<PAGE> 1
REGISTRATION NO. 333-70359
FORM SB-2
SECOND AMENDMENT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GREAT XPECTATIONS MARKETING, INC.
(Name of small business issuer in its charter)
8925 STERLING STREET, SUITE 120, IRVING, TEXAS 75063
(972) 929-2900
(Address and telephone number of principal executive offices)
8925 STERLING STREET, SUITE 120, IRVING, TEXAS 75063
(Address of principal place of business or intended principal place of business)
FORREST E. WATSON
PRESIDENT
GREAT XPECTATIONS MARKETING, INC.
8925 STERLING STREET
SUITE 120
IRVING, TX 75063
(972) 929-2900
(Name, address, and telephone number of agent for service)
APPROXIMATE DATE OF PROPOSED DISTRIBUTION TO THE PUBLIC:
AS SOON AS PRACTICABLE FOLLOWING APPROVAL
Copies to:
<TABLE>
<S> <C>
T. ALAN OWEN, ESQ. H. DAWSON FRENCH, ESQ.
T. ALAN OWEN & ASSOCIATES, P.C. FRENCH & HAMILTON
1112 EAST COPELAND ROAD 14651 NORTH DALLAS PARKWAY
SUITE 420 SUITE 434
ARLINGTON, TEXAS 76011 DALLAS, TEXAS 75240
(817) 460-4498 (972) 404-1414
</TABLE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Title of Each Amount to be Proposed Maximum Proposed Maximum Amount of
Class of Sec- Registered Offering Price Aggregate Offering Registration
urities to be Per Share Price Fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 7,268,490 $0.001(1) $7,268.49(1) $1.88(1)
Par Value of
$0.001/share
- ---------------------------------------------------------------------------------------------------------------
Total 7,268,490 $1.88
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The shares are being distributed to stockholders as a dividend. The
shares have nominal value which is assessed as the par value of the stock,
$0.001.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE> 2
GREAT XPECTATIONS MARKETING, INC.
Table of Contents
(Under Requirements of Item 502 of Regulation S-B)
<TABLE>
<CAPTION>
Heading Page Number
------- -----------
<S> <C>
Prospectus Cover Page ........................................... 1
Summary of Prospectus ........................................... 2
Summary Financial Data ........................................... 3
Risk Factors
o Potential inadequacy of capital for calendar year
o 50% marketing network loss
o No recent profit from operations ......................... 4
Company Information under
Heading of "Great Xpectations" .................................. 5
Distribution of Securities
of Great Xpectations ........................................... 8
Dividends ........................................... 9
Federal Income Taxes ........................................... 9
Capitalization ........................................... 10
Selected Financial Data ........................................... 11
Management's Discussion and
Analysis or Plan of Operation .................................. 12
o Liquidity and capital resources ......................... 12
o Results of operations ......................... 12
o Absence of trading market for the common stock ....... 13
o Operating plan .......................................... 13
o Discussion of change in financial condition ................ 14
o Year 2000 problem ................................. 14
Management ........................................... 15
Principal Security Holders .................................. 18
o Security ownership of certain beneficial owners ....... 18
o Security ownership of management ................ 19
Litigation ........................................... 19
Description of Securities ........................................... 20
Transfer Agent .................................................... 21
Legal Matters ........................................... 21
Experts .................................................... 21
Additional Information ........................................... 22
Financial Statements ................................................. F-1
</TABLE>
<PAGE> 3
PROSPECTUS
GREAT XPECTATIONS MARKETING, INC.
7,268,490 SHARES OF $0.001 PAR VALUE COMMON STOCK
--------------------------------------
OWNERSHIP OF THE COMMON STOCK OF GREAT XPECTATIONS MARKETING, INC.
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 4 FOR A DISCUSSION OF
THESE RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------
This prospectus relates to the distribution by GlobeNet International
I, Inc., a Delaware corporation, of 6,768,490 shares of the common stock of
Great Xpectations as a dividend to the holders of record of GlobeNet common
stock on June 5, 1998. The 6,768,490 shares of the Great Xpectations constitute
all of its presently issued and outstanding shares of common stock.
Certificates evidencing 6,768,490 shares of Great Xpectations will be
distributed by mail within a reasonable time after the date of this prospectus
on the basis of 1 share of Great Xpectations' common stock for each 2 shares of
GlobeNet.
There is no trading market for the common stock of Great Xpectations.
The date of this prospectus is September 15, 1999.
<PAGE> 4
SUMMARY OF PROSPECTUS
GREAT XPECTATIONS
Great Xpectations was incorporated in Texas on April 10, 1995, and
reincorporated in Nevada on December 31, 1998. Its principal executive office
address and telephone number are:
Great Xpectations Marketing, Inc.
8925 Sterling Street
Suite 120
Irving, Texas 75063
(972) 929-2900.
REASON FOR DISTRIBUTION
GlobeNet determined that spinning-off the stock of Great Xpectations
would be in the best interest of GlobeNet's stockholders. This spin-off will
give the common stockholders of GlobeNet an equity position in two publicly held
companies that engage in direct marketing of products and services.
OFFICES
Great Xpectations presently leases, through its wholly owned
subsidiary, GX Marketing, Inc., approximately 6,696 square feet of
office/warehouse space at a rental rate of $4,500 per month Great Xpectations'
office/warehouse lease expires on January 31, 2002. Approximately 1,700 square
feet of the warehouse space is subleased to an art framing company for $1,000
per month. Great Xpectations does not manufacture any of the products that it
sells, and it does not have or need manufacturing facilities as it buys custom
designed and manufactured products from a third party manufacturer.
2
<PAGE> 5
SUMMARY FINANCIAL DATA
The following summary financial data should be read in conjunction with
the financial statement and related notes which comprise a part of this
prospectus.
<TABLE>
<CAPTION>
STATEMENT OF OPERATION DATA: DECEMBER 31
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Sales $ 1,234,217 $ 1,641,068
Net income (loss) from operations $ (928,494) $ (62,775)
Income taxes (benefit) $ (71,900) $ --
Net income (loss) $ (856,594) $ (62,775)
Income (loss) per share $ (0.13) $ (0.01)
Weighted average shares outstanding 6,768,490 6,768,490
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalent $ 41,229 $ 155,987
Working capital (deficiency) $ (461,406) $ (228,646)
Total assets $ 263,148 $ 663,046
Retained earnings (deficit) $ (928,895) $ (72,301)
Total shareholders' equity (deficit) $ (411,904) $ 27,699
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA: JUNE 30
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Sales $ 506,189 $ 682,428
Net income (loss) from operations $ 29,950 $ (156,573)
Income taxes (benefit) $ -- $ 71,900
Settlement gain $ 183,988 $ --
Net income (loss) $ 213,938 $ (84,673)
Income (loss) per share $ 0.032 $ (0.013)
Weighted average shares outstanding 6,768,490 6,768,490
</TABLE>
<TABLE>
<CAPTION>
JUNE 30
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalent $ 59,537 $ 116,972
Working capital (deficiency) $ (310,039) $ (104,521)
Total assets $ 309,889 $ 587,084
Retained earnings (deficit) $ (714,957) $ (156,974)
Total shareholders' equity (deficit) $ (197,966) $ 360,017
</TABLE>
RISK FACTORS
1. POTENTIAL INADEQUACY OF CAPITAL FOR CALENDAR YEAR. As of June 30,
1999, Great Xpectations only has $59,537 cash available for operating funds.
This sum may very well be inadequate for all product purchases and payroll
requirements of Great Xpectations during the remainder of calendar year 1999.
2. 50% MARKETING NETWORK LOSS. In 1997, Great Xpectations lost
approximately 50% of its distribution network to its competitors, with the
number of its distributors falling from 5,204 to 2,720. This loss weakened Great
Xpectations financially by reducing its income. The loss of these distributors
further damaged Great Xpectations financially by requiring it to incur
additional expenses necessary to rebuild its distributor network. Great
Xpectations was only able to meet all of its cash needs in 1997 by deferring
officers' salaries, and there is no certainty that Great Xpectations' income
will be sufficient to cover all of its operating costs and rebuild its
distributor network.
3. NO RECENT PROFIT FROM OPERATIONS. Great Xpectations has not made a
profit from its operations in the last two years, 1997 and 1998. As a result,
there is a possibility that Great Xpectations will be unprofitable in 1999.
4
<PAGE> 7
GREAT XPECTATIONS
Great Xpectations was incorporated under the laws of the State of Texas
on April 10, 1995, with 100,000 shares of $0.01 par value common stock
authorized. Great Xpectations was reincorporated in the State of Nevada on
December 31, 1998, with 50,000,000 shares of $0.001 par value common stock
authorized and 20,000,000 shares of $0.001 par value Preferred Stock authorized.
At the time of its formation, the main business of Great Xpectations
was to provide marketing services for direct marketing companies, and soon most
of Great Xpectations's business was related to Mighty Power U.S.A., Inc.
Effective as of April 1, 1997, Great Xpectations purchased the assets and
specified liabilities of Health Thru Nature, Inc., a Texas corporation, and
Mighty Power USA, L.C., a Texas limited liability company.
Simultaneously with Great Xpectations' purchase of the assets of Heath
Thru Nature, Inc. and Mighty Power USA, L.C., the following occurred:
1. All of the issued and outstanding stock of Great Xpectations
was acquired by Mighty Power U.S.A., Inc., GlobeNet's
predecessor in interest; and
2. GlobeNet Inc., a Texas corporation, merged into Mighty Power
U.S.A., Inc. Following the merger, Mighty Power U.S.A., Inc.
changed its name to GlobeNet International I, Inc.
Even while a wholly owned subsidiary of GlobeNet, Great Xpectations
always operated independently from its parent. Great Xpectations is currently
engaged in the direct marketing of a line of nutritional supplements and
automobile and home care products and service products through a network of
independent distributors. Historically, the nutritional products have accounted
for over 90% of Great Xpectations's sales, but it is anticipated that the
service products will become a significant portion of its total sales in the
future. Great Xpectations had over 2,500 members in its direct marketing network
as of December 31, 1998, all of whom are located in the United States.
In 1997, Great Xpectations crossed a critical period in its operations
by surviving the loss of a large number of its distributors. Great Xpectations'
distributor network was raided by a competitor and approximately 50% of the
leadership members in the network were lost, along with many of the leaders'
down line network personnel. Prior to the raid, Great Xpectations had more than
5,000 distributors. Following this loss of distributors, sales were sufficient
to cover all cash expenses, but specific accruals such as additional
compensation to officers have not yet been paid. From the low ebb of 2,000
distributors at the beginning of 1998, Great Xpectations had recovered to a
level of slightly more than 2,500 distributors as of December 31, 1998.
At the end of 1997, Great Xpectations addressed several issues that
they believed would help them recruit and retain sales associates. The most
significant of these were decisions to add new products to its product line and
provide a greater support base for its distributors. Until
5
<PAGE> 8
recently, Great Xpectations and its distributor network focused the majority of
their marketing efforts on consumable products such as vitamins and dietary
supplements, skin creams, and automobile and home care and cleaning products.
However, sales of these products require continuous contact with the end user,
or re-selling, and are traditionally cyclical in nature, with very low sales in
the months of August, December, and January.
Commencing in March 1998, Great Xpectations has emphasized the
development and acquisition of service products more than sales of consumable
products and recruitment of distributors. As a result, overall sales did not
increase as expected. However, on December 1, 1998, the Great Xpectations'
distribution network began selling the following service products: (a) long
distance telephone service; and (b) a family benefit package. The amount of
sales of the service products were greater than expected by Great Xpectations'
management, and it is anticipated that at some point the sale of service
products will be the largest source of revenue for Great Xpectations.
Additionally, once the service products are subscribed to by a customer, the
income generated from them is not cyclical and represents a more stable source
of cash flow for Great Xpectations and its distributor network. As a result of
these service product sales, Great Xpectations is starting to receive stable,
reliable cash flow.
The new products have given Great Xpectations' sales associates the
ability to sell additional products to their existing customer base and have
provided new ways to gain introductions to potential customers and potential
sales associates. The greater level of sales support now being supplied by Great
Xpectations provides the distributor network members with a greater feeling of
comfort, knowing that their support needs and requirements will be met, without
question, by Great Xpectations' corporate office staff. The initial results have
shown that these adjustments/changes are working well. Sales for 1998 are down
24.79% compared to sales in 1997, but Great Xpectations believes that this
decline in sales was brought on by Great Xpectations focusing the majority of
its efforts on the development and acquisition of service products that generate
stable cash flow, not traditional direct marketing cyclical cash flow, during
most of 1998, as sales have increased at a rapid rate during the month of
December 1998. Great Xpectations believes that the new focus on service
products, in conjunction with sales of existing product lines, will result in a
net profit for the calendar year 1999 because this blend of products and
services will bring in both sales call generated income as well as continuous,
renewal income.
There is an ample supply of the raw materials needed for the
manufacture/blending of the products sold by Great Xpectations. The companies
that manufacture the nutritional supplements sold by Great Xpectations are:
SK Labs, Anaheim, California
Dews Research Labs, Mineral Wells, Texas
Summa Labs, Fort Worth, Texas
Production Labs, Vista, California
The company that manufactures/blends the household cleaning products
sold is Global Marketing, Dallas, Texas.
6
<PAGE> 9
The long distance telephone service sold is provided by NCN
Communications, Inc., Phoenix, Arizona, a reseller for WorldTel, Santa Anna,
California. The principal markets targeted for sales of long distance service
are consumers situated in Texas, Oklahoma, Arkansas, and California.
The family benefit package sold, which consists of discounted rates for
various health care providers, is provided by Plan USA, Houston, Texas. The
items contained in the family benefit package are savings or discounts on: (a)
prescription drugs; (b) vision care; (c) long term care following
hospitalization; (d) air ambulance service; (e) podiatric care; (f) chiropractic
care; (g) hearing care; (h) family dental care; (i) legal services, and (j)
travel. The principal markets targeted for sales of family benefit packages are
consumers situated in Texas, Oklahoma, Arkansas, and California.
Fortunately, Great Xpectations is not dependent on just a few customers
for its sales, as its customer basis consists of thousands of individuals.
Great Xpectations holds no patents on the products that it sells, but
it does hold the "Great Xpectations" trademark. Further, Great Xpectations does
not owe any person or entity any royalty on the products it sells, it simply
buys and resells products.
Most of the products that are sold by Great Xpectations do not require
any type of government approval. However, on the ones that do require approval,
cleaning products for example, approval is obtained by the manufacturer/blender
of these products prior to Great Xpectations' buying the products. There is no
government regulation applicable to the Internet service sold by Great
Xpectations. The Federal Communications Commission regulates the long distance
telephone service sold by Great Xpectations, but this regulation is applicable
only to the actual service provider.
In the past two fiscal years Great Xpectations has spent approximately
$25,000 on researching new products and services -- $12,000 in 1997 and $13,000
in 1998. These costs were incurred by Great Xpectations for purpose of
attempting to identify products and services that could be sold to increase
future sales and profits.
Great Xpectations does not sell any products that are hazardous. As a
result, it has no expenditures, money or time, relating to environmental law
compliance.
Great Xpectations currently has two executive officers. They are Dr.
Forrest E. Watson, president and treasurer, and Everett Sparks, vice president,
secretary, and chief financial officer. Additionally, Great Xpectations relies
heavily on the talent and experience of Connie Marwitz, the president of GX
Marketing, Inc., Great Xpectations' principal subsidiary.
For the purpose of limiting its potential liabilities and for the
protection of its stockholders, the business of Great Xpectations is managed by
its wholly owned subsidiary, GX Marketing, Inc., which shall be referred to as
"GXM" hereafter in this prospectus. GXM is a
7
<PAGE> 10
Texas corporation that was formed on December 29, 1998. GXM is currently in good
standing and has never been involved any bankruptcy or receivership proceeding.
Due to Great Xpectations' lack of funds, GlobeNet is bearing all of the
expenses of this spin-off, which is estimated to be approximately $50,000.
DISTRIBUTION OF SECURITIES OF GREAT XPECTATIONS
BACKGROUND AND REASONS FOR DISTRIBUTION
The board of directors of GlobeNet decided to spin-off the stock of
Great Xpectations to the stockholders of GlobeNet for the purpose of benefitting
its stockholders. The board of directors of GlobeNet and the management of Great
Xpectations believe that GlobeNet and Great Xpectations will be more effective
as separate entities in attracting new distributors and promoting sales of their
respective products. If Great Xpectations proves to be successful, the
stockholders of GlobeNet will have an equity interest in two publicly held
direct marketing companies.
Following the completion of the distribution of all of the stock of
Great Xpectations to the stockholders of GlobeNet, Great Xpectations will have
no direct affiliation with GlobeNet whatsoever. However, after the distribution,
Clinton H. Howard, the chairman of the board of GlobeNet, will own 53.67% of the
stock of Great Xpectations, but he does not plan to act as an officer or a
director of Great Xpectations.
METHOD OF DISTRIBUTION AND SUBSEQUENT TRADING
Certificates representing the 6,768,490 shares of Great Xpectations'
common stock will be distributed by mail within ten business days after the date
of this prospectus to holders of GlobeNet common stock of record on June 5,
1998. On that date, GlobeNet had slightly fewer than 500 stockholders of record.
The dividend will be distributed on the basis of 1 share of Great Xpectations
for each 2 shares of GlobeNet. No exchange of shares, payment, or other action
by holders of GlobeNet common stock will be required. Common stock of Great
Xpectations will be distributed to the nearest number of whole shares rounding
up. No fractional shares will be issued.
A copy of this prospectus will be mailed to each GlobeNet stockholder
of record as of June 5, 1998. Copies of this prospectus will also be mailed to
brokers and dealers who are known to trade or make a market in the common stock
of GlobeNet and to other brokers and dealers who might be interested in Great
Xpectations. Great Xpectations does not anticipate that an active market for its
common stock will develop within the foreseeable future. In the absence of an
active trading market, Great Xpectations' stock will be a relatively illiquid
investment. GlobeNet does not intend to make a market in the Great Xpectations'
common stock after the distribution.
8
<PAGE> 11
DIVIDENDS
Great Xpectations has not paid any cash dividends on its common stock
and does not anticipate paying any cash dividends in the foreseeable future.
FEDERAL INCOME TAXES
GlobeNet will report the distribution of Great Xpectations' common
stock as a distribution subject to the provisions of Section 301 of the United
States Internal Revenue Code of 1986. GlobeNet will recognize gain as a result
of the distribution to the extent the fair market value of the common stock
exceeds the adjusted basis of the common stock in the hands of GlobeNet.
GlobeNet will recognize no loss as a result of the distribution.
DIVIDENDS TAXED AS ORDINARY INCOME
In the opinion of T. Alan Owen & Associates, P.C., counsel to GlobeNet,
holders of GlobeNet common stock will be taxed on the dividend distribution as
ordinary income to the extent of GlobeNet's current and accumulated earnings and
profits, computed as of the close of the tax year during which the distribution
occurs. A portion of the distribution, if any, which exceeds a GlobeNet's
current and accumulated earnings and profits will reduce a stockholder's
adjusted basis in his GlobeNet common stock, but not below zero. To the extent
of any reduction in basis, the distribution would not be currently taxable. If
the amount of the distribution would have the effect of reducing a stockholder's
adjusted basis in his GlobeNet common stock below zero, the excess will be
treated as a gain from the sale or exchange of property. If the GlobeNet common
stock is a capital asset in the hands of the stockholder, the gain will be a
capital, either long-term or short-term, depending on whether the stockholder
has held his GlobeNet common stock for more than six months.
Non-corporate stock owners will be treated as having received a
distribution equal to the fair market value at the date of the distribution of
the common stock they receive. Corporate stock owners will generally be treated
as having received a distribution in an amount equal to the lesser of (a)
GlobeNet's adjusted basis in the common stock immediately prior to the
distribution, which will be approximately $0.001 per share, increased by the
amount of any gain recognized by GlobeNet on the distribution, or (b) the fair
market value of the common stock on the date of the distribution. However,
corporate stockholders may be entitled to the dividends-received deduction,
which would generally allow them a deduction, subject to specific limitations,
from their gross income of 80 percent of the amount of the dividend.
A non-corporate stockholder's tax basis in the common stock will equal
the fair market value of the common stock on the date of the distribution and a
corporate stockholder's tax basis in the common stock will generally equal the
lesser of the fair market value of the common stock on the date of the
distribution or the adjusted basis of the common stock in the hands of
9
<PAGE> 12
GlobeNet immediately prior to the distribution, increased in the amount of any
gain recognized to GlobeNet on the distribution.
The holding period of a corporate stockholder of GlobeNet will commence
on the date of the distribution. If gain is recognized on the distribution by
GlobeNet, as will be the case if the fair market value of the common stock
distributed exceeds it suggests basis, a corporate stockholder's holding period
will begin on the date of the distribution.
If gain is not recognized by GlobeNet on the distribution and the basis
of the common stock in the hands of the corporate stockholder is determined
under Internal Revenue Code Section 301(d)(2)(B), then, except for gain from
specific types of sales or exchanges of stock in foreign corporations, the
corporate stockholder will not be treated as holding the common stock
distributed during any period before the date on which a corporate stockholder's
holding period in his common stock began.
In the absence of a trading market for the common stock, "fair market
value" is to be calculated in accordance with Internal Revenue Service Revenue
Ruling 59-60, 1959-1C.B.237, which sets forth factors for this determination,
such as the nature of the business, its history, the general economic outlook,
book value, earnings capacity, dividend paying capacity, existence of goodwill,
and recent sales of Great Xpectations shares. Neither GlobeNet nor Great
Xpectations will advise the stockholders what the "fair market value" of the
common stock will be on the distribution date. Each stockholder must make his
own determination. However, GlobeNet intends to send stockholders I.R.S. Form
1099 (DIV) which will indicate the approximation of GlobeNet of the value of the
dividend distribution, and this approximation will be $0.001 per share.
The preceding discussion is a general summary of current federal income
tax consequences of the dividend distribution as presently interpreted, and a
given stockholder's particular tax consequences may vary depending on his
individual circumstances. Stockholders are encouraged to consult their own tax
counsel concerning the treatment of the distribution on their income tax
returns.
As a result of the Tax Reform Act of 1986, for a non-corporate
taxpayer, there will be no preferential tax treatment of long-term capital
gains. The distinction between short-term and a long-term capital gains will
still exist, but all gains will be taxed as ordinary income.
CAPITALIZATION
The following table shows the capitalization of Great Xpectations on
December 31, 1998, and as adjusted to reflect the issuance of the bonus stock
described in this prospectus. The "as adjusted" column includes the 500,000
shares of common stock issued to Forrest E. Watson, Everett Sparks, and T. Alan
Owen & Associates, P.C. under the terms of their respective employment
agreements with Great Xpectations.
10
<PAGE> 13
<TABLE>
<CAPTION>
OUTSTANDING AS ADJUSTED
------------ ------------
<S> <C> <C>
Common stock, par value $0.001, $ 6,768 $ 7,268
50,000,000 shares authorized,
6,768,490 and 7,268,490
issued and outstanding
Additional Paid in Capital $ 500 $ 500
</TABLE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial information. This
information has been derived from the financial statement of Great Xpectations
as of December 31, 1998, and for the previous years ended on December 31, 1997.
This information should be read in conjunction with the financial statements and
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" set forth in this prospectus immediately below this
table.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Sales $ 1,234,217 $ 1,641,068
Cost of sales 500,759 269,926
------------ ------------
Gross profit 733,458 1,371,142
------------ ------------
Operating expenses:
General and administrative 835,928 632,044
Distributor commissions 590,178 739,246
Interest 8,115 21,375
Goodwill impairment 119,343
Fixed asset impairment 50,770
Depreciation and amortization 58,348 41,252
------------ ------------
Total operating expenses 1,661,952 1,433,917
------------ ------------
Net income (loss) from operations (928,494) (62,775)
Income taxes (benefit) (71,900)
------------
Net income (loss) $ (856,594) $ (62,775)
============ ============
Earnings per share:
Income (loss) per share $ (0.13) $ (0.01)
============ ============
Weighted average shares outstanding 6,768,490 6,768,490
============ ============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 41,229 $ 155,987
Working capital (unaudited) $ (461,406) $ (228,646)
Total assets $ 263,148 $ 663,046
Retained earnings (deficit) $ (928,895) $ (72,301)
Total shareholders' equity $ (411,904) $ 27,699
</TABLE>
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
While Great Xpectations is in business and is not a "development stage"
company, it only has $41,229 cash for operating funds, and, as explained in
"Risk Factors" above, this may not be sufficient working capital for Great
Xpectations to survive as an operating entity. The only internal source of
working capital or liquidity is product and service sales. At the present time,
there are no external sources of liquidity.
It is estimated that the cash requirements of Great Xpectations will be
able to be satisfied with existing funds until October 1999. As a result, gross
sales will have to increase by approximately $21,000 per week or working capital
for the remainder of the year will have to be funded from additional equity,
currently unknown to be available, or loan proceeds.
Currently, Great Xpectations owes deferred compensation to Forrest
E. Watson and Savanna Marketing, Inc. for management services rendered to Great
Xpectations. The aggregate amount of deferred compensation is $84,000. Savanna
Marketing, Inc., a Texas corporation, provided the services of Connie Marwitz,
an experienced marketing management person who was formerly an employee of Great
Xpectations.
In order to be truly viable, Great Xpectations will have to obtain
additional working capital in the form of a substantial line of credit loan or
equity infusion, and increase its sales markedly. There are no assurances that
additional capital would be available or, if available, could be obtained
without the issuance of additional equity securities with a resultant dilution
in the equity of the holders of common stock, or that financing could be
arranged, if at all, on terms favorable to Great Xpectations. Further, there is
no assurance that Great Xpectations will be able to increase its sales volume to
the extent needed to maintain viable operations.
RESULTS OF OPERATIONS
During the fiscal year ending on December 31, 1997, Great Xpectations
experienced a steep decline in sales that was caused primarily by a large number
of its distributors breaking off from Great Xpectations to form their own direct
marketing company. In 1997, Great Xpectations had sales of $1,641,062, and had a
net loss of $62,775. The loss in 1997 can be attributed to Great Xpectations
taking on sufficient fixed overhead to properly handle its 1996
12
<PAGE> 15
sales volume and having an unexpected, precipitous drop in total sales. However,
Great Xpectations reorganized some of the functions and responsibilities
relating to sales and sales support. After the drastic drop in sales occurred
and leveled out, sales started to increase slowly near the end of 1997. Although
Great Xpectations was accruing specifically identified expenses relating to its
debt and employment agreements with its two principals, Great Xpectations
covered its cash requirements for operations.
During 1998, Great Xpectations' sales were relatively level, but
increased slightly at the end of the year. The rebuilding of Great Xpectations'
marketing network in 1997 was starting to show some returns in the form of
increased marketing and recruiting. During 1998, Great Xpectations had sales of
$1,234,217 and had a net operational loss of $328,991. In addition to this,
Great Xpectations took a write-down in its fixed assets and goodwill of
$170,013, resulting in a total loss for 1998 of $498,994. Great Xpectations'
management believes that sales will increase in 1999, and that it will report a
small net profit for 1999 because its current blend of products and services
will bring in both sales call generated income as well as continuous, renewal
income, as previously stated in this prospectus. However, if this does not
occur, there is great uncertainty that Great Xpectations will be considered to
be a going concern and may have to cease operations altogether.
ABSENCE OF TRADING MARKET FOR THE COMMON STOCK
No market for trading the common stock currently exists and there is no
assurance that a market ever will develop or, should a market ever be
established, that it will be maintained. The common stock does not now, and may
never, qualify for listing on any securities exchange. In the absence of an
over-the-counter market in the Great Xpectations' common stock, or listing on an
exchange, holders of the common stock will be unable to sell their securities
through usual and customary stock brokerage channels and may be unable to
determine the value of their securities.
OPERATING PLAN
Great Xpectations now has no research and development costs as
information on the products it sells such as herbal vitamin and food supplements
is broadly available to the public. Great Xpectations takes this available
information and "creates" its own mixes in order to have desirable products to
market.
Great Xpectations has property and equipment related to the marketing
of its products and the support of its distributors. There are no significant
capital items that could be used to create a large increase in sales. Therefore,
Great Xpectations has no plans to acquire or dispose of any capital items during
1999, or at anytime in the foreseeable future.
Since Great Xpectations' distributors are independent contractors, not
employees, it can double the size of its current sales force, which it intends
to do, without increasing the number of its employees.
There are no material commitments for capital expenditures as Great
Xpectations is
13
<PAGE> 16
merely a marketing organization structure that provides its distributors with
products and sales support.
DISCUSSION OF CHANGE IN FINANCIAL CONDITION
As of December 31, 1998, Great Xpectations had cash on hand in the
amount of $41,229, compared to $155,987 on December 31, 1997. While sales in
1998 were almost the same as in 1997, Great Xpectations increased its fixed
overhead in 1998 to be able to support an increased number of distributors and
this overhead cannot easily be trimmed. As of January 1999, Great Xpectations
had pared its operating expenses to a minimum, including moving its offices to a
less expensive lease space. In addition, Great Xpectations is no longer accruing
specified costs such as compensation to principal officers. Management believes
that this expense reduction will provide Great Xpectations with the cost savings
necessary for it to continue as a going concern and pay its operating expenses.
Should Great Xpectations not be able to cover its operating expenses
from its cash flow, it has few alternate sources of capital. The officers and
directors could, as they have done in the past, loan money to Great Xpectations.
Great Xpectations might obtain investment funds from a third party, but no
negotiations of this type are currently taking place.
There are no known trends, events, or circumstances known to management
that would cause a material impact on the financial position or the sales of
Great Xpectations. There are no significant items of income or loss expected in
the next twelve months that would materially affect the financial statements of
Great Xpectations.
YEAR 2000 PROBLEM
Great Xpectations does not anticipate a Year 2000 or Y2K problem with
respect to its own equipment as all of its computers and software are Year 2000
compliant. In addition, Great Xpectations has retained paper copies of all
computer information. Therefore, Great Xpectations does not expect to be
materially affected by any Y2K problem or situation that should arise if it
relates solely to Great Xpectations. However, since long distance telephone
service, an industry that potentially will experience a Y2K problem, is one of
the products currently being sold by Great Xpectations' marketing network, Great
Xpectations could be indirectly affected. Additionally, if the trucking industry
is affected by the Y2K problem, Great Xpectations could be affected by erratic
or lack of product delivery.
14
<PAGE> 17
MANAGEMENT OF GREAT XPECTATIONS
The following table identifies the officers and directors of Great
Xpectations.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Forrest E. Watson, Ed.D. 63 President, Treasurer, and
Chairman of the Board
Everett Sparks 49 Vice President, Secretary,
and Director
</TABLE>
Forrest E. Watson, Ed.D. Dr. Watson has served 34 years as a
Superintendent of public school systems with responsibility for annual budgets
in excess of $75,000,000. During his years of acting as a school system
Superintendent, Dr. Watson supervised over $400,000,000 in school construction.
Dr. Watson has served as the chairman of the board of Great Xpectations since
the date of its formation. Dr. Watson was also a director of GlobeNet prior to
his resignation upon the date of this prospectus. Dr. Watson acted as the
chairman of the board of directors and C.E.O. of Mighty Power U.S.A., Inc. from
April 1995 to March 1997, the effective date of the merger of GlobeNet Inc., a
Texas corporation, into Mighty Power U.S.A., Inc., GlobeNet's predecessor in
interest.
Everett Sparks. Mr. Sparks has worked in the financial side of the oil
and gas production and marketing industry as an investor and a consultant for
approximately 18 years, and a portion of his duties were economic forecasting
and the building of economic models. Additionally, Mr. Sparks, has acted as a
financial consultant to various private companies, concerning their operational
and functional activities for approximately 15 years.
The term of office of a director of Great Xpectations ends at the next
annual meeting of Great Xpectations' stockholders or when his successor is
elected and qualifies. The term of office of an officer of Great Xpectations
ends at the annual meeting of the board of directors expected to take place
immediately after the next annual meeting of the stockholders, or when his
successor is elected and qualifies. Mr. Sparks began acting as an officer and a
director of Great Xpectations as of December 31, 1998.
Great Xpectations will be substantially dependent upon the experience
and knowledge of its two principal officers and directors, Forrest E. Watson,
Ed.D. and Everett Sparks. The loss to Great Xpectations of either or both of
these persons could be expected to be detrimental to Great Xpectations. Great
Xpectations has entered into written employment agreements with Dr. Watson, who
will serve as Great Xpectations' president and treasurer, and Mr. Sparks, who
will serve as Great Xpectations' vice president and chief financial officer and
secretary for the calendar year 1999. Under the terms of the employment
agreements, Dr. Watson and Mr. Sparks will act in the above-stated capacities
without cash compensation until Great Xpectations is profitable.
15
<PAGE> 18
Persons who are deemed "affiliates" of Great Xpectations under the
rules and regulations of the Securities and Exchange Commission may not sell
their shares of common stock of Great Xpectations otherwise than in accordance
with all of the requirements of Rule 144 promulgated by the Securities and
Exchange Commission under the Securities Act of 1933. Rule 144 restricts the
time, amount, and manner in which affiliates may sell their common stock. Both
Dr. Watson and Mr. Sparks are affiliates of Great Xpectations. Additionally, due
to his ownership of 53.67% of the common stock, Clinton H. Howard is considered
to be an affiliate of Great Xpectations, and he will be in a position to control
Great Xpectations and its management.
Dr. Watson and Mr. Sparks will provide their services to Great
Xpectations on an "as needed" basis. This may require as much as 40 hours in a
given week, and may require as little as 3 hours in a given week.
REMUNERATION
Great Xpectations has authorized the issuance, effective as of the date
of this prospectus, of 225,000, 225,000, and 50,000 shares of Great
Xpectations's common stock to Forrest E. Watson, Ed.D., Everett Sparks, and T.
Alan Owen & Associates, P.C., respectively, under the terms of Great
Xpectations' stock bonus plan. Dr. Watson and Mr. Sparks, Great Xpectations' two
principal executive officers, have agreed with Great Xpectations that they will
perform their agreed upon duties for no cash compensation from the date of this
prospectus until Great Xpectations is profitable, and have agreed to perform
these duties for the entire calendar year of 1999 for only the common stock
described above, if necessary. Great Xpectations has paid no other remuneration
to its officers or directors, and, except as disclosed in this prospectus, does
not anticipate the payment of other remuneration until Great Xpectations becomes
profitable in its business.
STOCK BONUS PLAN
On December 15,1998, the board of directors of Great Xpectations
adopted a stock bonus plan for the purpose of employing persons to work for
Great Xpectations without cash payment for services and for incentive to perform
well. Under the terms of this plan, the board of directors is empowered to award
common stock of Great Xpectations as compensation to employees of Great
Xpectations, including the officers and independent contractors. The plan
authorizes the board of directors to administer the plan in its sole discretion,
but permits an award of no more than 750,000 shares of common stock in any one
year period. The plan may be amended or terminated by the board of directors,
but any amendment or termination cannot abrogate existing rights in the plan,
and, with respect to any increase in the amount of stock to be awarded, requires
approval of a majority of the stockholders of Great Xpectations.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Nevada law, Great Xpectations' bylaws provide that
Great Xpectations will indemnify its directors and officers against expense and
liabilities they incurred to defend, settle, or satisfy any civil or criminal
action brought against them on account of their being or
16
<PAGE> 19
having been Great Xpectations' directors or officers unless, in any action, they
are judged to have acted with gross negligence or willful misconduct. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers, or persons controlling Great Xpectations under
the above provisions, Great Xpectations has been informed that, in the opinion
of the Securities and Exchange Commission, this type of indemnification is
against public policy as expressed in the Securities Act, and is unenforceable.
CERTAIN TRANSACTIONS
The law firm of T. Alan Owen & Associates, P.C. has received legal fees
of $5,000.00 for services rendered in connection with the preparation of the
registration statement of which this prospectus forms a part and will be paid an
additional $5,000.00 upon the date of this prospectus.
On December 15,1998, Great Xpectations entered into employment
agreements with Forrest E. Watson, Ed.D. and Everett Sparks for a one year term,
beginning on January 1, 1999, without cash compensation. Under the terms of the
employment agreements, Great Xpectations agreed to include these persons under
the Great Xpectations' stock bonus plan and has issued 225,000 shares of Great
Xpectations' $0.001 par value common stock to each of them. Great Xpectations
has also issued 50,000 shares of Great Xpectations' common stock to T. Alan Owen
& Associates, P.C. for agreeing to render legal services to Great Xpectations in
connection with Great Xpectations' business for calendar year 1999, under the
terms of the Great Xpectations' stock bonus plan. However, as stated above, the
law firm of T. Alan Owen & Associates, P.C. has performed and will perform
services for Great Xpectations in the capacity of a third party, independent
contractor, not as Great Xpectations' employee. It should be noted that a state
court may determine not to enforce, or only partially enforce, some provisions
of the employment agreements relating to Dr. Watson, Mr. Sparks, and T. Alan
Owen & Associates, P.C.
GlobeNet, Great Xpectations' parent, is paying all of the costs and
expenses of this offering, estimated to be approximately $50,000, without any
right to reimbursement, for Great Xpectations.
Connie Marwitz is the president of both Savanna Marketing, Inc. and GX
Marketing, Inc. which are referenced in this prospectus. Ms. Marwitz is the sole
shareholder of Savanna Marketing, Inc.
As stated above, Great Xpectations has obtained its office and
warehouse space by and through its subsidiary, GX Marketing, Inc. GX Marketing,
Inc. is the named tenant on the lease.
17
<PAGE> 20
PRINCIPAL SECURITY HOLDERS OF GREAT XPECTATIONS
The following parties are the persons known to Great Xpectations to own
5% or more, beneficially or of record, of the stock, and by all officers and
directors of Great Xpectations as a group:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
BENEFICIAL OWNER AMOUNT % OF CLASS
- ---------------- ------ ----------
<S> <C> <C>
Clinton H. Howard 3,900,928 53.67%
3917 Fox Glen Dr.
Irving, TX 75062
Penny Slinger Hills, Trustee 702,002 9.66%
Hills 1988 Living Trust
910 Herman Gulch Road
Boulden Creek, CA 95006
Penny Slinger Hills, Trustee 40,704 0.56%
Hills Survivors Trust
910 Herman Gulch Road
Boulden Creek, CA 95006
Dr. M. G. Robertson 500,000 6.88%
977 Centerville Turnpike
Virginia Beach, VA 23463
</TABLE>
18
<PAGE> 21
SECURITY OWNERSHIP OF MANAGEMENT
All shares of common stock reflected in the table below are owned
directly and are owned beneficially and of record, and each stockholder has sole
voting, investment, and dispositive power, unless otherwise noted. The shares
listed as owned by Clinton H. Howard, the president and chairman of the board of
GlobeNet, includes 57,633 shares owned of record by Mr. Howard's wife. As a
result, following the distribution of the common stock of Great Xpectations to
the GlobeNet stockholders, Mr. Howard will control a majority of Great
Xpectations' common stock. However, Mr. Howard has represented that he has no
intention of actively participating in the management of Great Xpectations and
does not plan to be an officer or director of Great Xpectations. Further, Mr.
Howard plans to donate all or a majority of his Great Xpectations stock to
various charities over time. The recipients of the donations and the timing of
the donations will at the sole and absolute discretion of Mr. Howard.
<TABLE>
<CAPTION>
Title of Class Beneficial Owner Amount % of Class
- -------------- ---------------- ------ ----------
<S> <C> <C> <C>
Common Forrest E. Watson, Ed.D. 225,000 3.10%
8925 Sterling Street
Suite 120
Irving, Texas 75063
Common Everett Sparks 225,000 3.10%
1861 Brown Boulevard
Suite 759
Arlington, TX 76011
Common All Officers & Directors 450,000 6.20%
as a Group
</TABLE>
LITIGATION
Great Xpectations is currently engaged in a lawsuit that has been filed
in Dallas County Court at Law No. 3, Dallas, Texas, styled "Harry C. Liversage
v. Great Xpectations Marketing, Inc. and Mighty Power U.S.A., Inc.", Cause No.
cc-98-06854-c. In the lawsuit, the plaintiff is claiming damages in the amount
of $64,944.25 for alleged injuries sustained on the job and for wrongful
termination. This lawsuit was filed on July 16, 1998. In the opinion of Great
Xpectations' attorneys, T. Alan Owen & Associates, P.C., the lawsuit is without
merit because Texas is an employment "at will" state and the plaintiff's
allegations of injuries are believed to be spurious.
Other than the above lawsuit, Great Xpectations is not engaged in any
litigation or similar proceeding.
19
<PAGE> 22
DESCRIPTION OF SECURITIES OF GREAT XPECTATIONS
COMMON STOCK
General. Great Xpectations' authorized capital stock consists of
50,000,000 shares of common stock, $0.001 par value, and 20,000,000 shares of
preferred stock, $0.001 par value. Holders of the common stock are entitled to
receive any dividends that may be declared by the board of directors out of
funds legally available for this purpose. Great Xpectations has not paid any
dividends on its common stock and does not anticipate paying dividends for the
foreseeable future. In the event of liquidation, holders of the common stock are
entitled to a proportionate share of any distribution of Great Xpectations'
assets after the payment of liabilities. Holders of the common stock do not have
preemptive rights. Each share of common stock is entitled to one vote, and
cumulative voting is not permitted in the election of directors. All of the
issued and outstanding shares of common stock are, and the shares being offered
in this Prospectus will be, upon issuance, fully paid and non-assessable.
Certain voting requirements. The affirmative vote of the holders of a
majority of the shares present at a stockholders' meeting, at which a quorum is
present, generally constitutes stockholder approval or authorization of matters
for which stockholder approval or authorization is required. A sale or transfer
of substantially all of Great Xpectations' assets, liquidation, merger,
consolidation, reorganization, or similar extraordinary corporate event
generally requires the affirmative vote of a majority of the shares issued and
entitled to vote.
Elimination or limitation of liability of directors. Great Xpectations'
articles of incorporation contain a provision for the elimination or limitation
of liability of directors that is permitted by Nevada law. The articles of
incorporation provide that a director shall not be liable to Great Xpectations
or its stockholders for monetary damages for breach of fiduciary duty as a
director, but shall be liable (a) for any breach of the director's duty of
loyalty to Great Xpectations or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) for approving the payment of a dividend or a stock repurchase or
redemption prohibited by the laws of the State of Nevada, and (d) for any
transaction from which the director derived an improper personal benefit.
A director of a corporation organized and existing under the laws of
the State of Nevada owes the corporation and its stockholders a number of
fiduciary duties. Nevada law directs that a director owes fiduciary duties to
his corporation and it stockholders to act in the best interest of the
corporation with undivided and unselfish loyalty and to use that amount of care
in the management of the corporation's business which ordinary, careful, and
prudent men would use in similar circumstances in the handling of their own
affairs. More specifically, the duty of loyalty requires a director to place the
interests of the corporation ahead of his personal or other business interests.
The principal effect of the limitation of liability of the directors of
Great Xpectations is that stockholders will not have a cause of action for
monetary damages against a director for breach of fiduciary duty, including
grossly negligent business decisions by a director of Great
20
<PAGE> 23
Xpectations. However, this type of limitation of liability provision has no
effect on the availability of equitable remedies, such as an injunction or
rescission, for breach of a director's fiduciary duty.
In any case, the limitation of directors provision contained in Great
Xpectations' articles of incorporation will not limit a director's liability for
a violation, or violations, of federal securities laws.
The directors of Great Xpectations have a personal interest in seeing
the limitation of liability of directors provisions included in the articles of
incorporation of Great Xpectations, at the potential expense of Great
Xpectations' stockholders. Because Great Xpectations does not intend to maintain
liability insurance covering its directors, Great Xpectations will incur a
significant increase in liability exposure, or a greater risk to Great
Xpectations's assets and equity. The potential effect of this increase in
liability exposure is that Great Xpectations may incur a monetary loss as a
result of a director's violation of his duty of care or duty of loyalty and may
be unable to recoup these losses from the director. Any loss of this nature
would reduce the equity of Great Xpectations and could result in a decline in
the market value, if any, of the common stock held by Great Xpectations'
stockholders.
TRANSFER AGENT
Great Xpectations has retained Fidelity Transfer Company, 1800 SW
Temple, Suite 301, Salt Lake City, Utah 84115, as the transfer agent for the
common stock of Great Xpectations.
LEGAL MATTERS
The law firm of T. Alan Owen & Associates, P.C., 1112 East Copeland
Road, Suite 420, Arlington, Texas 76011, has acted as legal counsel for GlobeNet
and Great Xpectations in connection with the registration statement of which
this prospectus forms a part and related matters.
EXPERTS
The financial statements of Great Xpectations as of December 31, 1997
and 1998, as included in this prospectus, have been audited by Osborn, Swalm,
Thomas & Associates, PLLC, n/k/a Swalm, Thomas & Associates, PLLC, independent
certified public accountants, as stated in its report appearing in this
prospectus, and those financial statements are included in reliance upon the
report of this accounting firm, appearing elsewhere in the prospectus, and upon
its authority as an expert in auditing and accounting.
21
<PAGE> 24
ADDITIONAL INFORMATION
Great Xpectations has filed with the Securities and Exchange Commission
a registration statement on Form SB-2 under the Securities Act of 1933, for this
offering. This prospectus does not contain all the information in the
registration statement and its exhibits, which documents may be inspected and
copied at the Public Reference Section of the Securities and Exchange
Commission, at 450 Fifth Street, N.W., Washington D.C. 20549. Copies of these
materials may be obtained from the Public Reference Section of the Securities
and Exchange Commission at prescribed rates. Information on the operation of the
Public Reference Room may be obtained 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 concerning securities issuers that file
reports electronically with the SEC. This Internet site address is
http://www.sec.gov.
Upon the approval of Great Xpectations' registration statement, it will
be a fully reporting company that will file annual reports and quarterly reports
on Form 10-K and Form 10-Q. Additionally, Great Xpectations will file reports of
significant events that occur in between quarterly and annual reports on Form
8-K.
22
<PAGE> 25
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report F-2
Financial Statements
Balance Sheets as of June 30, 1999 (unaudited) and December 31, 1998 F-3
Statements of Operations for the six months ended June 30, 1999 and
1998 (unaudited) for the years ended December 31, 1998 and 1997 F-4
Statements of Shareholders' Equity for the six months ended June 30, 1999 (unaudited)
and years ended December 31, 1998 and 1997 F-5
Statements of Cash Flows for the six months ended June 30, 1999 and
1998 (unaudited) for the years ended December 31, 1998 and 1997 F-6
Notes to Financial Statements F-7
</TABLE>
All other schedules and financial statements are omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto.
F-1
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
Board of Directors
Great Xpectations Marketing, Inc.
Dallas, Texas
We have audited the accompanying balance sheets of Great Xpectations Marketing,
Inc. as of December 31, 1998, and the related statements of operations,
shareholders' equity and cash flows for the two year period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 statements and schedules. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for
our opinions.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Great Xpectations Marketing,
Inc. as of December 31, 1998 and the results of their operations and their cash
flows for the two year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company's significant operating losses and financial
commitments raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
SWALM, THOMAS & ASSOCIATES, PLLC
Plano, Texas
August 27, 1999
F-2
<PAGE> 27
GREAT XPECTATIONS MARKETING, INC.
BALANCE SHEET
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
JUNE 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 59,537 $ 41,229
Accounts receivable, net of allowance
for doubtful accounts 7,001 4,726
Accounts receivable - related party 100,000 100,000
Inventory 31,278 67,691
------------ ------------
Total current assets 197,816 213,646
Property and equipment, net of depreciation 34,888 42,316
Note receivable 76,000 --
Other assets 1,185 7,186
------------ ------------
$ 309,889 $ 263,148
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities
Accounts payable, trade $ 34,443 $ 243,330
Accrued expenses 240,712 200,022
Notes payable - related parties 232,700 231,700
------------ ------------
Total current liabilities 507,855 675,052
------------ ------------
Commitment and contingencies -- --
Shareholders' equity (deficiency):
Preferred stock, $.001 par value; authorized
20,000,000 shares: none issued -- --
Common stock, $.001 par value; authorized
50,000,000 shares; issued and outstanding
6,768,490 shares 6,768 6,768
Paid in capital 510,223 510,223
Retained earnings (deficit) (714,957) (928,895)
------------ ------------
(197,966) (411,904)
------------ ------------
$ 309,889 $ 263,148
============ ============
</TABLE>
See notes to financial statements.
F-3
<PAGE> 28
GREAT XPECTATIONS MARKETING, INC.
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 AND
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31,
------------------------------ ------------------------------
1999 1998 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 506,189 $ 682,428 $ 1,234,217 $ 1,641,068
Cost of sales 76,065 173,261 500,759 269,926
------------ ------------ ------------ ------------
Gross profit 430,124 509,167 733,458 1,371,142
------------ ------------ ------------ ------------
Operating expenses:
General and administrative 189,102 300,864 835,298 632,044
Distributor commissions 184,195 325,617 590,178 739,246
Interest 11,475 8,115 8,115 21,375
Goodwill impairment -- -- 119,243 --
Fixed asset impairment -- -- 50,770 --
Depreciation and amortization 15,402 31,144 58,348 41,252
------------ ------------ ------------ ------------
Total operating expenses 400,174 665,740 1,661,952 1,433,917
------------ ------------ ------------ ------------
Income (loss) from operations 29,950 (156,573) (928,494) (62,775)
Settlement gain 183,988 -- -- --
Income (taxes) benefit -- 71,900 71,900 --
------------ ------------ ------------ ------------
Net income (loss) $ 213,938 $ (84,673) $ (856,594) $ (62,775)
============ ============ ============ ============
Earnings per share:
Loss per share $ (0.032) $ (0.013) $ (0.127) $ (0.009)
============ ============ ============ ============
Weighted average shares outstanding 6,768,490 6,768,490 6,768,490 6,768,490
============ ============ ============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE> 29
GREAT XPECTATIONS MARKETING, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1999 AND
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Stock Total
------------------------- Paid In Retained Shareholders'
Shares Amount Capital Earnings Equity
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1996 6,768,490 $ 6,768 $ 472,038 $ (435,668) $ 43,138
Contributions -- -- 300 -- 300
Net Income - three months ended
March 31, 1997 -- -- -- 9,526 9,526
Acquisitions / reverse merger -- -- (379,106) 426,142 47,036
---------- ---------- ---------- ---------- ----------
Balances, March 31, 1997 6,768,490 6,768 93,232 -- 100,000
Net Loss - nine months ended
December 31, 1997 -- -- -- (72,301) (72,301)
---------- ---------- ---------- ---------- ----------
Balances, December 31, 1997 6,768,490 6,768 93,232 (72,301) 27,699
Forgiveness of inter-company debt -- -- 416,991 -- 416,991
Net Income (loss) -- -- -- (856,594) (856,594)
---------- ---------- ---------- ---------- ----------
Balances, December 31, 1998 6,768,490 6,768 510,223 (928,895) (411,904)
Net Income (Loss) -- -- -- 213,938 213,938
---------- ---------- ---------- ---------- ----------
Balances, June 30, 1999 6,768,490 $ 6,678 $ 510,223 $ (714,957) $ (197,966)
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 30
GREAT XPECTATIONS MARKETING, INC.
STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 1999 AND 1998 AND
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31,
-------------------------- --------------------------
1999 1998 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) from operations $ 213,938 $ (84,673) $ (856,594) $ (62,775)
Adjustments to reconcile loss to net cash
provided by (used for) operations:
Depreciation and amortization 15,402 31,144 58,348 41,252
Goodwill impairment -- -- 119,243 --
Fixed asset impairment -- -- 50,770 --
Loss on inventory -- -- 34,839 --
Income tax benefit -- (71,900) (71,900) --
Settlement gain (183,988) -- -- --
Change in assets and liabilities:
Accounts receivable (2,275) (5,370) 10,945 (1,752)
Inventory 36,413 41,477 32,514 (6,664)
Other assets 6,000 (10,343) (543) 18,269
Accounts payable (24,898) 41,757 228,227 (54,349)
Accrued expenses 40,690 38,807 70,870 75,291
Notes payable - related parties -- -- 229,500 --
---------- ---------- ---------- ----------
Cash provided by (used for) operating activities 101,282 (19,101) (93,781) 9,272
---------- ---------- ---------- ----------
Cash flow from investing activities:
Note receivable (76,000) -- -- --
Purchase of furniture and equipment (7,974) (19,914) (20,977) (36,186)
---------- ---------- ---------- ----------
Cash provided by (used for) investing activities (83,974) (19,914) (20,977) (36,186)
---------- ---------- ---------- ----------
Cash flow from financing activities:
Inter-company advances -- -- -- 250,000
Paid-in-capital -- -- -- 300
Notes Payable - related parties 1,000 -- -- --
Payment on note payable -- -- -- (100,000)
---------- ---------- ---------- ----------
Cash provided by (used for) financing activities 1,000 -- -- 150,300
---------- ---------- ---------- ----------
Net increase (decrease) in cash 18,308 (39,015) (114,758) 123,386
Cash, beginning of year 41,229 155,987 155,987 32,601
---------- ---------- ---------- ----------
Cash, end of year $ 59,537 $ 116,972 $ 41,229 $ 155,987
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 31
GREAT XPECTATIONS MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998 AND 1997
1. HISTORY:
Effective November 1, 1995 Seven Oaks Farms, Ltd. ("Seven Oaks") merged with
Mighty Power, Inc. ("MPI"). The merger, a purchase under Accounting Principles
Board Opinion 16, was accounted for as a reverse merger with MPI being the
acquirer. The Company then changed its name to Mighty Power USA, Inc. ("Mighty
Power").
Effective April 1, 1997, Mighty Power merged with GlobeNet Inc. (the "Merger").
The transaction, a purchase under Accounting Principles Board Opinion 16, has
been accounted for as a reverse merger with GlobeNet Inc. being the acquirer. In
connection with this transaction, the Company changed it name to GlobeNet
International I, Inc. ("GNI").
Concurrent with the Merger, an affiliate of Mighty Power, Great Xpectations
Marketing, Inc. ("GXI"), acquired all the assets and liabilities of two other
affiliates of the Company, Health Thru Nature, Inc. ("HTN") and Mighty Power
USA, L.C. ("MPLC") for $100,000 in notes payable. Mighty Power then purchased
all the outstanding common stock of GXI for an additional $100,000 note payable.
These transactions were also accounted for as purchases. Upon completion of the
acquisitions Mighty Power transferred all its operating assets and liabilities
to GXI.
As a result of these transactions, GXI (the "Company"), became a wholly-owned
subsidiary of GNI consisting of the assets, liabilities and operations of GXI,
Mighty Power, HTN, and MPLC. The Company is engaged in the marketing of
nutritional supplements and personal care products.
On July 28, 1998, GNI announced its intention to separate GXI from its network
marketing business through a spin-off to its shareholders ("the Distribution").
The Company's Board of Directors voted to approve, in principal, the
Distribution subject to other approvals and consents and satisfactory
implementation of the arrangements for the Distribution. The Company intends to
consummate the Distribution effective June 30, 1998, through a special dividend
to its stockholders of one share of GXI common stock for each two shares of
Company common stock.
The Company was originally organized in Texas on April 10, 1995. In August, 1998
the Company redomiciled to Nevada and changed its capital structure to authorize
20,000,000 shares of $1.00 par value preferred stock and 50,000,000 shares of
$.001 par value common stock. Issued and outstanding common stock was adjusted
to 6,768,490 shares effective on that date. All share and per share amounts have
been retroactively adjusted to reflect this change.
The financial statements present the financial position, results of operations
and cash flows of GXI as if it were formed as a separate entity of GNI for all
periods presented. GNI's historical basis in the assets and liabilities of GXI
has been carried over to the financial statements. All material inter-company
transactions and balances between GNI and GXI have been eliminated. GXI's
balance due to GNI for inter-company transactions has been forgiven by GNI and
recorded as additional paid-in-capital of $416,992.
F-7
<PAGE> 32
GREAT XPECTATIONS MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION - The Company sells its products through a network of
independent distributors. The Company recognizes revenue upon sale to its
distributors and records an allowance for sales returns.
INVENTORIES - Inventories, consisting of finished goods held for resale,
work-in-process and raw materials are stated at the lower of cost of market.
CASH EQUIVALENTS - For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation and amortization are being provided over the estimated useful lives
of the related assets, principally on the straight-line and declining balance
methods, ranging from three to seven years.
The Company reviews its property and other noncurrent assets for impairment when
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Impairment is measured as the amount by which the carrying
amount of the asset exceeds the fair market value of the asset less disposal
costs.
ACCOUNTING ESTIMATES - The preparation of financial statements, in conformity
with generally accepted accounting principles, requires management to make
estimates and assumptions that effect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
INCOME TAXES - The Company has adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS 109 requires
an asset and liability approach to financial accounting for income taxes. In the
event differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities result in deferred tax assets, SFAS 109
requires an evaluation of the probability of being able to realize the future
benefits indicated by such assets. A valuation allowance is provided for a
portion or all deferred tax assets when there is an uncertainty regarding the
Company's ability to recognize the benefits of the assets in future years.
EARNINGS (LOSS) PER SHARE - Earnings (loss) per share (EPS) are calculated in
accordance with Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings per Share", which was adopted in 1997 for all years presented. Basic
EPS is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the period. Diluted
EPS is not presented since it would be anti-dilutive.
CREDIT RISK - The Company's trade accounts receivable arise in the normal course
of business and primarily relate to sales of its products to its distributor
network. Such receivables are unsecured. The Company performs ongoing credit
evaluations of the entities from whom such accounts are receivable. The Company
places its cash investments in high credit quality institutions and limits the
amount of credit exposure to any one institution.
F-8
<PAGE> 33
GREAT XPECTATIONS MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998 AND 1997
FINANCIAL INSTRUMENTS - The carrying value of cash and cash equivalents,
accounts receivable and payable, accrued liabilities and notes payable
approximate fair value due to the short-term maturities of these assets and
liabilities. Fair value of long-term debt is estimated based on interest rates
for the same or similar debt offered to the Company having the same or similar
maturities and collateral requirements.
COMPREHENSIVE INCOME - Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130), requires that total comprehensive
income be reported in the financial statements. For the years ended December 31,
1998, 1997 and 1996, the Company's comprehensive income (loss) was equal to its
net income (loss) and the Company does not have income meeting the definition of
other comprehensive income.
3. BASIS OF PRESENTATION:
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern; they do not include any adjustments that may
be necessary relating to the recoverability of recorded asset amounts and
classification of recorded asset and liabilities. The going concern basis of
might not be appropriate since the Company has incurred substantial operating
losses in recent years and has incurred significant financial commitments as of
the date of this report.
The ability of the Company to continue as a going concern is dependant on the
Company's ability to achieve profitable operations and obtain additional equity
or long-term financing.
The Company is having preliminary discussions with potential investors regarding
additional equity capital. Management believes that upon effective registration
of the Company's common stock for trading, with the Securities and Exchange
Commission, such potential investors may effect a merger with the Company and/or
inject equity capital in to the Company. In addition, the Company plans to
continue seeking additional products or lines of business that will add volume
to its business without adding significant overhead costs.
4. INVENTORIES:
At June 30, 1999 and December 31, 1998 inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
Finished goods $ 31,278 $ 67,691
Packaging materials and other -- --
------------ ------------
Total $ 31,278 $ 67,691
============ ============
</TABLE>
F-9
<PAGE> 34
GREAT XPECTATIONS MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998 AND 1997
5. PROPERTY AND EQUIPMENT:
At June 30, 1999 and December 31, 1998 property and equipment consisted of the
following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
Furniture, fixtures and equipment $ 33,807 $ 31,801
Computer equipment and software 44,186 44,186
Leasehold improvements 5,968 --
------------ ------------
Total property and equipment 83,961 75,987
Less accumulated depreciation and amortization (49,073) (33,671)
------------ ------------
Net property and equipment $ 34,888 $ 42,316
============ ============
</TABLE>
6. NOTE RECEIVABLE:
On May 5, 1999 the Company loaned Bio Waste Technologies International, Ltd., an
unrelated party, $76,000. The unsecured note, originally due in full on May 15,
1999, has been extended to May 15, 2000.
7. ACCRUED EXPENSES:
At June 30, 1998 and December 31, 1998 accrued expenses consisted of the
following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
Sales and other taxes $ 169,237 $ 153,769
Commissions 21,000 21,000
Compensation / Payroll 39,000 23,599
Interest 11,475 --
Other -- 1,654
------------ ------------
$ 240,712 $ 200,022
============ ============
</TABLE>
F-10
<PAGE> 35
GREAT XPECTATIONS MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998 AND 1997
8. NOTES PAYABLE:
At December 31, 1998 notes payable consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
Demand notes payable - related parties $ 229,500 $ 229,500
Other 3,200 2,200
------------ ------------
$ 232,700 $ 231,700
============ ============
</TABLE>
In connection with the spin-off from GNI certain officers of the Company and
related entities agreed to forgive debt receivable from GNI aggregating
$228,653. In consideration of those sacrifices and other services performed, the
Company awarded those individuals and their related entities compensation of
$229,500 in the form of note payable. The notes are due on demand and accrue
interest at 10% until paid. One note payable - related party in the amount of
$190,000 is collateralized by all the outstanding common stock of GX Marketing,
Inc. a newly formed subsidiary (see Note 13).
9. COMMITMENTS:
In connection with providing Internet access to distributors and customers the
Company entered into a service agreement with Epoch Networks, Inc. ("Epoch").
Epoch agreed to provide Internet access and related services for a two year
period for fees based on volume and services provided with a $50,000 minimum per
month after a six month ramp-up period. As of December 31, 1999 the Company owed
Epoch approximately $ 200,000. In March 1999, the Company received a demand
letter from Epoch demanding $300,000 and a commitment to honor the remaining
$900,000 commitment under the agreement. In June 1999 the company settled with
Epoch for $16,002 and terminated the Internet service agreement. The settlement
resulted in a $183,988 gain in the June 30, 1999 income statement.
The Company leases its office and warehouse space under an operating lease
calling for monthly rent payments of $4,500 thru February 2002. Basic annual
rents for each of the next four years are as follows:
<TABLE>
<S> <C>
1999 $49,500
2000 54,000
2001 54,000
2002 4,500
</TABLE>
The Company has employment agreements with two key employees calling for payment
for services for one year, beginning with the effective date of the Company's
registration statement, for 550,000 shares in Company common stock.
In 1998 the Company adopted a stock bonus plan reserving 750,000 shares of
common stock for possible award to employees of the Company. As of the date of
this report no shares had been awarded under this plan.
F-11
<PAGE> 36
GREAT XPECTATIONS MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998 AND 1997
10. CONTINGENCIES:
As of December 31, 1998 and as of the date of this report the Company is
self-insured for casualty liability and product warranties. The Company's
exposure from casualty and product related claims could have a material adverse
effect to the Company.
From time to time the Company is involved in various legal matters arising in
the normal course of business. In the opinion of Management, such matters will
not have a material effect on the financial position of the Company.
11. INCOME TAXES:
The Company was part of a consolidated tax return during the period owned by
GNI. Net operating losses generated during that time were fully utilized by GNI
in reducing consolidated taxable income resulting in an income tax benefit of
$71,900. Deferred tax assets resulting from net operating loss carry-forwards
originating after the spin-off (approximately $558,000) have not been recorded
as there is doubt about the Company's ability to use them during the
carry-forward period. Therefore such deferred tax assets have been fully offset
by a valuation allowance.
Net operating loss carry forwards originating prior to the merger with GNI were
lost to the Company due the significant change in the Company's ownership, in
accordance with Internal Revenue Service Regulations.
12. YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
Year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect the Company's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, of
other third parties, will be fully resolved.
13. SUBSEQUENT EVENTS:
In January 1999, the Company formed a new subsidiary, GX Marketing, Inc.("GXM")
and transferred all customer service and administrative functions to GXM. The
Company will pay GXM a fee for such services. In addition, the Company
transferred the majority of its operating assets to GXM. All the outstanding
common stock of GXM was pledged as collateral on one of the related party notes
payable (see Note 8).
In addition, the Company entered into a credit arrangement with a related party
to loan up to $30,000 to the Company (or its subsidiary) as needed for working
capital purposes. As of the date of this report $25,000 has been advanced under
the agreement.
F-12
<PAGE> 37
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Nevada General Corporation Law provides that a corporation has the
power to (i) indemnify directors, officers, employees, and agents of Great
Xpectations against judgments, fines, and amounts paid in settlement in
connection with suits, actions, and proceedings against certain expenses
incurred by such parties if specified standards of conduct are met; and (ii)
purchase and maintain insurance on behalf of any of the foregoing parties
against liabilities incurred by such parties in the foregoing capacities. The
Bylaws of Great Xpectations provide for indemnification of its officers and
directors to the full extent permitted under Nevada law. In addition, such
instrument contains a mandatory general authorization provision to the effect
that expenses incurred by a director or officer in defending such inaction,
suit, or proceeding shall be paid in advance of the final disposition thereof
upon receipt of an undertaking to repay such amount if each yell ultimately be
determined to that he is not entitled to be indemnified by Great Xpectations.
(See item 17(c) below for a discussion of the position of the securities and
exchange commission with respect to indemnification for securities act
liabilities.)
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Filing Fee -- Securities and Exchange Commission $ 2
Transfer Agents and Registrar's Fees 1,000
Accounting Fees 37,748
Legal Fees 10,000
Printing Expenses 750
Miscellaneous 500
--------
Total $ 50,000
</TABLE>
- -----------------
All of such fees will be borne by GlobeNet International I, Inc., the
parent corporation of registrant.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Great Xpectations has issued 500,000 shares of its $0.001 par value
common stock to Everett Sparks, Forrest E. Watson, and T. Alan & Associates,
P.C., in consideration of their agreement to perform work for Great Xpectations
in calendar year 1999, and the work performed in calendar year 1999 thus far.
Great Xpectations relied on the exemption set forth in Section 4(2) of the
Securities Act of 1933 for an exemption from the registration requirement of
such Act.
II-1
<PAGE> 38
With respect to the planned distribution of all of the issued and
outstanding stock of Great Xpectations, GlobeNet plans to rely on Section 4(1)
of the Securities Act of 1933 for an exemption from the registration
requirements of such Act. Great Xpectations relied on Section 4(2) of the
Securities Act of 1933 for an exemption from such Act when the stock of Great
Xpectations was issued to GlobeNet.
Additionally, Great Xpectations obtained a signed representation from
Mr. Sparks, Dr. Watson, and T. Alan Owen & Associates, P.C., of their intent to
acquire the common stock of Great Xpectations for the purpose of investment only
and not for purpose of the subsequent distribution thereof. The certificates
representing the common stock issued to Mr. Sparks and Dr. Watson were impressed
with a legend restricting transfer of the securities represented thereby, and
they will issue stop transfer instructions to Fidelity Transfer Company, Salt
Lake City, Utah, the transfer agent for the Common Stock of Great Xpectations,
concerning the certificates representing the shares of Common Stock to be issued
to Mr. Sparks and Dr. Watson.
Dr. Watson, Mr. Sparks, and T. Alan Owen & Associates, P.C. will, in
this particular instance, be classified as sophisticated investors due to their
in-depth knowledge of the business and assets of Great Xpectations.
ITEM 27. EXHIBITS.
The following is a list of all the exhibits and financial statement
schedules filed as part of this registration statement:
Exhibits:
1. Not applicable.
2. Not applicable.
3.1. Articles of Incorporation of Great
Xpectations, as filed on December 31, 1998
with the Secretary of State of Nevada.
*3.2. Bylaws of Great Xpectations.
*4. Selected provisions of the Articles of
Incorporation of Great Xpectations that
define the rights of the holders of the
Common Stock of Great Expectations being
registered under this Registration
Statement.
5. Opinion of T. Alan Owen & Associates, P.C.,
1112 East Copeland Road, Suite 420,
Arlington TX 76011, regarding the legality
of the securities being registered under
this Registration Statement.
6. Not applicable.
7. Not applicable.
II-2
<PAGE> 39
8. Tax opinion of T. Alan Owen & Associates,
P.C., 1112 East Copeland Road, Suite 420,
Arlington TX 76011.
9. Not applicable.
10.1. Employment Contract between Great
Xpectations and Forrest E. Watson.
10.2. Employment Contract between Great
Xpectations and Everett Sparks.
10.3. Employment Contract between Great
Xpectations and T. Alan Owen & Associates,
P.C.
10.4. Stock Bonus Plan.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Not applicable.
16. Not applicable.
17. Not applicable.
18. Not applicable.
19. Not applicable.
20. Not applicable.
21. Subsidiaries of Great Xpectations:
GX Marketing, Inc., a Texas corporation
22. Not applicable.
23.1. The consent of T. Alan Owen & Associates,
P.C., Arlington, Texas, to the use of its
opinion with respect to the legality of the
securities covered by this Registration
Statement and to the use of its tax opinion,
and to the
II-3
<PAGE> 40
references to such firm in the Prospectus
filed as part of this Registration Statement.
23.2. The consent of Swalm, Thomas & Associates,
PLLC, Certified Public Accountants, to the
use of the financial statement of Great
Xpectations that was audited by such firm and
to the references to such firm in the
Prospectus filed as a part of this
Registration Statement.
24. Not applicable.
25. Not Applicable.
26. Not applicable.
27. Not applicable.
28. Not applicable.
- --------------------------------
* Previously filed
Financial statement schedules:
None.
ITEM 28. UNDERTAKINGS.
Great Xpectations undertakes to and agrees that it will:
1. File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
1. Include any prospectus required by section 10(a)(3)
of the Securities Act;
2. Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement; and
3. Include any additional or changed material
information on the plan of distribution.
2. For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
II-4
<PAGE> 41
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Irving,
State of Texas, on September 15, 1999.
GREAT XPECTATIONS MARKETING, INC.,
a Nevada corporation
By: /s/ FORREST E. WATSON
------------------------------------
Forrest E. Watson, President
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement was signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ FORREST E. WATSON
- -------------------------
Forrest E. Watson President and September 15, 1999
Treasurer and
Director
/s/ EVERETT SPARKS
- -------------------------
Everett Sparks Vice President September 15, 1999
and Secretary and
Director
</TABLE>
<PAGE> 42
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
1. Not applicable.
2. Not applicable.
3.1. Articles of Incorporation of Great
Xpectations, as filed on December 31, 1998
with the Secretary of State of Nevada.
*3.2. Bylaws of Great Xpectations.
*4. Selected provisions of the Articles of
Incorporation of Great Xpectations that
define the rights of the holders of the
Common Stock of Great Expectations being
registered under this Registration
Statement.
5. Opinion of T. Alan Owen & Associates, P.C.,
1112 East Copeland Road, Suite 420,
Arlington TX 76011, regarding the legality
of the securities being registered under
this Registration Statement.
6. Not applicable.
7. Not applicable.
8. Tax opinion of T. Alan Owen & Associates,
P.C., 1112 East Copeland Road, Suite 420,
Arlington TX 76011.
9. Not applicable.
10.1. Employment Contract between Great
Xpectations and Forrest E. Watson.
10.2. Employment Contract between Great
Xpectations and Everett Sparks.
10.3. Employment Contract between Great
Xpectations and T. Alan Owen & Associates,
P.C.
10.4. Stock Bonus Plan.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Not applicable.
</TABLE>
<PAGE> 43
<TABLE>
<S> <C>
16. Not applicable.
17. Not applicable.
18. Not applicable.
19. Not applicable.
20. Not applicable.
21. Subsidiaries of Great Xpectations:
GX Marketing, Inc., a Texas corporation
22. Not applicable.
23.1. The consent of T. Alan Owen & Associates,
P.C., Arlington, Texas, to the use of its
opinion with respect to the legality of the
securities covered by this Registration
Statement and to the use of its tax opinion,
and to the references to such firm in the
Prospectus filed as part of this
Registration Statement.
23.2. The consent of Swalm, Thomas & Associates,
PLLC, Certified Public Accountants, to the
use of the financial statement of Great
Xpectations that was audited by such firm
and to the references to such firm in the
Prospectus filed as a part of this
Registration Statement.
24. Not applicable.
25. Not Applicable.
26. Not applicable.
27. Not applicable.
28. Not applicable.
</TABLE>
- ----------------------
* Previously filed
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
GREAT XPECTATIONS MARKETING, INC.
The undersigned, a natural person of the age of eighteen (18) years or
more, acting as incorporator of a corporation under the laws of the State of
Nevada, hereby adopts the following Articles of Incorporation for such
corporation:
ARTICLE ONE
The name of the corporation is Great Xpectations Marketing, Inc.
ARTICLE TWO
The period of the corporation's duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the corporation is organized are to
engage in and transact any or all lawful business for which corporations may be
incorporated under the laws of the State of Nevada.
ARTICLE FOUR
The total authorized capital stock of the corporation is:
50,000,000 shares of common stock, with a par value of $0.001 per
share
20,000,000 shares of preferred stock, with a par value of $0.001 per
share
Such stock may be issued from time to time without action by the
shareholders for such consideration as may be determined, from time to
time, by the Board of Directors, and such shares so issued shall be
deemed fully paid stock, and the holders of such stock shall not be
liable for any further payments thereon. Further, the preferred stock
may be issued in one or more series, from time to time, at the
discretion
ARTICLES OF INCORPORATION -- Page 1
- -------------------------
<PAGE> 2
of the Board of Directors without shareholder approval, with each such
series to consist of such number of shares and to have such voting
powers (whether full or limited, or no voting powers) and such
designations, powers, preferences, and relative, participating,
optional, redemption, conversion, exchange, or other special rights,
and such qualifications, limitations, or restrictions thereof, as
shall be stated in the resolution or resolutions providing for the
issuance of such series adopted by the Board of Directors, and the
Board of Directors is hereby expressly vested with the authority, to
the full extent now or hereafter provided by law, to adopt any such
resolution or resolutions. Each share of any series of preferred stock
shall be identical with all other shares of such series, except as to
the date from which dividends, if any, shall accrue.
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done, or property actually
received.
ARTICLE SIX
Directors shall be elected by majority vote. Cumulative voting shall not be
permitted.
ARTICLE SEVEN
The street address of the initial registered office of the corporation is
One East First Street, Reno, Nevada 89501, and the name of its initial
registered agent at such address is The Corporation Trust Company.
ARTICLE EIGHT
The number of directors constituting the initial Board of Directors is two
(2); however, thereafter the Bylaws shall fix the number of directors. The names
and addresses of the persons who will serve as the directors until the first
annual meeting of the shareholders, or until their successors are elected and
qualified are:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Forrest E. Watson 9202 West Royal Lane
Irving, Texas 75063
Everett S. Sparks 9202 West Royal Lane
Irving, Texas 75063
</TABLE>
ARTICLES OF INCORPORATION -- Page 2
- -------------------------
<PAGE> 3
ARTICLE NINE
The name and address of the incorporator is:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
T. Alan Owen 1112 East Copeland Road
Suite 420
Arlington, Texas 76011
</TABLE>
ARTICLE TEN
No holder of any stock of the corporation shall be entitled as a matter of
right to purchase or subscribe for any part of any stock of the corporation
authorized by these Articles or of any additional stock of any class to be
issued by reason of any increase in the authorized stock of the corporation, or
of any bonds, certificates of indebtedness, debentures, warrants, options, or
other securities convertible into any class of stock of the corporation, but any
stock authorized by these Articles or any such additional authorized stock or
securities convertible into any stock may be issued and disposed of by the Board
of Directors to such persons, firms, corporations, or associations for such
consideration and upon such terms and in such manner as the Board of Directors
may in its discretion determine without offering any thereof on the same terms
or on any terms to the shareholders then of record or to any class of
shareholders, provided only that such issuance may not be inconsistent with any
provision of law or with any of the provisions of these Articles.
ARTICLE ELEVEN
The initial Bylaws shall be adopted by the Board of Directors. The Board of
Directors may amend or repeal the Bylaws or adopt new Bylaws, unless: (1) these
Articles of Incorporation or the Nevada corporate laws reserve the power
exclusively to the shareholders in whole or in part; or (2) the shareholders in
amending, repealing, or adopting a particular bylaw expressly provide that the
Board of Directors may not amend or repeal that bylaw. Unless these Articles of
Incorporation or a bylaw adopted by the shareholders provides otherwise as to
all or some portion of the corporation's Bylaws, the corporation's shareholders
may amend, repeal, or adopt the corporation's Bylaws even though the Bylaws may
also be amended, repealed, or adopted by the Board of Directors.
ARTICLES OF INCORPORATION -- Page 3
- -------------------------
<PAGE> 4
ARTICLE TWELVE
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for any act or omission in
his capacity as a director, except to the extent otherwise expressly provided by
a statute of the State of Nevada. Any repeal or modification of this Article
shall be prospective only, and shall not adversely affect any limitation of the
personal liability of a director of the corporation existing at the time of the
repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand, this 18th day of December,
1998.
------------------------------------
T. Alan Owen
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
BEFORE ME, the undersigned authority, on this day personally appeared T.
ALAN OWEN, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 18th day of December, 1998.
-------------------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
- ----------------------
ARTICLES OF INCORPORATION -- Page 4
- -------------------------
<PAGE> 1
EXHIBIT 5
[T. ALAN OWEN & ASSOCIATES, P. C. LETTERHEAD]
September 15, 1999
Board of Directors
Great Xpectations Marketing, Inc.
8925 Sterling Street
Suite 120
Irving Texas 75063
Gentlemen:
We have acted as counsel to Great Xpectations Marketing, Inc., a Nevada
corporation (the "Company"), in connection with the preparation and filing of a
Registration Statement Form SB-2 (the "Registration Statement") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The Registration Statement covers 7,268,490 shares of the $0.001 par value
Common Stock (the "Common Stock") of the Company.
As counsel for the Company, we have examined the original or copies
certified, or otherwise authenticated to our satisfaction, of the corporate
records of the Company and such other documents or certificates of public
officials as we have deemed necessary for the Opinion expressed herein.
In rendering the Opinion set forth herein, we have assumed (a) the legal
capacity of all natural persons, (b) the authenticity of all documents submitted
to us as originals, and (c) the conformity to original documents of all
documents submitted to us as copies.
Based upon our examination of such documents, materials, certificates, and
information as we had deemed appropriate or relevant for purpose of delivering
this Opinion, but subject to the qualifications set forth herein, we are of the
following opinion:
1. The Company is duly incorporated and validly existing and in good
standing under the laws of the State of Nevada.
2. The 7,268,490 shares of the common stock are validly issued, fully
paid, and non-assessable.
This Opinion is provided for the purpose of being filed with the Securities
and Exchange Commission as an Exhibit to the Registration Statement and, without
our prior written consent, may not be relied upon by any person, firm, or entity
whatsoever other than you, your counsel, and your successors and assigns.
<PAGE> 2
Board of Directors
Great Xpectations Marketing, Inc.
September 15, 1999
Page 2
We hereby consent to the use of this Opinion as an Exhibit to the
Registration Statement into the use of our name in the Prospectus forming a part
of the Registration Statement.
Sincerely,
T. ALAN OWEN & ASSOCIATES, P.C.
By: /s/
------------------------------
T. Alan Owen
TAO/jac
<PAGE> 1
EXHIBIT 8
[T. ALAN OWEN & ASSOCIATES, P.C. LETTERHEAD]
September 15, 1999
Board of Directors
Great Xpectations Marketing, Inc.
8925 Sterling Street
Suite 120
Irving, Texas 75063
Gentlemen:
We have acted as tax counsel to Great Xpectations Marketing, Inc., a Nevada
corporation (the "Company"), in connection with the preparation of the "Federal
Income Taxes" caption of the Prospectus forming part of the Registration
Statement on Form SB-2 (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
The Registration Statement covers 7,278,490 shares of the $0.001 par value
Common Stock (the "Common Stock") of the Company.
6,768,490 of the 7,268,490 shares of the Common Stock has been issued by
the Company to GlobeNet International I, Inc. ("GlobeNet") and will be
distributed (the "Distribution") to all holders of record on June 10, 1998 (the
"Record Date"), of Common Stock of GlobeNet on the effective date of the
Registration Statement.
Holders of GlobeNet stock will not be charged or assessed for the dividend
stock. Neither GlobeNet nor the Company will receive any proceeds from the
offering. GlobeNet will report the distribution of stock as a distribution
subject to the provisions of Section 301 of the Internal Revenue Code of 1986,
as amended (the "Code").
For purposes of rendering the opinions hereinafter set forth, we have
examined (a) the Registration Statement and the Prospectus included as a part
thereof (the "Prospectus") and (b) such other documents and instruments as we
have deemed necessary or relevant. Based solely upon such examination and our
interpretation of existing Federal Income Tax Laws, Court Decisions, Treasury
Department Regulations, and Internal Revenue Service Rulings, we are of the
opinion that Federal Income Tax consequences to the distributees of the Common
Stock will be as follows:
1. Under Section 311(b) of the Code, GlobeNet will recognize gain as a
result of the Distribution to the extent that the fair market value of
the Common Stock distributed exceeds its adjusted basis in the hands
of GlobeNet. For this purpose,
<PAGE> 2
Board of Directors
Great Xpectations Marketing, Inc.
September 15, 1999
Page 2
GlobeNet will be treated as though it had sold the Common Stock to its
stockholders at its fair market value. On the other hand, if the fair
market value of the Common Stock is less than its adjusted basis in
the hands of GlobeNet, GlobeNet will recognize a loss as a result of
the distribution.
2. The Distribution will be taxable to GlobeNet's stockholders pursuant
to Section 301 of the Code.
3. With respect to a non-corporate distributee, the amount of the
Distribution will be the fair market value of the Distribution to such
distributee determined as of the date of the Distribution. Under
Sections 301(c) and 316(a) of the Code, the amount of the Distribution
will be a dividend to the extent the Distribution is made out of
GlobeNet's current and accumulated earnings and profits computed as of
the close of the tax year in which the Distribution occurs.
The portion, if any, of the Distribution which is not a dividend will
reduce the adjusted basis of the GlobeNet Common Stock in the hands of
the non-corporate distributees. That portion (if any) of the
Distribution which is not a dividend, to the extent that such portion
exceeds the adjusted basis above such GlobeNet Common Stock, will be
treated as gain from the sale or exchange of property. Such gain will
be capital gain if such GlobeNet Common Stock is a capital asset in
the hands of such distributee and will be either long-term or
short-term depending on whether he has held such stock for more than
six months. The holding period of the Common Stock to be distributed
will commence on the day following the date of the Distribution.
4. The tax basis to the non-corporate distributee of the Common Stock to
be distributed will be the fair market value of such Common Stock on
the date of the Distribution.
5. With respect to a corporate distributee, the amount of the
Distribution will be the lesser of: (i) the fair market value of the
Distribution, determined as of the date of the Distribution; or (ii)
the adjusted basis (in the hands of GlobeNet immediately prior to the
Distribution) of the Common Stock to be distributed increased in the
amount of gain recognized to GlobeNet on the Distribution. However,
under Section 301(b) of the Code, if the distributee is a foreign
corporation, and in the amount received by such foreign corporation is
not effectively connected with the conduct by it of a trade or
business within the United States, the amount of the Distribution to
such foreign corporation will be the fair market value of the
Distribution determined as of the date of the Distribution. Under
Sections 301(c) and 316(a) of the Code, the amount of the Distribution
will be a dividend to the extent the Distribution is made out of
GlobeNet's current and accumulated earnings and profits computed as of
the close of the tax year in which the Distribution occurs.
<PAGE> 3
Board of Directors
Great Xpectations Marketing, Inc.
September 15, 1999
Page 3
The portion, if any, of the Distribution which is not a dividend will
reduce the adjusted basis of the GlobeNet Common Stock in the hands of
the corporate distributee. That portion (if any) of the Distribution
which is not a dividend and, to the extent that such portion exceeds
the adjusted basis of such GlobeNet Common Stock will be treated as
gain from the sale or exchange of property. Such gain will be capital
gain if such GlobeNet Common Stock is a capital asset in the hands of
such distributee and will be either long-term or short-term depending
on whether it has held such stock for more than six months.
6. The tax basis to the corporate distributee of the Common Stock to be
distributed will be the lesser of: (i) the fair market value of such
Common Stock on the date of the distribution; or (ii) the adjusted
basis (in the hands of GlobeNet immediately before the Distribution)
of the Common Stock to be distributed, increased in the amount gain
recognized to GlobeNet on the Distribution. However, under Section
301(d)(3) of the Code, if such distributee is a foreign corporation,
and if the amount received by such corporation is not effectively
connected with the conduct by it of a trade or business within the
United States, the tax basis of the Common Stock to be distributed
will be the fair market value of the Distribution determined as of the
date of the Distribution.
7. The determination of the holding period with respect to a corporate
distributee of the Common Stock to be distributed does not appear
settled. The corporate distributee (which is not a foreign corporation
of the type described in paragraph 6 above) could contend that such
holding period includes the period for which the common stock to be
distributed was held by GlobeNet. Such position would be predicated on
the theory that since the tax basis (as described above) of the Common
Stock to such corporate distributee might be the adjusted basis of the
Common Stock in the hands of GlobeNet pursuant to Section 1223(2) of
the Code, which provides that the holding period of the property,
however acquired, shall include the period for which such property was
held by any other person where such property has, for determining gain
or loss from a sale were changed, the same basis (in whole or in part)
in his hands as it would have in the hands of such other person.
However, the Internal Revenue Service might take the position that
Section 1223(2) of the Code is not applicable to the Distribution and,
consequently, that the holding period of the Common Stock to be
distributed will commence on the day following the date of the
Distribution
8. In the absence of a trading market for the Common Stock, "fair market
value" should be calculated in accordance with Revenue Ruling 59-60
1959(1)C.B.237, which sets forth proposed factors to be considered in
making such determination.
We hereby consent to the inclusion of this Opinion as an Exhibit to the
Registration Statement and to the reference in the Prospectus to our firm under
the heading of "Federal Income Taxes".
<PAGE> 4
Persons reviewing this opinion should be aware that:
(1) Statutes, regulations, and rulings with respect to all of the
foregoing tax matters are subject to change by Congress or by the
Department of the Treasury, and the interpretation of such statutes,
regulations, and rulings may be modified or affected by judicial
decision or by the Department of the Treasury. Because of the
continual changes by Congress, the Treasury Department, and the Courts
with respect to the administration and the interpretation of the tax
laws, no assurance can be given that the foregoing opinions and
interpretations will not be challenged by the Internal Revenue
Service, or, if challenged, that such opinions and interpretations
will be sustained.
(2) Each individual taxpayer's situation will be different. Accordingly,
we recommend that the respective distributee be advised to seek their
own personal tax counsel with respect to the tax considerations
discussed above.
(3) No opinion in any matter not expressly stated should be inferred from
the opinion set forth herein.
Sincerely,
T. ALAN OWEN & ASSOCIATES, P.C.
By: /s/
-------------------------------------
T. Alan Owen
TAO/jac
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into this 15th day of December, 1998,
by and between Great Xpectations Marketing, Inc., a Nevada corporation
("Employer") and Forrest E. Watson ("Employee") under the terms and for
consideration herein stated.
Employer hereby employs and Employee hereby agrees to become employed under
the terms stated herein by Employer as its President for a period of one year
beginning with the effective date of the Registration Statement referred to
below.
Employer hereby agrees to include Employee under its Stock Bonus Plan
whereby Employee will receive as his sole compensation as an employee the sum of
225,000 shares of the Company's Common Stock (restricted under Rule 144).
Employee agrees to provide such services as are customary and normal in the
capacity of President of Employer and shall use his best efforts to further of
the Company's business of direct sales and marketing of products.
Nothing herein shall be deemed to preclude Employee from engaging in other
employment with other entities so long as Employee performs his necessary job
functions, it being understood between Employer and Employee that Employee will
exercise such discretion as he deems advisable in resolving any conflicts that
may arise.
Employee shall be entitled to reimbursement for the expenses he incurs in
connection with the performance of his duties hereunder.
This Agreement shall be interpreted by and construed in accordance with the
laws of the State Texas, and shall be deemed entered into in Irving, Texas.
EXECUTED this 15th day December, 1998.
EMPLOYER:
GREAT XPECTATIONS MARKETING, INC.,
a Nevada corporation
By: /s/
-------------------------------------
Everett S. Sparks, Vice President
EMPLOYEE:
/s/
-----------------------------------------
FORREST E. WATSON
EMPLOYMENT AGREEMENT - Page 1
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into this 15th day of December, 1998,
by and between Great Xpectations Marketing, Inc., a Nevada corporation
("Employer") and Everett Sparks ("Employee") under the terms and for
consideration herein stated.
Employer hereby employs and Employee hereby agrees to become employed under
the terms stated herein by Employer as Vice President and Chief Financial
Officer for a period of one year beginning with the effective date of the
Registration Statement referred to below.
Employer hereby agrees to include Employee under its Stock Bonus Plan
whereby Employee will receive as his sole compensation as an employee the sum of
225,000 shares of the Company's Common Stock (restricted under Rule 144).
Employee agrees to provide such services as are customary and normal in the
capacity of Vice President and Chief Financial Officer of Employer and shall use
his best efforts to further of the Company's business of direct sales and
marketing of products.
Nothing herein shall be deemed to preclude Employee from engaging in other
employment with other entities so long as Employee performs his necessary job
functions, it being understood between Employer and Employee that Employee will
exercise such discretion as he deems advisable in resolving any conflicts that
may arise.
Employee shall be entitled to reimbursement for the expenses he incurs in
connection with the performance of his duties hereunder.
This Agreement shall be interpreted by and construed in accordance with the
laws of the State Texas, and shall be deemed entered into in Irving, Texas.
EXECUTED this 15th day December, 1998.
EMPLOYER:
GREAT XPECTATIONS MARKETING, INC.,
a Nevada corporation
By: /s/
-----------------------------------
Forrest E. Watson, President
EMPLOYEE:
By: /s/
------------------------------------
EVERETT SPARKS
EMPLOYMENT AGREEMENT - Page 1
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into this 15th day of December, 1998,
by and between Great Xpectations Marketing, Inc., a Nevada corporation
("Employer") and T. Alan Owen & Associates, P.C. ("Employee") under the terms
and for consideration herein stated.
Employer hereby employs and Employee hereby agrees to become employed under
the terms stated herein by Employer as Employer's general counsel for the
calendar year of 1999.
Employer hereby agrees to include Employee under its Stock Bonus Plan
whereby Employee will receive as its sole compensation for the services
described below the sum of 50,000 registered shares of the Company's Common
Stock.
Employee agrees to provide general legal counsel to Employer, which shall
not include legal work incident to significant transactions, for the calendar
year of 1999.
Nothing herein shall be deemed to preclude Employee from engaging in other
employment with other entities so long as Employee performs its necessary
functions, it being understood between Employer and Employee that Employee will
exercise such discretion as its management deems advisable in resolving any
conflicts that may arise.
Employee shall be entitled to reimbursement for the expenses it incurs in
connection with the performance of its duties hereunder.
This Agreement shall be interpreted by and construed in accordance with the
laws of the State Texas, and shall be deemed entered into in Irving, Texas.
EXECUTED this 15th day December, 1998.
EMPLOYER:
GREAT XPECTATIONS MARKETING, INC.,
a Nevada corporation
By: /s/
--------------------------------------
Forrest E. Watson, President
EMPLOYEE:
T. ALAN OWEN & ASSOCIATES, P.C.,
a Texas professional corporation
By: /s/
-------------------------------------
T. Alan Owen
EMPLOYMENT AGREEMENT - Page 1
<PAGE> 1
EXHIBIT 10.4
GREAT XPECTATIONS MARKETING, INC.
STOCK BONUS PLAN
I. ADOPTION
This Stock Bonus Plan (the "Plan") is adopted for the benefit of Great
Xpectations Marketing, Inc. (the "Company") and its employees for the following
purposes:
A. to induce its employees to remain in the employ of the Company;
B. to provide incentive to employees to perform services for the Company
without cash compensation; and
C. to facilitate and encourage ownership of the Stock of the Company by
its employees.
II. STRUCTURE OF THE PLAN
The Board of Directors of the Company has authority to award bonus stock
benefits to designated employees, in the discretion of the Board. There is no
intention that this plan qualify as a tax free trusteed plan under Section 401,
et seq., of the Internal Revenue Code, nor under the Employee Retirement Income
Security Act of 1974, as amended. All bonus stock issued hereunder will
represent compensation to recipients, subject to income tax, and will constitute
a deductible expense to the Company.
Administration of the Plan. In connection with the administration of the
Plan, (i) the Board of Directors of the Company shall have sole discretion and
authority with respect to awards of bonus stock, and (ii) the Board of Directors
shall be the sole authority with respect to interpretation of this Plan, and its
decision shall be final and binding. The Board of Directors shall determine the
recipients of bonus stock and the amount of such stock to be awarded.
III. SHARES TO BE SUBJECT TO AWARD
There shall be awarded a maximum of 750,000 shares in any fiscal year of
the Company.
IV. REGISTRATION OF BONUS STOCK
The Company may, at its sole and absolute discretion, register the Bonus
Stock, if any, awarded by the Board of Directors, with the Securities and
Exchange Commission prior to the issuance of such Bonus Stock.
STOCK BONUS PLAN - Page 1
<PAGE> 2
V. DEFINITIONS
The following meanings are ascribed to the terms listed below, as used
herein.
"Company" means Great Xpectations Marketing, Inc.
"Employee" means any person employed by the Company to render
services to the Company in any capacity, including, without limitation,
the officers and directors of the Company and third party service
providers such as accountants, attorneys, and consultants.
"Board of Directors" means the Board of Directors of the Company,
which shall administer the Plan.
"Participant" means any Employee awarded any Bonus Stock under
this Plan.
"Plan" means this Stock Bonus Plan.
VI. AMENDMENT - TERMINATION
This Plan maybe amended or terminated at any time by the Board of
Directors. Such amendment, if any shall be adopted, shall not, however, serve to
increase the number of shares of Bonus Stock which may be awarded in any one
year period, except upon approval of a majority of the shareholders of the
Company. No amendment or termination of this Plan shall have any effect on any
awards of Bonus Stock made prior to such amendment or termination.
VII. EFFECTIVE DATE
This Plan shall become effective when adopted by and so declared effective
by the Board of Directors of the Company.
Executed this 15th day of December, 1998.
GREAT XPECTATIONS MARKETING, INC.
By: /s/
------------------------------
Forrest E. Watson, President
ATTEST:
/s/
- -----------------------------------
Everett Sparks, Secretary
STOCK BONUS PLAN - Page 2
<PAGE> 1
EXHIBIT 21
Subsidiaries of Great Xpectations
GX Marketing, Inc. a Texas Corporation
<PAGE> 1
CONSENT OF INDEPENDENT LEGAL COUNSEL
By execution hereof, T. Alan Owen & Associates, P.C. hereby consents to
the use by Great Xpectations Marketing, Inc. (the "Company"), a Nevada
corporation, of (i) its opinion with respect to the securities covered in the
Company's filing of a Registration Statement on Form SB-2., and (ii) its tax
opinion regarding the issuance of the securities covered in the aforementioned
Registration Statement.
Additionally, T. Alan Owen & Associates, P.C. consents to the
references by the Company to T. Alan Owen & Associates, P.C. in the Prospectus
that was prepared as part of the Registration Statement.
T. ALAN OWEN & ASSOCIATES, P.C.
By: /s/
--------------------------------
T. Alan Owen
Arlington, Texas
September 15, 1999
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
By execution hereof, Swalm, Thomas & Associates, PLLC hereby consents
to the use by Great Xpectations Marketing, Inc. (the "Company"), a Nevada
corporation, of financial statements on the Company, prepared by Swalm, Thomas &
Associates, PLLC, in connection with the Company's filing of a Registration
Statement on Form SB-2.
Additionally, Swalm, Thomas & Associates, PLLC consents to the
references by the Company to Swalm, Thomas & Associates, PLLC under the heading
"Experts" in the Prospectus that was prepared as part of the Registration
Statement.
SWALM, THOMAS & ASSOCIATES, PLLC
By: /s/
--------------------------------
Plano, Texas
September 15, 1999
