transportation and sale of Alberta's oil, natural
gas, coal, electricity, and mineral resources. The Ministry operates through two
distinct organizations, the Alberta Department of Energy and the Alberta Energy
and Utilities Board. The Ministry is constantly promulgating rules and
regulations, and revising existing rules and regulations, relating to the oil
and natural gas industry in Alberta. For example, amendments to Section 24 of
the Natural Gas Royalty Regulation ("Regulation") specify the various monthly
and annual reports required under the Regulation and provide new penalty rules
for non-compliance, effective January 1, 1999.
Direct sellers of gas to core consumers (which might include small producers
such as the Company) are regulated by the Alberta government under the Natural
Gas Direct Marketing Regulation, and might require registration and bonding for
producers dealing with core consumers. All of these regulatory factors could
have a significant effect on the price of natural gas and oil in the Alberta
market.
Environmental Regulations. The operations which the Company has interests in are
subject to numerous federal, state and local laws and regulations governing the
discharge of materials into the environment or otherwise relating to
environmental protection. These laws and regulations may require the acquisition
of a permit before drilling commences, restrict the types, quantities and
concentration of various substances that can be released into the environment in
connection with drilling and production activities, limit or prohibit drilling
activities on certain lands within wilderness, wetlands and other protected
areas, require remedial measures to mitigate pollution from former operations,
such as pit closure and plugging abandoned wells, and impose substantial
liabilities for pollution resulting from production and drilling operations.
Public interest in the protection of the environment has increased dramatically
in recent years. The trend of more expansive and stricter environmental
legislation and regulations applied to the oil and natural gas industry could
continue, resulting in increased costs of doing business and consequently
affecting profitability. To the extent laws are enacted or other governmental
action is taken that restricts drilling or imposes more stringent and costly
waste handling, disposal and cleanup requirements, the business and prospects of
the Company could be adversely affected.
8
<PAGE>
The Company anticipates that its interests will generate waste that may be
subject to the federal Resource Conservation and Recovery Act ("RCRA") and
comparable state statutes. The U.S. Environmental Protection Agency ("EPA") and
various state agencies have limited the approved methods of disposal for certain
hazardous and non-hazardous wastes. Furthermore, certain wastes generated by the
Company's oil and natural gas interests that are currently exempt from treatment
as "hazardous wastes" may in the future be designated as "hazardous wastes," and
therefore be subject to more rigorous and costly operating and disposal
requirements.
The Oil Pollution Act of 1990, ("OPA") contains numerous requirements relating
to the prevention of and response to oil spills into waters of the United
States. The OPA subjects owners of facilities to strict joint and several
liability for all containment and cleanup costs and certain other damages
arising from a spill, including, but not limited to, the costs of responding to
a release of oil to surface waters. The OPA also requires owners and operators
of offshore facilities that could be the source of an oil spill into federal or
state waters, including wetlands, to post a bond, letter of credit or other form
of financial assurance in amounts ranging from $10 million in specified state
waters to $35 million in federal outer continental shelf waters to cover costs
that could be incurred by governmental authorities in responding to an oil
spill. Such financial assurances may be increased by as much as $150 million if
a formal risk assessment indicates that the increase is warranted. Noncompliance
with OPA may result in varying civil and criminal penalties and liabilities.
Future operations of the Company may also be subject to the federal Clean Water
Act ("CWA") and analogous state laws. Pursuant to the requirements of the CWA,
the EPA has adopted regulations concerning discharges of storm water runoff.
This program requires covered facilities to obtain individual permits,
participate in a group permit or seek coverage under an EPA general permit. If
the Company owns properties that require permits for discharges of storm water
runoff, the Company believes that it will be able to obtain, or be included
under, such permits, where necessary. Like OPA, the CWA and analogous state laws
relating to the control of water pollution provide varying civil and criminal
penalties and liabilities for releases of petroleum or its derivatives into
surface waters or into the ground. CERCLA, also known as the "Superfund" law,
and similar state laws impose liability, without regard to fault or the legality
of the original conduct, on certain classes of persons that are considered to
have contributed to the release of a "hazardous substance" into the environment.
These persons include the owner or operator of the disposal site or sites where
the release occurred and companies that disposed or arranged for the disposal of
the hazardous substances found at the site. Persons who are or were responsible
for releases of hazardous substances under CERCLA may be subject to joint and
several liability for the costs of cleaning up the hazardous substances that
have been released into the environment, for damages to natural resources and
for the costs of certain health studies, and it is not uncommon for neighboring
landowners and other third parties to file claims for personal injury and
property damage allegedly caused by the hazardous substances released into the
environment.
9
<PAGE>
The Company also anticipates that its interests may be subject to a variety of
federal, state and local permitting and registration requirements relating to
protection of the environment. Management believes that its interests will be
able to maintain substantial compliance with current applicable environmental
laws and regulations and that continued compliance with existing requirements
will not have a material adverse effect on the Company.
Operating Hazards and Insurance. The oil and natural gas business involves a
variety of operating hazards and risks such as well blowouts, craterings, pipe
failures, casing collapse, explosions, uncontrollable flows of oil, natural gas
or well fluids, fires, formations with abnormal pressures, pipeline ruptures or
spills, pollution, releases of toxic gas and other environmental hazards and
risks. These hazards and risks could result in substantial losses to the Company
from, among other things, injury or loss of life, severe damage to or
destruction of property, natural resources and equipment, pollution or other
environmental damage, cleanup responsibilities, regulatory investigation and
penalties and suspension of operations. In addition, the Company may be liable
for environmental damages caused by previous owners of property purchased and
leased by the Company. As a result, substantial liabilities to third parties or
governmental entities may be incurred, the payment of which could reduce or
eliminate the funds available for exploration, development or acquisitions or
result in the loss of the Company's properties. In accordance with customary
industry practices, the Company expects that it will maintain insurance against
some, but not all, of such risks and losses. There can be no assurance that any
insurance obtained by the Company will be adequate to cover any losses or
liabilities. The Company cannot predict the availability of insurance or the
availability of insurance at premium levels that justify its purchase. The
occurrence of a significant event not fully insured or indemnified against could
materially and adversely affect the Company's financial condition and
operations. The Company may elect to self-insure if management believes that the
cost of insurance, although available, is excessive relative to the risks
presented. In addition, pollution and environmental risks generally are not
fully insurable. The occurrence of an event not fully covered by insurance could
have a material adverse effect on the financial condition and results of
operations of the Company.
Securities Exchange Act Industry Guide 2. The Securities Exchange Act Industry
Guide 2 requires certain information be provided by small business issuers
engaged in the oil and gas industry including estimates of oil and natural gas
reserves. There are numerous uncertainties inherent in estimating oil and
natural gas reserves and their estimated values, including many factors beyond
the control of the producer. Reservoir engineering is a subjective process of
estimating underground accumulations of oil and natural gas that cannot be
measured in an exact manner. Estimates of economically recoverable oil and
natural gas reserves and of future net cash flows necessarily depend upon a
number of variable factors and assumptions, such as historical production from
the area compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions concerning
future oil and natural gas prices, future operating costs, severance and excise
taxes, development costs and work-over and remedial costs, all of which may in
fact vary considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery, and estimates of the future net cash flows expected therefrom
prepared by different engineers or by the same engineers but at different times
may vary substantially and such reserve estimates may be subject to downward or
upward adjustment based upon such factors. Actual production, revenues and
expenditures with respect to the Company's reserves will likely vary from
estimates, when and if made, and such variances may be material. In addition,
the 10% discount factor, which is required by the Securities Exchange Commission
to be used in calculating discounted future net cash flows for reporting
10
<PAGE>
purposes, is not necessarily the most appropriate discount factor based on
interest rates in effect from time to time and risks associated with the Company
or the oil and natural gas industry in general.
In general, the volume of production from oil and natural gas properties
declines as reserves are depleted, with the rate of decline depending on
reservoir characteristics. Except to the extent the Company conducts successful
exploration and development activities or acquires properties containing proved
reserves, or both, the proved reserves of the Company will decline as reserves
are produced. The Company's future oil and natural gas production is, therefore,
highly dependent upon its level of success in finding or acquiring additional
reserves. The business of exploring for, developing or acquiring reserves is
capital intensive. To the extent cash flow from operations is reduced and
external sources of capital become limited or unavailable, the Company's ability
to make the necessary capital investment to maintain or expand its asset base of
oil and natural gas reserves would be impaired. The failure of an operator of
the Company's wells to adequately perform operations, or such operator's breach
of the applicable agreements, could adversely impact the Company. In addition,
there can be no assurance that the Company's future exploration, development and
acquisition activities will result in additional proved reserves or that the
Company will be able to drill productive wells at acceptable costs. Furthermore,
although the Company's revenues could increase if prevailing prices for oil and
natural gas increase significantly, the Company's finding and development costs
could also increase. The Wyoming Property is currently undeveloped and as such
there are no records as to average sales price, production costs, total gross
and net productive wells, drilling activities or delivery commitments. The
Company has not performed its own examination as to the net oil or gas reserves
existing on the Wyoming Property. The total amount of undeveloped acreage is
6,360 acres. According to I.T.A., the Alberta Property currently contains one
existing deep abandoned natural gas well. Also according to I.T.A., during the
drilling of the existing well, a gas flow was encountered from an uphole zone.
The amount of undeveloped acreage on the Alberta Property is 1,120 acres. The
Company has not performed its own examination as to the net oil or gas reserves
existing on the Alberta Property. Neither the Alberta Property nor the Wyoming
Property have proven oil or gas reserves at this time.
In or about December, 1999, the management of the Company decided to review the
Company's agenda, primarily the direction the Company would take with its varied
projects. The management of the Company has always been seeking new business
opportunities believed to hold a potential profit. The management identified the
"Internet" as a profitable business opportunity when the LANSource project
arose. Subsequently, with the advent of the "CardStakes.com" project, the
Company believes that the "Internet" projects would be a positive revenue
producer. The management of the Company has principally agreed to go forward and
concentrate the Company's focus on its "Internet" project and put its oil and
gas projects temporarily on hold. Management of the Company also discussed the
possibility of either selling off its oil and gas interests or vending its oil
and gas projects to another company. To date, no concrete decision has been made
on the sale or vending of the Company's oil and gas projects.
Business of Company's Subsidiary. On February 19, 1999, the Company and Jack Sha
caused PDTech.com, a Nevada corporation, to be formed as a subsidiary of the
Company. On or about June 8, 1999, PDTech.com changed its name to
CardStakes.com. At the time CardStakes.com was incorporated, it was contemplated
that founders would be issued founders shares in CardStakes.com in consideration
for incorporating and initially financing CardStakes.com.
The Compte Agreement provides that the Company may grant sublicenses to third
parties on terms agreeable to Compte De Sierge with respect to the proprietary
technology. On or about June 15, 1999, CardStakes.com became such a third party
licensee. On or about that date, the Company and CardStakes.com entered into a
licensing agreement whereby CardStakes.com acquired 51% of the Company's rights,
title and interest under the Compte Agreement. The result is that CardStakes.com
has the right to utilize and commercially exploit certain software and related
proprietary technology allowing for the marketing and sale of greeting cards
over the Internet. The technology licensed from Compte De Sierge also allows
CardStakes.com to conduct a scratch and win whereby the winners are awarded cash
coupons and discounts. In exchange for the rights in the Compte Agreement,
CardStakes.com issued to the Company 9,126,531 shares of CardStakes.com's $.0001
par value common stock. The Company and CardStakes.com valued those assets at
$1,470,000 based on the Company's historical cost basis. Any and all assets
acquired by CardStakes.com from the Company will be recorded in CardStakes.com's
financial statements at the Company's historical cost basis. On or about August
16, 1999, the Company distributed 2,199,779 shares of the Company's $.0001 par
value common stock to the Company's shareholders as dividends. As of September
30, 1999, there were 11,726,531 shares of the CardStakes.com's $.0001 par value
common stock issued and outstanding. As of that date (i) the Company was the
holder of 6,926,752 of those shares; (ii) the Company's shareholders were issued
2,199,779 of such stock as dividends; (iii) Jack Sha, President and a director
11
<PAGE>
of CardStakes.com and President and a director of the Company, held 500,000 of
such shares; and (iv) 2,100,000 of such shares were held by shareholders who had
purchased the shares in CardStakes.com's initial private placement pursuant to
the exemption from the registration requirements of the Securities Act of 1933
("Act") specified by the provisions of Section 3(b) of the Act and Rule 504 of
Regulation D promulgated by the Securities and Exchange Commission pursuant to
Section 3(b).
The Greeting Card Industry. Based on research conducted by the Company,
including, but not limited to, searching the Internet for similar operations,
the Company believes that Cardstakes.com is the first Internet site to combine a
greeting card and a scratch and win entry. CardStakes.com's cards feature
special effects, animation, music, and custom design abilities. The cards at
www.cardstakes.com can be sent free with or without a purchase while visiting
any of the www.2uonline.com websites set up by the Company. The Company's
websites offer products such as jewels, flowers, chocolates and original art. We
anticipate that revenue will be generated from the sale of goods at the
www.2uonline.com websites.
According to information gathered by the Company from the website maintained by
the Greeting Card Association ("GCA"), an organization representing card
publishers and allied members of the greeting card industry, in 1998, the
purchase of over 7 billion greeting cards by American consumers generated a
total of $7.5 billion in United States retail sales. Also according to the GCA,
of the total greeting cards purchased annually, roughly half are seasonal and
the remaining half are everyday cards.
On or about May 20, 1999, the Company commissioned the firm of Hall, Dickler,
Kent, Freidman & Wood of New York, New York, to provide a legal opinion
regarding the operation of the Internet greeting card scratch and win by the
Company's subsidiary, CardStakes.com. The opinion provided by Hall, Dickler,
Kent, Freidman & Wood provided that the scratch and win activities proposed by
CardStakes.com fall under the sweepstakes and promotions laws of the United
States allowing residents of the United States to freely participate in sending
and receiving CardStakes.com's electronic greeting card, while also enabling the
recipient to play a scratch and win ticket for cash coupons and discounts. Hall,
Dickler, Kent, Freidman & Wood concluded that the promotion conducted by
CardStakes.com could be permissibly conducted in all United States
jurisdictions.
CardStakes.com's Card. Customers of CardStakes.com can send animated, singing,
speaking, personally customized, virtual cards over the Internet for free with
our without a purchase from one of the 2uonline.com cybermall websites. The card
contains a scratch and win ticket that offers cash discounts and coupons. Should
the recipient want to review the cards in the future, the card will remain in
the recipient's mailbox until deleted.
CardStakes.com's cards allow the sender a high level of interaction in the
designing and viewing process. The user has the opportunity to send stock cards
(from art deco, vogue, classic, Victorian, and cartoons to 3D animation) after
choosing their own clip art and/or pictures to customize the greeting card.
There is also the option of speak as you type audio capabilities allowing the
sender to include his or her own voice with the card. For example, the card will
say "Hi! John, thank you for a wonderful time, love, Susan White."
Competition in the Greeting Card Industry. Competition in the Internet greeting
card industry is significant. Certain of Cardstakes.com's competitors have more
experience, seasoned management, name recognition, marketing capabilities and
financial resources than the CardStakes.com CardStakes.com may also encounter
increasing competition from the new as well as the existing Internet greeting
card operations. CardStakes.com may also encounter indirect competition from
companies selling greeting cards in the traditional storefront form. It is
possible that increased competition could have a material adverse effect on
CardStakes.com. Many of these competitors have greater financial and other
resources, and more experience in the greeting card industry than
CardStakes.com. There can be no assurance that competitors have not or will not
succeed in developing technologies that are more effective than any which that
have been or are being developed by CardStakes.com or which would render the
greeting card operations of CardStakes.com obsolete and non-competitive.
Business Interruption; Reliance on Computer and Telecommunications
Infrastructure. The Company or its subsidiary's success will be dependent in
large part on its continued investment in sophisticated telecommunications and
computer systems and computer software. The Company and/or its subsidiary
anticipates making significant investments in the acquisition, development, and
maintenance of such technologies in an effort to remain competitive and
anticipates that such expenditures will be necessary on an on-going basis.
Moreover, computer and telecommunication technologies are evolving rapidly and
are characterized by short product lifecycles, which requires the Company to
anticipate technological developments. There can be no assurance that the
Company or its subsidiary will be successful in
12
<PAGE>
anticipating, managing or adopting such technological changes on a timely basis
or that the Company or its subsidiary will have the capital resources available
to invest in new technologies. In addition, Internet related business is highly
dependent on computer and telecommunications equipment and software systems, the
temporary or permanent loss of which, through physical damage or operating
malfunction, could have a material adverse effect on the either the Company or
its subsidiary's business.
Employees. The Company currently has 2 part-time employees and 2 full-time
employees. None of the Company's employees are subject to any collective
bargaining agreements. Each employee of the Company will be required, as a
condition of employment, to execute an agreement not to disclose the Company's
trade secrets or other confidential information.
Reports to Security Holders. The Company is filing this Registration Statement
on Form 10-SB and all amendments thereto in order to meet its obligations under
the Securities and Exchange Act of 1934. The Company is currently listed on the
Over-the-Counter Bulletin Board Quotation Service ("OTCBB") maintained by the
National Association of Securities Dealers, Inc., under the symbol "TWOU". As
such, the Company is required to provide an annual report to its security
holders, which will include audited financial statements, and quarterly reports,
which will contain unaudited financial statements. The Company is a reporting
company. The public may read and copy any materials filed with the SEC at the
SEC's Public Reference Room at 450 Fifth Street NW, Washington, D.C. 20549. The
public may also obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that
site is http://www.sec.gov.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources. The Company had cash resources of US$2,246.00
at December 21, 1998. At September 30, 1999, the Company had cash resources of
US$54,490.00. At September 30, 1999, the Company had total current assets of
US$95,811.00 and total current liabilities of US$4,137.00. At September 30,
1999, total current assets exceeded total current liabilities by US$91,674.00.
The cash and equivalents constitute the Company's present internal sources of
liquidity. Because neither the Company nor its subsidiaries are generating any
significant royalty revenues, the Company's only external source of liquidity is
the sale of its capital stock.
Results of Operations. The Company has not yet realized any significant revenue
from operations, nor does it expect to in the foreseeable future. Loss from
operations increased from $0.00 in 1997 to US$10,796.99 in 1998 due to the
Company's renewed activities in locating and evaluating suitable gas and oil
leases and the general, selling, and administrative amortization of organization
costs. From inception to September 30, 1999, the Company experienced a net loss
of US$1,243,046.00.00 which resulted primarily as a result of selling, general
and administrative expenses and commissions.
In order to address the going concern problem discussed in the Company's
financial statements, the Company will require additional cash. The Company will
also require additional cash to implement its business strategies, including
cash for (i) payment of increased operating expenses and (ii) further
implementation of those business strategies. No assurance can be given, however,
that the Company will have access to the capital markets in the future, or that
financing will be available on acceptable terms to satisfy the cash requirements
of the Company to implement its business strategies. The inability of the
Company to access the capital markets or obtain acceptable financing could have
a material adverse effect on the results of operations and financial conditions
of the Company and could severly threaten the Company's ability to operate as a
going concern.
13
<PAGE>
The Company's forecast of the period of time through which its financial
resources will be adequate to support its operations is a forward-looking
statement that involves risks and uncertainties, and actual results could vary
as a result of a number of factors.
The Company anticipates that it will need to raise additional capital within the
next 12 months in order to continue as a going concern. Such additional capital
may be raised through additional public or private financings, as well as
borrowings and other resources. To the extent that additional capital is raised
through the sale of equity or equity-related securities, the issuance of such
securities could result in dilution of the Company's stockholders. There can be
no assurance that additional funding will be available on favorable terms, if at
all. If adequate funds are not available within the next 12 months, the Company
may be required to curtail its operations significantly or to obtain funds
through entering into arrangements with collaborative partners or others that
may require the Company to relinquish rights to certain of its assets that the
Company would not otherwise relinquish.
The Company does not anticipate any material expenditures within the next 12
months that will affect its liquidity. The Company does not anticipate any
significant research and development within the next 12 months, nor does the
Company anticipate that it will lease or purchase any significant equipment
within the next 12 months. The Company does not anticipate a significant change
in the number of its employees within the next 12 months. The Company is not
aware of any material commitment or condition that may affect its liquidity
within the next 12 months.
The Company anticipates that it will begin to realize a positive revenue stream
beginning in or about the third quarter of 2000, as a result of the activities
of its subsidiary, CardStakes.com, Inc. Specifically, the Company, as a holder
of 59% of CardStakes.com's issued and outstanding stock, believes that
CardStakes.com, Inc.'s greeting card/scratch and win business, having recently
completed its beta testing, will generate a positive revenue stream for the
Company.
Item 3. Description of Property.
Property held by the Company. As of the dates specified in the following table,
the Company held the following property in the following amounts:
================================================================================
Property December 31, 1998 September 30, 1999
- -------------------------------------------------------------------------------
Cash and equivalents US$2,246.00 US$54,490.00
================================================================================
The Company defines cash equivalents as all highly liquid investments with a
maturity of 3 months or less when purchased. The Company does not presently own
any interests in real estate. The Company does not presently own any inventory
or equipment.
The Company's Facilities. The Company does not own any real or personal
property. However, the Company does lease office space from Holm Investments
Ltd. The Company leases the office space for $1,700 a month. This expense is
reflected in the accounts payable section of the attached financial statements.
Office services are provided to the Company by Jack Sha for which he receives
$2,000 per month.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners. The following are
persons, other than directors and officers, who are beneficial owners
of 5% or more of the Company's issued and outstanding common stock:
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount and Nature of Percent of Class
- -------------- ------------------------ Beneficial Owner ----------------
--------------------
<S> <C> <C> <C>
Common Stock YENN Asset Management(1) 1,100,000(2) 5.4%
Warrants to Purchase Buckingham Square, The Penthouse
Common Stock Seven Mile Beach, West Bay Road
Grand Cayman, Cayman Islands
Common Stock J&S Overseas Holding Ltd.(3) 1,800,000(4) 8.9%
Warrants to Purchase Buckingham Square, The Penthouse
Common Stock Seven Mile Beach, West Bay Road
Grand Cayman, Cayman Islands
Common Holm Investment Ltd. (6) 1,900,000(5) 9.4%
Stock 534 Beachview Drive
Warrants to Purchase Vancouver, British Columbia
Common Stock Canada V7G 1P9
Common Stock Mae Joan Liu 1,500,000(7) 7.4%
Options to Purchase 1066 Groveland Road
Common Stock West Vancouver, British Columbia
V7S 1Z4
Common Stock Rising Phoenix Development Group Ltd. 3,800,000(8) 18.8%
Common Stock Compte De Sierge 6,000,000 29.7%
Accomodative Corp.
</TABLE>
14
<PAGE>
(1) The beneficial owner of YENN Asset Management is Regina Strakova, Krezdub
317, 696 64, Czech Republic.
(2) Includes 100,000 shares of the Company's $.0001 par value common stock and
1,000,000 unexercised warrants to purchase the Company's $.0001 par value common
stock at $.30 per share.
(3) The beneficial owner of J&S Overseas Holding Ltd. is Fred Tham, 1301 Pik Hoi
House, Choi Hung Estate, Kowloon, Hong Kong.
(4) Includes 1,190,000 shares of the Company's $.0001 par value common stock
owned by J & S and 610,000 unexercised warrants to purchase the Company's $.0001
par value common stock at $.25 per share.
(5) Includes 910,000 unexercised warrants to purchase the Company's $.0001
common stock at $.25 per share , 690,000 shares of the Company's $.0001 par
value common stock and 300,000 options to purchase the Company's $.0001 par
value common stock held by Richard Angelo Holmes, beneficial owner of Holm
Investments Ltd.
(6) The beneficial owner of Holm Investment Ltd. is Richard Angelo Holmes.
(7) Includes 900,000 shares of the Company's $.0001 par value common stock and
600,000 options to purchase the Company's $.0001 par value common stock.
(8) Stock to be issued pursuant to the Company's agreement with Rising Phoenix.
(b) Security Ownership by Management. As of September 30, 1999, the directors
and principal executive officers of the Company beneficially owned, in the
aggregate, 950,000 shares of the Company's common stock, or approximately 4.7%
of the issued and outstanding shares, as set forth on the following table:
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount and Nature of Percent of Class
- -------------- ------------------------ Beneficial Owner ----------------
--------------------
<S> <C> <C> <C>
Common Shares Jack Sha 300,000 shares 3.0%
5550 Cambie Street, Suite 306 300,000 options
Vancouver, British Columbia
V5Z 3A2 President and Director
Common Shares Ferdinand Marehard 300,000 shares 1.7%
1270 Robson Street, Suite 406 50,000 options
Vancouver, British Columbia Secretary/Treasurer
V6E 3Z6 and Director
</TABLE>
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403 of Regulation S-B.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and principal executive officers of the Company are as specified
on the following table:
15
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Name and Address Age Position Term as Director
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jack Sha 48 President and a Director From October, 1998 to present
5550 Cambie Street, Suite 306
Vancouver, British Columbia V5Z 3A2
- ------------------------------------------------------------------------------------------------------------------------------------
Ferdinand Marehard 70 Secretary/Treasurer From October, 1998 to present
1270 Robson Street, Suite 406 and Director
Vancouver, British Columbia V6E 3Z6
====================================================================================================================================
</TABLE>
Jack Sha is the President and a Director of the Company. Mr. Sha was the
president of Tokyo Trading Ltd. from 1990 through 1994, during which time he was
involved in the decision making process for various investment opportunities
ranging from golf course developments to mining properties. In 1991, Mr. Sha
acquired, on behalf of the Tokyo Trading Ltd., the rights to develop and market
a unique essence for skin care products. In 1994, Mr. Sha underwent major
surgery and was inactive until 1998.
Ferdinand Marehard is the Secretary, Treasurer and a Director of the Company.
Mr. Marehard was the president of West-Mar Resources Ltd. ("West-Mar") from 1984
through 1994, during which time he managed West-Mar's participation in various
foreign and domestic gas and oil leases. In 1985, Mr. Marehard managed
West-Mar's participation in the development of six gas wells in Indiana, and
also participated in negotiations for the acquisition of a 1,200,000 acre oil
concession in Liberia, West Africa. In 1986 he acquired, on behalf of West-Mar,
a 5% working interest on 40,000 acres in Adams County, Indiana. From 1990
through 1994 he participated in drilling and developing a horizontal well and in
waterflood oil production in Texas. He also acquired, on behalf of West-Mar,
17,000 acres of gas and oil leases in the state of Washington. From 1975 through
1981 Mr. Marehard was the president of Hesca Resources Corp., Ltd.; from 1982
through 1984 he was the president of Demus Petro Corporation; and from 1979
through 1984 he was the president of Mar-Gold Resources, Ltd. These entities
participated in the oil and gas industry and the mining industry. During this
period, Mr. Marehard had a broad range of management duties for these companies,
including oversight of drilling and production of oil wells in Kentucky, Texas
and Utah. He also negotiated the acquisition of several properties in the
Greenwood-Grandforks gold camp and negotiated financing for the various company
operations. Mr. Marehard has experience in prospecting, including examination of
property in the field. He has supervised placer gold leases in the Yukon and has
identified and negotiated for silver, lead, zinc and copper bearing property on
Vancouver Island, British Columbia. He has experience in mining and exploration
for precious and base metals in British Columbia, the Yukon, the Northwest
Territories and the United States. Michael Wright has extensive experience in
the amusement game industry, commercial real estate sales and development as
well as the gaming and lottery industries. Mr. Wright operated, sold and
marketed amusement video games for Bally Manufacturing. He was an executive
vice-president of Exidy where he manufactured and sold video games. Mr. Wright
was involved with international sales and marketing with Taito Corporation in
Japan. He was also the president of Simutrak, a company specializing in laser
disc technology for coin operated video games. Mr. Wright's real estate
experience involves the development and sale of commercial and single family
real estate in Northern California. Mr. Wright was involved with the design,
manufacture, distribution and operation of slot machines for Bally Gaming. Mr.
Wright operated the National Television Bingo Lottery in Prague. He also was the
president of OnPoint, a San Diego based company where he was involved in the
manufacture and sale of vending machines for the lottery and transportation
industries. Mr. Wright was the president and CEO of Border Capital, a Canadian
public company involved in the software and design of television game shows for
the global lottery industry. Mr. Wright attended the University of Portland
where he majored in Mass Communications. Mr. Wright is currently the Chairman of
the Company's Board of Directors. None of the above listed persons share any
familial relationship. Other than the persons listed above, there are no
significant employees expected by the Company to make a significant contribution
to the business of the Company. All directors of the Company serve until the
next annual meeting of stockholders. The Company's executive officers are
appointed by the Company's Board of Directors and serve at the discretion of the
Board of Directors.
Robert Klein, President of Rising Phoenix, resigned from the Company's Board of
Directors. It is anticipated that Mr. Klein will not return to the Company's
Board of Directors. There are no orders, judgments, or decrees of any
governmental agency or administrator, or of any court of competent jurisdiction,
revoking or suspending for cause any license, permit or other authority to
engage in the securities business or in the sale of a particular security or
temporarily or permanently restraining Mr. Sha or Mr. Marehard from engaging in
or continuing any conduct, practice or employment in connection with the
purchase or sale of securities, or convicting such person of any felony or
misdemeanor involving a security, or any aspect of the securities business or of
theft, nor are Mr. Sha or Mr. Marehard the officers or directors of any
corporation or entity so enjoined.
16
<PAGE>
Item 6. Remuneration of Directors and Officers.
Executive Compensation. Specified below, in tabular form, is the aggregate
annual remuneration of the Company's Chief Executive Officer and the four (4)
most highly compensated executive officers other than the Chief Executive
Officer who were serving as executive officers at the end of the Company's last
completed fiscal year. The officers of the Company received no direct
compensation from the Company during the Company's most recent fiscal year. The
officers of the Company are reimbursed for expenses incurred on behalf of the
Company.
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C>
Name of Individual or Identity of Group Capacities in which Remuneration was Aggregate Remuneration
received
- ------------------------------------------------------------------------------------------------------------------------------------
Jack Sha President $2,000/month
====================================================================================================================================
</TABLE>
As of September 30, 1999, the Company has paid Jack Sha compensation in the
following amounts.
=============================================================
Month Compensation
-------------------------------------------------------------
May $700.00
-------------------------------------------------------------
June $1,400.00
-------------------------------------------------------------
July $1,400.00
-------------------------------------------------------------
August $1,700.00
-------------------------------------------------------------
September $1,000.00
-------------------------------------------------------------
October $1,000.00
-------------------------------------------------------------
November $1,000.00
=============================================================
The Company anticipates compensating Jack Sha for accrued salary when and if the
funds are available.
Directors' Compensation. The directors of the Company do not receive
compensation in their capacities as directors. However, the directors of the
Company are reimbursed for expenses incurred on behalf of the Company.
Item 7. Certain Relationships and Related Transactions.
Agreement to Purchase Rising Phoenix Development Group Ltd.'s Corporate Assets
was not the result of arms-length negotiations. As specified above, on January
15, 1999, the Company signed a letter of intent to acquire all of the corporate
assets of Rising Phoenix Development Group, Ltd. (previously defined as "Rising
Phoenix") in exchange for 3,800,000 shares of the Company's common stock and
seventy-five thousand dollars (US$75,000). The president of Rising Phoenix,
Robert Klein, was on the Company's Board of Directors from February 1, 1999
through early in March, 1999, at which time Mr. Klein resigned from the
Company's Board of Directors. It is anticipated that Mr. Klein will not rejoin
the Company's Board of Directors.
As of September 30, 1999, the Company had advanced a total of $80,495 to its
subsidiary CardStakes.com to pay for operating expenses. The Company and
CardStakes.com have not yet negotiated repayment terms. However, the Company
anticipates that repayment of such funds will be contingent on CardStakes.com's
results of operations. The outstanding amount due to the Company bears on
interest.
Anti-Dilution Provision. In anticipation of the issuance of shares pursuant to
the license agreement entered into between the Company and CardStakes.com (more
particularly described in Item 1 of this Amendment No. 3 to the Company's Form
10-SB), on or about March 9, 1999, the Company's subsidiary, CardStakes.com
amended its Articles of Incorporation to include an Anti-Dilution Provision
("Provision") providing for the continuous and nondilutable 51% ownership of
CardStakes.com by the Company. In or around September, 1999, CardStakes.com and
the Company agreed that the Provision would be removed from CardStakes.com's
Articles of Incorporation. As consideration for the removal of the Provision,
CardStakes.com agreed to issue the Company 2,000,000 shares of its $.0001 par
value common stock. On or about September 10, 1999, CardStakes.com's President
and Secretary executed a Certificate of Amendment to CardStakes.com's Articles
of Incorporation removing the Provision.
17
<PAGE>
Although the Company has not yet formally adopted a policy for the resolution of
conflicts regarding related party transactions, the Company does anticipate that
it will fully disclose any and all related party transactions, including, but
not limited to, (i) disclosing such transactions in prospectus' where required;
(ii) disclose in any and all filings with the Securities and Exchange
Commission, where required; (iii) obtain uninterested directors consent; (iv)
obtain shareholder consent where required; and (v) take any and all other action
required by relevant law and /or the Company's governing documents
Transactions with Promoters. Holm Investments Ltd. is a promoter of the Company
and has received 600,000 shares of common stock of the Company for promotional
services provided to the Company.
Item 8. Description of Securities.
The Company is authorized to issue 100,000,000 shares of common stock, $.0001
par value, each share of common stock having equal rights and preferences,
including voting privileges. As of September 30, 1999, 20,197,500 shares of the
Company's common stock were issued and outstanding, with 7,070,000 shares
subject to certain restrictions and 13,127,500 unrestricted shares. The shares
of $.0001 par value common stock of the Company constitute equity interests in
the Company entitling each shareholder to a pro rata share of cash distributions
made to shareholders, including dividend payments. The holders of the Company's
common stock are entitled to one vote for each share of record on all matters to
be voted on by shareholders. There is no cumulative voting with respect to the
election of directors of the Company or any other matter, with the result that
the holders of more than 50% of the shares voted for the election of those
directors can elect all of the Directors. The holders of the Company's common
stock are entitled to receive dividends when, as and if declared by the
Company's Board of Directors from funds legally available therefor; provided,
however, that cash dividends are at the sole discretion of the Company's Board
of Directors. In the event of liquidation, dissolution or winding up of the
Company, the holders of common stock are entitled to share ratably in all assets
remaining available for distribution to them after payment of liabilities of the
Company and after provision has been made for each class of stock, if any,
having preference in relation to the Company's common stock.
Holders of the shares of Company's common stock have no conversion, preemptive
or other subscription rights, and there are no redemption provisions applicable
to the Company's common stock. All of the outstanding shares of the Company's
common stock are duly authorized, validly issued, fully paid and non-assessable.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
The Company has 21 shareholders. The Company participates in the OTC Bulletin
Board Electronic Quotation System maintained by the National Association of
Securities Dealers, Inc., under the trading symbol "TWOU". According to quotes
provided by Smallcapcenter.com, the Company's common stock has closed at:
Quarter High Low
- ------------------------------------------------------- ------------------------
1998 Fourth Quarter $ .60 $ .41
- ------------------------------------------------------- ------------------------
1999 First Quarter $ .75 $ .23
- ------------------------------------------------------- ------------------------
1999 Second Quarter $ 1.09 $ .27
- ------------------------------------------------------- ------------------------
1999 Third Quarter $ .54 $ .37
- ------------------------------------------------------- ------------------------
1999 Fourth Quarter $ .39 $ .23
- ------------------------------------------------------- ------------------------
December 31, 1999
to February 11, 2000 $ .92 $ .30
- ------------------------------------------------------- ------------------------
Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.
As of December 31, 1999, there were two million five hundred twenty thousand
(2,520,000) warrants outstanding. YENN Asset Management was the holder of
1,000,000 of the aforementioned warrants. J & S Overseas Holdings Ltd. ("J&S")
was the holder of 610,000 of such warrants. Holm Investments Ltd. was the holder
of 910,000 of such warrants. The
18
<PAGE>
1,000,000 YENN warrants represent the right to purchase from the Company one
share of its $.0001 par value common stock at a price of $.30 per share and all
of which expire by their own terms on October 31, 2000. The 610,000 outstanding
warrants held by J&S represent the right to purchase from the Company one share
of its $.0001 par value common stock at a price of $0.25 per share and all of
which expire by their own terms on January 15, 2001. The 910,000 warrants held
by Holm Investment Ltd. represent the right to purchase from the Company one
share of its $.0001 par value common stock at a price of $0.25 per share.
Between June 15, 1999 and July 7, 1999, CardStakes.com issued 7,126,531 shares
of its $.0001 par value common stock to the Company pursuant to the licensing
agreement between the Company and CardStakes.com. Under the licensing agreement,
Cardstakes.com received from the Company the right to utilize and exploit the
technology necessary to sell greeting cards over the Internet (more particularly
described in Item 1 of this Amendment No. 3 to the Company's Form 10-SB). On or
about August 16, 1999, the Company issued to each of its shareholders entitled
to receive dividends, 1 share of CardStakes.com's $.0001 par value common stock
for every 8 shares of the Company's $.0001 par value common stock. The Company
issued a total of 2,199,779 shares of CardStakes.com's $.0001 par value common
stock to the Company's shareholders.
On or about September 10, 1999, and in consideration for the removal of the
anti-dilution provision from CardStakes.com's Articles of Incorporation (more
particularly described in Item 7 of this Amendment No. 3 to the Company's
Registration Statement on Form 10-SB), CardStakes.com issued an additional
2,000,000 shares of its $.0001 par value common stock to the Company.
On or about April 23, 1999, the Company issued options to purchase shares of the
Company's $.0001 par value common stock for $0.25 per share in the following
amounts: (i) May Joan Liu in the amount of 600,000 (the Company valued the
consulting services provided by Ms. Liu at US$37,500.00); (ii) Richard Angelo
Holmes in the amount of 300,000 (the Company valued the consulting services
provided by Mr. Holmes at US$18,750.00); (iii) Jack Sha in the amount of 300,000
(the Company valued the services provided by Mr. Sha at US$18,750.00); and (iv)
Ferdinand Marehard in the amount of 50,000 (the Company valued the services
provided by Mr. Marehard at US$3,125.00). All of such options were issued in
reliance upon the exemption from the registration and prospectus delivery
requirements of the Act as set forth in Regulation S promulgated by the
Securities and Exchange Commission. Specifically, the issuance was made to a
"non-U.S. person outside the United States of America" as that term is defined
under applicable federal and state securities laws. All of such options are
exercisable on a 1:1 basis for the $.0001 par value common stock of the Company.
The options are exercisable at a price of $0.25 per share and expire by their
own terms 18-months from the grant date.
Penny Stock Regulation. The Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the Commission, which (i) contained a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading; (ii) contained a description of the
broker's or dealer's duties to the customer and of the rights and remedies
available to the customer with respect to violation to such duties or other
requirements of Securities' laws; (iii) contained a brief, clear, narrative
description of a dealer market, including "bid" and "ask" prices for penny
stocks and significance of the spread between the "bid" and "ask" price; (iv)
contains a toll-free telephone number for inquiries on disciplinary actions; (v)
defines significant terms in the disclosure document or in the conduct of
trading in penny stocks; and (vi) contains such other information and is in such
form (including language, type, size and format), as the Commission shall
require by rule or regulation. The broker-dealer also must provide, prior to
effecting any transaction in penny stock, the customer (i) with bid and offer
quotations for the penny stock; (ii) the compensation of the broker-dealer and
its salesperson in the transaction; (iii) the number of shares to which such bid
and ask prices apply, or other comparable information relating to the depth and
liquidity of the market for such stock; and (iv) month account statements
showing the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgement of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for
19
<PAGE>
a stock that becomes subject to the penny stock rules. If any of the Company's
securities become subject to the penny stock rules, holders of those securities
may have difficulty selling those securities.
Item 2. Legal Proceedings.
On or about April 15, 1999, a Statement of Claim, on behalf of the Company as
Plaintiff, was issued by the Ontario Court, General Division. Also on or about
April 15, 1999, that Statement of Claim was served on Defendant LANSource. As
described in Item 1, LANSource and the Company entered into a letter agreement
whereby the Company was to purchase a 12.5% interest in LANSource with an option
to purchase an additional 38.5% interest. A formal agreement was to be finalized
on or before March 31, 1999. The letter agreement provided that in the event a
formal agreement was not consummated by March 31, 1999, the letter agreement
would be null and void and LANSource would be permitted to retain all deposits
made by the Company. The Company alleges that LANSource agreed that its counsel
would draft the final agreement in an expeditious manner. The Company further
alleges that counsel for LANSource did not produce an agreement for review by
the Company until March 25, 1999. Moreover, the Company alleges that, prior to
its receipt of the proposed final agreement from counsel for LANSource, the
proposed agreement had not been read or approved by LANSource, the agreement was
incomplete and in need of substantial revisions, and that LANSource failed and
neglected to provide the essential information necessary for a meaningful review
of the proposed final agreement.
The Company has alleged that it has been damaged in the amount of $1,000,000 in
that LANSource breached its agreement with the Company, breached its fiduciary
duty to the Company and breached its duty of good faith. In the alternative, the
Company has asked that the Court either: (i) compel LANSource to perform its
obligations under the agreement; (ii) order LANSource to pay into the Court a
total of $300,000 representing the deposit money paid to LANSource by the
Company, declare that the agreement between the Company and LANSource is
rescinded and return the deposit amount to the Company; declare that LANSource
has breached the agreement and proceed to trial to determine the Company's
damages; or issue an order requiring LANSource to disgorge to the Company any
and all profits earned by LANSource as a result of its breach. Moreover, the
Company has alleged punitive damages in the amount of $100,000. While the action
is pending, the Company has asked the Ontario Court to enjoin LANSource from:
(i) transferring or disposing of, in any manner, its assets; (ii) borrowing
funds except in the usual course of business; (iii) granting any license,
franchise or similar arrangement to any person relating to its intellectual
property or potential intellectual property; (iv) issuing, distributing or
transferring in any way shares, warrants, options or other securities; (v)
redeeming or purchasing any of the company's shares; (vi) taking or instituting
proceedings to alter its corporate structure in any way; (vii) amending its
Bylaws, Articles or any material agreements; or (viii) taking action to
materially change the nature of its business in any way. The Company plans to
vigorously prosecute its claim against LANSource. In or about December, 1999,
the Company and LANSource reached an out-of-court settlement.
Item 3. Changes in and Disagreements with Accountants.
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
Item 4. Recent Sales of Unregistered Securities.
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
On or about December 31, 1998, the Company commenced an offering of shares of
its common stock in reliance on an exemption from the registration requirements
of the Securities Act of 1933 ("Act") specified by the provisions of Section
3(b) of the Act and Rule 504 of Regulation D promulgated by the Securities and
Exchange Commission pursuant to Section 3(b). The Company relied on Rule 504 of
Regulation D because although at the time of the offering the Company was a
development stage company, it did have a specific business plan to pursue
interests in revenue producing activities such as the production of oil and gas
and, later, Internet-related activities. The Company sold a total of 7,127,500
shares of its common stock pursuant to that offering, all of which were
purchased prior to April 6, 1999. The aggregate offering price was $1,000,000.
The Company was able to rely on Rule 504 of Regulation D because it met all of
the requirements of such rule including, but not limited to, that rules
limitations on the amount which may be raised. Gross proceeds from the offering
were US$1,000,000 in cash, as follows:
20
<PAGE>
3,000,000 shares at US $.08 per share (total US$240,000)
1,000,000 shares at US $.10 per share (total US$100,000)
1,562,500 shares at US $.22 per share (total US$343,750)
500,000 shares at US $.15 per share (total US$75,000)
500,000 shares at US $.20 per share (total US$100,000)
565,000 shares at US $.25 per share (total US $141,250)
The offering price for the Company's shares of common stock was arbitrarily
established by the Company and had no relationship to assets, book value,
revenues or other established criteria of value. The total number of purchasers
was eleven (11). Proceeds from the 504 offering were used for, among other
purposes, working capital, including legal fees; office equipment and office
expenses; and to finance the Company's various acquisition contracts.
On or about January 6, 1999, the Company issued 800,000 shares of its $.0001 par
value common stock for services rendered by Jeff Shear and Frank Cecchin. Those
shares were issued in reliance upon an exemption from registration requirements
of the Securities Act of 1933 ("Act") specified by the provisions of Regulation
S of the Act. Specifically, the issuance was made to a "non-U.S. person outside
of the United States of America" as that is defined under applicable state and
federal securities laws. The Company valued those services at US $8,000.00.
On or about January 6, 1999, the Company issued 600,000 shares of its $.0001 par
value common stock for cash. Those shares were issued in reliance upon an
exemption from the registration requirements of the Securities Act of 1933
("Act") specified by the provisions of Regulation S of the Act promulgated by
the Securities and Exchange Commission. Specifically, the issuance was made to a
"non-U.S. person outside of the United States of America" as that is defined
under applicable state and federal securities laws. The proceeds to the Company
were US$6,000.00. Such proceeds were used for working capital.
On or about January 28, 1999, the Company issued 600,000 shares of its $.0001
par value common stock as compensation for consulting services rendered. Those
shares were issued in reliance upon an exemption from the registration
requirements of the Securities Act of 1933 ("Act") specified by the provisions
of Regulation S of the Act and promulgated by the Securities and Exchange
Commission. Specifically, the issuance was made to a "non-U.S. person outside of
the United States of America" as that is defined under applicable state and
federal securities laws. The Company valued those consulting services at
US$120,000.00.
On or about February 26, 1999, the Company issued 500,000 shares of its $.0001
par value common stock for consulting services rendered by Joe Beruti. Those
shares were issued in reliance upon an exemption from registration requirements
of the Securities Act of 1933 ("Act") specified by the provisions of Regulation
S of the Act. Specifically, the issuance was made to a "non-U.S. person outside
of the United States of America" as that is defined under applicable state and
federal securities laws. The Company valued those consulting services at
US$100,000.00
On or about April 28, 1999, the Company issued 400,000 shares of its $.0001 par
value common stock for consulting services rendered by E-Vista Commerce Ltd, a
British Columbia Corporation. Those shares were issued in reliance upon an
exemption from registration requirements of the Securities Act of 1933 ("Act")
specified by the provisions of Regulation S of the Act. Specifically, the
issuance was made to a "non-U.S. person outside of the United States of America"
as that is defined under applicable state and federal securities laws. The
Company valued those consulting services at US$56,000.00.
On or about April 30, 1999, the Company issued to YENN Asset Management, a
company located in the Cayman Islands, 1,100,000 warrants to subscribe for and
purchase from the Company one share of the Company's $.0001 par value common
stock at a purchase price of $0.30 per share. The warrants were issued in
reliance upon the exemption from the registration requirements of the Act as set
forth in Regulation S promulgated by the Securities and Exchange Commission.
Specifically, the issuance was made to a "non-U.S. person outside the United
States of America" as that term is defined under applicable federal and state
securities laws. On or about September 15, 1999, YENN Asset Management exercised
100,000 of such warrants at $0.30 per share resulting in gross proceeds to the
Company of US$30,000.
On or about April 30, 1999, the Company issued to J&S Overseas Holdings Ltd., a
company located in the Cayman Islands ("J&S"), 800,000 warrants to subscribe for
and purchase from the Company one share of the Company's $.0001 par value common
stock at a purchase price of $0.30 per share. The warrants were issued in
reliance upon the exemption from the registration requirements of the Act as set
forth in Regulation S promulgated by the Securities and Exchange Commission.
Specifically, the issuance was made to a "non-U.S. person outside the United
States of America" as that term is defined under applicable federal and state
securities laws. On or about July 7, 1999, J&S exercised all 800,000 warrants to
purchase the Company's $.0001 par value common stock at a purchase price of $.30
per share.
Pursuant to the terms of the Compte Agreement (more particularly described
within Item 1 "Description of Business"), the Company, on or about June 15,
1999, issued 3,000,000 shares of its $.0001 par value common stock to Compte De
Sierge Accomodative Corp., a Panama corporation. The shares were issued in
reliance upon the exemption from the registration and prospectus delivery
requirements of the Act as set forth in Regulation S promulgated by the
Securities and Exchange Commission. Specifically, the issuance was made to a
"non-U.S. person outside the United States of America" as that term is defined
under applicable federal and state securities laws. The Company valued those
shares at US$0.50 per share, the market price at the time of the Compte
Agreement was executed.
On or about July 15, 1999, pursuant to the J&S Agreement the Company issued to
J&S Overseas Holdings Ltd., a company located in the Cayman Islands ("J&S"),
1,000,000 warrants to subscribe for and purchase from the Company one share of
the Company's $.0001 par value common stock at a purchase price of $0.25 per
share. The warrants were issued in reliance upon the exemption from the
registration requirements of the Act as set forth in Regulation S promulgated by
21
<PAGE>
the Securities and Exchange Commission. Specifically, the issuance was made to a
"non-U.S. person outside the United States of America" as that term is defined
under applicable federal and state securities laws. On or about July 20, 1999, J
& S exercised 800,000 of warrants for such a purchase price of $.30 per share
for a total of US$240,000.
Also, on or about June 15, 1999, the Company issued 20,000 shares of its $.0001
par value common stock for services rendered by Hector Cruz, the Company's
transfer agent. Those shares were issued in reliance upon an exemption from the
registration requirements of the Securities Act of 1933 ("Act") specified by the
provisions of Section 4(2) of the Act and Rule 506 of Regulation D promulgated
by the Securities and Exchange Commission pursuant to Section 4(2). The Company
valued those services at US$5,000.00.
On or about June 30, 1999, the Company issued 250,000 shares of its $.0001 par
value common stock for consulting services provided by Mae Joan Liu. Those
shares were issued in reliance upon an exemption from the registration
requirements of the Act as set forth in Regulation S promulgated by the
Securities and Exchange Commission. Specifically, the issuance was made to a
"non-U.S. person outside the United States of America" as that term is defined
under applicable federal and state securities laws. The Company valued those
services at US$50,000.00.
Item 5. Indemnification of Directors and Officers.
Article VII of the Company's Bylaws provides that no officer or director of the
Company shall be personally liable for obligations of the Company or for any
duties or obligations arising out of any acts or conduct of such an officer or
director performed for on behalf of the Company. That Article VII also provides
that the Company shall indemnify each officer and director from and against any
and all claims, judgments and liabilities by reason of any action taken or
omitted to have been taken by him or her as a director or officer, and also
provides that the Company shall reimburse each officer and director for all
legal and other expenses reasonably incurred in connection with such a claim or
liability; provided, however, that such officers and directors shall not be
indemnified against, or be reimbursed for, any expense incurred in connection
with any claim or liability arising out of such a person's own negligence or
willful misconduct.
Moreover, Article Five of the Company's Restated and Amended Certificate of
Incorporation filed January 13, 1999 with the Delaware Secretary of State
provides, in pertinent part, that the directors of the Company shall not be
personally liable to the Company or its stockholders for breach of fiduciary
duty as a director, except for (1) breach of such director's duty of loyalty to
the Company or its stockholders, (2) for acts or omissions not in good faith
which involve intentional misconduct or a knowing violation of law, (3) for
transactions in which such director derived improper personal benefit, or (4)
pursuant to the provisions of Section 174 of the General Corporation Law. The
Company anticipates that it will enter into indemnification agreements with each
of its officers and directors pursuant to which the Company agrees to indemnify
each such officer and director for all expenses and liabilities, including
criminal monetary judgments, penalties and fines, incurred by such officer and
director in connection with any criminal or civil action brought or threatened
against such officer or director by reason of such officer or director being or
having been an officer or director of the Company. In order to be entitled to
indemnification by the Company, such officer or director must have acted in good
faith and in a manner such person believed to be in the best interests of the
Company and, with respect to criminal actions, such officer or director must
have had no reasonable cause to believe his or her conduct was unlawful.
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO PUBLIC
POLICY AND, THEREFORE, UNENFORCEABLE.
PART F/S
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Registration Statement, Form 10-SB.
(a) Index to Financial Statements. Page
1 Independent Auditor's Report F-1
2 Consolidated Audited Balance Sheets
as at December 31, 1997, December 31, 1998
and September 30, 1999 F-2 through F-3
3 Consolidated Audited Statement of Operations
for Periods Ending
December 31, 1997, December 31, 1998,
and September 30, 1999 F-3
4 Audited Statement of Changes to Stockholders'
Equity for Periods
Ending December 31, 1997, December 31, 1998
and September 30, 1999 F-4
5 Audited Statement of Cash Flows
for Periods Ending
December 31, 1997, December 31, 1998 and
September 30, 1999 F-5
6 Notes to Audited Financial Statements F-6 through F-10
22
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PART III
Item 1. Index to Exhibits
Copies of the following documents are filed with this Amendment No. 2 to
Registration Statement, Form S-B, as exhibits:
<TABLE>
<CAPTION>
<S> <C>
1 Certificate of Incorporation Filed With Form 10-SB
of Power Direct, Inc.
2 Certificate of Amendment Filed With Form 10-SB
of Certificate of Incorporation of
Power Direct, Inc.
3 Amended and Restated Certificate of Filed With Form 10-SB
Incorporation of Power Direct, Inc.
(Charter document)
4 Bylaws of Power Direct, Inc. Filed With Form 10-SB
(Instrument defining the rights of
Security holders)
5 Letter of Agreement Between Filed With Form 10-SB
I.T.A. Enterprises, Inc. and
Power Direct, Inc.
6 Letter of Intent Between Rising Filed With Form 10-SB
Phoenix Development Group Ltd. and
Power Direct, Inc.
7 Letter of Intent Between LANSource Filed With Form 10-SB
Technologies, Inc. and Power Direct, Inc.
8 Agreement to Sell URL Between the Company
and Holm Investments E-1
9 Sub-Licensing Agreement Between the Company
and CardStakes.com, Inc. E-2 through E-15
10 Asset Purchase and Sale Agreement Between
the Company and Rising Phoenix Development Ltd. E-16 through E-46
11 Agreement to Sell URL Between May Joan Liu and
the Company E-47
12 Agreement to Sell URL Between CardTek (International)
Holdings Ltd. and the Company E-48
13 Agreement to Sell URL Between R. Angelo Holmes and
the Company E-49
14 Agreement to Sell URL Between Cybermall Consulting
Services Ltd. and the Company E-50
</TABLE>
23
<PAGE>
SIGNATURES
In accordance with the provisions of Section 12 of the Securities Exchange
Act of 1934, the Company has duly caused this Amendment No. 3 to Registration
Statement on Form 10-SB to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Vancouver, British Columbia, Canada, on March
21, 2000.
2U Online.com, Inc.,
a Delaware corporation
By: /s/ Jack Sha
----------------------
Jack Sha
Its: President
24
<PAGE>
James E. Slayton, CPA
- --------------------------------------------------------------------------------
2858 WEST MARKET STREET
SUITE C
FAIRLAWN, OHIO 44333
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors November 19, 1999
Power Direct, Inc. (the Company)
I have audited the Balance Sheet of Power Direct, Inc. (A Development Stage
Company), as of September 30, 1999, December 31, 1998 and December 31, 1997 and
the related Statements of Operations, Stockholders' Equity and Cash Flows for
the period January 1, 1999 to September 30, 1999 and the two years ended
December 31, 1998, December 31, 1997 and the period of September 13, 1993 (Date
of Inception) to September 30, 1999. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statement presentation. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Power Direct, Inc., (A
Development Stage Company), at September 30, 1999, December 31, 1998 and
December 31, 1997, and the results of its operations and cash flows for the
period January 1, 1999 to September 30, 1999 and the two years ended December
31, 1998, December 31, 1997, and the period September 13, 1993 (Date of
Inception) to September 30, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, The Company has had limited operations and has not
established a long term source of revenue. This raises substantial doubt about
its ability to continue as a going concern. Management's plan in regard to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
James E. Slayton, CPA
Ohio License ID# 04-1-15582
F-1
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September December December
30, 1999 31, 1998 31, 1997
<S> <C> <C> <C>
ASSETS
Current Asset
Cash in Bank 54,490.00 2,246.00 0.00
Accounts Receivable 39,321.00 0.00 0.00
Other Current Assets 2,000.00
------------------------------------------
Total Current Assets 95,811.00 2,246.00 0.00
OTHER ASSETS
Other Assets 1,123.00 0.00 0.00
Universal Resource Locator 200,000.00
Investment in Cardstakes.com 1,602,862.00
Investment in Vertizontal 20,393.00
Investment in Rising Phoenix 75,000.00
Investment in LANSource 202,265.00
Investment in Liberty Oil and Gas 44,400.00
------------------------------------------
Total Other Assets 2,146,033.00 0.00 0.00
TOTAL ASSETS 2,241,844.00 2,246.00 0.00
==========================================
</TABLE>
See accompanying notes to financial statements
-2-
F-2
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September December December
30, 1999 31, 1998 31, 1997
<S> <C> <C> <C>
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable 4,137.00 13,042.99
------------------------------------------
Total Liabilities 4,137.00 13,042.99 0.00
Minority Interest in Subsidiary ($26,971 at time (23,997.00)
of acquisition less income attributable to
minority internet $60,968)
EQUITY
Common Stock, 5.0001 par value, authorized
100,000,000 common shares; issued and
outstanding at 12/31/97, 6,000,000 common
shares; issued and outstanding at 12/31/98,
6,000,000 common shares; issued and
outstanding at 09/30/99, 18,497,500 2,020.00 600.00 100.00
Additional paid in capital 3,502,730.00 400.00 900.00
Retained Earnings (1,243,046.00) (11,798.99) (1,000.00)
Total Stockholders' Equity 2,261,704.00 (10,798.99) 0.00
------------------------------------------
TOTAL LIABILITIES & OWNER'S EQUITY 2,241,844.00 2,246.00 0.00
==========================================
</TABLE>
-3-
F-3
See accompanying notes to financial statements
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR PERIODS ENDING
<TABLE>
<CAPTION>
Date of
Inception
to
September September December December
30, 1999 30, 1999 31, 1998 31, 1997
<S> <C> <C> <C> <C>
REVENUE
Services 0.00 0.00 0.00 0.00
COSTS AND
EXPENSES
General and Administrative 1,197,618.00 1,185,821.00 10,797.00 0.00
Commissions 99,500.00 99,500.00
---------------------------------------------------------------
Total Costs and
Expenses 1,297,118.00 1,285,321.00 10,797.00 0.00
---------------------------------------------------------------
Other income (Expense):
Interest income 3,104.00 3,104.00
------------- ------------- ----------
Total Other Income (Expense) 3,104.00 3,104.00 0.00 0.00
Net Ordinary Income or (Loss) before Minority
Interest (1,294,014.00) (1,282,217.00) (10,797.00) 0.00
---------------------------------------------------------------
Less: Income or (Loss) attributed to Minority
Interest .41*$124312 (50,968.00) (50,968.00) 0.00 0.00
---------------------------------------------------------------
Net Ordinary Income or (Loss) (1,243,046.00) (1,231,249.00) (10,797.00)
===============================================================
Weighted average number of common shares
outstanding 13,882,778 13,882,778 6,000,000 2,000,000
Net Loss Per Share -0.083 -0.052 -0.0018 0
</TABLE>
See accompanying notes to financial statements
-4-
F-4
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIODS ENDING
December 31, 1997, December 31, 1998 and September 30, 1999
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during Total
Common Stock paid-in development Stockholder's
Shares Amount capital stage Equity
------------ --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 6,000,000 600.00 400.00 (1,000.00) 0.00
Balance December 31, 1996 6,000,000 600.00 400.00 (1,000.00) 0.00
Balance December 31, 1997 6,000,000.00 600.00 400.00 (1,000.00) 0.00
Net loss year ended December 31, 1998 (10,797.00) (10,797.00)
--------------------------------------------------------------
Balance December 31, 1998 6,000,000 $600.00 $400.00 ($11,797.00) (10,797.00)
--------------------------------------------------------------
January 9, 1999 issued for services 800,000 80.00 7,920.00 8,000.00
January 6, 1998 issued for cash 600,000 60.00 5,940.00 8,000.00
January 28, 1998
Issued (or consulting services 600,000 60.00 118,940.00 120,000.00
February 28, 1998 500,000 50.00 99,950.00 100,000.00
April 14, 1999 issued for cash 7,127,600 712.76 988,287.25 1,000,000.00
April 28, 1998 issued for services 400,000 40.00 56,950.00 58,000.00
On of about June 15, 1999
Issued for interest in Cardstakes.com 3,000,000 300.00 1,498,700.00 1,500,000.00
June 15, 1999
Issued for services rendered 20,000 2.00 4,998.00 5,000.00
June 30, 1998
Issued for services rendered 250,000 25.00 49,975.00 50,000.00
July 20, 1998
Issued for cash 800,000 80.00 239,920.00 240,000.00
September 19, 1999
Issued for cash 100,000 10.00 29,990.00 30,000.00
September 15, 1999 granted options
for 1,250,000 shares of .0001 par common
stock 388,750.00 388,750.00
Net loss January 1, 1998 to September 30, 1999 (1,231,249.00) (1,231,249.00)
---------------------------------------------------------------
Balance September 30, 1999 20,197,500 52,019.75 $3,602,730.25 ($1,243,045.00) $2,261,704.00
===============================================================
</TABLE>
See accompanying notes to financial statements
-5-
F-5
<PAGE>
Power Direct, Inc..
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR PERIOD
<TABLE>
<CAPTION>
Date of January 1,
Inception 1999
to to
September September December December
30, 1999 30, 1999 31, 1998 31, 1997
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) from operations (690,296.00) (578,499.00) (10,797.00) 0.00
Adjustments to reconcile net income to net cash
provided
Depreciation Expense 0.00
Amortization of intangible Assets (Minority
Interest) 41,667.00 41,667.00
Services rendered In exchange for stock 155,000.00 155,000.00
Increase in current assets (41,321.00) (41,321.00)
Increase (Decrease) in current
liabilities 4,137.00 (5,905.00) 13,043.00
------------ ------------ ---------- ----
Net Cash provided by Operating Activities (530,813.00) (532,059.00) 2,246.00 0.00
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Long Term Investments 691,697.00 491,697.00
------------ ------------ ---------- ----
Net cash used by investing activities 491,697.00 491,697.00 (0.00)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 1,277,000.00 1,276,000.00
Net cash provided by financing
activities 1,277,000.00 1,276,000.00 0.00 0.00
Net increase (decrease) in cash 254,490.00 252,244.00 2,246.00 0.00
Cash and cash equivalents, beginning
of period 0.00 2,246.00 0.00 0.00
Cash and cash equivalents, end of
year 254,490.00 254,490.00 2,246.00 0.00
</TABLE>
See accompanying notes to financial statements
-6-
F-6
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized September 13, 1993, under the laws of the State
of Delaware, as Power Direct, Inc. The Company currently has no operations and
in accordance with SFAS #7, the Company is considered a development stage
company.
On September 30, 1993, the company issued 10,000 Shares of its .01 par
value common stock for cash of $ 1,000.00.
On July 30, 1998, the State of Delaware approved the Company's restated
Articles of Incorporation, which increased its capitalization from 10,000 common
shares to 25,000,000 common shares. The par value was changed from $.01 par
value to $0.0001.
On July 30, 1998, the Company forward split its common stock 200:1, thus
increasing the number of outstanding common stock shares from 10,000 to
2,000,000 shares.
On October 21, 1998, the Company forward split its common stock 3:1, thus
increasing the number of outstanding common stock shares from 2,000,000 to
6,000,000 shares.
On December 16, 1998, the Company increased its capitalization from
25,000,000 common shares to 100,000,000 common shares. The par value remained at
$0.0001.
The Statement of Stockholder's equity reflects changes in par value and
common stock splits retroactively.
On January 6, 1999, the Company issued 600,000 shares of its $0.0001 par
value common stock for $6,000.00 in cash.
On January 16, 1999, The Company issued 800,000 shares of its $0.0001 par
value common stock for $8,000.00 in services rendered.
On January 28, 1999, the Company issued 600,000 shares of its $0.0001 par
value common stock for services rendered in the amount of $120,000.00.
On February 26, 1999, the Company issued 500,000 shares of its $0.0001 par
value common stock for services rendered in the amount of $100,000.00.
On April 14, 1999, the Company completed a Regulation D, Rule 504 offering,
issuing 7,121,500 shares of its $0.0001 par value common stock for $1,000,000.00
in cash. These share were issued at varying prices which reflected market prices
at time of subscription.
On April 28, 1999, the Company issued 400,000 shares of its $0.0001 par
value common stock for services rendered in the amount of $56,000.00.
-7-
F-7
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY-continued
On or about June 15, 1999, the Company issued 3,000,000 shares of its
$0.0001 par value common stock for an interest in Cardstakes.com valued at $.50
per share, the market price at the time the agreement was reached. There will be
a future exchange of an additional 3,000,000 shares of common stock when the
licensing agreement is finalized.
On June 15, 1999, the Company issued 20,000 shares of its $0.0001 par value
common stock for services rendered in the amount of $5,000.00.
On June 30, 1999, the Company issued 250,000 shares of its $0.0001 par
value common stock for services rendered in the amount of $50,000.00.
On July 20, 1999, the Company issued 800,000 shares of its $0.0001 par
value common stock for cash in the amount of $240,000.00 and redeemed 800,000
warrants.
On September 15, 1999, the Company issued 100,000 shares of its $0.0001 par
value common stock for cash in the amount of $30,000 and redeemed 100,000
warrants.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting polices and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. Basic earnings per share is computed using the weighted average number
of shares of common stock outstanding. Diluted earnings per share were not
included as the inclusion of warrants is anti-dilutive.
3. The Company has adopted December 31 as its fiscal year end.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
5. The Company has not yet adopted all accounting pronouncements issued.
The effect on the financial statements is deemed insignificant and immaterial
and there were no adjustments made to the financial statements.
6. Organization costs were expensed when incurred.
7. The Company records its inventory at cost.
8. The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions which affect the reported amounts of assets and liabilities as at
the date of the financial statements and revenues and expenses for the period
reported. Actual results may differ from these estimates.
-8-
F-8
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
9. The Company's Statement of Cash Flows is reported utilizing cash
(currency on hand and demand deposits) and cash equivalents( short-term, highly
liquid investments). The Company's Statement of Cash Flows is reported utilizing
the indirect method of reporting cash flows.
10. The cost of plant and equipment is depreciated over the estimated
useful life of the equipment utilizing the straight line method of depreciation.
The amount of depreciation recorded during this period was $0.00.
11. Power Direct, Inc. purchased a majority interest in Cardstakes.com. The
Company has accounted for the business combination as a pooling of interest and
consolidation. All intercompany eliminations have been made. This interest was
recorded at fair value based on the market price of the Company's stock given
up. The interest is not available for sale.
12. The Company has incurred Universal Resources Locator's costs as part of
web site development. The costs of the web site will be amortized over 60
months, once the development is complete and in operations. Universal Resources
Locators were recorded at the Company's cost. Each reporting period the Company
will evaluate whether event or changes have occurred which would call for a
review for impairment of value.
13. The Company experienced losses since its inception September 13, 1993
(Date of inception) to September 30, 1999. The Company will review its need for
a provision for federal income tax after each operating quarter and each period
for which a statement of operations is issued. There has not been any deferred
tax benefits recorded as management has deemed it less than likely that the net
operating losses will be utilized. The net operating loss carryforwards will
begin to expire in 2008.
14. The Company has purchased interests in Vertizonal, Rising Phoenix and
LANSource. Vertizonal and Rising Phoenix investments have been recorded
utilizing the equity method of accounting. The Company alleges that LANSource
breached the agreement and is currently in negotiations to settle the alleged
breach. The above interests were not purchased with the intent to trade or make
available for trade and were recorded at fair value.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital or revenues, it would be unlikely for the
Company to continue as a going concern. It is management's plan to seek
additional capital through loans or private placements.
-9-
F-9
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTION
The Company does not own any real or personal property. Office services are
provided without charge by a director. Such costs are immaterial to the
financial statements and, accordingly, have not been reflected therein. The
officers and directors of the Company are involved in other business activities
and may, in the future, become involved in other business opportunities. If a
specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such conflicts.
NOTE 5 - WARRANTS AND OPTIONS
On July 15, 1999, the Company issued warrants to J & S Overseas Holding as
part of the purchase agreement for URL. At September 30, 1999, there were
1,000,000 of these warrants outstanding. The warrants may be exercised one
warrant for one share of the Company's common stock and $0.25 cents per share.
On April 30, 1999, the Company issued warrants to Yenn Assets as part of a
Regulation S offering. At September 30, 1999, there were 1,000,000 of these
warrants outstanding. The warrants may be exercised one warrant for one share of
the Company's common stock and $0.30 cents per share.
The warrants have not been assigned a value, as the monetary value of these
warrants is not readily determined since the warrants are not trading.
The Company has options agreements with the following individuals.
May Joan Liu 600,000
R. Angelo Holmes 300,000
Jack Sha 300,000
Ferdinand Marehard 50,000
The options may be exercised on a one option for one share of the Company's
common stock and $0.25 cents per share. The options are good for a period of 18
months from grant date.
The Company following the guidelines of the fair value method and recorded
a compensation expense $388,750.00 based on the difference between option price
and market price on the grant
NOTE 6 - LONG TERM COMMITMENTS
The Company does not have any long term rental agreements nor does it have
any long term debt obligations.
-10-
F-10
AGREEMENT TO SELL URL (Universal Resource Locator)
Agreement made this 1st day of September, 1999 by and between Holm Investments
of Vancouver, British Columbia, Canada (hereinafter referred to as "Seller") and
Power Direct, Inc. of Delaware, USA (hereinafter referred to as the "Buyer").
Whereas the Seller desires to sell and the buyer desires to buy the asset known
as the URL (Universal Resource Locator) registered as "GREETINGCARDLOTTO.NET" as
well as associated URL's registered as "E-CARDLOTTO.NET" and "CARDLOTTO.NET, the
parties hereto agree and covenant as follows:
1. The total purchase price for all three (3) URL's is one million (1,000,000)
warrants of Power Direct, Inc. restricted (rule 144) common stock
exercisable for up to two (2) years from delivery at twenty five cents US
currency (US$0.25) each.
2. The warrants are to be delivered at the time of the passing ownership
papers of the URL's to the Buyer by the Seller.
3. The property to be sold hereunder shall be conveyed by a standard Bill of
Sale, duly executed by the Seller.
4. The Seller promises and agrees to convey good, clear, and marketable title
to all the property to be sold hereunder, the same to be free and clear of
all liens and encumbrances.
5. Consummation of the sale, with payment by the Buyer of total purchase price
and the delivery by the Seller of a Bill of Sale, will take place on or
before November 1st, 1999.
6. All of the terms, representations and warranties shall survive the closing.
This Agreement shall bind and inure to the benefit of the Seller and Buyer
and their respective heirs, executors, administrators, successors and
assigns.
7. If this Agreement shall contain any term or provision which shall be
invalid or against public policy or if the application of same is invalid
or against public policy, then, the remainder of this Agreement shall not
be affected thereby and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate on September 10th, 1999.
/s/ R. Angelo Holmes /s/ Jack Sha
-------------------- --------------
SELLER R. Angelo Holmes BUYER Jack Sha
President President
Holm Investments Ltd. Power Direct, Inc.
E-1
PROPRIETARY TECHNOLOGY USAGE
SUB-LICENSING AGREEMENT
PREAMBLE
This Agreement made effective this 10th day of July, 1999, is made and entered
into by and between POWER DIRECT, INC., a corporation incorporated in the State
of Delaware, USA, having an office at 4291 Meridian Street, Suite 29,
Bellingham, WA 98226 ("Power") and CardStakes.com, a corporation incorporated in
the State of Nevada, USA, having an office at 4291 Meridian Street, Suite 48,
Bellingham, WA 98226 ("CStakes"), whereby Power, with the agreement and consent
of Compte's directors, shall sublicense CStakes to utilize certain Proprietary
Technology for the production of the CardStakes.com web site.
ARTICLE 1 TITLE
This Proprietary Technology Usage Sublicensing Agreement by Power enabling
CStakes to produce the CardStakes.com web site may hereinafter be referred to as
the "Sub-Licensing Agreement".
ARTICLE 2 RECITALS
A. WHEREAS, Power (Power Direct, Inc.) is a public company participating on
the OTC Bulletin Board with its primary business in investment and joint
ventures; and,
B. WHEREAS, Compte (Compte De Sierge Accomodative Corporation) is a private
company specializing in designing software systems; and,
C. WHEREAS, CStakes (CardStakes.com) is a private company operating a web site
on the Internet; and,
D. WHEREAS, Compte has licensed the Proprietary Technology Usage to Power, and
is consenting to the Sub-Licensing by Power to CStakes, upon the basis that
Compte will be providing the Proprietary Technology to produce the
Cardstakes.com web site; and,
E. WHEREAS, Power, with the agreement and consent of Compte, will grant to
CStakes a worldwide exclusive Sub-License in perpetuity to produce the said
CardStakes.com web site on terms and conditions similar to those agreed to
by Power, contained in the License Agreement dated 1Oth of September, 1999
between Power and Compte; and,
F. WHEREAS, CStakes, having had the opportunity to evaluate the potential of
the Proprietary Technology, desires a Sub-License be granted by Power.
E-2
<PAGE>
NOW THEREFORE, in consideration of the premises, other good and valuable
consideration, the receipt and sufficiency is hereby acknowledged by the
parties, and the mutual covenants and agreements recited hereinafter, the
parties hereto agree as follows:
Section 2.1 Definitions
In this Agreement, the Preamble, Recitals, this Section and the Schedules
hereto, unless the context otherwise requires:
2.1.1 "Sub-Licensing Agreement" means the Sub-Licensing Agreement and
all Schedules attached hereto;
2.1.2 "Power" means Power Direct Inc., a publicly traded corporation
formed in the State of Delaware, USA, their successors and
assigns;
2.1.3 "Compte" means COMPTE DE SIERGE ACCOMODAT1VE CORPORATION, a
corporation formed in Panama City, Panama;
2.1.5 "CStakes" means CardStakes.com, a corporation formed in the
State of Nevada, USA;
2.1.6 "Business Day" means a day other than a Saturday, Sunday,
statutory holiday or day that is declared by any governmental
authority to be a civic holiday in the jurisdiction in which an
event contemplated hereby is to take place;
2.1.7 "Proprietary Technology" means the proprietary software and
systems owned and developed by Compte;
2.1.8 "Sub-Licensing Fee" means the portion of gross sale revenue,
defined as fifty-one percent (51%) of the gross revenue paid to
Power by CStakes as sub-licensee of the said Proprietary
Technology;
2.1.9 "External Audit" means the annual audit to be conducted by an
independent Certified Public Accountant firm selected by CStakes
at its expense;
2.1.10 "Sweepstakes" means, including, without limitation, the
following:
(a) production and communication of the CardStakes.com web site,
utilizing all or any portion of the Proprietary Technology;
(b) organization of secure accounting of virtual sweepstakes
tickets, processing of sweepstakes winners;
(c) the development, planning and operation of one or more
sweepstakes to be operated and such other business
opportunities as may arise pursuant to the Proprietary
Technology in accordance with Sub-Licensing Agreement;
(d) all other permitted sweepstakes activities pursuant to
applicable law and permits and
E-3
<PAGE>
licenses derived thereunder for each jurisdiction;
2.1.11 "Country of Domicile" means United States of America including
all geographical territory under the control of the Sovereignty
of the country of United States or any other suitable
alternatives;
2.1.12 "Sweepstakes Parameters" shall refer to Sweepstake design and
procedures which establish and define the prize structure,
sweepstakes rules and other parameters for the Sweepstakes;
2.1.13 "Gross Revenue" shall mean any and all gross revenue from the
Sweepstakes due and/or paid, from whatever source derived, to
CStakes without duplication, which can be attributed in any
manner to some portion of the Proprietary Technology; i.e., the
Proprietary Technology forms at least a part of the
consideration, whether expressly recited or not, for the revenue
paid.
Specific examples of Gross Revenue, without intending to limit
the scope of its definition, include the gross ticket
(Sweepstakes) dollar volume, etc.
2.1.14 "Internal Audit" means the quarterly audit to be conducted by a
auditor appointed by CStakes at its expense;
2.1.15 "Person" means any individual, partnership, limited partnership,
syndicate, sole proprietorship, company or corporation with or
without share capital, unincorporated association, trust,
trustee, executor, administrator or other legal personal
representative, regulatory body or agency, government or
governmental agency, authority or entity however designated or
constituted.
2.1.16 "Proprietary System(s)" shall by definition, and by agreement of
the parties hereto, also include:
(a) The Proprietary Technology Software as described in the
Proprietary Technology Usage License Agreement dated
effective the 28th day of April, 1999, between Power and
Compte;
(b) Any device, system, system component, method or process that
may be used for purchasing the product on the CardStakes.com
web site.
2.1.17 "Proprietary Technology" means all technology and confidential
information considered by Power/CStakes/Compte to be proprietary
technology (including without limitation, Proprietary Systems)
and all other information and/or know how of any kind
whatsoever, however developed, acquired or used by Power, and/or
CStakes, and/or Compte, used to operate the CardStakes.com web
site excluding any information already known to the public and
in the public domain;
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2.1.18 "Operation Center" means the Sweepstakes command and control
center located in the appropriate location to be determined;
2.1.19 "$" means currency of the United States of America.
Section 2.2 Compliance with Laws.
The parties shall conduct their affairs in strict accordance with all
applicable laws and regulations, and that such policies will govern their
conduct with respect to the transaction contemplated by this Agreement in all
respects.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES AND GRANT OF LICENSE FOR PROPRIETARY
TECHNOLOGY AND GRANT OF RIGHT OF FIRST REFUSAL:
Section 3.1 Representations and Warranties of POWER.
POWER warrants and represents to CStakes, and acknowledges that in reliance
thereon Power may warrant and represent to CStakes and/or their related entities
the following:
3.1.1 POWER is a corporation in good standing under the laws of USA,
3.1.2 POWER has full authority and capacity to execute the
Sub-Licensing Agreement;
3.1.3 POWER is authorized to enter into the Sub-Licensing Agreement,
and to carry out its terms to the full extent required.
Section 3.2 Representations and Warranties of CStakes.
CStakes warrants and represents to Power, and acknowledges that in reliance
thereon CStakes may warrant and represent to Power and/or their related entities
the following:
3.2.1 CSTAKES is a corporation in good standing under the laws of USA;
3.2.2 CSTAKES has full authority and capacity to execute the
Sub-Licensing Agreement;
3.2.3 CSTAKES is authorized to enter into the Sub-Licensing Agreement,
and to carry out its terms to the full extent required;
3.2.4 CSTAKES has the capacity to utilize the Proprietary Technology
for the production of CardStakes.com web site as contemplated
herein;
3.2.5 CSTAKES is authorized to carry out the terms of the Sub-License
Agreement to the full extent in respect to the utilization of
the Proprietary Technology for the production of the
CardStakes.com web site herein;
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3.2.6 CSTAKES and its employees shall, at all times, conduct the
development and the production of the CardStakes.com web site in
accordance with all applicable laws worldwide.
Section 3.3 GRANT OF LICENSE FOR PROPRIETARY TECHNOLOGY
3.3.1 Grant of Exclusive Sub-Licenses.
Subject to the terms and conditions of this Agreement, Power may
with the consent of Compte grant sublicenses to third parties
with new terms agreeable to Compte in respect to the Proprietary
Technology, to the extent necessary to produce the
CardStakes.com web site in accordance with the Sweepstakes
Parameters.
3.3.2 Proprietary Technology.
Save and except for the technology associated with
CardStakes.com that is and shall remain proprietary to Compte,
to the extent that Compte, will expend time, effort, money to
make enhancements to the Proprietary Technology, that involve
the use or enhancement of the Proprietary Technology resulting
in new technology, the parties hereby acknowledge that such new
technology shall not extinguish or derogate from the original
Proprietary Technology of Compte and that all proprietary right,
title, and interest in and to the new technology and enhanced
Proprietary Technology shall be the properties of Compte.
3.3.3 Preservation of Data.
All data compiled in connection with the Proprietary Technology
will be copied or otherwise preserved and archived on storable
media by Compte to ensure that all Proprietary Technology in the
form of data is backed up in the case of any loss or damage to
the original data for the benefit of the parties and delivered
from time to time upon request by any party.
ARTICLE 4 REVENUE STREAM
Section 4.1 Revenue Stream.
The parties agree that in consideration for the foregoing Sub-Licenses,
CStakes shall agree that a Sub-Licensing Fee shall be payable by CStakes
directly to Power on the basis of a Revenue Stream from the operations of the
CardStakes.com web site.
An amount of fifty-one percent (51%) Gross Revenue shall be paid to Power,
including, without limitation, revenue derived from any and all things of value
(paid directly or indirectly), for the right to support, sponsor or play the
Sweepstakes, and for the right to use in any way Proprietary Systems or any
other portion of the Proprietary Technology.
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Section 4.2 Payment Terms
The parties agree that the applicable amount payable shall be tendered to
Power in successive weekly payments by close of business within the next five
(5) Business Days (excluding any statutory holiday) of each and every week in
which payment is being calculated and received in the CardStakes.com bank
account, and remitted to such bank designated by Power in accordance with
Power's instructions and in U.S. Dollars at the bank information to be specified
by written notice.
Section 4.3 Statement of Ticket Sales.
Each remittance shall be accompanied by a weekly statement of Gross Revenue
and Gross Receipts for each Sweepstake, which shall be subject to verification
by Power's designated accountants and, which statement shall disclose the total
Gross Revenue and total Net Revenue, the method used to calculate the ticket
sales, other non-sweepstake revenue and payment, and the amount due Power. All
such statements shall be in a form determined in accordance with generally
accepted accounting principles and acceptable to Power (See also Comprehensive
Audit and Accounting Procedures in Article 9 below).
ARTICLE 5 NO ABATEMENT
Section 5.1 No Abatement
The parties hereto agree that there shall be no abatement or reduction of
the monies due to Power from CStakes for any reason.
Section 5.2 Access to Business and Records.
At all times during the subsistence of this Sub-Licensing Agreement the
duly authorized representatives of Power shall, at their sole risk and expense
and at reasonable intervals and times, have access to CStakes and to all records
and other data and information relating to the Sweepstakes which is in the
possession of the CStakes.
Section 5.3 Notice of Disputes.
Either party shall provide the other party with written notice of any
material dispute or matter as between Power or CStakes.
Section 5.4 Non-disclosure Except as Required by Law.
All information and data concerning or derived from the Operation of the
Sweepstakes shall be kept confidential and, except to the extent required by law
or by regulation or policy of any securities commission, stock exchange or other
regulatory body, shall not be disclosed to any person in strict confidence
without the prior consent of both parties, which consent shall not unreasonably
be withheld.
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ARTICLE 6 ACQUISITION OF REVENUE STREAM
Section 6.1 Cash Payments.
All cash payments will made pursuant to Article 4 and Article 5 of this
Sub-Licensing Agreement.
Section 6.2 Stock Payments.
A stock payment of 7,126,531 Shares (Seven Million One Hundred Twenty Six
Thousand Five Hundred Thirty One Shares) of CardStakes.com's common stock, 144
restricted with a one year hold period, shall be issued from CardStakes.com's
Treasury to Power Direct, Inc. upon signing of this agreement.
Of the above issue of 7,126,531 Shares (Seven Million One Hundred Twenty
Six Thousand Five Hundred Thirty One Shares) of CardStakes.com's common stock,
144 restricted with a one year hold period, Power Direct, Inc. will retain
4,932,152 Shares (Four Million Nine Hundred Thirty Two Thousand One Hundred
Fifty Two Shares), and the remaining balance of 2,194,379 Shares (Two Million
One Hundred Ninety Four Thousand Three Hundred Seventy Nine Shares) will be
issued as a stock dividend to Power Direct, Inc. shareholders of record.
ARTICLE 7 TERMINATION AND RELATED MATTERS
Section 7.1 Termination for Material Default.
Subject to Article 13 (FORCE MAJEUR), a non-defaulting party may terminate
this Agreement upon the occurrence of any material default or breach by the
defaulting party of any as follows:
7.1.1 The non-defaulting party will notify the defaulting party in
writing of the occurrence of a material default of this
Agreement;
7.1.2 The defaulting party will have a period of ten (10) days from
delivery of the written notice in which to either:
(a) correct or remedy the material default of this Agreement in
a manner satisfactory to the non-defaulting party acting
reasonably;
(b) the default of this Agreement which is acceptable to the
non-defaulting party acting reasonably.
Section 7.2 Right to Cure Material Default.
Subject to Article 12 (Arbitration) below, if the defaulting party fails to
correct or remedy the material default of this Agreement or provide the
non-defaulting party with an
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acceptable plan, for the remedy or the correction of the material default of
this Agreement, the non-defaulting party may terminate this Agreement upon ten
(10) days written notice to the defaulting party.
Section 7.3 Surrender in Case of Termination.
Should a termination take effect, CStakes shall within twenty (20) Business
Days promptly return to Power all documents and other material containing or in
any way relating to Proprietary Technology.
Section 7.4 Survival of Obligations.
In the event of any termination, all obligations of the parties existing
prior to termination and all obligations, whether known or unknown at the time
of termination, stemming from the act or omissions of a given party while this
Agreement was in force and effect, shall remain an obligation of the given party
until discharged.
ARTICLE 8 SUBLICENSING / ASSIGNMENT / LIENS / ENCUMBRANCES
CStakes agrees not to, or not to purport to, assign, pledge, cause any
lien, encumbrance or more generally any cloud of title whatsoever to affect all
or any part of the Proprietary Technology. The parties hereto agree and
understand that the purpose of this clause is to insure that in case of any
termination of rights licensed hereunder, as provided herein, title to the
licensed rights respecting the Proprietary Technology will be free and clear of
any cloud on title.
ARTICLE 9 REPORTING / ACCOUNTING / AUDIT / PAYMENTS
Section 9.1 Monthly Reporting.
CStakes shall make daily online and monthly written report, as provided
herein, available to Power stating as to each period including but not limited
to the amount of Gross Revenue, and the amount due to Power for the
Sub-Licensing Fee under the terms of this Sub-Licensing Agreement.
Section 9.2 Audit and Records.
CStakes shall keep true and accurate records and books of account, in
sufficient detail to enable the fees payable to Power hereunder to be
determined, showing the annual audited summary of Gross Revenue including a
summary of amounts paid pursuant to Article 4 hereof during the course of this
Sub-Licensing Agreement, which records and books of account shall be open for
inspection and independent audit by the other parties, or a duly appointed agent
of a party upon reasonable advance notice and during CStakes's usual business
hours. In the event a party has such independent audit performed and it reveals
that CStakes has underpaid Power by at least $10,000 (Ten Thousand Dollars),
then CStakes shall reimburse the parry that undertook such audit for the
reasonable costs of such audit.
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Section 9.3 Certification of Reports.
Each monthly report contemplated herein shall be accompanied by a written
certification from an authorized officer of CStakes as to the accuracy of the
report.
Section 9.4 Nil Report.
Should no sums be due, a report shall nevertheless be rendered to document
the facts and circumstances surrounding the no sums due situation.
Section 9.5 Report Due Date.
All monthly reports due hereunder shall be filed within 20 days after the
close of each month.
ARTICLE 10 TERM
Unless earlier terminated according to the provisions herein, this
agreement shall continue in force and effect in perpetuity.
ARTICLE 11 CONFIDENTIALITY
Section 11.1 Non-disclosure.
All information disclosed or furnished by one party to the other, whether
orally or in writing, in connection with the transaction contemplated hereunder
shall be deemed to be proprietary and confidential information of the disclosing
party, save and except to the extent that such confidential information must be
disclosed by law. The receiving party agrees that for the term of this Agreement
plus a period of seven (7) years after the date of earlier termination of this
Agreement, it shall not disclose any proprietary and confidential information to
any third party nor use the information for any purpose other than acting in the
best interest of and to protect the interest of each party hereto.
Section 11.2 Permitted disclosure.
The provisions of Section 11.1 notwithstanding, the receiving party may
disclose any such information without the prior written consent of the other
party, if such disclosure is required lawfully by any governmental agency, court
of competent jurisdiction or is otherwise required to be disclosed by law, but
only to the extent of such requirement, provided, however, that before making
any such disclosure, such party will provide to the other party prior written
notice of such contemplated disclosure and an adequate opportunity to interpose
objections to such disclosure or to take such other action as is necessary to
assure the confidential nature of such information.
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ARTICLE 12 ARBITRATION / CONSTRUCTION / APPLICABLE LAW
Section 12.1 AAA
Any controversy or claim arising out of or relating to this Agreement, or
breach thereof; shall be settled by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association, in
Seattle, Washington, or such other jurisdiction neutral to both parties within
the United States that the parties shall in writing agree, and judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
Section 12.2 Attornment.
By the execution of this Agreement each of the parties irrevocably and
unconditionally, with respect to any matter or thing arising out of or
pertaining to this Agreement, hereby attorns and submits to the jurisdiction of
the arbitration hearing to be conducted under the International Arbitration
Rules of the American Arbitration Association, in Seattle, Washington, by this
reference thereto.
Section 12.3 Selection of Arbitrators.
The arbitration shall be before three neutral arbitrators all of whom shall
be of the State Bar of Washington, actively engaged in the practice of law for
at least ten (10) years to be selected in accordance with the International
Arbitration Rules of the American Arbitration Association and shall proceed
under the expedited procedures of the said Rules, irrespective of the amount in
dispute.
Section 12.4 Choice of Law and Attornment.
The parties further agree to be bound by the laws of the State of
Washington, but are hereby deemed to have submitted to the said jurisdiction of
the American Arbitration Association in Seattle, Washington, by this reference
thereto, which shall apply the laws of the State of Washington in the
interpretation of this Agreement.
Section 12.5 Remedies.
12.5.1 Authority.
The arbitrators shall have the authority to award any remedy or
relief that a court of the State of Washington could order or
grant, including, without limitation, specific performance of
any obligation created under the Agreement, the awarding of
punitive damages, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the
arbitration process.
12.5.2 Damages Inadequate.
Each of the parties confirm that damages at law may be an
inadequate remedy for a
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breach or threatened breach of this Agreement and agrees that in
the event of a breach or threatened breach of any provision the
respective rights and obligations hereunder shall be enforceable
by specific performance, injunction pending an arbitration
hearing, or other equitable remedy that may be granted pending
an arbitration hearing to maintain the status quo.
12.5.3 Escrow
Pending the outcome of the arbitration, the parties shall place
in escrow with the American Arbitration Association as escrow
agent the monies or subject matter in dispute. The escrow agent
shall be entitled to release such monies or subject matter in
dispute as directed by the arbitrators in the award, unless the
parties agree otherwise in writing.
ARTICLE 13 FORCE MAJEURE
Each party shall be excused from any breach or default with respect to this
Agreement to the extent that the party was prevented from performance by reason
of anything beyond the party's control and not reasonably avoidable such as a
strike or other labor disturbance, act of any governmental authority or agency,
fire, flood, wind, storm or any act of God, or the act or omission of any party
not controlled by that parry. No party shall be liable to the other party for
any delay in or failure of performance under this Agreement due to a Force
Majeure. Any such delay in or failure of performance shall not constitute
default or give rise to any liability for damages. The existence of such causes
of delay or failure shall extend the period of performance to such extent as is
mutually determined by the parties to be necessary to enable complete
performance by a party if reasonable diligence is exercised after the causes or
delay or failure have been removed.
ARTICLE 14 NOTICES
Section 14.1 Notice Requirements.
14.1.1 All notices for the purpose of this Agreement shall be deemed to
be properly served when in writing and sent by tele-copier or
facsimile, to the other party at the address set forth in the
opening paragraph of this Agreement, or to such substitute
address as such party may from time to time designate in writing
to the other.
14.1.2 Each party shall cause all notices which may in any way affect
the obligations and responsibilities of the other party to be
directed or forwarded to that other party as the case may be and
agrees to forward all notices effecting the Proprietary
Technology that may be received from third parties to the other
party.
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14.1.3 An accidental omission in the giving of, or failure to give, a
notice required by this Agreement will not invalidate or affect
in any way the legality of any meeting or other proceeding in
respect of which such notice was or was intended to be given.
14.1.4 A party may change its address by giving written notice, of such
change to the other.
14.1.5 A document sent by telex or facsimile will be deemed to be
received on the first Business Day after valid transmission.
ARTICLE 15 INDEMNITY FOR MATERIAL BREACH
Section 15.1 Mutual Indemnities.
Each party shall indemnify, defend and hold the other harmless from and
against all claims, demands, losses, costs, expenses, obligations, liabilities,
damages, recoveries and deficiencies, including interest, penalties and
reasonable attorney's fees, that the other may incur as a result of any material
breach by the other of any terms, representations or warranties hereof.
ARTICLE 16 NON-WAIVER
Section 16.1 No Waiver.
The failure by either party to enforce at any time any of the provisions of
this Agreement, or any rights in respect thereto, or to exercise any election
herein provided, shall in no way be considered to be a waiver of such
provisions, rights or elections, or in any way to affect the validity of this
Agreement. The exercise by a party of any of its rights herein or any of its
elections under the terms of covenants herein shall not preclude or prejudice
that party from exercising the same or any other right it may have under this
Agreement or law, irrespective of any previous action or proceeding taken by
that party hereunder.
ARTICLE 17 INVALIDITY / ILLEGALITY OF PART AGREEMENT
Section 17.1 Entire Agreement / Written Modification.
This Agreement sets forth the entire intent of and understanding between
the parties hereto with respect to the subject matter hereof, supersedes all
prior discussions, negotiations and Agreements between them, and may be amended
only by a written agreement signed by all parties.
Section 17.2 Partial Invalidity / Severability.
If any provision of this Agreement or any part of any provision (in this
section called the "Offending Provision") is declared or becomes unenforceable,
invalid or illegal for any reason
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whatsoever including, without limiting the generality of the foregoing, a
decision by any competent courts, legislation, statutes, bylaws or regulations
or any other requirements having the force of law, then the remainder of this
Agreement will remain in full force and effect as if this Agency Agreement has
been executed without the Offending Provision, but amended so as to be capable
of being interpreted in a manner that is most consistent with the original
intention of the parties as stated herein.
ARTICLE 18 FURTHER ASSURANCES
The parties hereby covenant and agree to do the things, to attend the
meetings and to execute the further documents, Agreements, and assurances that
may be deemed necessary or advisable from time to time in order to carry out the
terms and conditions of this Agreement in accordance with their true intent.
ARTICLE 19 INTERPRETATION
Section 19.1 Interpretation of Agreement
For all purposes of this Agreement, except as otherwise expressly provided
or as the context otherwise requires:
19.1.1 The headings will be considered as provided for convenience only
and as not forming a part of this Agreement, and will not be
used to interpret, define or limit the scope, extent or intent
of this Agreement or any of its provisions;
19.1.2 The word "including", when following any general term or
statement, is not to be construed as limiting the general term
or statement to the specific items or matters set forth or to
similar items or matters, but rather as referring to all other
items or matters that could reasonably fall within the broadest
possible scope of the general term or statement;
19.1.3 Accounting terms not otherwise defined have the meanings
assigned to them in accordance with generally accepted U.S.
GAAP;
19.1.4 A reference to a statute includes every regulation made pursuant
thereto, all amendments to the statute or to any such regulation
in force from time to time, and any statute or regulation which
supplements or supersedes such statutes or any such regulation;
19.1.5 A reference to an entity includes any entity that is a successor
to such entity;
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19.1.6 Words importing the masculine gender include the feminine or
neuter, words in the singular include the plural, and for
greater certainty, End Users includes all its Related Entities
formed at the relevant time, and vice versa.
ARTICLE 20 EXECUTION
Section 20.1 Counterparts.
This Agreement may be executed in one or more counterparts and/or via one
document exchanged between the parties and/or their attorneys, Federal Express
or facsimile machine. Each part or facsimile shall for all purposes be deemed an
original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed at
Vancouver, British Columbia, Canada effective as of the date first written
above.
POWER DIRECT, INC. CARDSTAKES.COM
By /s/ Ferdinand Marehard By /s/ Robert Klein
----------------------- -----------------------
Ferdinand Marehard, Robert Klein,
Secretary Treasurer Secretary Treasurer
By /s/ Jack Sha By /s/ Jack Sha
----------------------- -----------------------
Jack Sha, President Jack Sha, President
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ASSET PURCHASE AND SALE AGREEMENT
By and Among
Power Direct, Inc.,
a Delaware corporation,
and
Rising Phoenix Development Ltd.,
a British Columbia corporation.
THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement") is nude and entered into in
duplicate this fifteenth day of November, 1999, by and among Power Direct, inc.,
a Delaware corporation ("Purchaser"), and Rising Phoenix Development Group Ltd.,
a British Columbia corporation ("Seller"), and provides for the Purchaser to
acquire all of the business assets of the Seller, subject to the liabilities
assumed pursuant to the provisions of this Agreement by the Purchaser and no
other liabilities, on the terms and subject to the conditions specified in this
Agreement.
RECITALS
A. The Purchaser desires to acquire, on the terms and subject to the
conditions specified in this Agreement, the business of the Seller insofar as
the same is conducted by the use of the Acquired Assets (as that term is defined
the provisions of Section 1.1 of this Agreement).
B. The Seller believes that it is in the best interests of the Seller, and,
therefore, it desires, to sell the Acquired Assets to the Purchaser, on the
terms and subject to the conditions specified in this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL BE
DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS,
PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN
THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED
LEGALLY AND EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT
AND WARRANT AS FOLLOWS:
ARTICLE I
DEFINITIONS
As used in this Agreement, the capitalized terms specified in this
Agreement shall have the meanings and definitions specified and indicated by the
provisions of this Article I, unless a
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different and common meaning of such a term is clearly indicated by the context,
and variants and derivatives of the those terms shall have correlative meanings.
To the extent that certain of the definitions specified in this Article I
suggest; indicate or express agreements between or among parties to this
Agreement, or contain representations, warranties or covenants of a party, the
parties agree to the same, by execution of this Agreement. Agreements,
representations, warranties and covenants specified in any part or provision of
this Agreement shall for all purposes of this Agreement be treated in the same
manner as other such agreements, representations, warranties and covenants
specified elsewhere in this Agreement, and the article, section or paragraph of
this Agreement within which such an agreement, representation, warranty, or
covenant appears shall have no separate meaning or effect on the same.
1.1 "Acquired Assets". The assets of the Seller being acquired by the
Purchaser pursuant to the provisions of this Agreement, as specified on Schedule
2.1 of this Agreement, and all other assets of the Seller, tangible or
intangible, including contractual, warranty and other rights, the use or value
of which will come within the Control (as that term is defined by the provisions
of Section 1.15 of this Agreement) by the Purchaser when the Transaction (as
that term is defined by the provisions of Section 1.36 of this Agreement) is
consummated.
1.2 "Acquired Business". The business conducted by the Seller in which the
Seller utilized the Acquired Assets, as described on Schedule 2.1 to this
Agreement.
1.3 "Acquired Facilities". All office space, warehouses, stores, plants,
production facilities, manufacturing facilities, fixtures, furniture, office
equipment, computer equipment, common areas, storage facilities, rights of way,
driveways, and improvements owned or leased by the Seller or otherwise used by
the Seller in connection with the operation of its business or leased or
subleased by the Seller to other person or Entities, but only to the extent that
the same consist of Acquired Assets.
1.4 "Affiliate". When used with respect to a person, an "Affiliate" of that
person is a person controlling, controlled by, or under common control with that
person.
1.5 "Agreement". This Asset Purchase and Sale Agreement, including all of
its schedules and exhibits and all other documents specifically referred to in
this Agreement that have been or are to be delivered by a party to this
Agreement to another such party in connection wit the Transaction or this
Agreement, and including, but not limited to, all duly and validly adopted
amendments, modifications, and supplements to or of this Agreement and such
schedules, exhibits and other documents.
1.6 "Assumed Liabilities". The Liabilities (as that term is defined by the
provisions of Section 1.22 of this Agreement) of the Seller being assumed by the
Purchaser pursuant to the provisions of this Agreement, as specifically
identified in Schedule 2.1 to this Agreement, and no other Liabilities of the
Seller or the Acquired Business.
1.7 "Audited Financial Statements". The balance sheet, income statement,
statement of
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stockholders' equity, and statement of cash flows or, in each instance,
equivalent statements of the respective, subject corporation as commonly
provided to such corporation's shareholders, as at December 31, 1998, and for
the three (3) years then ended, as reported on by Auditors.
1.8 "Auditors". Independent certified public accountants currently retained
for the purpose of auditing financial statements of the respective, particular
person.
1.9 "Business Day". Any day that is not a Saturday, Sunday or day on which
banks in Wilmington, Delaware are authorized to close.
1.10 "Closing". The completion and consummation of the Transaction, to
occur as contemplated in Article II of this Agreement.
1.11 "Closing Date". The date on which the Closing actually occurs, which
shall be no later than December__, 1999, unless otherwise agreed by the parties,
but shall not in any event be prior to satisfaction or waiver of the conditions
to Closing specified in Article VII of this Agreement.
1.12 "Closing Time". The time at which the Closing actually occurs. All
events that are to occur at the Closing Time shall, for all purposes, be deemed
to occur simultaneously, except to the extent, if at all, that a specific order
of occurrence is otherwise described.
1.13 "Code". The Internal Revenue Code of 1986, as amended and in effect on
the date the parties sign this Agreement.
1.14 "Consideration". (i) Three million eight hundred thousand (3,800,000)
shares of $.0001 par value common stock of the Purchaser to be issued by the
Purchaser to the Seller at the Closing ("Subject Shares"); and (ii) Seventy-Five
Thousand Dollars ($75,000.00), for which the Acquired Assets will be purchased
from the Seller.
1.15 "Control". Generally, the power to direct the management or affairs of
an Entity.
1.16 "Dollars" of the symbol "$" refers to and shall mean the currency of
the United States of America, unless otherwise specified.
1.17 "Entity". A corporation, trust, association, municipality,
partnership, sole proprietorship, joint venture, or other form of organization
formed for the conduct of a business, whether active or passive.
1.18 "ERISA". The Employee Retirement Income Security Act of 1974, as
amended and in effect at the time of execution of this Agreement.
1.19 "GAAP". Generally Accepted Accounting Principles as applied
consistently in the United States of America, as in effect on the date of any
statement, report or determination that
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purports to be, or is required to be, prepared or made in accordance with GAAP.
All references in this Agreement to financial statements prepared in accordance
with GAAP shall mean in accordance with GAAP consistently applied throughout the
periods to which reference is made.
1.20 "Inventories". The stock of raw materials, work-in-process and
finished goods, including, but not limited to, finished goods purchased for
resale, held by the Seller for manufacturing, assembly, processing, finishing,
sale, or resale to others from time to time in the ordinary course of the
business of the Seller, in the form in which such inventories then are held or
after manufacturing, assembling, finishing, processing, incorporating with other
goods or items, refining, or similar processes.
1.21 "IRS". The United States Internal Revenue Service.
1.22 "Liabilities". At any time ("Determination Time"), the obligations of
a person or Entity, whether known or unknown, contingent or absolute, recorded
on its books or not, resulting in any way from facts, events, agreements,
obligations or occurrences that existed, occurred or transpired at a prior time,
or resulted from the passage of time to the Determination Time, but not
including obligations accruing or payable after the Determination Time to the
extent (but only to the extent) that such obligations (a) result from previously
existing agreements for services, benefits, or other considerations and (b)
accrue or become payable with respect to services, benefits, or other
considerations received by the person or Entity after the Determination Time.
1.23 "Multiemployer Plan". A "multiemployer plan," as defined in Section
3(37) of ERISA or Section 414(f) of the Code, or, in either case, successor
provisions to such provisions adopted by amendments to ERISA or the Code, as the
case may be, and including, in each case, other provisions of ERISA, of the
Code, or of other law, and regulations adopted pursuant to ERISA, or the Code,
or such other law, modifying, amending, interpreting, or otherwise affecting the
application of such provisions, either in general or as applied to the nature or
circumstances of a particular Entity that is a party to, or is affected by, or
is involved in, the Transaction and with respect to which Entity the use of the
term in this Agreement, or in the particular provision in this Agreement, is
relevant.
1.24 "Payables". Liabilities of a person or Entity resulting from the
borrowing of money or the incurring of obligations for merchandise or goods
purchased.
1.25 "Pension Plan". A "pension plan" or "employee pension benefit plan,"
as defined in Section 3(2) of ERISA or successor provisions to such provision
adopted by amendments to ERISA and including other provisions of ERISA; or of
other law, and regulations adopted pursuant to ERISA or such other law,
modifying, amending, interpreting, & otherwise affecting the application of such
provision, either in general or as applied to the nature or circumstances of a
particular Entity that is a party to, or is affected by, or is involved in, the
Transaction and with respect to which Entity the use of the term in this
Agreement, or in the particular provision in this Agreement, is relevant.
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1.26 "Projections". The projections of economic results of the Seller,
prepared quarterly through October 31, 1999, and delivered to the Purchaser
pursuant to the terms of this Agreement. The Projections include projected
financial results for the business operations of the Seller. The Purchaser
acknowledges that projections of future economic performance are necessarily
unreliable and subject to the occurrence or nonoccurrence of a variety of
events, but the Seller represents and warrants that the Projections have been
prepared on the basis of assumptions that are, in the judgment of the Seller,
reasonable in all respects and are not, to the knowledge of the Seller, contrary
in any material respect to fact or to events that have occurred or are presently
in existence.
1.27 "Proprietary Information". For example, but without any limitation,
any and all marketing and sales data, plans and strategies, financial
projections, customer lists, prospective customer lists, promotional ideas, data
concerning services, designs, methods, inventions, improvements, discoveries,
designs whether or not patentable, "know-how", training and sales techniques and
any other information of a similar nature.
1.28 "Proprietary Rights". Trade secrets, copyrights, patents, trademarks,
service marks, customer lists, and all similar types of intangible property
developed, created or owned by the person claiming ownership, proprietary or
similar, or used by such person in connection with such person's business,
whether or not the same are entitled to legal protection.
1.29 "Purchaser". Power Direct, Inc., a Delaware corporation, which,
pursuant to the provisions of this Agreement, is purchasing the Acquired Assets.
1.30 "Receivables". Accounts receivable, notes receivable, and other
obligations presented as assets on the books, records and financial statements
of an Entity or a person, in accordance with GAAP, indicating moneys owed, due
and payable to that Entity or person on whose financial statements such
receivables are presented.
1.31 "SEC". The Securities and Exchange Commission.
1.32 "Securities Act". The Securities Act of 1933, as amended to the date
as of which any reference thereto is relevant pursuant to this Agreement,
including any substitute or replacement statute adopted in place or lieu
thereof.
1.33 "Seller". Rising Phoenix Development Group Ltd., a British Columbia
corporation, which, pursuant to the provisions of this Agreement, is selling the
Acquired Assets.
1.34 "Seller Balance Sheet". The most recent balance sheet included in the
Audited Financial Statements of the Seller.
1.35 "Subsidiary" or "Subsidiaries". With respect to any Entity, another
Entity of which fifty percent (50%) or more of the effective voting power, or
the effective power to elect a majority of the board of directors or similar
governing body, or fifty percent (50%) or more of the woe equity interest, is
owned by such first Entity, directly or indirectly.
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1.36 "Transaction". The sale of the Acquired Assets, subject to the Assumed
Liabilities, for the consideration as contemplated by, and on the terms and
subject to the conditions of, this Agreement.
1.37 "Unaudited Financial Statements". The balance sheet, income statement,
statement of stockholders' equity and statement of cash flows or equivalent
statements of the respective, subject Entity or person, as commonly prepared, as
at October 31, 1999, with comparable statements for the similar period of the
prior fiscal year.
1.38 "Welfare Plan". A "welfare plan" or an "employee welfare benefit
plan," as defined in Section 3(1) of ERISA or successor provisions to such
provision adopted by amendments to ERISA and including other provisions of ERISA
or of other law, and regulations adopted pursuant to ERISA or such other law,
modifying, amending, interpreting, or otherwise affecting the application of
such provision, either in general or as applied to the nature or circumstances
of a particular Entity that is a party to, or is affected by, or is involved in,
the Transaction and with respect to which Entity the use of the term in this
Agreement, or in the particular provision in this Agreement, is relevant.
ARTICLE II
THE TRANSACTION
2.1 The Transaction. On the Closing Date, and at the Closing Time, on, and
in all instances subject to, each of the terms, conditions, provisions and
limitations specified in this Agreement, the Seller shall sell, transfer,
convey, assign, deliver and set over to the Purchaser, by instruments
satisfactory in form and substance to the Purchaser, and the Purchaser shall
acquire from the Seller, the Acquired Assets, subject to the Assumed
Liabilities, and only those Liabilities and no others, in exchange for the
Consideration. The assets specified on Schedule 2.1 to this Agreement, the
provisions of which, by this reference, are made a part of this Agreement as
though specified completely and specifically at length in this Section 2.1, are
all the assets reasonably necessary for the conduct of the Acquired Business in
the ordinary course and in the same manner as that in which such business has
been conducted in the immediate past, including, but not limited to, all
Proprietary Rights of the Seller so used in the ordinary conduct of the Acquired
Business and all contract, warranty, and other intangible rights relating to or
resulting from such Acquired Business. Neither the Purchaser nor any of its
Affiliates is assuming, becoming liable for, agreeing to discharge or in any
manner becoming in any way responsible for, any of the Liabilities of the
Seller, other than those Liabilities expressly specified on Schedule 2.1 and
accepted by the Purchaser pursuant to this Section 2.1.
2.2 Delivery of Consideration. Pursuant this Transaction, the Purchaser
shall deliver or cause to be delivered on the Closing Dare (i) the certificate
evidencing and representing the Subject Shares. The Purchaser has, prior to the
execution of this Agreement, delivered to the Seller Seventy-Five Thousand
Dollars ($75,000.00) in partial performance of Purchaser's obligation to deliver
the Consideration.
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2.3 Closing. The Closing of the transaction shall occur at the offices of
Stepp & Beauchamp LLP, 1301 Dove Street, Suite 460, Newport Beach, California,
at 10:00 A.M., or at such other place as the Purchaser and the Seller may agree,
on the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
3.1 Organization and Qualification. The Purchaser is a corporation duly
organized, validly existing and in good standing pursuant to the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to conduct its business as that business is now being conducted. The
Purchaser is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned
or leased by it, or the nature of its activities, is such that qualification as
a foreign corporation in that jurisdiction is required by law.
3.2 Authority Relative to This Agreement. The Purchaser has the requisite
corporate power and authority to carry out its obligations specified by the
provisions of this Agreement. The execution and delivery of this Agreement and
the consummation of the Transaction have been duly authorized and approved by
the requisite corporate authority of the Purchaser and no other corporate
proceedings on the part of the Purchaser are necessary to approve and adopt this
Agreement or to approve the consummation of the Transaction, including the
issuance and delivery of the Subject Shares. The Purchaser has, and any officer,
director or representative executing this Agreement for and on behalf of the
Purchaser has, the legal capacity and authority to enter into and deliver this
Agreement. This Agreement is a valid and legally binding obligation of the
Purchaser and is enforceable completely against the Purchaser in accordance with
its terms, except as such enforceability may be limited by general principles of
equity, bankruptcy, insolvency, moratorium and similar laws relating to
creditors' rights generally, and subject to approval of any and all governmental
regulatory agencies and authorities having jurisdiction of the relationship
between the parties contemplated by the provisions of this Agreement and the
Transaction.
3.3 Absence of Breach; No Consents. The execution, delivery and performance
of this Agreement, and the performance by the Purchaser of its obligations
specified by the provisions of this Agreement (except for compliance with any
regulatory or licensing laws applicable to the business of the Purchaser, all of
which, to the extent applicable to the Purchaser (and to the extent within its
Control), will be satisfied in all material respects prior to the Closing) do
not (i) conflict with, and will not result in a breach of, any of the provisions
of the Certificate of Incorporation or Bylaws of the Purchaser; (ii) contravene
any law, rule or regulation of any state or commonwealth, the United States,
(except for compliance with regulatory or licensing laws, all of which, to the
extent applicable to the Purchaser (and to the extent within the Control of the
Purchaser), will be satisfied in all material respects prior to the Closing), or
any applicable foreign jurisdiction, or contravene any order, writ, judgment,
injunction, decree, determination, or award affecting or obligating the
Purchaser, in such a manner as to provide a basis for enjoining or otherwise
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preventing consummation of the Transaction; (iii) conflict with or result in a
material breach of or default pursuant to any material indenture or loan or
credit agreement or any other material agreement or instrument to which the
Purchaser is a party, in such a manner as to provide a basis for enjoining or
otherwise preventing consummation of the Transaction; or (iv) require the
authorization, consent, approval or license of any third party of such a nature
that the failure to obtain the same would provide a basis for enjoining or
otherwise preventing consummation of the Transaction.
3.4 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with this Agreement
or the Transaction or any related transaction based upon any agreements, written
or oral, made by or on behalf of Purchaser or any of its Subsidiaries.
3.5 Taxes. The Purchaser has properly filed or caused to be filed all
federal, state, local and foreign income and other tax returns, reports and
declarations that are required by applicable law to be filed by the Purchaser
and has paid, or made full and adequate provision for the payment of, all
federal, state, local and foreign income and other taxes properly due for the
periods for which such returns, reports and declarations are applicable.
3.6 Litigation. No investigation or review by any governmental agency with
respect to the Purchaser is pending or threatened (other than inspections and
reviews customarily made of businesses such similar to that the Purchaser), nor
has any governmental agency indicated to the Purchaser an intention to conduct
the same. There is no action, litigation matter or proceeding pending or
threatened against or affecting the Purchaser at law or in equity, or before any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality.
3.7 Employees, Etc. There are no collective bargaining, bonus, profit
sharing, compensation, or other plans, agreements, trusts, funds, or
arrangements maintained by the Purchaser for the benefit of directors, officers
or employees of, and there are no employment, consulting, severance, or
indemnification arrangements, agreements, or understandings between the
Purchaser, on the one hand, and any current or former directors, officers or
other employees (or Affiliates thereof), on the other hand, except as disclosed
to the Seller in writing. The Purchaser is not, and following the Closing will
not be, obligated by any express or implied contract or agreement to employ,
directly or as consultant or otherwise, any person for any specific period of
rime or until any specific age.
3.8 Compliance With Laws. The Purchaser is in compliance with all, and has
received no notice of any violation of any, laws or regulations applicable to
its operations, including, but nor limited to, the laws and regulations relevant
to the use or utilization of premises, or with respect to which compliance is a
condition of engaging in any aspect of the business of the Purchaser and the
Purchaser has all permits, licenses, zoning rights and other governmental
authorizations necessary to conduct its business as presently conducted.
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3.9 Ownership of Assets. The Purchaser has good, marketable and insurable
title, or valid, effective and continuing leasehold rights in the case of leased
property, to all real property (as to which, in the case of owned property, such
title is fee simple) and all personal property owned or leased by the Purchaser
in such a manner as to create the appearance or reasonable expectation that the
same is owned or leased by the Purchaser; such ownership is free and clear of
all liens, claims, encumbrances and charges, except liens for ties not yet due
and minor imperfections of title and encumbrances, if any, which, singly and in
the aggregate, are nor substantial in amount and do not materially detract from
the value of the property subject thereto or materially impair the use thereof;
no other person or Entity has any ownership or similar right in, or contractual
or other right to acquire any such right in, any of such assets. The Purchaser
does not know of any potential action by any party, governmental or other, and
no proceedings with respect thereto have been instituted of which the Purchaser
has notice, that would materially affect the Purchaser's ability to use and to
utilize each of the Purchaser's assets. The Purchaser has received no notices
from any mortgagee regarding any of its leased properties.
3.10 Proprietary Rights. The Purchaser possesses full and complete
ownership of, or adequate and enforceable long-term licenses or other rights to
use (without payment), all of the Purchaser's Proprietary Rights; the Purchaser
has not received any notice of conflict which asserts the rights of others with
respect thereto; and the Purchaser has in all material respects performed all of
the obligations required to be performed by the Purchaser, and is not in default
in any material respect, pursuant to any agreement relating to any such
Proprietary Right.
3.11 Subsidiaries. All of the Subsidiaries of Purchaser; direct or
indirect, have been identified by the Purchaser to the Seller, and the Purchaser
has no other Subsidiaries.
3.12 Trade Names. The Purchaser has not utilized any fictitious business
names or similar names in the conduct of the Purchaser's business or in the
utilization of the Purchaser's assets.
3.13 Employee Benefit Plans. The Purchaser does not maintain or contribute
to any Pension Plan or any Welfare Plan, nor is the Purchaser presently, nor has
the Purchaser been within the last six (6) years, a participating employer in
any Multiemployer Plan, affecting, in any case, employees of the Purchaser.
3.14 Accounts Receivable. All accounts receivable of the Purchaser
represent transactions in the ordinary course of business and are current and
collectible.
3.15 Accounts Payable. The accounts payable of the Purchaser at the time of
the Closing will be all amounts owed by the Purchaser in respect of trade
accounts due and other Payables of the Purchaser.
3.16 Labor Matters. There are no activities or controversies, including,
but not limited to, any labor organizing activities, election petitions or
proceedings, proceedings preparatory thereto, unfair labor practice complaints,
labor strikes, disputes, slowdowns, or work stoppages, pending or, to the best
of the knowledge of the Purchaser, threatened, affecting employees of the
Purchaser.
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3.17 Insurance. The Purchaser has insurance policies in full force and
effect insuring the assets of the Purchaser and such insurance policies provide
for coverages which are usual and customary in the business of the Purchaser as
to amount and scope, and are adequate to protect the assets of the Purchaser
against any reasonably foreseeable risk of loss, including business
interruption. The Purchaser has not within the past three (3) years received any
notice of cancellation of any insurance agreement affecting the assets of the
Purchaser.
3.18 Full Disclosure. The documents, certificates and other writings
furnished or to be furnished by or on behalf of the Purchaser to the Seller
pursuant to the provisions of this Agreement, taken together in the aggregate,
do not and will not contain any untrue statement of a material fact, or omit to
specify any material fact necessary to make the information specified therein,
considering the circumstances pursuant to which such information was specified
not misleading.
3.19 Capitalization; the Subject Stock; Related Matters. The authorized
capital stock of the Purchaser consists of one hundred million (100,000,000)
shares of $.0001 par value common stock. As of the date of this Agreement, there
are eighteen million four hundred ninety-seven thousand five hundred
(18,497,500) shares of such common stock issued and outstanding. The Subject
Shares, when issued, will be duly, legally and validly issued and will be
non-assessable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as follows:
4.1 Organization and Qualification. The Seller is a corporation duly
organized, validly existing and in good standing pursuant to the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to conduct its business as that business is now being conducted. The
Seller is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned or
leased by it, or the nature of its activities, is such that qualification as a
foreign corporation in that jurisdiction is required by law.
4.2 Authority Relative to This Agreement. The Seller has the requisite
corporate power and authority to carry out its obligations specified by the
provisions of this Agreement. The execution and delivery of this Agreement and
the consummation of the Transaction have been duly authorized and approved by
the requisite corporate authority of the Seller and no other corporate
proceedings on the part of the Seller are necessary to approve and adopt this
Agreement or to approve the consummation of the Transaction, including the sale
and delivery of the Acquired Business and each of the Acquired Assets, except
for shareholder approval specified elsewhere in this Agreement. The Seller has,
and any officer, director or representative executing this Agreement for and on
behalf of the Seller has, the legal capacity and authority to enter into and
deliver this Agreement. This Agreement is a valid and legally binding obligation
of the Seller and is enforceable completely against the Seller in accordance
with its terms, except as such
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enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors' rights generally,
and subject to approval of any and all governmental regulatory agencies and
authorities having jurisdiction of the relationship between the parties
contemplated by the provisions of this Agreement and the Transaction.
4.3 Absence of Breach; No Consents. The execution, delivery and performance
of this Agreement, and the performance by the Seller of its obligations
specified by the provisions of this Agreement, do not (i) contravene any law,
ordinance, rule or regulation of any State or Commonwealth or political
subdivision of the United States except for and compliance with regulatory or
licensing laws all of which, to the extent applicable to the Seller (and to the
extent within the Control of the Seller), will be satisfied in all material
respects prior to the Closing), or of any applicable foreign jurisdiction, or
contravene any order, writ, judgment, injunction, decree determination, or award
of any court or other authority having jurisdiction, or cause the suspension or
revocation of any authorization, consent, approval, or license, presently in
effect, which affects or obligates the Seller or all or any part of the Acquired
Business or any of the Acquired Assets or any material properties of the
Acquired Business, except in any such event when such contravention will not
have a material adverse effect on the business, condition (financial or
otherwise), operations or prospects of the Acquired Business or any of the
Acquired Assets and will not have a material adverse effect on the validity of
this Agreement or on the validity of the consummation the Transaction; (ii)
conflict with or result in a material breach of or default under any material
indenture or loan or credit agreement or any other material agreement or
instrument to which the Seller or any of part of the Acquired Business is a
party or by which any of the material properties of the Acquired Business may be
affected or obligated; (iii) require the authorization, consent, approval, or
license of any third party; or (iv) provide justification for the loss or
suspension of any permits, licenses, or other authorizations used in the
Acquired Business.
4.4 Broker. No broker, finder or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with this
Agreement or the Transaction or any related transaction based upon any
agreements, written or oral, made by or on behalf of Seller or any of its
Subsidiaries. The Seller does not have any obligation to pay finder's or
broker's fees or commissions in connection with the exercise of options to renew
or extend real estate leases to which the Seller is a party.
4.5 Financial Statements. On or before the Closing, the Seller will deliver
or cause to be delivered to the Purchaser the following:
1. Audited Financial Statements;
2. Unaudited Financial Statements;
3. All documents of the Seller filed with the SEC within the four (4)
years preceding the date of execution of this Agreement; and
4. The Projections.
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All of the historical financial statements contained in such documents were
prepared from the books and records of the Seller. The Audited Financial
Statements were prepared in accordance with GAAP, and fairly and accurately
present the financial situation and condition of the Seller as at the dates and
for the periods indicated. Without limiting the foregoing, at the date of the
Seller Balance Sheet, the Seller owned each of the assets specified on the
Seller Balance Sheet, and the valuation of such assets in the Seller Balance
Sheet is not more than their fair saleable value (on an item-by-item basis) at
that date; and the Seller had no Liabilities, other than those specified in the
Seller Balance Sheet, nor any Liabilities in amounts in excess of the amounts
included for them in the Seller Balance Sheet. The Unaudited Financial
Statements were prepared in a manner consistent with the basis of presentation
used in the Audited Financial Statements, and fairly present the financial
situation and condition of the Seller as at and for the periods indicated,
subject to normal year-end adjustments, none of which will be material. The
Projections reasonably anticipate the results of operations that the Seller
expects it will achieve, absent the occurrence of extraordinary events or
unusual conditions of which the Seller is not presently on notice. From the date
of this Agreement through the Closing Date the Seller will continue to prepare
financial statements on the same basis that it has done so in the past, will
promptly deliver the same to the Purchaser, and the foregoing representations
will be applicable to each financial statement so prepared and delivered.
4.6 No Undisclosed Liabilities. The Seller has no Liabilities which are not
adequately presented or reserved against on the Seller Balance Sheet, except
Liabilities incurred since the date of the Seller Balance Sheet in the ordinary
course of business and consistent with past practice. Without limiting the
foregoing, (a) there are no unpaid leasehold improvements at any of the Acquired
Facilities or locations for which the Seller is or will be responsible and (b)
there are no deferred rents due to lessors at or with respect to any of such
Acquired Facilities or locations.
4.7 No Material Adverse Change, Etc. Since the date of the Seller Balance
Sheet, other than as contemplated or caused by this Agreement, there has not
been (i) any material adverse change in the business, condition (financial or
otherwise), operations, or prospects of the Seller; (ii) any damage,
destruction, or loss, whether covered by insurance or not, having a material
adverse effect on the business, condition (financial or otherwise), operations
or prospects of the Seller; (iii) any entry into or termination of any material
commitment, contract, agreement or transaction (including, but not limited to,
any material borrowing or capital expenditure or sale or other disposition of
any material asset or assets) of or involving the Seller, other than this
Agreement and agreements executed in the ordinary course of business; (iv) any
redemption, repurchase or other acquisition for value of its capital stock by
the Seller, or any issuance of capital stock of the Seller or of securities
convertible into or rights to acquire any such capital stock or any dividend or
distribution declared, set aside or paid on capital stock of the Seller; (v) any
transfer of or right granted pursuant to any material lease, license, agreement,
patent, trademark, trade name or copyright of the Seller; (vi) any sale or other
disposition of any asset of the Seller, or any mortgage, pledge or imposition of
any lien or other encumbrance on any asset of the Seller, other than in the
ordinary course of business, or any agreement relating to any of the foregoing;
or (vii) any default or breach by the Seller in any material respect pursuant to
any
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contract, license or permit. Since the date of the Seller Balance Sheet, the
Seller has conducted its business only in the ordinary and usual course, and,
without limiting the foregoing, no changes have been made in (i) executive
compensation amounts, (ii) the manner in which other employees of the Seller are
compensated, (iii) supplemental benefits provided to any such executives or
other employees, or (d) inventory amounts in relation to sales amounts, except,
in any such event, in the ordinary course of business and, in any event, without
material adverse effect on the business, condition (financial or otherwise),
operations or prospects of the Seller.
4.8 Taxes. The Seller has properly filed or caused to be filed all federal,
state, local and foreign income and other tax returns, reports and declarations
that are required by applicable law to be filed by the Seller and that relate to
or in any way affect the Acquired Business or the Acquired Assets and has paid,
or made full and adequate provision for the payment of, all federal, state,
local and foreign income and other taxes properly due for the periods for which
such returns, reports and declarations are applicable.
4.9 Litigation. No investigation or review by any governmental agency with
respect to the Acquired Business or any of the Acquired Assets or the use
thereof is pending or threatened (other than inspections and reviews customarily
made of businesses such as the Acquired Business), nor has any governmental
agency indicated to the Seller an intention to conduct the same. There is no
action, litigation matter or proceeding pending or threatened against or
affecting the Acquired Business or the Acquired Assets at law or, in equity, or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality.
4.10 Employees, Etc. There are no collective bargaining, bonus, profit
sharing, compensation or other plans, agreements, trusts, funds or arrangements
maintained by the Seller, and there are no employment, consulting, severance or
indemnification arrangements, agreements, or understandings between the Seller,
on the one hand, and any current or former employees of the Seller (or
Affiliates thereof), on the other hand. The Seller is not, and following the
Closing will not be, obligated by any express or implied contract or agreement
to employ, directly, or as a consultant or otherwise, any person for any
specific period of time or until any specific age.
4.11 Compliance With Laws. The Acquired Business and each of the Acquired
Assets is in compliance with all, and has received no notice of any violation of
any, laws or regulations applicable to the operations of the Acquired Business,
including, but not limited to, the laws and regulations relevant to the use or
utilization of premises, or with respect to which compliance is a condition of
engaging in any aspect of the business of the Acquired Business or utilizing any
of the Acquired Assets, and the Acquired Business has all permits, licenses,
zoning rights and other governmental authorizations necessary to conduct the
Acquired Business as presently conducted. All such permits, licenses, zoning
rights and other governmental authorizations will, as a part and consequence of
the Transaction, be transferred to the Purchaser at the Closing.
4.12 Ownership of Assets. The Seller has good, marketable and insurable
tide, or valid, effective and continuing leasehold rights in the case of leased
property, to all real property (as to
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which, in the case of owned property, such title is fee simple) and all personal
property owned or leased by the Seller and comprising any part of the Acquired
Assets or the Acquired Business, or used by it in the conduct of the Acquired
Business in such in manner as to create the appearance or reasonable expectation
that the same is owned or leased by the Seller; such ownership is free and clear
of all liens, claims, encumbrances and charges, except liens for taxes not yet
due and minor imperfections of title and encumbrances, if any, which, singly and
in the aggregate, are not substantial in amount and do not materially detract
from the value of the property subject thereto or materially impair the use
thereof; no other person or Entity has any ownership or similar right in, or
contractual or other right to acquire any such right in, any of such assets; and
such ownership will be conveyed to the Purchaser at the Closing pursuant to the
Transaction. The Seller does not know of any potential action by any party,
governmental or other, and no proceedings with respect thereto have been
instituted of which the Seller has notice, that would materially affect the
Purchaser's ability to use and to utilize each of such assets in the business of
the Acquired Business. The Seller has received no notices from any mortgagee
regarding any leased properties of the Acquired Business or the leasehold
interest in which comprises any part of the Acquired Assets.
4.13 Proprietary Rights. The Seller possesses full and complete ownership
of, or adequate and enforceable long-term licenses or other rights to use
(without payment), all Proprietary Rights used in the Acquired Business or
utilized in conjunction with the Acquired Assets, and all such ownership,
license or other rights shall be conveyed to the Purchaser at the Closing
pursuant to the Transaction; the Seller has not received any notice of conflict
which asserts the rights of any other person or Entity with respect thereto; and
the Seller has in all material respects performed all of the obligations
required to be performed by the Seller, and is not in default in any material
respect, pursuant to any agreement relating to any such Proprietary Right.
4.14 Trade Names. The Seller has nor utilized any trade name, fictitious
business name, or other similar name to conduct any part of the Acquired
Business or to utilize any of the Acquired Assets during the ten (10) years
preceding the date of this Agreement.
4.15 Employee Benefit Plans. The Seller does not maintain or contribute to
any Pension Plan or Welfare Plan, nor is the Seller presently, nor has the
Seller been within the last six (6) years, a participating employer in any
Multiemployer Plan, affecting, in any case, employees of the Acquired Business
or employees of the Seller.
4.16 Facilities. The Acquired Facilities are (as to physical plant and
structure) structurally sound and none of the Acquired Facilities, nor any of
the vehicles or other equipment used by the Seller in connection with the
Acquired Business, has any material defects and all of them are in all material
respects in good operating condition and repair and are adequate for the uses to
which they are being put; none of such Acquired Facilities, vehicles or other
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs which are not material in nature or cost. The Seller is
not in breach, violation or default of any lease affecting the Acquired Business
or the Acquired Assets with respect to, or as a result of, which the other party
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(whether lessor, lessee, sublessor, or sublessee) thereto has the right to
terminate the same, and the Seller has not received notice of any claim or
assertion that the Seller is or may be in any such breach, violation or default.
4.17 Accounts Receivable. All accounts receivable of the Seller, whether or
not specified on the Seller Balance Sheet, represent transactions in the
ordinary course of business, and are current and collectible net of any reserves
specified on the Seller Balance Sheet (which reserves are adequate and were
calculated consistent with past practice).
4.18 Inventories. All Inventories of the Seller are of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which, in the
aggregate, are immaterial in amount. Items included in such Inventories are
carried on the books of the Seller at the lower of cost or market and, in any
event, at not greater than their net realizable value, on an item by item basis,
after appropriate deduction for costs of completion, marketing costs,
transportation expenses and allocation of overhead.
4.19 Contracts. The Schedule 4.19 to this Agreement specifies all
contracts, agreements, or understandings, whether express or implied, written or
verbal, to which the Seller is a party. Schedule 4.19 to this Agreement also
specifies a brief summary of each such contract, agreement or understanding
identified therein. Without in any respect limiting the foregoing, Schedule 4.19
to this Agreement specifies a description of all leases of properties by the
Seller, including all amendments, supplements, extensions and modification
thereof, identifying, inter alia, the dare each such document was executed and
its effective period. The Seller is not a party to any executory contract to
sell or transfer any part of any leasehold interest of the Seller. True and
accurate copies of all leases, and of all amendments, supplements, extensions,
modifications thereof, have heretofore been delivered to the Purchaser by the
Seller.
4.20 Accounts Payable. The accounts payable specified on the Seller Balance
Sheet do, and those specified in the most recent balance sheet included in the
Unaudited Financial Statements do, and those specified on the books and records
of the Seller at the time of the Closing will, specify all amounts owed by the
Seller in respect of trade accounts due and other Payables, and the actual
Liabilities of the Seller in respect of such obligations was not, and will not
be, on any of such dates, in excess of the amounts so specified on the balance
sheets or the books and records of the Seller, as the case may be.
4.21 Labor Matters. There are no activities or controversies, including,
but not limited to, any labor organizing activities, election petitions or
proceedings, proceedings preparatory thereto, unfair labor practice complaints,
labor strikes, disputes, slowdowns, or work stoppages, pending or, to the best
of the knowledge of the Seller, threatened, affecting employees of the Seller.
4.22 Insurance. The Seller has insurance policies in full force and effect
insuring the Acquired Assets and the Acquired Business, and such insurance
policies provide for coverages which are usual and customary `in the business of
the Acquired Business as to amount and scope,
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and arc adequate to protect the Acquired Business and the Acquired Assets
against any reasonably foreseeable risk of loss, including business
interruption. The Seller has not within the past three (3) years received any
notice of cancellation of any insurance agreement affecting the Acquired Assets
or the Acquired Business.
4.23 Title to and Utilization of Real Properties. The Seller owns fee,
simple, insured title to all real property included in the Acquired Assets and
has the unfettered right to use the same, and is not aware of any claim, notice
or threat to the effect that the Seller's right to own and use such property is
subject in any way to any challenge, claim, assertion of rights, proceeding
toward condemnation or confiscation, in whole or in part, or is otherwise
subject to challenge. Each parcel of real property the ownership of, or
leasehold interest in, which is included among the Acquired Assets is free of
any and all hazardous wastes, toxic substances, or other types of contamination
or matters of environmental concern, and the Seller is not subject to any
liability resulting from or related to any such wastes, substances, contaminants
or matters of environmental concern in connection with any such property. The
Seller has, in conjunction with acquiring ownership of, or any leasehold
interest in, each parcel of real property the ownership of, or leasehold
interest in, which is included among the Acquired Assets, (i) caused an audit
and examination to be made as to the existence of any hazardous wastes, toxic
substances or other types of contamination or matters of environmental concern
affecting each such property, which examination indicated that such property was
free of any such wastes, substances, contaminants or other matters of
environmental concern, and the Seller has delivered a copy of the report of such
audit and examination to the Purchaser; and (ii) obtained an appropriate policy
of title insurance insuring the interest of the Seller in such property, which
insurance policy was not subject to any exceptions not reasonably acceptable in
the ordinary course of business, and a copy of which has been delivered to the
Purchaser.
4.24 Full Disclosure. The documents, certificates, and other writings
furnished or to be furnished by or on behalf of the Seller to the Purchaser
pursuant to the provisions of this Agreement, taken together in the aggregate,
do not and will not contain any untrue statement of a material fact, or omit to
specify any material fact necessary to make the information specified,
considering the circumstances pursuant to which such information was specified,
not misleading.
4.25 Actions Since Seller Balance Sheet Date. Since the date of the Seller
Balance Sheet, the Seller has taken no actions that would be prohibited pursuant
to the provisions of this Agreement (without the prior consent of the Purchaser)
after the date of this Agreement.
4.26 The Seller's Acquisition Intention. Seller represents and confirms to
the Purchaser that it (i) is an "accredited investor" within the meaning of Rule
501(a) pursuant to the Securities Act or, if not such an accredited investor,
has, alone or together with a purchaser representative within the meaning of
Rule 501(b) pursuant to the Securities Act, such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Purchaser's securities; (ii) is aware of the
limits on resale of the Subject Shares imposed because of the nature of the
Transaction (Rule 144); and (iii) is receiving the Subject
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Shares without registration pursuant to the Securities Act, in reliance on that
exemption from registration and prospectus delivery requirements of the
Securities Act specified by Regulation S promulgated pursuant to the Securities
Act for investment, and without any intent to sale, resale, or otherwise
distribute the Subject Shares in any manner that is in violation of the
Securities Act. The certificates representing the Subject Shares, when delivered
to the Seller at the Closing, may have appropriate orders restricting transfer
placed against them on the records of the transfer agent for such securities,
and may have placed upon them the following legend:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN
ACQUIRED FOR INVESTMENT ONLY AND HAVE NOT BEEN REGISTERED PURSUANT TO THE
PROVISIONS OF THE SECURITIES ACT OF 1933 AS AMENDED ("ACT"), AND HAVE BEEN
OFFERED AND SOLD IN RELIANCE UPON THE EXEMPTION SET FORTH IN REGULATION S
PROMULGATED PURSUANT THERETO. WITHOUT SUCH REGISTRATION AND UNTIL THE COMPANY
BECOMES A "REPORTING COMPANY", SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT IN A MANNER
ALLOWED BY REGULATION S AND UPON DELIVERY TO THE COMPANY OF AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED FOR
SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN
VIOLATION OF THE ACT, APPLICABLE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER.
Seller shall not transfer or attempt any transfer of any the Subject Shares
without first complying with the substance of that legend, and satisfaction of
the Purchaser may, if the Purchaser so requests, depend in part upon an opinion
of counsel acceptable in form and substance to the Purchaser, a no-action letter
of the SEC, or equivalent evidence. Seller acknowledges, without limitation,
that the foregoing agreement and representation shall apply to the Subject
Shares issued to Seller.
ARTICLE V
COVENANTS OF THE PURCHASER
5.1 Affirmative Covenants. From the date of this Agreement through the
Closing Date, the Purchaser will take every action reasonably required of the
Purchaser in order to satisfy the conditions to Closing set forth in this
Agreement and otherwise to ensure the prompt and expedient consummation of the
Transaction, substantially as contemplated by this Agreement and will exert all
reasonable efforts to cause the Transaction to be consummated; provided,
however, in all instances that the representations and warranties of the Seller
in this Agreement are and remain true and accurate and that the covenants and
agreements of the Seller in this Agreement are honored and that the conditions
to the obligations of the Purchaser set forth in this Agreement are not
incapable of satisfaction.
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5.2 Cooperation. The Purchaser shall cooperate with the Seller and its
counsel, accountants and agents in every way in closing and consummating the
Transaction and in delivering all documents and instruments deemed reasonably
necessary or useful by counsel to the Seller.
5.3 Expenses. Whether or not the Transaction is consummated, all costs and
expenses incurred by the Purchaser in connection with this Agreement and the
Transaction shall be paid by the Purchaser.
5.4 Publicity. Prior to the Closing any written news releases by the
Purchaser pertaining to this Agreement or the Transaction shall be submitted to
the Seller for review and approval prior to release by the Purchaser, and shall
be released only in a form approved by the Seller; provided, however, that (i)
such approval shall not be unreasonably withheld, and (ii) such review and
approval shall not be required of releases by the Purchaser, if prior review and
approval would prevent the timely and accurate dissemination of such press
release as required to comply, in the judgment of counsel, with any applicable
law, rule or policy.
5.5 Access and Information. The Purchaser shall provide to the Seller and
to the Seller's accountants, counsel, and other representatives reasonable
access during normal business hours throughout the period prior to the Closing
to all of the Purchaser's properties, books, contracts, commitments, records
(including, but not limited to, tax returns) and personnel relating to the
Purchaser and, during such period, the Purchaser shall furnish promptly to the
Seller (i) all written communications relating to the business of the Purchaser,
(ii) internal monthly financial statements of the Purchaser when and as
available, and (iii) all other information relating to the business of the
Purchaser, as the Seller may reasonably request, but no investigation pursuant
to this Section 5.5 shall affect any representations or warranties of the
Purchaser or the conditions to the obligations of the Seller to consummate the
Transaction. In the event of the termination of this Agreement, the Seller will,
and will cause its representatives to, deliver to the Purchaser or, upon
Purchaser's request, destroy all documents, work papers and other material, and
all copies thereof, obtained by the Seller or on the Seller's behalf from the
Purchaser as a result of this Agreement or in connection with this Agreement or
the Transaction, whether so obtained before or after the execution of this
Agreement, and will hold in confidence all confidential information that has
been designated as such by the Purchaser in writing or by appropriate and
obvious notation and will not use any such confidential information, except in
connection with the Transaction, until such time as such information is
otherwise publicly available. Seller and its representatives shall assert their
rights pursuant to this Section 5.5 in such manner as to minimize interference
with the business of the Purchaser.
5.6 Conduct of Business Pending the Transaction. Prior to the consummation
of the Transaction or the termination of this Agreement pursuant to its terms,
unless the Seller shall otherwise consent in writing, which consent shall not be
unreasonably withheld or delayed, and except as otherwise contemplated by this
Agreement, the Purchaser will comply with each of the following:
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(1) The business of the Purchaser will be conducted only in the ordinary
and usual course, the Purchaser shall keep intact the business
organization and goodwill of the Purchaser's business, keep available
the services of the employees of the Purchaser and maintain good
relationships with suppliers, lenders, creditors, distributors,
employees, customers and others having business or financial
relationships with the Purchaser, and the Purchaser shall immediately
notify the Seller of any event or occurrence or emergency material to,
and not in the ordinary and usual course of business of, the
Purchaser;
(2) The Purchaser shall not create, incur or assume any long-term or
short-term indebtedness for money borrowed or make any capital
expenditures or commitment for capital expenditures, affecting the
business of the Purchaser;
(3) The Purchaser shall not (a) adopt, enter into, or amend any bonus,
profit sharing, compensation, stock option, warrant, pension,
retirement, deferred compensation, employment, severance, termination,
or other employee benefit plan, agreement, trust fund, or arrangement
for the benefit or welfare of any employees of the Purchaser or (b)
agree to any material (in relation to historical compensation)
increase in the compensation payable or to become payable to, or any
increase in the contractual term of employment of, any such employee;
(4) The Purchaser shall not sell, lease, mortgage, encumber, or otherwise
dispose of or grant any interest in any of its assets;
(5) The Purchaser shall not enter into, or terminate, any material
contract, agreement, commitment, or understanding relating to or
affecting the business of the Purchaser;
(6) The Purchaser shall not enter into any agreement, commitment, or
understanding, whether in writing or otherwise, with respect to any of
the matters referred to in subparagraphs (1) through (5) above;
(7) The Purchaser will continue properly and promptly to file when due all
federal, state, local, foreign and other tax returns, reports and
declarations required to be filed by the Purchaser, and will pay, or
make full and adequate provision for the payment of, all taxes and
governmental charges due from or payable by the Purchaser;
(8) The Purchaser will comply with all laws and regulations applicable to
the operations of the Purchaser;
(9) The Purchaser shall not issue or agree to issue any additional shares
of, or rights of any kind to acquire any shares of, the Purchaser's
capital stock of any class, or
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enter into any contract, agreement, commitment, or arrangement with
respect to any of the foregoing; and
(10) The Purchaser will maintain in full force and effect insurance
coverage relating to the Purchaser's business of a type and amount
customary in the business of the Purchaser (but not less than that
presently in effect).
5.7 Updating of Exhibits. The Purchaser shall notify the Seller of any
changes, additions or events which may cause any change in or addition or events
to any schedules or exhibits delivered by the Purchaser pursuant to this
Agreement, promptly after the occurrence of the same and at the Closing by the
delivery of updates of all schedules and exhibits. No notification made pursuant
to this section shall be deemed to cure any breach of any representation or
warranty made in this Agreement, unless the Seller specifically agrees thereto
in writing nor shall any such notification be considered to constitute or be a
waiver by the Seller of any condition set forth in this Agreement.
5.8 Issuance and delivery of the Subject Shares. On the Closing, the
Purchaser shall issue and deliver or caused to be issued and delivered to the
Seller a certificate evidencing three million eight hundred thousand (3,800,000)
shares of the Purchaser's $.0001 par value common stock; which certificate shall
specify appropriate legend regarding the restricted nature of those shares;
ARTICLE VI
COVENANTS OF THE SELLER
6.1 Affirmative Covenants. From the date of this Agreement through the
Closing Date, the Seller will take every action reasonably required of the
Seller to satisfy the conditions to closing set forth in this Agreement and
otherwise to ensure the prompt and expedient consummation of the Transaction
substantially as contemplated hereby and will exert all reasonable efforts to
cause the Transaction to be consummated; provided, however, in all instances
that the representations and warranties of the Purchaser in this Agreement are
and remain true and accurate and that the covenants and agreements of the
Purchaser in this Agreement are correct and that the conditions to the
obligations of the Seller set forth in this Agreement are not incapable of
satisfaction.
6.2 Name. The Seller agrees that following consummation of the Transaction,
neither the Seller nor any Entity the Seller Controls or Affiliate of the Seller
shall make any attempt to make any use of any name pursuant to which the Seller
has conducted the Acquired Business, or authorize any other person or Entity to
do so, without the consent of the Purchaser.
6.3 Access and Information. The Seller shall provide to the Purchaser and
to the Purchaser's accountants, counsel and other representatives reasonable
access during normal business hours throughout the period prior to the Closing
to all of its properties, books, contracts,
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commitments, records (including, but not limited to, tax returns) and personnel
relating to the Acquired Assets or the Acquired Business and, during such
period, the Seller shall furnish promptly to the Purchaser (i) all written
communications relating to the Acquired Assets or the Acquired Business, (ii)
internal monthly financial statements of the Acquired Business when and as
available, and (iii) all other information relating to the Acquired Assets or
the Acquired Business as the Purchaser may reasonably request, but no
investigation pursuant to this Section 6.3 shall affect any representations or
warranties of the Seller, or the conditions to the obligations of the Purchaser
to consummate the Transaction. In the event of the termination of this
Agreement, the Purchaser will, and will cause the Purchaser's representatives
to, deliver to the Seller or, upon Seller's request, destroy all documents, work
papers, and other material, and all copies thereof, obtained by the Purchaser or
on the Purchaser's behalf from the Seller as a result of this Agreement or in
connection with this Agreement or the Transaction, whether so obtained before or
after the execution of this Agreement, and will hold in confidence all
confidential information that has been designated as such by the Seller in
writing or by appropriate and obvious notation, and will not use any such
confidential information except in connection with the Transaction, until such
time as such information is otherwise publicly available. Purchaser and its
representatives shall assert their rights pursuant to this Section 6.3 in such
manner as to minimize interference with the business of the Seller.
6.4 No Solicitation. The Seller and those acting on behalf of the Seller
will not, and the Seller will use its best efforts to cause its employees,
agents, and representatives (including any investment banker) not, directly or
indirectly, to solicit, encourage, or initiate any discussions with, or
negotiate or otherwise deal with, or provide any information to, any person or
Entity other than the Purchaser and its officers, employees, and agents,
relating to the Acquired Assets or the Acquired Business. The Seller will notify
the Purchaser immediately upon receipt of any inquiry, offer or proposal
relating to any of the foregoing. None of the foregoing shall prohibit providing
information to others in a manner in keeping with the ordinary conduct of the
Seller's business, or providing information to government authorities.
6.5 Conduct of Business Pending the Transaction. The Seller covenants and
agrees with the Purchaser that, prior to the consummation of the Transaction or
the termination of this Agreement pursuant to its terms, unless the Purchaser
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed, and except as otherwise contemplated by this Agreement, the
Seller will comply with each of the following:
(1) The Acquired Business, and the other businesses of the Seller that
relate to, use or affect the Acquired Assets, if any, will be
conducted only in the ordinary and usual course, the Seller shall keep
intact the business organization and goodwill of the Acquired
Business, keep available the services of the employees of the Seller
and maintain good relationships with suppliers, lenders, creditors,
distributors, employees, customers and others having business or
financial relationships with the Acquired Business, and the Seller
shall immediately notify the Purchaser of any event or occurrence or
emergency material to, sand not in the ordinary and usual
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course of business of, the Acquired Business or affecting any material
part of the Acquired Assets;
(2) The Seller shall not create, incur or assume any long-term or
short-term indebtedness for money borrowed or make any capital
expenditures or commitment for capital expenditures, affecting the
Acquired Business or any of the Acquired Assets, except in the
ordinary course of business and consistent with past practice;
(3) The Seller shall not (a) adopt, enter into, or amend any bonus, profit
sharing, compensation, stock option, warrant, pension, retirement,
deferred compensation, employment, severance, termination, or other
employee benefit plan, agreement, trust fund, or arrangement for the
benefit or welfare of any employees of the Seller, or (b) agree to any
material (in relation to historical compensation) increase in the
compensation payable or to become payable to, or any increase in the
contractual term of employment of, any such employee;
(4) The Seller shall not sell, lease, mortgage, encumber, or otherwise
dispose of or grant any interest in any of the Acquired Assets except
for sales, encumbrances and other dispositions or grants in the
ordinary course of business of the Acquired Business and consistent
with past practice and except for liens for taxes not yet due or liens
or encumbrances that are not material in amount or effect and do not
impair the use of the property, or as specifically provided for or
permitted in this Agreement;
(5) The Seller shall not enter into, or terminate, any material contract,
agreement, commitment, or understanding relating' to or affecting the
Acquired Assets or the Acquired Business;
(6) The Seller shall not enter into any agreement, commitment, or
understanding, whether in writing or otherwise, wit respect to any of
the matters referred to in subparagraphs (1) through (5) above;
(7) The Seller will continue properly and promptly to file when due all
federal, state, local, foreign and other tax returns, reports and
declarations required to be filed by it relating to the Acquired
Assets or the Acquired Business, and will pay, or make full and
adequate provision for the payment of, all taxes and governmental
charges due from or payable by the Seller relating to the Acquired
Assets or the Acquired Business;
(8) The Seller will comply with all laws and regulations applicable to the
operations of the Acquired Business and the utilization of the
Acquired Assets; and
(9) The Seller will maintain in full force and effect insurance coverage
relating to the
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Acquired Assets and the Acquired Business of a type and amount
customary in the business of the Acquired Business (but not less than
that presently in effect).
6.6 Cooperation. The Seller will cooperate with the Purchaser and the
Purchaser's counsel, accountants and agents in every way in consummating and
closing the Transaction and in delivering all documents and instruments deemed
reasonably necessary or useful by the Purchaser.
6.7 Expenses. Whether or not the Transaction is consummated, all costs and
expenses incurred by the Seller in connection with this Agreement and the
Transaction shall be paid by the Seller.
6.8 Publicity. Prior to the Closing any written news releases by the Seller
relating to this Agreement or the Transaction shall be submitted to the
Purchaser for review and approval prior to release by the Seller, and shall be
released only in a form approved by the Purchaser.
6.9 Updating of Exhibits and Disclosure Documents. The Seller shall notify
the Purchaser of any changes, additions, or events which may cause any change in
or addition to any schedules or exhibits delivered by the Seller pursuant to
this Agreement promptly after the occurrence of the same and again at the
Closing by delivery of appropriate updates to all such schedules and exhibits.
No such notification made pursuant to this section shall be deemed to cure any
breach of any representation or warranty made in this Agreement, unless the
Purchaser specifically agrees thereto in writing nor shall any such notification
be considered to constitute or be a waiver by the Purchaser of any condition set
forth in this Agreement.
6.10 Payment of Unassumed Liabilities. The Seller agrees promptly to pay
when due, or otherwise to discharge, without cost or expense to the Purchaser,
each and every Liability of the Seller that is not specifically assumed by the
Purchaser pursuant to this Agreement, as described in Section 2.1 of this
Agreement.
6.11 Continued Action Regarding Exemption. The Seller shall take any and
all additional action which is necessary or appropriate to maintain that
exemption from the registration and prospectus delivery requirements of the
Securities Act provided by Regulation S promulgated pursuant to the Securities
Act.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to Obligation of Purchaser. The obligation of the Purchaser
to effect and consummate the Transaction shall be subject to the fulfillment at
or prior to the Closing of the following conditions, unless the Purchaser shall
waive such fulfillment in writing:
(1) This Agreement and the Transaction shall have received all approvals,
consents, authorizations, and waivers from governmental and other
regulatory agencies and
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other third parties (including lenders, holders of debt securities and
lessors) required to consummate the Transaction;
(2) There shall not be in effect a preliminary or permanent injunction or
other order by any federal or state court which prohibits the
consummation of the Transaction;
(3) The Seller shall have performed in all material respects each of the
Seller's agreements and obligations specified in this Agreement and
required to be performed on or prior to the Closing and shall have
complied with all material requirements, rules, and regulations of all
regulatory authorities having jurisdiction relating to the
Transaction;
(4) No material adverse change shall, in the judgment of the Purchaser,
have taken place in the business condition (financial or otherwise),
operations, or prospects of the Acquired Business or the Acquired
Assets since the date of this Agreement other than those, if any, that
result from the changes permitted by this Agreement;
(5) The representations and warranties of the Seller set forth in this
Agreement shall be true in all material respects as of the date of
this Agreement and, except in such respects as, in the judgment of the
Purchaser, do not materially and adversely affect the business,
condition (financial or otherwise), operations, or prospects of the
Acquired Business or the Acquired Assets, as of the Closing, as if
made as of the Closing; and
(6) The Purchaser shall have received from the Seller an officers'
certificate, executed by the Chief Executive Officer and Chief
Financial Officer of the Seller (in their capacities as such), dated
the Closing Date, as to the satisfaction of the conditions in
Paragraphs (3), (4), and (5) of this section (to the best of their
knowledge).
7.2 Conditions to Obligation of the Seller. The obligation of the Seller to
effect the Transaction shall be subject to the fulfillment at or prior to the
Closing of the following conditions, unless the Seller shall waive such
fulfillment in writing:
(1) This Agreement and the Transaction shall have received all approvals,
consents, authorizations, and waivers from governmental and other
regulatory agencies and other third parties (including lenders,
holders of debt securities and lessors required by law to consummate
the Transaction;
(2) There shall not be in effect a preliminary or permanent injunction or
other order by any federal or state authority which prohibits the
consummation of the Transaction.
(3) The Purchaser shall have performed in all material respects the
Purchaser's agreements and obligations specified in this Agreement
required to be performed on or prior to the Closing;
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(4) The representations and warranties of the Purchaser set forth in this
Agreement shall be true in all material respects as of the date of
this Agreement and, except in such respects as do not materially and
adversely affect the business of the Purchaser, as of the Closing Date
as if made as of the Closing Date; and
(5) The Seller shall have received from the Purchaser an officers'
certificate, executed by the Chief Financial Officer and the Chief
Executive Officer of the Purchaser (in their capacities as such),
dated the Closing Date, as to the satisfaction of the conditions of
Paragraphs (3) and (4) of this section (to the best of their
knowledge).
ARTICLE VIII
DOCUMENTS AND INSTRUMENTS TO BE DELIVERED AT CLOSING
8.1 The Purchaser to the Seller. On the Closing, the Purchaser shall
deliver or cause to be delivered the following instruments and documents to the
Seller:
(1) A certificate evidencing and representing three million eight hundred
thousand (3,800,000) shares of the Purchaser's $.0001 par value common
stock (the Subject Shares), which certificate shall specify the
appropriate legend regarding the restricted nature of those Subject
Shares; and
(2) The Officers' Certificate contemplated by the provisions of Paragraph
(5) of Section 7.2 of this Agreement.
8.2 The Seller to the Purchaser. On the Closing, the Seller shall deliver
or cause to be delivered the following instruments and documents to the
Purchaser:
(1) A Bill of Sale, executed by the President and the Secretary of the
Seller, pursuant to which title to the Acquired Assets are transferred
and vested in the Purchaser;
(2) All books, records, journals, disks, checks, minute books, documents,
memoranda and other instruments relating to the business of the Seller
which are necessary or appropriate to enable the Purchaser to carry on
and conduct the business and affairs of the Acquired Business and to
utilize the Acquired Assets after the Closing; and
(3) The officers' Certificate contemplated by the provisions of Paragraph
(6) of Section 7.1 of this Agreement.
ARTICLE IX
TERMINATION, AMENDMENT WAIVER
9.1 Termination. This Agreement and the Transaction may be terminated at
any time prior to the Closing:
(1) By mutual consent of the Purchaser and the Seller; or
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(2) By either Purchaser or the Seller, upon written notice to the other,
if the conditions to such party's obligations to consummate the
Transaction, in the case of Purchaser, as specified in Section 7.1 of
this Agreement, or, in the case of the Seller, as provided in Section
7.2 of this Agreement, were not, or cannot reasonably be, satisfied on
or before December __, 1999, unless the failure of condition is the
result of the material breach of this Agreement by the party seeking
to terminate this Agreement.
9.2 Amendment. This Agreement may be amended by the Purchaser and the
Seller by action taken at any time. This Agreement may not be amended, except by
an instrument in writing signed on behalf of the Purchaser and the Seller.
9.3 Waiver. At any time prior to the Closing, the Purchaser or the Seller
may (i) extend the time for the performance of any of the obligations or other
acts of the other party, (ii) waive any inaccuracies in the representations and
warranties specified in this Agreement or in any document delivered pursuant to
this Agreement, or (iii) waive compliance with any of the agreements or
conditions specified in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1. Notices. Any notice, direction or instrument required or permitted to
be given pursuant to this Agreement shall be given in writing by (i) telegram,
facsimile transmission or similar method, if confirmed by mail as herein
provided, by mail; (ii) if mailed postage prepaid, by certified mail, return
receipt requested; or (iii) hand delivery to any party at the addresses of the
parties specified, below. If given by telegram or facsimile transmission or
similar method or by hand delivery, such notice, direction or instrument shall
be deemed to have been given or made on the day on which it was given, and if
mailed, shall be deemed to have been given or made on the second (2nd) business
day following the day after which it was mailed. Any party may, from time to
time by similar notice, give notice of any change of address, and in such event,
the address of such party shall be deemed to be changed accordingly. The
address, telephone number and facsimile transmission number for the notice of
each party are:
If to Seller: Rising Phoenix Development Group Ltd.
409 Granville Street, Suite 304
Vancouver, British Columbia V6C 1T2
If to Purchaser: Power Direct, Inc.
1288 Alberni Street, Suite 806
Vancouver, British Columbia V6E 4N5
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<PAGE>
10.2. Indemnification Seller shall save Purchaser harmless from and against
and shall indemnify Purchaser for any liability, loss, costs, expenses or
damages howsoever caused by reason of any injury (whether to body, property or
personal or business character or reputation) sustained by any person or to
property by reason of any act, neglect, default or omission of Seller or any of
Seller's agents, employees or other representatives, and Seller shall pay all
amounts to be paid or discharged in case of an action or any such damages or
injuries. If Purchaser is sued in any court for damages by reason of any of the
acts of Seller, Seller or such other party shall defend the resulting action (or
cause same to be defended) at Seller's expense and shall pay and discharge any
judgment that may be rendered in any such action; if Seller fails or neglects to
so defend in such action, Purchaser may defend such action and any expenses,
including reasonable attorneys' fees, which Purchaser may pay or incur in
defending such action and the amount of any judgment which Purchaser may be
required to pay shall be promptly reimbursed by Seller upon demand by Purchaser.
10.3 Recovery of Enforcement Costs. In the event either party shall
institute any action or proceeding to enforce any provision of this Agreement to
seek relief from any violation of this Agreement, or to otherwise obtain any
judgment or order relating to or arising from the subject matter of this
Agreement, the prevailing party shall be entitled to receive from the losing
party such prevailing party's actual attorneys' fees and costs incurred to
prosecute or defend such action or proceeding.
10.4 Assignment. Neither party shall have the right, without the consent of
the other party, to assign, transfer, sell, pledge, hypothecate, delegate, or
otherwise transfer, whether voluntarily, involuntarily or by operation of law,
any of such party's rights or obligations created by the provisions of this
Agreement, nor shall the parties' rights be subject to encumbrance or the claim
of creditors. Any such purported assignment, transfer, or delegation shall be
null and void.
10.4. Captions and Interpretations. Captions of the articles, sections and
paragraphs of this Agreement are for convenience and reference only, and the
works specified therein shall in no way be held to explain, modify, amplify or
aid in the interpretation, construction, or meaning of the provisions of this
Agreement. The language in all parts to this Agreement, in all cases, shall be
construed in accordance with the fair meaning of that language as if prepared by
all parties and not strictly for or against any party. Each party and counsel
for such party have reviewed this Agreement. The rule of construction, which
requires a court to resolve any ambiguities against the drafting party, shall
not apply in interpreting the provisions of this Agreement.
10.5 Entire Agreement. This Agreement and the exhibits to this Agreement
are the final written expression and the complete and exclusive statement of all
the agreements, conditions, promises, representations, warranties and covenants
between the parties with respect to the subject matter of this Agreement, and
this Agreement supersedes all prior or contemporaneous agreements, negotiatons,
representations, warranties, covenants, understandings and discussions by and
between and among the parties, their respective representatives, and any other
person, with respect to the subject matter specified in this Agreement. No
provision of any exhibit or schedule to this Agreement shall supersede or annul
the terms and provisions of this Agreement, unless the
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<PAGE>
matter specified in such exhibit or schedule shall explicitly so provide to the
contrary, in the event of ambiguity in meaning or understanding between the
provisions of this Agreement proper and the appended exhibits or schedules, the
provisions of this Agreement shall prevail and control in all instances.
10.6 Choice of Law. This Agreement shall be deemed to have been entered
into in the State of Delaware. All questions concerning the validity,
interpretation, or performance of any of the terms, conditions and provisions of
this Agreement or of any of the rights or obligations of the parties shall be
governed by, and resolved in accordance with, the laws of the State of Delaware
without regard to conflicts of law principles.
10.7 Number and Gender. Whenever the singular number is used in this
Agreement and, when required by the context, the same shall include the plural,
and vice versa; the masculine gender shall include the feminine and the neuter
genders, and vice versa.
10.8 Successors and Assigns. This Agreement and each of its provisions
shall obligate the heirs, executors, administrators, successors, and assigns of
each of the parties. Nothing specified in this article, however, shall be a
consent to the assignment or delegation by any party of such party's respective
rights and obligations created by the provisions of this Agreement.
10.9 Third Party Beneficiaries. Except as expressly specified by the
provisions of this Agreement, this Agreement shall not be construed to confer
upon or give to any person, other than the parties hereto, any right, remedy or
claim pursuant to, or by reason of, this Agreement or of any term or condition
of this Agreement.
10.10 Severability. In the event any part of this Agreement, for any
reason, is determined by a court of competent jurisdiction to be invalid, such
determination shall not affect the validity of any remaining portion of this
Agreement, which remaining portion shall remain in full force and effect as if
this Agreement had been executed with the invalid portion thereof eliminated. It
is hereby declared the intention of the parties that they would have executed
the remaining portion of this Agreement without including any such part, parts,
or portion which, for any reason, may be hereafter determined to be invalid.
10.11 Governmental Rules and Regulations. The transactions contemplated by
the provisions of this Agreement are and shall remain subject to any and all
present and future orders, rules and regulations of any duly constituted
authority having jurisdiction of that transaction.
10.12 Execution in Counterparts. This Agreement may be prepared in multiple
copies and forwarded to each of the parties for execution. All of the signatures
of the parties may be affixed to one copy or to separate copies of this
Agreement and when all such copies are received and signed by all the parties,
those copies shall constitute one agreement which is not otherwise separable or
divisible. Counsel for the Purchaser shall keep all of such signed copies and
shall conform one copy to show all of those signatures and the dates thereof and
shall mail a copy of such conformed copy to each of the parties within thirty
(30) days after the receipt by such counsel
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of the last signed copy, and such counsel shall cause one such conformed copy to
be filed in the principal office of such counsel.
10.13 Reservation of Rights. The failure of any party at any time or times
hereafter to require strict performance by any other party of any of the
warranties, representations, covenants, terms, conditions and provisions
specified in this Agreement shall not waive, affect of diminish any right of
such party failing to require strict performance, to demand strict compliance
and performance therewith and with respect to any other provisions, warranties,
terms, and conditions specified in this Agreement. Any waiver of any default
shall not waive or affect any other default, whether prior or subsequent
thereto, and whether the same or of a different type. None of the
representations, warranties, covenants, conditions, provisions and terms
specified in this Agreement shall be deemed to have been waived by any act or
knowledge of any party, its agents, trustees, officers, or employees and any
such waiver shall be made only by an instrument in writing, signed by the
waiving party and directed to any non-waiving party specifying such waiver, and
each party reserves such party's rights to insist upon strict compliance
herewith at all times.
10.14 Survival of Covenants, Representations and Warranties. All covenants,
representations, and warranties made by each party to this Agreement shall be
deemed made for the purpose of inducing the other party to enter into and
execute this Agreement. The representations, warranties, and covenants specified
in this Agreement shall survive the Closing and shall survive any investigation
by either party whether before or after the execution of this Agreement. The
covenants, representations, and warranties of the Seller and the Purchaser are
made only to and for the benefit of the ether and shall not create or vest
rights in other persons.
10.15 Concurrent Remedies. No right or remedy specified in this Agreement
conferred on or reserved to the parties is exclusive of any other right or
remedy specified in this Agreement or by law or equity provided or permitted;
but each such right and remedy shall be cumulative of, and in addition to, every
other right and remedy specified in this Agreement or now or hereafter existing
at law or in equity or by statute or otherwise, and may be enforced concurrently
therewith or from time to time. The termination of this Agreement for any reason
whatsoever shall not prejudice any right or remedy which any party may have,
either at law, in equity, or pursuant to the provisions of this Agreement.
10.16 Force Majeure. If any party is rendered unable, completely or
partially, by the occurrence of an event of "force majeure" (hereinafter
defined) to perform such party's obligations created by the provisions of this
Agreement, such party shill give to the other party prompt written notice of the
event of "force majeure" with reasonably complete particulars concerning such
event; thereupon, the obligations of the party giving such notice, so far as
those obligations are affected by the event of "force majeure," shall be
suspended during, but no longer than, the continuance of the event of "force
majeure." The party affected by such event of "force majeure" shall use all
reasonable diligence to resolve, eliminate and terminate the event of "force
majeure" as quickly as practicable. The requirement that an event of "force
majeure" shall be remedied with all reasonable dispatch as hereinabove
specified, shall not require the settlement of strikes,
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lockouts or other labor difficulties by the party involved, contrary to such
party's wishes, and the resolution of any and all such difficulties shall be
handled entirely within the discretion of the party concerned. The term "force
majeure" as used herein shall be defined as and mean any act of God, strike,
civil disturbance, lockout or other industrial disturbance, act of the public
enemy, war, blockage, public riot, earthquake, tornado, hurricane, lightening,
fire, epidemics, quarantine restrictions, public demonstration, storm, flood,
explosion, freight embargoes, governmental action, governmental delay, restraint
or inaction, unavailability of equipment, default of a party's subcontractors or
suppliers, and any other cause or event, whether of the kind enumerated
specifically herein, or otherwise which is not reasonably within the control of
the party claiming such suspension.
10.17 Consent to Agreement. By executing this Agreement, each party, for
itself represents such party has read or caused to be read this Agreement in all
particulars, and consents to the rights, conditions, duties and responsibilities
imposed upon such party as specified in this Agreement. Each party represents,
warrants and covenants that such party executes and delivers this Agreement of
its own free will and with no threat, undue influence, menace, coercion or
duress, whether economic or physical. Moreover, each party represents, warrants,
and covenants that such party executes this Agreement acting on such party's own
independent judgment.
10.18 Waiver and Modification. No modification, supplement or amendment of
this Agreement or of any covenant, representation, warranty, condition, or
limitation specified in this Agreement shall be valid unless the same is made in
writing and duly executed by both parties. No waiver of any covenant,
representation, warranty, condition, or limitation specified in this Agreement
shall be valid unless the same is made in writing and duly executed by the party
making the waiver. No waiver of any provision of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver.
10.19 Further Assurances. The parties shall from time to time sign and
deliver any further instruments and take any further actions as may be necessary
to effectuate the intent and purposes of this Agreement.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed in
duplicate on the date first written above by their respective officers thereunto
duly authorized.
Power Direct, Inc.,
a Delaware corporation
By: /s/ Jack Sha
--------------------------------
Jack Sha
Its: President
By: /s/ Ferdinand Marehard
--------------------------------
Ferdinand Marehard
Its: Secretary
Rising Phoenix Development Ltd.,
a British Columbia corporation
By: /s/ Robert Klein
--------------------------------
Robert Klein
Its: President
By: [ILLEGIBLE]
--------------------------------
Its: Secretary
/s/ Jeffrey Shear
--------------------------------
Jeffrey Shear
31
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AGREEMENT TO SELL URL (Universal Resource Locator)
Agreement made this 19th day of November, 1999 by and between May Joan Liu, of
1066 Groveland Road, West Vancouver, BC V7S 1Z4 (hereinafter referred to as
"Seller") and Power Direct, Inc. of Delaware, USA (hereinafter referred to as
the "Buyer").
Whereas the Seller desires to sell and the buyer desires to buy the three (3)
assets known as the URL (Universal Resource Locator) registered as
"Thankyou2u.com", "Homeaccents2u.com" and "Necessities2u.com", the parties
hereto agree and covenant as follows:
1. The total purchase price for the URL is six hundred fifty thousand
(650,000) shares of Power Direct, Inc.'s restricted (rule 144) common
stock.
2. The shares are to be delivered at the time of the passing ownership papers
of the URL's to the Buyer by the Seller.
3. The property to be sold hereunder shall be conveyed by a standard Bill of
Sale, duly executed by the Seller.
4. The Seller promises and agrees to convey good, clear, and marketable title
to all the property to be sold hereunder, the same to be free and clear of
all liens and encumbrances.
5. Consummation of the sale, with payment by the Buyer of total purchase price
and the delivery by the Seller of a Bill of Sale, will take place on or
before February 19th, 2000.
6. All of the terms, representations and warranties shall survive the closing.
This Agreement shall bind and inure to the benefit of the Seller and Buyer
and their respective heirs, executors, administrators, successors and
assigns.
7. If this Agreement shall contain any term or provision which shall be
invalid or against public policy or if the application of same is invalid
or against public policy, then, the remainder of this Agreement shall not
be affected thereby and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate on November 19th, 1999.
/s/ May Joan Liu /s/ Jack Sha
- ------------------------ ------------------------
SELLER May Joan Liu BUYER Jack Sha
1066 Groveland Road President
West Vancouver, BC V7S 1Z4 Power Direct, Inc.
E-47
AGREEMENT TO SELL URL (Universal Resource Locator)
Agreement made this 24th day of November, 1999 by and between CardTek
(International) Holdings Ltd., Suite 2B, Mansion House, 143 Main Street,
Gibraltar (hereinafter referred to as "Seller") and Power Direct, Inc. of
Delaware, USA (hereinafter referred to as the "Buyer").
Whereas the Seller desires to sell and the buyer desires to buy the four (4)
assets known as the URL (Universal Resource Locator) registered as
"Gaming2u.com", "Weddings2u.com", "Essentials2u.com" and "Theorient2u.com", the
parties hereto agree and covenant as follows:
1. The total purchase price for the URL is eight hundred thousand (800,000)
shares of Power Direct. Inc.'s restricted (rule 144) common stock.
2. The shares are to be delivered at the time of the passing ownership papers
of the URL's to the Buyer by the Seller.
3. The property to be sold hereunder shall be conveyed by a standard Bill of
Sale, duly executed by the Seller.
4. The Seller promises and agrees to convey good, clear, and marketable title
to all the property to be sold hereunder, the same to be free and clear of
all liens and encumbrances.
5. Consummation of the sale, with payment by the Buyer of total purchase price
and the delivery by the Seller of a Bill of Sale, will take place on or
before February 24th, 2000.
6. All of the terms, representations and warranties shall survive the closing.
This Agreement shall bind and inure to the benefit of the Seller and Buyer
and their respective heirs, executors, administrators, suctessors and
assigns.
7. If this Agreement shall contain any term or provision which shall be
invalid or against public policy or if the application of same is invalid
or against public policy, then, the remainder of this Agreement shall not
be affected thereby and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate on November 24th, 1999.
/s/ A. Mason /s/ Jack Sha
- ------------------------ ------------------------
SELLER Aveline Mason BUYER Jack Sha
Director President
IMT, Inc. Power Direct, Inc.
on behalf of
CardTek (International) Holdings Ltd.
E-48
AGREEMENT TO SELL URL (Universal Resource Locator)
Agreement made this 25th day of November, 1999 by and between R. Angelo Holmes
of 534 Beachview Drive, North Vancouver, British Columbia V7G 1P9 (hereinafter
referred to as "Seller") and Power Direct, Inc. of Delaware, USA (hereinafter
referred to as the "Buyer").
Whereas the Seller desires to sell and the buyer desires to buy the two (2)
assets known as the URL (Universal Resource, Locator) registered as
"Things2u.com" and "Arrangements2u.com", the parties hereto agree and covenant
as follows:
1. The total purchase price for the URL is two hundred fifty thousand
(250,000) shares of Power Direct, Inc.'s restricted (rule 144) common
stock.
2. The shares are to be delivered at the time of the passing ownership papers
of the URL's to the Buyer by the Seller.
3. The property to be sold hereunder shall be conveyed by a standard Bill of
Sale, duly executed by the Seller.
4. The Seller promises and agrees to convey good, cleat, and marketable title
to all the property to be sold hereunder, the same to be free and clear of
all liens and encumbrances.
5. Consummation of the sale, with payment by the Buyer of total purchase price
and the delivery by the Seller of a Bill of Sale, will take place on or
before February 25th, 2000.
6. All of the terms, representations and warranties shall survive the closing.
This Agreement shall bind and inure to the benefit of the Seller and Buyer
and their respective heirs, executors, administrators, successors and
assigns.
7. If this Agreement shall contain any term or provision which shall be
invalid or against public policy or if the application of same is invalid
or against public policy, then, the remainder of this Agreement shall not
be affected thereby and shall remain in full force and effect
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate on November 25, 1999.
/s/ R. Angelo Holmes /s/ Jack Sha
- ------------------------- ------------------------
SELLER R. Angelo Holmes BUYER Jack Sha
President
Power Direct, Inc.
E-49
AGREEMENT TO SELL URL (Universal Resource Locator)
Agreement made this 25th day of November, 1999 by and between Cybermall
Consulting Services Ltd., of Cable Beach Court, Suite 4l, West Bay Street, P.O.
Box CB-11728, Nassau, Bahamas (hereinafter referred to as "Seller") and Power
Direct, Inc. of Delaware, USA (hereinafter referred to as the "Buyer").
Whereas the Seller desires to sell and the buyer desires to buy the two (2)
assets known as the URL (Universal Resource Locator) registered as
"Website2u.com" and "Gourmet2u.com", the parties hereto agree and covenant as
follows:
1. The total purchase price for the URL is five hundred thousand (500,000)
shares of Power Direct, Inc.'s restricted (rule 144) common stock.
2. The shares are to be delivered at the time of the passing ownership papers
of the URL's to the Buyer by the Seller.
3. The property to be sold hereunder shall be conveyed by a standard Bill of
Sale, duly executed by the Seller.
4. The Seller promises and agrees to convey good, clear, and marketable title
to all the property to be sold hereunder, the same to be free and clear of
all liens and encumbrances.
5. Consummation of the sale, with payment by the Buyer of total purchase price
and the delivery by the Seller of a Bill of Sale, will take place on or
before February 25th, 2000.
6. All of the terms, representations and warranties shall survive the closing.
This Agreement shall bind and inure to the benefit of the Seller and Buyer
and their respective heirs, executors, administrators, successors and
assigns.
7. If this Agreement shall contain any term or provision which shall be
invalid or against public policy or if the application of same is invalid
or against public policy, then, the remainder of this Agreement shall not
be affected thereby and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate on November 25th, 1999.
/s/ [ILLEGIBLE] /s/ Jack Sha
- ------------------------- ------------------------
Cybermall Consulting Services Ltd. BUYER Jack Sha
Cable Beach Court, Suite #1 President
West Bay Street Power Direct, Inc.
P.O. Box CB-11728
Nassau, Bahamas
E-50
