As filed with the Securities and Exchange Commission
on July , 1999
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
ROANOKE TECHNOLOGY CORP.
(Exact name of registrant as specified in its charter)
FLORIDA 22-3558993
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1433 GEORGIA AVENUE, ROANOKE RAPIDS, NORTH CAROLINA 27870
(Address of principal executive offices)
Registrant's telephone number, including area code (252) 537-9222
Securities to be registered pursuant to Section 12(b) of the Act:
None
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001 per share
(Title of class)
Certain statements made in this registration statement are not
based on historical facts, but are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933,
as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may,"
"will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by
discussions of strategy. These statements reflect the reasonable
judgment of Roanoke Technology Corp. ("Roanoke" or "We") with
respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially
from those in the forward-looking statements.
ITEM 1. BUSINESS.
INTRODUCTION
Headquartered in Roanoke Rapids, North Carolina, we are a
developer and marketer of software solutions and services
engineered to maximize and promote Internet web site presence. To
put it simply, our primary business function is to make our
customers Internet web sites easy to find. Anyone searching the
Web for a product or service uses a search engine. More than 82%
of Internet traffic originates at a search engine. Therefore, it
is important that our customer's Web sites appear in the top 10 to
20 positions of targeted search engine indexes. Simply put, that
is what we do. Unlike most promotional firms that utilize
expensive advertising, we offer a suite of proprietary technology
products which allow our users to analyze and market their Web
Sites in a superior, cost effective manner. Our technologies
employ advanced harvesting and analyzer technologies, using
artificial intelligence, that assist in choosing the best key
words for achieving the highest possible rank listing on the major
Internet search engines. Since most Web surfers ignore search
results beyond the first hundred listed sites, a higher ranking
almost always translates to higher visitor hits for our customers.
This results in greater exposure for our customers, improved
results for their web presence, and increased customer reliance on
our services.
As the Internet develops and moves away from the pioneer age, the
sweeping transitions of the Internet from an information platform
to a medium for e-commerce is well under way. Web sites are no
longer perceived just for informational content or to simply
establish Internet presence. In order to fully capitalize on the
opportunity that the Internet represents, today's companies
require implementation of a proven Internet promotional strategy
to maintain traffic and develop sales. In order for companies to
fully realize the potential of the Internet, companies must
effectively market their web sites beyond standard prints and
media advertising.
FORMATION
We were formed in Florida on December 11, 1997 under the name
Suffield Technologies Corp. On July 11, 1998, we filed an
amendment to our incorporation document to change our name to
Roanoke Technology Corp. On July 20, 1998, we filed an
application to do business in North Carolina. On July 22, 1998,
the State of Virginia issued a Certificate of Merger whereby Top-
10 Promotions, Inc. merged into us. On September 4, 1998, we filed
a Certificate of Assumed Name in Halifax County, North Carolina to
do business under the name Top 10 Promotions.
SERVICES
We offer 3 levels of service, specifically, the Starter Plan, the
Standard Plan and the Premium Plan. The first 2 levels, Starter
and Standard, are offered to engage in a dialogue with potential
customers. These plans assist the owners of the "hobby/personal"
type of web site. The vast majority of our customers are
businesses purchasing the Premium Plan. When a customer chooses
the Premium Plan, we commence service with the following steps:
(1) Identify appropriate key words or terms for the customer's
web site (the Premium Plan allows for 6 terms. Additional
terms may be purchased not to exceed 12 phrases/terms in
total).
(2) Identify the unique algorithms associated with each of the
search engine's robot and indexing practices.
(3) Create a customer web page for each term for each search
engine (usually 4 or 5 pages are needed for each term).
Each contract will require a creation of approximately 200
web pages. The pages actually consist of sets of about 20
pages per search engine.
(4) The created web pages are then moved to the customer's web
site or server.
(5) We verify the placement of the web pages. We submit them
to each search engine. Due to search engines different
operating procedures, this process can take up to 10
working days.
(6) Approximately 4 weeks after we have completed the
submissions, preliminary results will be noticed. After a
period of 45 to 60 days, a customer can check its results
at the customer section of our web site. The customer's
results will usually peak after 90 days (post submission).
As part of the premium Plan, we will continue to monitor and
furnish "Visibility Reports" for each customer for up to 6 months.
The reports are compiled every 7 to 10 working days and are
electronically mailed to each customer. The results are also
available on our web site.
We guarantee the following for our Premium Plan:
. We will secure for our customer no less than 10 placements
somewhere within the top 20 positions somewhere across the
top search engines. We target thirteen engines consisting of
the following: Yahoo, Excite, Infoseek, Planet Search,
HotBot, Lycos, Snap, AOL Netfind, LookSmart, AltaVista,
Netscape, Web Crawler and MSN.
. Our customer's placements will consist of the existing pages
as well as the new "Bridge Pages" we make for them.
. The listings may appear on any single search engine, all the
search engines or spread across any number of the search
engines listed above.
. Over the last 12 months our customers have averaged more
than 50 placements in the top 20 positions across the top
search engines. However, we do not guarantee this to our
customers.
. We guarantee placement of our customers URL(s) in the search
engine index. We do not guarantee traffic to a customer's
web site.
. If we fail to meet the above guarantee within 90 days of a
customer's pages being submitted to its server, we will
refund 100% of the customer's payment or repeat the service,
at the customer's choice.
PERSONNEL
We currently employ 24 full time employees. They fall into 3
different categories: 3 management, 9 sales, and 12 support
personnel. In the 18 months that we have been in business, no
employee has left us.
COMPETITION
There are numerous Internet promotion companies that promote web
sites. They all use one of three distinctly different
methodologies for promoting their customer's web sites. The vast
majority simply submit the URL of the customer's "Home Page" to
hundreds of search engines. This is the least effective way
because this method has the following built-in problems: (a) most
of the search engines are search engines in name only, and are
really directories. The user must know the name of the company to
have any degree of success; (b) over 82% of the search engine
traffic is driven by the most popular search engines. This
renders the vast majority of the others very ineffective; (c) this
method can not work successfully because it is almost impossible
to make a web page appeal to more than 1 or 2 search engines.
Each search engine employs different indexing practices. To date,
the only successful method of obtaining consistent rankings in the
search engines is to make pages for each "keyword phrase" for each
engine.
The second method of promoting a site in the search engines is to
purchase positions within the indexes or to purchase advertising
space on the site in the form of banner advertisements. The cost
of this method is extremely expensive and not practical for small
business owners.
The third way is to prepare pages for each "keyword phrase" for
each search engine. We utilize this method. To date, we have no
knowledge of any other company that has the ability to effectively
track what characteristics appeal to the major search engines and
to make pages based on those characteristics.
The market for a worldwide on-line commerce web site is relatively
new, quickly evolving and subject to rapid change. There are few
substantial barriers to entry, and we expect to have additional
competition from existing competitors and new entrants in the
future. It is our belief, however, that we represent the leading
edge of the industry. While competition exists in the form of
smaller and less advanced services, we believe our proprietary
technology allows us to deliver to our customers a more effective
website promotion services than any of our competitors. In
addition, we are not aware of any competitors which matches our
visibility guarantee.
GENERAL BUSINESS CONDITIONS
There is no apparent seasonality in the company's business.
Our business is not dependent upon any single customer or type of
business. Since we have no subcontractors, we are not
dependent upon an outside sales force. All work is performed in
house. This includes the creation and development of our
software.
CUSTOMERS
Our potential market or customer base consists of every business-
oriented web site in the world. At present, there are
approximately 3.9 million ".com" and ".net" web sites registered
with internic (the organization responsible for registering
domains). These are the 1st level domains that are commercial in
nature. Assuming the ratio of web sites to Internet users
increases proportionately over the next 3 years, there will be
approximately 21 million business- oriented sites by the beginning
of the year 2003.
Our largest single customer accounts for less than two percent of
our total revenues and no particular industry accounts for more
than two percent of our revenues.
The following is a list of what types of businesses a few of our
customers are involved with:
. Florists
. Real Estate
. Insurance
. Telephone Equipment
. Auto Supplies
. Plastic Surgeon
. Print Media
. Financial Advisory
. Pet Supplies
. Police Supplies
. e-commerce
. Pump Sprayers
. Farm Equipment
. Printing Supplies
. Recycling
. Y2K Supplies
. Clothing
. Autoclave Equipment
. Industrial Equipment Supplier
. Material Manufacturers
. Material brokers
. Business Consultants
. Time Management Consultants
. Advertising Agency
. Personnel Placement Agency
. Pilot Supplies
. Medical Supplies
. Pool Supplies
. Golf Equipment
. Recreation Equipment
. Travel Agency
ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The following selected financial data has been extracted from our
financial statements for the six months that ended April 30, 1999,
and for the period from inception, December 11, 1997 through
October 31, 1998. The results of our operations for any
interim period are not necessarily indicative of the results
attained for a full fiscal year. This selected financial data
should be read in conjunction with our financial statements and
the Notes thereto and "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" included elsewhere
herein.
SUMMARY OPERATIONS DATA
Six Months Ended December 11,1997(Inception)
April 30, 1999 through October 31, 1998
---------------- ----------------------------
Revenue $452,450 $109,809
Net Gain (Loss) (177,955) (126,376)
Net loss per share $0.027 $0.04
Weighted Average Shares
Used in Computation 6,412,500 3,159,400
SUMMARY BALANCE SHEET DATA
Six Months Ended December 11, 1997(Inception)
April 30, 1999 through October 31, 1998
---------------- -------------------------
Total Assets $961,893 $97,799
Current Assets 169,402 35,615
Total Liabilities 44,096 75,199
Current Liabilities 36,946 8,554
Long-term notes payable 7,150 66,645
Shareholders' Equity
(Surplus) 917,797 22,600
MANAGEMENT'S DISCUSSION AND ANALYSIS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Statements in this Annual Report on Form 10-K concerning the
Company's business outlook or future economic performance;
anticipated profitability, gross billings, commissions and
fees, expenses or other financial items; and statements
concerning assumptions made or exceptions as to any future events,
conditions, performance or other matter are "forward-looking
statements" as that term is defined under the Federal
Securities Laws. Forward-looking statements are subject to
risks, uncertainties and other factors which would cause actual
results to differ materially from those stated in such
statements. Such risks, uncertainties and factors include,
but are not limited to, (I) the uncertain acceptance of the
internet and the Company's Internet content, (ii) that the Company
has grown rapidly and there can be no assurance that the
Company will continue to be able to grow profitably or manage
its growth, (iii) risks associated with acquisitions, (iv)
competition, (v) the Company's quarterly operating results
have fluctuated in the past and are expected to fluctuate in the
future, (vi) the Company's business experiences seasonality, (vii)
the loss of services of certain key individuals could have a
material adverse effect on the Company's business, financial
condition or operating results,(viii) litigation involving a
former employee, (ix) the Company has entered into certain
transactions with affiliated parties and (x) the control of
the Company by David Smith.
Overview
A substantial part of the company's growth has been achieved
through acquisitions. For the period December 11, 1997
through May 31, 1999, the Company completed 2 acquisitions.
Given the significant number of acquisitions from inception to
date, the results from operations from period to period are not
necessarily comparable.
Gross revenues refer to fees earned in the design, development,
production, and marketing of technology to provide enhanced
internet marketing capabilities. The Company earns revenue when
it provides internet services that improve an internet site's
ranking when searched on the leading internet search engines.
The Company guarantees that the customer will receive at least ten
placements within the top twenty positions, somewhere across the
targeted search engines. Generally, the payment terms require
payment to the Company at, or prior to, the time that the services
are performed. Historically, the Company has not experienced
substantial problems with unpaid accounts or had to refund
significant monies for failure to meet the guarantee.
The Company has technological expertise in preparing and
submitting web site pages with "key search words" to the targeted
search engines. The web site page is configured so that when
these key search words are entered into a search engine, the
search will most likely hit on this web page.
Primarily as a result of the acquisition of Top-10 Promotions,
Inc. on May 29, 1998, the Company's revenue has been generated
from the sale of services as has been mentioned above. The
acquisition was accounted for using the purchase method of
accounting and the results of operations of Top-10 Promotions,
Inc. are included in the financial statements. In the first
year of business activity, the Company was building a sales
team and experienced gross revenue of $109,809. During the
first and second quarter of the following year the Company had
$452,450 in gross revenue. The Company is continuously
monitoring the internet marketplace for opportunities to
expand its presence and intends to continue its acquisition
strategy to supplement its internal growth. The Company's
internal growth stems from ideas of selected individuals. The
Company continues to recruit individuals of this same level of
expertise.
The Company's operating expenses have increased significantly
since inception primarily due to headcount increases as a
result of hiring staff to support increased sales and the
purchase of new technology. Primarily as a result of the
acquisition of Offshore Software Development Ltd. on March 30,
1999, the Company has realized efficiencies in its data base
operations that have resulted in increased sales. The Company has
continued to count as a cost of sales the cost of continually
updating its program code. The Company currently employs the
programmers that, in the past, it had used to outsource its
program code updates. The cost of sale category primarily
includes cost of internet lines, programmer fees, sales salaries
and other miscellaneous charges. The costs of sales for the two
quarters ended April 30, 1999 was $292,221 and $56,083 for the
period ended October 31, 1998.
Office and general expenses for the period ended October 31, 1998
was $61,236 and $110,107 for the two quarters ended April 30,
1999, excluding officer compensation. Officer compensation
for the period ended October 31, 1998 was $134,389 and
$230,967 for the two quarters ended April 30, 1999. Officer
compensation for both periods described was primarily stock
based compensation as described in the footnotes to the financial
statements. The impact on future stock based compensation is
uncertain as the Company continues to include stock based
compensation as a recruitment tool.
Other income and expense is comprised primarily with depreciation
and amortization expense. The Company benefited with interest
income from a money market account and paid interest on a
small balance owed on a credit card; however the amounts are
immaterial. Net expense from other income and expense for the
two quarters ended April 30, 1999 was $25,081 and $5,297 for the
period ending October 31, 1998.
Results of Operations
The following table sets forth the periods indicated gross
revenue, detailed cost of sales, general and administrative
costs, officer compensation and EBITDA for the Company.
<TABLE>
<S> <C> <C> <C> <C>
Six From
Months Percent of Inception Percent of
Ended Gross To Gross
4 /30/99 Revenue 10/31/98 Revenue
-------- ----------- --------- ---------
Gross Revenue $452,450 100.00% $109,809 100.00%
Cost of Sales:
T1 lines & costs 47,156 10.4% 24,810 22.6%
Programmers 51,816 11.5% 26,215 23.9%
Sales salaries & taxes 166,810 36.9% 4,696 4.3%
Other consulting 23,500 5.2% 0 0%
Other 2,939 .6% 362 .3%
Total 292,221 64.6% 56,083 ( 51.1%)
General & Administrative 191,074 42.2% 137,125 (124.9%)
EBITDA (1) (30,845) (6.8%) (83,399) (76.0%)
Cash flows:
Operating (12,763) (136,212)
Investing (122,525) (66,784)
Financing 241,304 216,791
</TABLE>
(1) Earnings before interest, income taxes depreciation and
amortization. EBITDA is presented to provide additional
information about the Company's ability to meet its future
debt service, capital expenditures and working capital
requirements and is one of the measures which determines the
Company's ability to borrow under its credit facility. EBITDA
should not be considered in isolation or as a substitute for
operating income, cash flows from operating activities and
other income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as
a measure of the Company's profitability or liquidity. EBITDA
for the indicated periods is calculated as follows (after
excluding officer compensation in the form of stock
compensation of $150,000 for the two quarters ended April 30,
1999 and $58,500 for the period ended October 31, 1998)
<TABLE>
<S> <C> <C>
Six From
Months Inception
Ended To
EBITDA Calculation 4/30/99 10/31/98
- ------------------ ------- --------
Net income (loss) $ (27,955) $ (67,876)
Interest, net 1,609 697
Income tax expense (benefit) (27,971) (20,820)
Depreciation and amortization 23,472 4,600
EBITDA $ (30,845) $ (83,399)
</TABLE>
The six months ended May 30, 1999 compared to the period ended
October 31, 1998
A direct period by period comparison can not be made without
annualized figures as the second period is not complete. This
type of analysis is speculative and will not be discussed.
This section will describe relevant issues that effect each of the
periods shown.
The Company is experiencing rapid growth as seen in the above
results of operations. The primary cost associated with this
growth is the addition of more sales staff. The Company has
determined a progression of additional sales staff as sales
increases as being an important strategy. The additional cost
of other consulting in the cost of sales section is not
expected to continue. The costs of internet line access are
continually negotiated by the Company's management. As can be
seen, these negotiations leave these costs stable as business
activity increases. In addition the Company's management has
stabilized the programming costs associated with its continual
technology improvement program.
Liquidity and Capital Resources
The Company's principal capital requirements have been to fund (i)
acquisition, (ii) working capital, (iii) capital expenditures
and (iv) advertising and development of its internet business.
Continued development in its internet business has included
the acquisition of assets which improves the efficiency of the
program technology that the Company operates with. The
Company's working capital ratio has been maintained from 4.16
to 4.59 during the reported periods. This is due to sales, as
Company policy, being paid for in advance or at the time
services are performed. In addition to this, the Company has
converted any significant debt into capital contributions, as
discussed in the footnotes to the financial statements. The
Company has structured itself to rely on investments by
shareholders to expand its business rather than seek material
short-term and long-term financing. The Company is planning
to expand its market. This direction will require substantial
adverting as planned by the Company's management. Due to this
substantial investment, the Company will seek additional
capital rather than deplete its working capital. If
additional capital is not obtained, the Company's management
plans to continue its growth in its current markets.
The Company does not provide software to its customers and
therefore does not have Year 2000 compliance issues with the
services it provides. The Company has taken precautions for
its home office which include power generation, Year 2000
compliance with its current software and offsite duplication
of business activities, if needed. The Company cannot;
however, provide for every contingency that may exist external to
the Company.
The Company's financial statements have been presented on the
basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has suffered
recurring losses from operations in prior years, and requires
additional capital to continue its planned development.
Management believes the Company will continue as a going concern
and is actively marketing its services and web site which
would enable the Company to meet its current obligations and
provide additional funds for continued growth and new product
development. In addition management is also embarking on
other strategic initiatives to expand its business opportunities.
However, there can be no assurance these activities will be
successful.
YEAR 2000 ISSUE
Many of the current installed computer systems and software
products are coded to accept only two-digit entries in the date
code field and cannot reliably distinguish dates beginning on
January 1, 2000 from dates prior to the year 2000. Many companies'
software and computer systems may need to be upgraded or replaced
in order to correctly process dates beginning in 2000 and to
comply with the "Year 2000" requirements. We have reviewed our
internal programs and have determined that all products and
information/non-information technologies systems are year 2000
compliant, due in large part to our limited operating history and
the emphasis on compliance during our planning and development
stages. To date, we have not incurred material cost, and
furthermore we believe that any future actions taken will not have
a material effect on our operating results of financial condition.
However, we work with third parties that use equipment and
software that may not be Year 2000 compliant. Failure of such
third parties' equipment or software to properly process dates for
the year 2000 and thereafter could require us to incur
unanticipated expenses to remedy any problems, which could have a
material adverse effect on our business, results of operations and
financial condition.
ITEM 3. PROPERTIES
We presently occupy two facilities. The first is approximately
1,000 square feet and is located at 1039 East 10th Street, Roanoke
Rapids, North Carolina. Until May 1, 1999 this was our only
location. We rent this space on a month to month basis at the
monthly rental of $500.00. We have our networking employees at
this location, and also use the space as a repair and storage
facility. Our second facility is approximately 3,000 square feet
and is located at 1433 Georgia Avenue, Roanoke Rapids, North
Carolina. This facility was built to order for us and was occupied
on May 1, 1999. The monthly rental is $2,500.00. The lease
extends to November 1, 2006. We use the space for administrative
offices and our corporate headquarters. We believe that such a
facility will provide us with adequate space for at least the next
twelve months. At the end of the lease term (specifically,
November 1, 2006), if we have not defaulted under the lease, we
can renew the lease for an additional 5 years at a renegotiated
rental price provided we give the landlord 30 days notice before
the end of the initial term.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of June 30, 1999, certain
information with respect to (i) those persons or groups known to
us to be the beneficial owners of more than five percent of our
common stock, (ii) each of our directors, (iii) each of our
executive officers and (iv) all of our directors and executive
officers as a group. The stockholders listed in the table have
sole voting and investment power with respect to our common stock
owned by each of them. As of June 30, 1999, there were 11,228,684
shares of Common Stock issued and outstanding.
<TABLE>
<S> <C> <C>
Percent of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned Outstanding
------------------ -------------
David L. Smith, Jr. 5,885,000 52.41%
Glenn Canady 15,000 *%
Edwin Foster -0- -0-
All executive officers and directors 5,900,000 52.54%
as a group (3 persons)
*Less than 1%.
</TABLE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors and their ages as of June 30,
1999 are as follows:
Name Age Position
-----------------------------
David L. Smith, Jr. 43 Chief Executive Officer,
President and Director
Glenn L. Canady 35 Vice President - Operations and
Director
Edwin E. Foster, Jr. 50 Secretary
Each of our directors will hold office until the next annual
meeting of our stockholders and until his or her successor is
elected and qualified or until his or her earlier resignation or
removal. Each officer serves at the discretion of our Board of
Directors.
David L. Smith, Jr. was born and raised in Durham, North Carolina.
He attended East Carolina University from 1973 to 1976 where he
majored in business with a minor in physical education. He
received an athletic scholarship in wrestling to East Carolina
University and left school prior to obtaining his college degree
to train for the 1976 Summer Olympics. From 1992 through 1995,
David was the sole owner of a company called DJ Distributors, a
sole proprietorship based in Roanoke Rapids, North Carolina. This
company was a direct sales organization involved in reselling
vacuum cleaners. In 1995, DJ Distributors was no longer involved
in direct sales. David used this company to start an Internet
business developing web sites for companies. In October of 1997,
David formed Top 10 Promotions, Inc., a Virginia corporation to
continue the business of DJ Distributors. Effective May 28, 1998,
we acquired all the shares of Top 10 Promotions, Inc. (which
became our wholly owned subsidiary) and appointed David our
President and one of our directors.
Glenn L. Canady began working for us as Vice President on March 1,
1999. In 1986, he received his Bachelor of Science Degree in
Mechanical Engineering from Louisiana Tech University. In 1987,
he received a Masters in Mechanical Engineering from Georgia Tech
University. He started his professional career in 1988 as an
Engineer with General Dynamics in Fort Worth, Texas. His
responsibilities included system integration and design support
for several secret military aircraft using sophisticated CAD/CAM
systems. He was promoted to Senior Engineer in 1989 during his
work on the computerized mock-up of the A-12 prototype bomber for
the United States Navy. In 1992, Glenn formed and was the owner
of a company called Ultragrafix Unlimited Inc. based in Arlington,
Texas. Ultragrafix developed, manufactured and marketed a series
of prints, software, and books using computer designed random dot
stereograms. In 1996, Ultragrafix was acquired by a company,
Global Tech 2000, based in Arlington, Texas. Global Tech 2000
marketed products and services on the Internet. In 1998, Global
Tech 2000 started selling web site promotions for us and quickly
became our number one reseller. Glenn resigned his position as
President of Global Tech 2000 in February 1999.
Edwin E. Foster, Jr. began working for us as Secretary in July
1999. In 1970, he received a Bachelor of Scince Degree in Biology
from Syracuse University. In 1971, he attended the Simmons School
of Funeral Service in Syracuse, New York. For the next 10 years,
he worked in the funeral services industry. In 1980, he started
working in a placement service firm in the Wall Street area of New
York City. Thereafter, he formed a financial services company
with 3 other shareholders under the name FMD&J, Inc. He worked
for this company for approximately 10 years. In 1990, he took a
position in a pharmaceutical research consulting firm called NJC
Enterprises, Ltd. In 1993, such company moved to Research
triangle Park in North Carolina. He was in charge of the entire
company relocation including, but not limited to, office site
selection, equipment purchasing, move and set up, staffing and
computer network establishment. In 1995, he became the Vice
President of Administration and Finance. Ed retired from such
company in 1997 and continued his retirement until he started
working for us recently.
ITEM 6. EXECUTIVE COMPENSATION.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<S> <C> <C> <C>
Name and
Principal
Position Year Salary Bonus
---- ------ ------
David L. Smith,Jr. (1) 1999 $120,000 30% of net
income before
income tax
Chief Executive Officer, 1998 $ 75,888.67 None
Director
Glenn Canady 1999 $ 60,000(2) (3)
Vice President 1998 None None
Edwin Foster 1999 $ 50,000 None
Vice President 1998 None None
</TABLE>
(1) David received 750,000 of our restricted shares due to the
fact that we exceeded $200,000 in revenues for the first 3
month period of 1999.
(2) Adjusted to $80,000 per year as of June 4, 1999. Glenn
also receives sales commissions. In addition, if our
gross revenues exceed $5,000,000 in any fiscal year,
Glenn's salary increases to $120,000 per year.
(3) Glenn's employment agreement provides for the option of
purchasing stock at $1.00 per share as follows: 5,000 of
our shares for each year he is employed by us during the
first 3 years of employment; 50,000 shares if our gross
revenues exceed $2,000,000 during the term of Glenn's
employment agreement; 50,000 shares if gross revenues
exceed $5,000,000 during the term of Glenn's employment
agreement. The maximum amount of shares that Glenn can
receive under his employment agreement with us is 115,000
common shares. All shares are restricted for a 2 year
period from when we issue the shares to Glenn.
(4) In 1998, our original officers received stock issuances
with a cash value of $58,500 for services rendered.
Compensation of Directors
The Directors of the Company do not receive compensation for their
services as directors but may be reimbursed for their reasonable
expenses for attending Board meetings.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 28, 1998, we undertook a Stock Purchase Agreement and Share
Exchange ("Stock Agreement") with Top 10 Promotions, Inc. ("Top
10"), a Virginia Corporation. The sole shareholder of Top 10 was
David L. Smith, Jr., our Chief Executive officer and Director.
Pursuant to the terms of the Stock Agreement, Top 10 became our
wholly owned subsidiary. In exchange for David tendering his Top
10 shares to us, he received 500,000 of "restricted" stock.
Additionally, Top 10, as our wholly owned subsidiary received
funding from us of $50,000 at closing and $17,500 per month for an
eleven month period commencing ninety (90) days after the closing
date of May 28, 1998.
On March 30, 1999, we completed an Asset Purchase Agreement and
Share Exchange ("Asset Agreement") with Offshore Software
Development Ltd. ("Offshore"), a Cayman Islands Corporation.
Pursuant to the Asset Agreement, we purchased all of the assets of
Offshore, four personal computers, and two subject software
products with computer codes in exchange for the issuance of
9/10ths of one of our common shares for each share of Offshore
held by an Offshore shareholder at the time of the Closing. This
resulted in the issuance of 999,111 of our shares. The owner of
Offshore had no relationship with any of our officers or principal
stockholders, and is not presently employed by us.
ITEM 8. LEGAL PROCEEDINGS
We are not presently a party to any litigation of any kind or
nature whatsoever, nor to our knowledge and belief is any
litigation threatened or contemplated.
ITEM 9. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.
Our Common Stock, par value $0.0001, has been traded on the OTC
Electronic Bulletin Board under the symbol "RAKE" since October,
1998, and there are currently market makers for our common stock.
The following table sets forth the high and low sale prices of our
common stock as reported on the OTC Electronic Bulletin Board.
These price quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual
transactions.
December 31, 1998 5.125 5.125
March 31, 1999 8.00 7.125
June 30, 1999 9.9375 9.75
Number of Registered Holders
The number of registered holders of our common stock as of June
30, 1999 was 25, and we believe that there are a greater number of
beneficial owners of our shares of common stock.
Dividends
To date, we have not declared or paid any cash dividends on our
Common Stock. We currently anticipate that we will retain all
available funds for use in the operation and expansion of our
business, and we do not intend to pay cash dividends on our common
stock in the foreseeable future. Further, there can be no
assurance that the operations of our business will generate the
revenue and cash flow needed to declare cash dividends in the
foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
During the period between February and April, 1998, we completed 2
Regulation D, Rule 504 Offerings in which we issued a total of
1,800,000 shares of our common stock for an aggregate offering
price of $70,000. The first offering was for 800,000 shares at
$0.025 per share. The second offering was for 1,000,000 shares at
$0.05 per share.
Commencing October, 1998, we undertook another Regulation D, Rule
504 Offering in which we issued a total of 2,000,000 shares of our
common stock at $.10 per share for an aggregate offering price of
$200,000. This offering included options to the subscribers of
the 2,000,000 shares to purchase an additional 250,000 shares of
our common stock for $1.00 per share by October 15, 1999 and an
additional 225,000 shares of our common stock for $2.00 per
share by April 15, 2000. To date, 226,376 options at $1.00
per share have been exercised; and 3,197 options at $2.00 per
share have been exercised. Therefore, to date we have raised
$232,770 based on the exercise of the options.
We believe that our common stock issued in the above Regulation D,
Rule 504 Offerings were issued in transactions not involving a
public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended
and Rule 504 of Regulation D.
In December 1997, we issued 25,000 shares of our common stock to
Richard I. Anslow, our attorney, in exchange for legal services
rendered. No underwriter was involved in this transaction. We
believe the shares issued in this transaction did not involve a
public offering and were made in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act of
1933, as amended.
On May 28, 1998, we undertook a Stock Purchase Agreement and Share
Exchange ("Stock Agreement") with Top 10 Promotions, Inc. ("Top
10"), a Virginia Corporation. The sole shareholder of Top 10 was
David L. Smith, Jr., our Chief Executive officer and Director.
Pursuant to the terms of the Stock Agreement, Top 10 became our
wholly owned subsidiary. In exchange for David tendering his Top
10 shares to us, he received 500,000 of our "restricted" shares
plus other consideration. On May 11, 1999, David L. Smith, Jr.
purchased 2,650,000 of our "restricted" shares from James Lee
for par value.
On March 30, 1999, we completed an Asset Purchase Agreement and
Share Exchange ("Asset Agreement") with Offshore Software
Development Ltd. ("Offshore"), a Cayman Islands Corporation.
Pursuant to the Asset Agreement, we purchased all of the assets of
Offshore, specifically four personal computers and two subject
software products with computer codes, in exchange for the
issuance of 9/10ths of one of our common shares for each share of
Offshore held by an Offshore shareholder at the time of the
Closing. This resulted in the issuance of 999,111 of our shares.
We believe the shares issued in the Stock Agreement and Asset
Agreement did not involve a public offering and were made in
reliance upon an exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended.
In May, 1999 we issued Eagle Research Group, Inc. 250,000 of our
shares for consulting services rendered by Eagle Research for us.
The shares are restricted in accordance with Rule 144 of the 1933
Securities Act, as amended. For this share issuance, we relied
upon an exemption from registration provided by Section 4(2) of
the Securities Act of 1933, as amended.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
Our authorized capital stock is 50,000,000 shares of Common Stock,
par value $0.0001 per share and 10,000,000 shares of preferred
Stock, par value $.0001 per share. As of June 30, 1999, we had
issued 11,228,684 of our shares of Common Stock and none of our
Preferred Stock.
The following brief description of our common stock does not
purport to be complete and is subject in all respects to Florida
law and to the provisions of our Articles of Incorporation, as
amended (the "Articles") and our Bylaws, copies of which have been
filed as exhibits to this registration statement.
Each share of our common stock entitles the holder to one (1) vote
on all matters submitted to a vote of the stockholders. Our
common stock does not have cumulative voting rights, which means
that the holders of a majority of the outstanding shares of our
common stock voting for the election of directors can elect all
members of the Board of Directors. A majority vote is also
sufficient for other actions that require the vote or concurrence
of stockholders except in cases in which more than a simple
majority is required by law. Holders of our common stock are
entitled to receive dividends, when, as and if declared by the
Board of Directors, in its discretion, from funds legally
available therefore. Holders of shares of our common stock are
entitled to share, on a ratable basis, such dividends as may be
declared by the Board of Directors out of funds, legally available
therefor. Upon our liquidation, dissolution or winding up, after
payment to creditors, the holders of our common stock are entitled
to share ratably in the assets of the Company, if any, legally
available of distribution to our common stockholders. Our Bylaws
require that only a majority of the issued and outstanding shares
of our common stock need be represented to constitute a quorum and
to transact business at a stockholders' meeting.
Our common stock has no preemptive rights or no subscription,
redemption or conversion privileges. All of the outstanding
shares of our common stock are fully paid and non assessable.
Our Board of Directors has total discretion as to the issuance and
the determination of the rights and privileges of any shares of
our common stock which may be issued in the future, which rights
and privileges may be detrimental to the rights and privileges of
the holders of our existing shares of our common stock now issued
and outstanding.
The transfer agent and registrar for our common stock is Interwest
Transfer Co., Inc., Salt Lake City, Utah.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Florida law, a director is not personally liable for
monetary damages to the corporation or any other person for any
statement, vote, decision, or failure to act unless (i) the
director breached or failed to perform his duties as a director,
and (ii) a director's breach of, or failure to perform, those
duties constitutes (1) a violation of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or
had no reasonable cause to believe his conduct was unlawful; (2) a
transaction from which the director derived an improper personal
benefit, either directly or indirectly; (3) a circumstance under
which an unlawful distribution is made; (4) in a proceeding by or
in the right of the corporation or in a proceeding in which the
corporation procures a judgment in its favor or by or in the right
of a shareholder, conscious disregard for the best interest of the
corporation or willful misconduct; or (5) in a proceeding by or in
the right of someone other than the corporation or a shareholder,
recklessness or an act or omission which was committed in bad
faith or with malicious purpose or in a manner exhibiting wanton
and willful disregard of human rights, safety, or property. A
corporation may purchase and maintain insurance on behalf of any
director or officer against any liability asserted against him and
incurred by him in his capacity or arising out of his status as
such, whether or not the corporation would have the power to
indemnify under Florida law.
Our Bylaws limit, to the maximum extent permitted by Florida law,
the personal liability of our directors and officers for monetary
damages for breach of their fiduciary duties as directors and
officers. Our Bylaws provide further we shall indemnify to the
fullest extent permitted by Florida law any person made a party to
any action or proceeding by reason of the fact that such person
was our director, officer, employee or agent. Our Bylaws also
provide that our directors and officers who are entitled to
indemnification shall be paid their expenses incurred in
connection with any action, suit or proceeding in which such
director or officer is made a party by virtue of his being our
officer or director to the maximum extent permitted by Florida
law.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
For the information required by this Item, refer to the Index to
Financial Statements appearing on page F-1 of the registration
statement.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
FINANCIAL STATEMENTS
For the information required by this Item, refer to the Index to
Financial Statements appearing on page F-1 of the registration
statement.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ROANOKE TECHNOLOGY CORP.
By: /s/ David L. Smith, Jr.
---------------------------
David L. Smith, Jr.
Chief Executive Officer and
President
Dated: July 12, 1999
Exhibits
Exhibit No. Description
- ----------- ----------------------------------------------
3.1 Articles of Incorporation of Roanoke Technology
Corp. (formerly known as Suffield Technologies
Corp.) and Articles of Amendment
3.2 By-laws of Roanoke Technology Corp.
10.1 March 30, 1999 Asset Purchase Agreement and Share
Exchange with Offshore Software Development Ltd.
10.2 May 28, 1998 Stock Purchase Agreement and Share
Exchange with Top 10 Promotions, Inc.
10.3 Articles of Merger and Plan of Merger of Top 10
Promotions, Inc. and Roanoke Technology Corp.
27.1 Financial Data Schedule
Exhibit 3.1 Articles of Incorporation
- -----------------------------------------
ARTICLES OF INCORPORATION
OF
SUFFIELD TECHNOLOGIES CORP.
The undersigned incorporator hereby forms a corporation under
Chapter 607 of the laws of the State of Flroida.
ARTICLE I. NAME
----------------
The name of the corporation shall be:
SUFFIELD TECHNOLOGIES CORP.
The address of the principal office of this corporation shall be
4255 Route 9, Suite D, Freehold, New Jersey 07728 and the mailing
address of the corporation shall be the same.
ARTICLE II. NATURE OF BUSINESS
-------------------------------
This corporation may engage or transact in any or all lawful
activities or business permitted under the laws of the United
States, the State of Florida or any other state, country,
territory or nation.
ARTICLE III. CAPITAL STOCK
----------------------------
The maximum number of shares of stock that this corporation
is authorized to have outstanding at any one time is 60,000,000 to
include 50,000,000 shares of common stock having $.0001 par value
per shares and 10,000,000 shares of preferred stock at $.0001 par
value per share.
ARTICLE IV. REGISTERED AGENT
-----------------------------
The street address of the initial registered office of the
corporation shall be 1201 Hays Street, Tallahassee, Florida 32301,
and the name of the initial registered agent of the corporation at
that address is Corporation Service Company.
ARTICLE V. TERM OF EXISTENCE
-----------------------------
This corporation is to exist perpetually.
ARTICLE VI. DIRECTORS
----------------------
All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation
managed under the direction of its Board of Directors, subject to
any limitation set forth in these Articles of Incorporation. This
corporation shall have one Director, initially. The mane and
addresses of the initial members of the Board of Directors are:
William H. Luckman 4255 Route 9, Suite D
Dir. Freehold, New Jersey 07728
ASSIGNMENT BY THE SOLE INCORPORATOR
OF THE ARTICLES OF INCORPORATION OF
SUFFIELD TECHNOLOGIES CORP.
Corporation Service Company, as sole incorporator, for value
received hereby assigns any and all rights it may have as
such incorporator to the following:
William H. Luckman
Dated: December 12, 1997
CORPORATION SERVICE COMPANY
By: /s/ Karen B. Rozar
---------------------------------
Its Agent, Karen B. Rozar
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
Suffield Technologies Corp.
---------------------------
Pursuant to the provisions of section 607.1006, Florida Statute,
this Florida profit corporation adopts the following articles of
amendment to its articles of incorporation.
FIRST: Amendment(s) adopted (indicate article number(s) being
amended, added or deleted)
Article VI should be amended to read:
The member of the Board of Directors is:
James Lee 600 Madison Avenue
New York, New York
SECOND: If an amendment provides for an exchange,
reclassification or cancellation of issued shares, provision for
implementing the amendment if not contained in the amendment
itself, are as follows:
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
Pursuant to the provision of Chapter 607, Florida Statutes, the
undersigned corporation adopts the following articles of amendment
to its articles of incorporation.
FIRST: The name of the corporation is:
SUFFIELD TECHNOLOGIES CORP.
SECOND: The following amendment(s) to the articles of
incorporation was (were) adopted by the corporation:
The name of the corporation shall be: ROANOKE TECHNOLOGY CORP.
THIRD: The amendment(s) was (were) adopted by the Board od
Directors on the first day of June, 1998. Shareholder approval
was not required.
Dated: June 4th, 1998
By: /s/ James Lee
----------------------------
James Lee, Director
STATE OF NEW YORK
COUNTY OF NEW YORK
Before me, the undersigned authority, personally appeared James
Lee, to me well known to be the person who executed the foregoing
articles of m\amendment to the articles of incorporation and
acknowledge before me, according to law, that he made and
subscribed the same for the purposes therein mentioned and set
forth.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th
day of June, 1998
/s/ Martin Lerner
----------------------------------
Notary Public
EXHIBIT 3.2
BYLAWS
OF
SUFFIELD TECHNOLOGIES CORP
ARTICLE I
SHAREHOLDERS
1. SHARE CERTIFICATES. Certificates evidencing fully-paid
shares of the corporation shall set forth thereon the
statements prescribed by Section 607.0625 of the Florida
Business Corporation Act ("Business Corporation Act") and by
any other applicable provision of law, must be signed, either
manually or in facsimile, by any one of the following
officers: the President, a Vice President, the Secretary, an
Assistant Secretary, the Treasurer, an Assistant Secretary,
by an officer designated by the Board of Directors, and may
bear the corporate seal or its facsimile. If the person who
signed, either manually or in facsimile, a share certificate
no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
2. FRACTIONAL SHARES OR SCRIP. The corporation may:
issue fractions of a share or pay in money the fair value of
fractions of share: make arrangements, or provide reasonable
opportunity, for any person entitled to or holding a
fractional interest in a share to sell such fractional
interest or to purchase such additional fractional interests
as may be necessary to acquire a full share; and issue scrip
in registered or bearer form, over the manual or facsimile
signature of an officer of the corporation or its agent,
entitling the holder to receive a full share upon surrendering
enough scrip to equal a full share. Each certificate
representing scrip must be conspicuously labeled "scrip" and
must contain the information required by of Section 607.0625
of the Business Corporation Act. The holder of a fractional
share is entitled to exercise the rights of a shareholder,
including the right to vote, to receive dividends, and to
participate in the assets of the corporation upon liquidation.
The holder of scrip is not entitled to any of these rights
unless the scrip provides for them. The Board of Directors
may authorize the issuance of scrip subject to any condition
considered desirable, including (a) that the scrip will become
void if not exchanged for full shares before a specified date;
and (b) that the shares for which the scrip is exchangeable
may be sold and the proceeds paid to the scripholders.
3. SHARE TRANSFERS. Upon compliance with any
provisions restricting the transferability of shares that may
be set forth in the articles of incorporation, these Bylaws,
or any written agreement in respect thereof, transfers of
shares of the corporation shall be made only on the books of
the corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation, or
with a agent or a registrar and on surrender of the
certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon, if any. Except as may
be otherwise provided by law or these Bylaws, the person in
whose name shares stand on the books of the corporation shall
be deemed the owner thereof for all purposes as regards the
corporation; provided that whenever any transfer of shares
shall be made for collateral security, and not absolutely,
such fact, if known to the Secretary of the
corporation shall be so expressed in the entry of transfer.
4. RECORD DATE FOR SHAREHOLDERS. For the purpose of
determining shareholders entitled to notice of or to vote any
meeting of shareholders to demand a special meeting, or to
take any other action, the Board of Directors, of the
corporation may fix a date as the record date for any such
determination of shareholders, such date in any case to be not
more than seventy days before the meeting or action requiring
such determination of shareholders. A determination of
shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the
meeting unless the Board of Directors fixes a new record date,
which it must do if the meeting is adjourned to a date more
than one hundred twenty days (120) days after the date fixed
for the original meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of shareholders or a waiver
thereof or to participate or vote thereat or to consent or
dissent in writing in lieu of a meeting, as the case may be,
the term "share" or "shares" or "shareholder" or
"shareholders" refers to an outstanding share or shares and to
a holder or holders of record of outstanding shares when the
corporation is authorized to issue only on a class of shares,
and said reference is also intended to include any outstanding
share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the
articles of incorporation confer such rights where there are
two or more classes or series of shares or upon whom the
Business Corporation Act confers such rights
notwithstanding that the articles of incorporation may provide
for more than one class or series of shares, one or more of
which are limited or denied such rights thereunder.
6. SHAREHOLDER MEETING.
-TIME. The annual meeting shall be held on the date fixed
from time to time by the directors. A special meeting shall
be held on the date fixed from time to time by the directors
except when the Business Corporation Act confers
the right to call a special meeting upon the shareholders.
-PLACE. Annual meetings and special meetings shall be held
at such place in or out of the State of Florida as the
directors shall from time to time fix.
-CALL. Annual meetings may be called by the directors or the
Chairman of the Board of Directors, the Vice Chairman of the
Board of Directors, the President , or the Secretary or by an
officer instructed by the directors or the President to call
the meeting. Special meetings may be called in like manner.
-NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE . The
corporation shall notify shareholders of the date, time, and
place of each annual and special shareholders' meeting. Such
notice shall be no fewer than ten or more than sixty days
before the meeting date. Unless the Business Corporation Act
or the articles of incorporation require otherwise, notice of
an annual meeting need not include a description of the
purpose or purposes for which the meeting need not include a
description of the purpose or purposes for which the meeting
is called. Notice shall be given in the manner provided in
Section 607.0141 of the Business Corporation Act, by or at
the direction of the President, the Secretary, or the officer
or persons calling the meeting. Notice of a special meeting
must include a description of the purpose or purposes for
which the meeting is called. Unless the Business Corporation
Act or the articles of incorporation require
otherwise, the corporation is required to give notice only to
shareholders entitled to vote at the meeting. A shareholder
may waive any notice required by the Business Corporation Act,
the articles of incorporation, or the Bylaws before or after
the date and time stated in the notice. The waiver must be in
writing, be signed by the shareholder entitled to the notice,
and be delivered to the corporation for inclusion in the
objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business
at the meeting; or waives objection to consideration of a
particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is
presented.
-VOTING LIST FOR MEETING. After fixing a record date for a
meeting, the corporation shall prepare an alphabetical list of
the names of all its shareholders who are entitled to notice
of a shareholders' meeting, arranged by voting group, with the
address of and number and class and series, if any of shares
held by each shareholder. The shareholders' list must be
available for inspection by any shareholder, for a period of
ten days prior to the meeting or such sorter time as exists
between the record date and the meeting and continuing
through the meeting at the corporation's
principal office, or at a place identified in the meeting
notice in the city where the meeting will be held, or at the
office, of the corporation's transfer agent or registrar. A
shareholder, his agent or attorney is entitled on written
demand to inspect the list subject to the requirements of
Section 607.1602(3) of the Business Corporation Act, to copy
the list, during regular business hours and at his expense,
during the period it is available for inspection. The
corporation shall make the shareholders' list available at the
meeting, and any shareholder, or his agent or attorney is
entitled to inspect the list at any time during the meeting or
any adjournment.
-CONDUCT OF MEETING. Meetings of the shareholders shall be
presided over by one of the following officers in the order of
seniority and if present and acting - the Chairman of the
Board, if any, the Vice Chairman of the Board, if any, the
President, a Vice President, if any, or, if none of the
foregoing is in office and present and acting, by a chairman
to be chosen by the shareholders. The Secretary of the
corporation, or his absence, an Assistant Secretary, shall act
as secretary of every meeting, but, if neither the Secretary
nor an Assistant Secretary is present, the chairman of the
meeting shall appoint a secretary of he meeting.
-PROXY REPRESENTATION. A shareholder may appoint a proxy to
vote or otherwise act for him by signing an appointment from,
either personally or his attorney-in-fact. An appointment of
a proxy is effective when received by the Secretary or other
officer or agent authorized to tabulate votes.
An appointment is valid for up to eleven months, unless a
longer period is expressly provided in the appointment form.
An appointment of a proxy is revocable by the shareholder
unless the anointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest.
-SHARES HELD BY NOMINEES. The corporation may establish a
procedure by which the beneficial owner of shares that are
registered in the name of a nominee is recognized by the
corporation as the shareholder. The extent of this
recognition may be determined in the procedure.
-QUORUM . Unless the articles of incorporation or the
Business Corporation Act provides otherwise, a majority of the
votes entitled to be cast on a matter by a voting a group
constitutes a quorum o that voting group for action on that
matter. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of
those shares exists with respect to that matter. Once a share
is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting
and for any adjournment of that meeting unless a new record
date is or must be set for that adjourned meeting.
-VOTING. Directors are elected by a plurality of the votes
cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. If a quorum exists,
action on a matter, other than the election of directors, by a
voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the
action, unless the articles of incorporation or the Business
Corporation Act requires a greater number of affirmative
votes.
7. ACTION WITHOUT MEETING. Unless otherwise provided in the
articles of incorporation action required or permitted by the
provisions of the Business Corporation Act to be taken at an
annual or special meeting of shareholders may be taken without
a meeting, without prior notice, and without a vote if the
action is taken by the holders of outstanding stock of each
voting group entitled to vote thereon having not less than the
minimum number of votes with respect to each voting group that
would be necessary to authorize or take such action at a
meeting at which all voting groups and shares entitled to vote
hereon were present and voted. In order to be effective the
action must be evidenced by one or more written consents
describing the action taken , dated and signed by approving
shareholders having the requisite number of each voting group
entitled to vote thereon, and delivered to the corporation by
delivery to its principal office in State of Florida, its
principal place of business, the corporate Secretary, or
another officer or agent of the corporation having custody of
the book in which proceedings of meetings of shareholders are
recorded. No written consent shall be effective to take the
corporate action referred to therein, unless within sixty days
of the date of the earliest dated consent delivered in the
manner require by Section 607.0704 of the Business Corporation
Act, written consents signed by holders of shares having the
number of votes required to take action are delivered to the
corporation by delivery as set forth in Section 607.0704 of
the Florida Business Corporation Act. Action under thus
paragraph be subject to the requirements of Section 607.0704
of the Business Corporation Act.
ARTICLE II
BOARD OF DIRECTORS
1. FUNCTIONS GENERALLY - COMPENSATION. All corporate power
shall be exercised by or under the authority of, and the business
and affairs of the corporation managed under the direction of,
a Board of Directors. The Board may fix the compensation of
directors.
2.QUALIFICATIONS AND NUMBER. A director need not be a
shareholder, a citizen of the United States, or a resident of
the State of Florida. The initial Board of Directors shall
consist of one person, which shall be the number of directors
until changed. Thereafter, the number of directors shall not be
less than one (1) nor more than ten (10). The number of
directors may be fixed or changed from time to time by the
shareholders. The number shall never be less than one.
3. TERMS AND VACANCIES. The Terms of the initial directors of
the corporation expire at the first shareholders' meeting at
which directors are elected. The terms of all other directors
expire at the next annual shareholders' meeting following
their election. A decrease in the number of
directors does not shorten an incumbent director's term. The term
of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. Despite
the expiration of a director's term, the director
continues to serve until his successor is elected and qualifies or
until there is a decrease in the number of directors.
Whenever a vacancy occurs on the Board of Directors, including
a vacancy resulting from an increase in the numbers of directors,
it may be filled by the affirmative vote of a majority of the
remaining directors, through less than a quorum of the Board
of Directors, or by the shareholders, unless the articles of
incorporation provide otherwise.
4. MEETINGS.
-TIME. Meetings shall be held at such time as the Board
shall fix, except that the first meeting of a newly elected
Board shall be held as soon after its election as the
directors may conveniently assemble.
-PLACE. The Board of Directors may hold regular or special
meetings in or out of the State of Florida at such place as
shall be fixed by the Board.
-CALL. No call shall be required for regular meetings for
which time and place have been fixed. Special meetings may
be called by or at the direction of the Chairman of the Board,
if any, the Vice Chairman of the Board, if any, of the
President, or of a unanimous decision by all of the directors
in office.
-NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. Regular meetings
of the Board of Directors may be held without notice of the
date, time, place, or purpose of the meeting. Written, or
oral, notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the
directors thereat. The notice of a special meeting need not
describe the purpose of the meeting. Notice of a meeting of
the Board of Directors need not given to any director who
signs a waiver of notice of such meeting and a waiver of any
and all objection to the place of the meeting, the time of the
meeting, or the manner in which it has been called or
convened, except when a director states, at the beginning of
the meeting or promptly upon arrival at the meeting, any
objection to the transaction of business because the meeting
is not lawfully called or convened.
-QUORUM AND ACTION. A quorum of the Board of Directors
consists of a majority of the number of directors prescribed
in or fixed in accordance with these Bylaws. If a quorum is
present when a vote is taken, the affirmative vote of a
unanmious vote of directors present is the act of the Board of
Directors. The Board of Directors may permit any or all
directors to participate in a regular or special meeting by,
or conduct the meeting through use of, any means of
communication by which all directors participating may
simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be
present in person at the meeting.
-CHAIRMAN OF THE MEETING. Meetings of the Board of Directors
shall be presided over by the following directors in the order
of seniority and if present and acting the Chairman of the
Board, if any, the Vice Chairman of the Board, if any, the
President, or ny other director chosen by the Board.
5. REMOVAL OF DIRECTORS . The shareholders may remove one or
more directors with or without cause pursuant to the
provisions of Section 607.0808 of the Business Corporation
Act.
6. COMMITTEES. The Board of Directors by resolution adopted by a
majority of the full Board of Directors, may designate from
among its members an executive committee and one or more other
committees each of which, to the extent provided in such
resolution or in the articles of incorporation or the Bylaws,
shall have and may exercise all the authority of the Board of
Directors, except such authority as may not be delegated under
the Business Corporation Act. Each committee may have two or
more members, who serve at the pleasure of the Board of
Directors. The provisions of Sections 607.082, 607.0823, and
607.0824 of the Business Corporation Act, which govern
meetings, notice and waiver of notice, and quorum and voting
requirements, apply to committees and their members as well.
7. ACTION WITHOUT MEETING. Action required or permitted by the
Business Corporation Act to be taken at a Board of Directors'
meeting or committee meeting may be taken without a meeting if
the action is taken by all members of the Board or of the
committee. The action must be evidenced by one or more
written consents describing the action taken, signed by each
director or committee member. Action taken under this
paragraph is effective when the last director signs the
consent, unless the consent specifies a different effective
date.
ARTICLE III
OFFICERS
The corporation shall have a President, and a Secretary, and
such other officers as may be deemed necessary, who may be
appointed by the directors. The same individual may
simultaneously hold more than one office in the corporation.
A duly appointed officer may appoint one or more officers or
assistant officers is authorized by the Board of Directors.
Each officer of the corporation has the authority and shall
perform the duties prescribed by the Board of Directors or by
direction of an officer authorized by the Board of Directors
to prescribe the duties of other officers; provided, that the
Secretary shall have the responsibility for preparation and
custody of minutes of the directors' and shareholders'
meetings and for authenticating records of the corporation.
The Board of Directors may remove any officer at any time with
or without cause.
ARTICLE IV
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the
corporation and the name of the initial registered agent of
the corporation are set forth in the original articles of
incorporation.
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT AND SHARE EXCHANGE
by and among
ROANOKE TECHNOLOGY CORP.
a Florida Corporation
and
OFFSHORE SOFTWARE DEVELOPMENT LTD.
a Cayman Islands Corporation
effective as of March 30, 1999
ASSET PURCHASE AGREEMENT AND SHARE EXCHANGE
THIS ASSET PURCHASE AGREEMENT AND SHARE EXCHANGE, made and
entered into this 30th day of March, 1999, by and among Roanoke
Technology Corp., a Florida corporation with its principal place
of business located at 909 Monroe Street, Roanoke Rapids, NC 27870
("Roanoke") and Offshore Software Development Ltd., a Cayman
Islands Corporation with its principal place of business at 4th
Floor, Harbor Centre, P.O. Box 613, George Town, Grand Cayman,
Cayman Islands, British West Indies ("Offshore").
Premises
A. This Agreement provides for the acquisition of all of the
assets of Offshore by Roanoke whereby Offshore's shareholders
shall be issued nine tenths (9/10) of a share of Roanoke for each
Offshore share owned (or such other percentage as set forth in
Section 3.2 herein).
B. The majority shareholders and boards of directors of
Roanoke and Offshore have determined, subject to the terms and
conditions set forth in this Agreement, that the transaction
contemplated hereby is desirable and in the best interests of
their stockholders, respectively. This Agreement is being entered
into for the purpose of setting forth the terms and conditions of
the proposed acquisition.
Agreement
NOW, THEREFORE, on the stated premises and for and in
consideration of the mutual covenants and agreements hereinafter
set forth and the mutual benefits to the parties to be derived
herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
ROANOKE
As an inducement to and to obtain the reliance of Offshore,
Roanoke represents and warrants as follows:
Section 1.1 Organization. Roanoke is a corporation duly
organized, validly existing, and in good standing under the laws
of Florida and has the corporate power and is duly authorized,
qualified, franchised and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own
all of its properties and assets and to carry on its business in
all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the
jurisdiction in which the character and location of the assets
owned by it or the nature of the business transacted by it
requires qualification. Included in the Roanoke Schedules (as
hereinafter defined) are complete and correct copies of the
articles of incorporation, bylaws and amendments thereto of
Roanoke as in effect on the date hereof. The execution and
delivery of this Agreement does not and the consummation of the
transactions contemplated by this Agreement in accordance with the
terms hereof will not violate any provision of Roanoke's articles
of incorporation or bylaws. Roanoke has full power, authority and
legal right and has taken all action required by law, its articles
of incorporation, its bylaws or otherwise to authorize the
execution and delivery of this Agreement.
Section 1.2 Capitalization. The authorized capitalization
of Roanoke consists of 50,000,000 Common Shares, $0.0001 par
value per share, and 10,000,000 Preferred Shares, $0.0001 par
value per share. As of the date hereof, Roanoke has 9,015,000
common shares issued and outstanding, of which 3,840,000 common
shares are unrestricted. Roanoke is presently a public company
trading on the OTC Bulletin Board.
As of the Closing Date hereof, no shares of Preferred Stock
will be issued or outstanding. All issued and outstanding shares
are legally issued, fully paid and nonassessable and are not
issued in violation of the preemptive or other rights of any
person.
Section 1.3 Subsidiaries. Roanoke has no subsidiaries.
Section 1.4 Options and Warrants. There are no existing
options, warrants, calls or commitments of any character to
which Roanoke is a party and by which it is bound. Roanoke has no
securities, warrants or options authorized or issued, except for
an option to purchase an additional 235,000 common shares at $1.00
per share; and 225,000 common shares at $2.00 per share, both
received through a Confidential Term Sheet.
Section 1.5 Litigation and Proceedings. To the best of
Roanoke's knowledge and belief, there are no actions, suits,
proceedings or investigations pending or threatened by or against
Roanoke or affecting Roanoke or its properties, at law or in
equity, before any court or other governmental agency or
instrumentality, domestic or foreign or before any arbitrator of
any kind that would have a material adverse affect on the
business, operations, financial condition or income of Roanoke.
Roanoke does not have any knowledge of any default on its part
with respect to any judgment, order, writ, injunction, decree,
award, rule or regulation of any court, arbitrator or governmental
agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a
default.
Section 1.6 Material Contract Defaults. To the best of
Roanoke's knowledge and belief, Roanoke is not in default in any
material respect under the terms of any outstanding contract,
agreement, lease or other commitment which is material to the
business, operations, properties, assets or condition of Roanoke,
and there is no event of default in any material respect under any
such contract, agreement, lease or other commitment in respect of
which Roanoke has not taken adequate steps to prevent such a
default from occurring.
Section 1.7 No Conflict With Other Instruments. The
execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the
breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust or
other material contract, agreement or instrument to which Roanoke
is a party or to which any of its properties or operations are
subject.
Section 1.8 Governmental Authorizations. To the best of
Roanoke's knowledge, Roanoke has all licenses, franchises, permits
or other governmental authorizations legally required to enable
Roanoke to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal
and state securities and corporation laws, as hereinafter
provided, no authorization, approval, consent or order of, or
registration, declaration or filing with, any court or other
governmental body is required in connection with the execution and
delivery by Roanoke of this Agreement and the consummation of
Roanoke of the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF OFFSHORE
As an inducement to, and to obtain the reliance of Roanoke,
Offshore represents and warrants as follows:
Section 2.1 Organization. Offshore is a corporation duly
organized, validly existing and in good standing under the laws of
the Cayman Islands and has the corporate power and is duly
authorized, qualified, franchised and licensed under all
applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry
on its business in all material respects as it is now being
conducted, including qualification to do business as a foreign
entity in the country or states in which the character and
location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in the Offshore
Schedules (as hereinafter defined) are complete and correct copies
of the certificate of incorporation, memorandum and articles of
association and amendments thereto of Offshore as in effect on the
date hereof. The execution and delivery of this Agreement does
not and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate
any provision of Offshore's certificate of incorporation or
bylaws. Offshore has full power, authority and legal right and
has taken all action required by law, its articles of
incorporation, bylaws or otherwise to authorize the execution and
delivery of this Agreement.
Section 2.2 Capitalization. The authorized capitalization
of Offshore consists of 50,000,000 shares. As of the date
hereof, there are 17,082,346 shares issued and outstanding of
which none are unrestricted. After the completion of this merger,
Jagerton Research Ltd. will tender all of its Offshore shares to
treasury and Richard McCabe will tender all 5,000,000 of his
Offshore shares to treasury. Upon completion of this merger,
McCabe will be issued 25,000 shares of Roanoke, notwithstanding
the formula set forth in Section 3.2 below and pursuant to the
agreement dated March 19, 1999. In addition, Richard McCabe is
entitled to additional compensation as indicated in the March
30, 1999 agreement.
Section 2.3 Subsidiaries. Offshore has no subsidiaries.
Section 2.4 Tax Matters; Books & Records
(a) The books and records, financial and others, of
Offshore are in all material respects complete and correct and
have been maintained in accordance with good business accounting
practices; and
(b) Offshore has no liabilities with respect to the payment
of any country, federal, state, county, local or other taxes
(including any deficiencies, interest or penalties).
Section 2.5 Information. The information concerning
Offshore as set forth in this Agreement and in the Offshore
Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit
to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not
misleading.
Section 2.6 Absence of Certain Changes or Events. Except
as described herein or in the Offshore Schedules, since February
28, 1999:
(a) Offshore has not: (i) amended its certificate of
incorporation, memorandum of association or articles of
association; (ii) waived any rights of value which in the
aggregate are extraordinary or material considering the business
of Roanoke; (iii) made any material change in its method of
management, operation or accounting; or (iv) made any accrual or
arrangement for or payment of bonuses or special compensation of
any kind or any severance or termination pay to any present or
former officer or employee;
(b) Offshore has not: (i) granted or agreed to grant any
options, warrants or other rights for its certificates, bonds or
other corporate securities calling for the issuance thereof, which
option, warrant or other right has not been canceled as of the
Closing Date; (ii) borrowed or agreed to borrow any funds or
incurred or become subject to, any material obligation or
liability (absolute or contingent) except liabilities incurred in
the ordinary course of business; and
(c) to the best knowledge of Offshore, it has not become
subject to any law or regulation which materially and adversely
affects, or in the future may adversely affect, the business,
operations, properties, assets or condition of Offshore.
Section 2.7 Title and Related Matters. Offshore has good
and marketable title to and is the sole and exclusive owner of all
of its properties, inventory, interests in properties and assets,
real and personal (collectively, the "Assets") free and clear of
all liens, pledges, charges or encumbrances. Except as set forth
in the Offshore Schedules, Offshore owns free and clear of any
liens, claims, encumbrances, royalty interests or other
restrictions or limitations of any nature whatsoever and all
procedures, techniques, marketing plans, business plans, methods
of management or other information utilized in connection with
Offshore's business. Except as set forth in the Offshore
Schedules, no third party has any right to, and Offshore had not
received any notice of infringement of or conflict with asserted
rights of others with respect to any product, technology, data,
trade secrets, know-how, proprietary techniques, trademarks,
service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a materially adverse affect on the business,
operations, financial conditions or income of Offshore or any
material portion of its properties, assets or rights.
Section 2.8 Litigation and Proceedings. There are no
actions, suits or proceedings pending or, to the best of
Offshore's knowledge and belief, threatened by or against or
affecting Offshore, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign or
before any arbitrator of any kind that would have a material
adverse effect on the business, operations, financial condition,
income or business prospects of Offshore. Offshore does not have
any knowledge of any default on its part with respect to any
judgement, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator or governmental agency or
instrumentality.
Section 2.9 Contracts. On the Closing Date:
(a) There are no material contracts, agreements,
franchises, license agreements, or other commitments to which
Offshore is a party or by which it or any of its properties are
bound;
(b) Offshore is not a party to any contract, agreement,
commitment or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction,
decree or award which materially and adversely affects, or in the
future may (as far as Offshore can now foresee) materially and
adversely affect, the business, operations, properties, assets or
conditions of Offshore; and
(c) Offshore is not a party to any material oral or written:
(i) contract for the employment of any officer or employee; (ii)
profit sharing, bonus, deferred compensation, stock option,
severance pay, pension, benefit or retirement plan, agreement or
arrangement covered by Title IV of the Employee Retirement Income
Security Act, as amended; (iii) agreement, contract or indenture
relating to the borrowing of money; (iv) guaranty of any
obligation for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of
obligations, which, in the aggregate exceeds $1,000; (v)
consulting or other contract with an unexpired term of more than
one year or providing for payments in excess of $10,000 in the
aggregate; (vi) collective bargaining agreement; (vii)
contract, agreement, or other commitment involving payments by it
for more than $10,000 in the aggregate.
Section 2.10 No Conflict With Other Instruments. The
execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the
breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust or
other material contract, agreement or instrument to which Offshore
is a party or to which any of its properties or operations are
subject.
Section 2.11 Material Contract Defaults. To the best of
Offshore's knowledge and belief, Offshore is not in default in any
material respect under the terms of any outstanding contract,
agreement, lease or other commitment which is material to the
business, operations, properties, assets or condition of Offshore,
and there is no event of default in any material respect under any
such contract, agreement, lease or other commitment in respect of
which Offshore has not taken adequate steps to prevent such a
default from occurring.
Section 2.12 Governmental Authorizations. To the best of
Offshore's knowledge, Offshore has all licenses, franchises,
permits and other governmental authorizations that are legally
required to enable it to conduct its business operations in all
material respects as conducted on the date hereof. Except for
compliance with federal and state securities or corporation laws,
no authorization, approval, consent or order of, or registration,
declaration or filing with, any court or other governmental body
is required in connection with the execution and delivery by
Offshore of the transactions contemplated hereby.
Section 2.13 Compliance With Laws and Regulations. To the
best of Offshore's knowledge and belief, Offshore has complied
with all applicable statutes and regulations of any federal, state
or other governmental entity or agency thereof, except to the
extent that noncompliance would not materially and adversely
affect the business, operations, properties, assets or condition
of Offshore or would not result in Offshore's incurring any
material liability.
Section 2.14 Insurance. All of the insurable properties
of Offshore are insured for Offshore's benefit under valid and
enforceable policy or policies containing substantially equivalent
coverage and will be outstanding and in full force at the Closing
Date.
Section 2.15 Approval of Agreement. The holders of a
majority of the Common Voting Shares outstanding of Offshore have
authorized the execution and delivery of the Agreement by Offshore
and have approved the transactions contemplated hereby.
Section 2.16 Material Transactions or Affiliations. As of
the Closing Date, there will exist no material contract, agreement
or arrangement between Offshore and any person who was at the time
of such contract, agreement or arrangement an officer, director or
person owning of record, or known by Offshore to own beneficially,
ten percent (10%) or more of the issued and outstanding Common
Shares of Offshore and which is to be performed in whole or in
part after the date hereof. Offshore has no commitment, whether
written or oral, to lend any funds to, borrow any money from or
enter into any other material transactions with, any such
affiliated person.
ARTICLE III
EXCHANGE PROCEDURE AND OTHER CONSIDERATION
Section 3.1 Bill of Sale for Assets. On the Closing Date,
Offshore shall deliver to Roanoke a bill of sale for all of the
assets of Offshore and any and all other documents to transfer all
of the assets to Roanoke.
Section 3.2 Issuance of Roanoke Common Shares. In
exchange for the transfer of all of the assets of Offshore to
Roanoke pursuant to Section 3.1, Roanoke shall issue to each
Offshore shareholder nine tenths (9/10) of a Roanoke common share
for each share of Offshore owned at the time of the Closing. Such
shares shall be restricted under Rule 144 of the 1933 Securities
Act. Notwithstanding the above, if the closing bid price for the
Roanoke shares as listed on the OTC Bulletin Board is: (i) between
$6.75 and $7.49 on the day immediately prior to Closing, then the
share exchange percentage listed above shall be revised so that
Roanoke shall issue to each Offshore shareholder one (1) Roanoke
common share for each share of Offshore owned at the time of the
Closing; (ii) between $6.74 and $5.50 on the day immediately prior
to Closing, then the share exchange percentage listed above shall
be revised so that Roanoke shall issue to each Offshore
shareholder one and 1/10th (1.1) Roanoke common share for each
share of Offshore owned at the time of the Closing; (iii) $5.49 or
less on the day immediately prior to Closing, then the share
exchange shall be revised to an amount mutually agreed upon by
Roanoke and Offshore.
Section 3.3 Events Prior to Closing. Upon execution
hereof or as soon thereafter as practical, management of Offshore
and Roanoke shall execute, acknowledge and deliver (or shall cause
to be executed, acknowledged and delivered) any and all
certificates, opinions, financial statements, schedules,
agreements, resolutions rulings or other instruments required by
this Agreement to be so delivered, together with such other items
as may be reasonably requested by the parties hereto and their
respective legal counsel in order to effectuate or evidence the
transactions contemplated hereby, subject only to the conditions
to Closing referenced herein below.
Section 3.4 Closing. The closing ("Closing") of the
transactions contemplated by this Agreement shall be on or about
March 30, 1999 ("Closing Date").
Section 3.5 Termination.
(a) This Agreement may be terminated by the board of
directors or majority interest of Shareholders of either Roanoke
or Offshore, respectively, at any time prior to the Closing Date
if:
(i) there shall be any action or proceeding before any
court or any governmental body which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this
Agreement and which, in the judgement of such board of directors,
made in good faith and based on the advice of its legal counsel,
makes it inadvisable to proceed with the exchange contemplated by
this Agreement; or
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is required
to consummate such transactions.
In the event of termination pursuant to this paragraph (a) of
this Section 3.5, no obligation, right, or liability shall arise
hereunder and each party shall bear all of the expenses incurred
by it in connection with the negotiation, drafting and execution
of this Agreement and the transactions herein contemplated.
(b) This Agreement may be terminated at any time prior to
the Closing Date by action of the board of directors of Roanoke if
Offshore shall fail to comply in any material respect with any of
its covenants or agreements contained in this Agreement or if any
of the representations or warranties of Offshore contained herein
shall be inaccurate in any material respect, which noncompliance
or inaccuracy is not cured after 20 days written notice thereof is
given to Offshore. If this Agreement is terminated pursuant to
this paragraph (b) of this Section 3.5, this Agreement shall be of
no further force or effect and no obligation, right or liability
shall arise hereunder.
Section 3.6 Directors of Roanoke After Acquisition. Upon
the Closing, the Board of Directors of Roanoke shall be the
following: David Smith and Glen Cannady. Each director shall hold
office until his successor shall have been duly elected and shall
have qualified or until his earlier death, resignation or removal.
Section 3.7 Officers of Roanoke. Upon the closing, the
following persons shall be elected as officers of Roanoke in
accordance with procedures set forth in the Roanoke bylaws.
NAME OFFICE
- ----- ------
David Smith President/Chief Executive
Officer/Treasurer/Secretary
ARTICLE IV
SPECIAL COVENANTS
Section 4.1 Access to Properties and Records. Prior to
closing, Roanoke and Offshore will each afford to the officers
and authorized representatives of the other full access to the
properties, books and records of each other, in order that each
may have full opportunity to make such reasonable investigation as
it shall desire to make of the affairs of the other and each will
furnish the other with such additional financial and operating
data and other information as to the business and properties of
each other, as the other shall from time to time reasonably
request.
Section 4.2 Availability of Rule 144. Roanoke and
Offshore shareholders holding "restricted securities, " as that
term is defined in Rule 144 promulgated pursuant to the Securities
Act will remain as "restricted securities". Roanoke is under no
obligation to register such shares under the Securities Act, or
otherwise. The stockholders of Roanoke and Offshore holding
restricted securities of Roanoke and Offshore as of the date of
this Agreement and their respective heirs, administrators,
personal representatives, successors and assigns, are intended
third party beneficiaries of the provisions set forth herein. The
covenants set forth in this Section 4.2 shall survive the Closing
and the consummation of the transactions herein contemplated.
Section 4.3 Special Covenants and Representations Regarding
the Roanoke Common Shares to be Issued in the Exchange. The
consummation of this Agreement, including the issuance of the
Roanoke Common Shares to the Shareholders of Offshore as
contemplated hereby, constitutes the offer and sale of securities
under the Securities Act, and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from
the registration and prospectus delivery requirements of such
statutes which depend, inter alia, upon the circumstances under
which the Offshore Shareholders acquire such securities.
Section 4.4 Third Party Consents. Roanoke and Offshore
agree to cooperate with each other in order to obtain any required
third party consents to this Agreement and the transactions herein
contemplated.
Section 4.5 Actions Prior and Subsequent to Closing.
(a) From and after the date of this Agreement until the
Closing Date, except as permitted or contemplated by this
Agreement, Offshore will each use its best efforts to:
(i) carry on its business in substantially the same manner
as it has heretofore;
(ii) maintain and keep its properties in states of good
repair and condition as at present, except for depreciation due to
ordinary wear and tear and damage due to casualty;
(iii) maintain in full force and effect insurance
comparable in amount and in scope of coverage to that now
maintained by it;
(iv) perform in all material respects all of its
obligations under material contracts, leases and instruments
relating to or affecting its assets, properties and business;
(v) maintain and preserve its business organization intact,
to retain its key employees and to maintain its relationship with
its material suppliers and customers; and
(vi) fully comply with and perform in all material respects
all obligations and duties imposed on it by all federal and state
laws and all rules, regulations and orders imposed by federal or
state governmental authorities.
(b) From and after the date of this Agreement until the
Closing Date, Offshore will not, without the prior consent of
Roanoke:
(i) except as otherwise specifically set forth herein, make
any change in its certificate of incorporation, memorandum or
articles of association;
(ii) declare or pay any dividend on its outstanding Common
Shares, except as may otherwise be required by law, or effect any
stock split or otherwise change its capitalization, except as
provided herein;
(iii) enter into or amend any employment, severance or
agreements or arrangements with any directors or officers;
(v) grant, confer or award any options, warrants,
conversion rights or other rights not existing on the date hereof
to acquire any Common Shares; or
(vi) purchase or redeem any Common Shares.
Section 4.6 Indemnification.
(a) Offshore hereby agrees to indemnify Roanoke and each of
the officers, agents and directors of Roanoke as of the date of
execution of this Agreement against any loss, liability, claim,
damage or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or threatened or
any claim whatsoever), to which it or they may become subject to
or rising out of or based on any inaccuracy appearing in or
misrepresentation made in this Agreement, including, but not
limited to, misrepresentations. The indemnification provided for
in this paragraph shall survive the Closing and consummation of
the transactions contemplated hereby and termination of this
Agreement; and
(b) Roanoke and its officers and directors hereby agrees to
indemnify Offshore and each of the officers, agents, directors and
current shareholders of Roanoke as of the Closing Date against any
loss, liability, claim, damage or expense (including, but not
limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation,
commenced or threatened or any claim whatsoever), to which it or
they may become subject arising out of or based on any inaccuracy
appearing in or misrepresentation made in this Agreement. The
indemnification provided for in this Section shall survive the
Closing and consummation of the transactions contemplated hereby
and termination of this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF ROANOKE
The obligations of Roanoke under this Agreement are subject
to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 5.1 Accuracy of Representations. The
representations and warranties made by Roanoke in this Agreement
were true when made and shall be true at the Closing Date with the
same force and effect as if such representations and warranties
were made at the Closing Date (except for changes therein
permitted by this Agreement), and Roanoke shall have performed or
compiled with all covenants and conditions required by this
Agreement to be performed or complied with by Roanoke prior to
or at the Closing. Offshore shall be furnished with a
certificate, signed by a duly authorized officer of Roanoke
and dated the Closing Date, to the foregoing effect.
Section 5.2 Shareholder Approval. A majority of the
outstanding Common Shares of Roanoke shall have approved this
Agreement and the transactions contemplated herein.
Section 5.3 Officer's Certificate. Offshore shall have
been furnished with a certificate dated the Closing Date and
signed by a duly authorized officer of Roanoke to the effect that:
(a) the representations and warranties of Roanoke set forth in
the Agreement and in all Exhibits, Schedules and other documents
furnished in connection herewith are in all material respects true
and correct as if made on the Effective Date; (b) Roanoke has
performed all covenants, satisfied all conditions, and complied
with all other terms and provisions of this Agreement to be
performed, satisfied or complied with by it as of the Effective
Date; (c) since such date and other than as previously disclosed
to Roanoke, Roanoke has not entered into any material transaction
other than transactions which are usual and in the ordinary
course if its business; and (d) no litigation, proceeding,
investigation or inquiry is pending or, to the best knowledge of
Roanoke, threatened, which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this
Agreement or, to the extent not disclosed in the Roanoke
Schedules, by or against Roanoke which might result in any
material adverse change in any of the assets, properties, business
or operations of Roanoke.
Section 5.4 No Material Adverse Change. Prior to the
Closing Date, there shall not have occurred any material adverse
change in the financial condition, business or operations of nor
shall any event have occurred which, with the lapse of time or the
giving of notice, may cause or create any material adverse change
in the financial condition, business or operations or Roanoke.
Section 5.5 Other Items. Offshore shall have received
such further documents, certificates or instruments relating to
the transactions contemplated hereby as Offshore may reasonably
request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF OFFSHORE
The obligations of Offshore under this Agreement are subject
to the satisfaction, at or before the Closing date (unless
otherwise indicated herein), of the following conditions:
Section 6.1 Accuracy of Representations. The
representations and warranties made by Offshore in this Agreement
were true when made and shall be true as of the Closing Date
(except for changes therein permitted by this Agreement) with the
same force and effect as if such representations and warranties
were made at and as of the Closing Date, and Offshore shall have
performed and complied with all covenants and conditions required
by this Agreement to be performed or complied with by Offshore
prior to or at the Closing. Roanoke shall have been furnished
with a certificate, signed by a duly authorized executive officer
of Roanoke and dated the Closing Date, to the foregoing effect.
Section 6.2 Shareholder Approval. A majority of the
outstanding Common Shares of Offshore shall have approved this
Agreement and the transactions contemplated herein.
Section 6.3 Officer's Certificate. Roanoke shall be
furnished with a certificate dated the Closing date and signed by
a duly authorized officer of Roanoke to the effect that: (a) the
representations and warranties of Offshore set forth in the
Agreement and in all Exhibits, Schedules and other documents
furnished in connection herewith are in all material respects true
and correct as if made on the Effective Date; and (b) Offshore had
performed all covenants, satisfied all conditions, and complied
with all other terms and provisions of the Agreement to be
performed, satisfied or complied with by it as of the Effective
Date.
Section 6.4 No Material Adverse Change. Prior to the
Closing Date, there shall not have occurred any material adverse
change in the financial condition, business or operations of nor
shall any event have occurred which, with the lapse of time or
the giving of notice, may cause or create any material adverse
change in the financial condition, business or operations of
Offshore.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Brokers and Finders. Each party hereto hereby
represents and warrants that it is under no obligation, express or
implied, to pay certain finders in connection with the bringing of
the parties together in the negotiation, execution, or
consummation of this Agreement. The parties each agree to
indemnify the other against any claim by any third person not
listed in Schedule 7.1 for any commission, brokerage or finder's
fee or other payment with respect to this Agreement or the
transactions contemplated hereby based on any alleged agreement or
understanding between the indemnifying party and such third
person, whether express or implied from the actions of the
indemnifying party.
Section 7.2 Law, Forum and Jurisdiction. This Agreement
shall be construed and interpreted in accordance with the laws of
the State of Florida, United States of America.
Section 7.3 Notices. Any notices or other communications
required or permitted hereunder shall be sufficiently given if
personally delivered to it or sent by registered mail or certified
mail, postage prepaid, or by prepaid telegram addressed as
follows:
If to Roanoke and : Richard I. Anslow & Associates
4255 Route 9, Suite D
Freehold, New Jersey 07728
If to Offshore: Richard I. Anslow & Associates
4255 Route 9, Suite D
Freehold, New Jersey 07728
or such other addresses as shall be furnished in writing by any
party in the manner for giving notices hereunder, and any such
notice or communication shall be deemed to have been given as of
the date so delivered, mailed or telegraphed.
Section 7.4 Attorneys' Fees. In the event that any
party institutes any action or suit to enforce this Agreement or
to secure relief from any default hereunder or breach hereof, the
breaching party or parties shall reimburse the non-breaching party
or parties for all costs, including reasonable attorneys' fees,
incurred in connection therewith and in enforcing or collecting
any judgment rendered therein.
Section 7.5 Confidentiality. Each party hereto
agrees with the other party that, unless and until the
transactions contemplated by this Agreement have been consummated,
they and their representatives will hold in strict confidence all
data and information obtained with respect to another party or
any subsidiary thereof from any representative, officer, director
or employee, or from any books or records or from personal
inspection, of such other party, and shall not use such data or
information or disclose the same to others, except: (i) to the
extent such data is a matter of public knowledge or is required by
law to be published; and (ii) to the extent that such data or
information must be used or disclosed in order to consummate the
transactions contemplated by this Agreement.
Section 7.6 Schedules; Knowledge. Each party is
presumed to have full knowledge of all information set forth in
the other party's schedules delivered pursuant to this Agreement.
Section 7.7 Third Party Beneficiaries. This
contract is solely between Roanoke and Offshore and except as
specifically provided, no director, officer, stockholder,
employee, agent, independent contractor or any other person or
entity shall be deemed to be a third party beneficiary of this
Agreement.
Section 7.8 Entire Agreement. This Agreement
represents the entire agreement between the parties relating to
the subject matter hereof. This Agreement alone fully and
completely expresses the agreement of the parties relating to the
subject matter hereof. There are no other courses of dealing,
understanding, agreements, representations or warranties, written
or oral, except as set forth herein. This Agreement may not be
amended or modified, except by a written agreement signed by all
parties hereto.
Section 7.9 Survival; Termination. The
representations, warranties and covenants of the respective
parties shall survive the Closing Date and the consummation of the
transactions herein contemplated for 18 months.
Section 7.10 Counterparts. This Agreement may be
executed in multiple counterparts, each of which shall be deemed
an original and all of which taken together shall be but a single
instrument.
Section 7.11 Amendment or Waiver. Every right and
remedy provided herein shall be cumulative with every other right
and remedy, whether conferred herein, at law, or in equity, and
may be enforced concurrently herewith, and no waiver by any party
of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then,
theretofore, or thereafter occurring or existing. At any time
prior to the Closing Date, this Agreement may be amended by a
writing signed by all parties hereto, with respect to any of the
terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be
extended by a writing signed by the party or parties for whose
benefit the provision is intended.
Section 7.12 Incorporation of Recitals. All of the
recitals hereof are incorporated by this reference and are made a
part hereof as though set forth at length herein.
Section 7.13 Expenses. Each party herein shall bear
all of their respective cost s and expenses incurred in connection
with the negotiation of this Agreement and in the consummation of
the transactions provided for herein and the preparation thereof.
Section 7.14 Headings; Context. The headings of the
sections and paragraphs contained in this Agreement are for
convenience of reference only and do not form a part hereof and in
no way modify, interpret or construe the meaning of this
Agreement.
Section 7.15 Benefit. This Agreement shall be binding
upon and shall inure only to the benefit of the parties hereto,
and their permitted assigns hereunder. This Agreement shall not
be assigned by any party without the prior written consent of the
other party.
Section 7.16 Public Announcements. Except as may be
required by law, neither party shall make any public announcement
or filing with respect to the transactions provided for herein
without the prior consent of the other party hereto.
Notwithstanding same, both parties agree that Roanoke will be
issuing a press release regarding this transaction.
Section 7.17 Severability. In the event that any
particular provision or provisions of this Agreement or the other
agreements contained herein shall for any reason hereafter be
determined to be unenforceable, or in violation of any law,
governmental order or regulation, such unenforceability or
violation shall not affect the remaining provisions of such
agreements, which shall continue in full force and effect and be
binding upon the respective parties hereto.
Section 7.18 Failure of Conditions; Termination. In
the event of any of the conditions specified in this Agreement
shall not be fulfilled on or before the Closing Date, either
of the parties have the right either to proceed or, upon prompt
written notice to the other, to terminate and rescind this
Agreement without liability to any other party. The election to
proceed shall not affect the right of such electing party
reasonably to require the other party to continue to use its
efforts to fulfill the unmet conditions.
Section 7.19 No Strict Construction. The language
of this Agreement shall be construed as a whole, according to its
fair meaning and intendment, and not strictly for or against
either party hereto, regardless of who drafted or was principally
responsible for drafting the Agreement or terms or conditions
hereof.
Section 7.20 Execution Knowing and Voluntary; Conflict
of Interest. In executing this Agreement, the parties
severally acknowledge and represent that each: (a) has fully and
carefully read and considered this Agreement; (b) has been or has
had the opportunity to be fully apprized by its attorneys of the
legal effect and meaning of this document and all terms and
conditions hereof; (c) is executing this agreement voluntarily,
free from any influence, coercion or duress of any kind; and (d)
acknowledges and agrees that Richard I. Anslow & Associates shall
be representing both parties and waives such conflict of interest.
IN WITNESS WHEREOF, the corporate parties hereto have
caused this Agreement to be executed by their respective officers,
hereunto duly authorized, and entered into as of the date first
above written.
ROANOKE TECHNOLOGY CORP.
ATTEST:
/s/ James Lee
- ---------------------------- By: /s/ David L. Smith
JAMES LEE, Secretary --------------------------
DAVID SMITH, President
ATTEST: OFFSHORE SOFTWARE DEVELOPMENT LTD.
/s/ Richard McCabe
- ---------------------------- By:/s/ Richard McCabe
RICHARD MCCABE, Secretary ---------------------------
RICHARD MCCABE, President
STOCK PURCHASE AGREEMENT AND SHARE EXCHANGE
by and among
SUFFIELD TECHNOLOGIES CORP.
a Florida Corporation
and
TOP 10 PROMOTIONS, INC.
a Virginia Corporation
effective as of May 28, 1998
STOCK PURCHASE AGREEMENT AND SHARE EXCHANGE
THIS STOCK PURCHASE AGREEMENT AND SHARE EXCHANGE, made
and entered into this 28th day of May, 1998, by and among Suffield
Technologies Corp., a Florida corporation with its
principal place of business located at 777 South Flagler Drive,
8th Floor, West Tower, West Palm Beach, Florida 33401 ("SUFFIELD"), Top 10
Promotions, Inc., a Virginia Corporation
with its principal place of business at 909 Monroe Street, Roanoke
Rapids, North Carolina 27870 ("Top 10") and the individual listed
on Exhibit "A" attached hereto and specifically incorporated
herein by this reference (the "Top 10 Shareholder"), (Top 10 and
Top 10 Shareholder jointly referred to as the "Top 10").
Premises
A. This Agreement provides for the acquisition of Top
10 by Suffield whereby Top 10 shall become a wholly owned
subsidiary of Suffield and in connection therewith, the issuance
of 500,000 ($0.0001 par value per share) shares of restricted
common stock of Suffield to the Top 10 Shareholder as designated
on Exhibit "A" and other consideration.
B. The boards of directors of Suffield and Top 10
have determined, subject to the terms and conditions set forth in
this Agreement, that the transaction contemplated hereby is
desirable and in the best interests of their stockholders,
respectively. This Agreement is being entered into for the
purpose of setting forth the terms and conditions of the proposed
acquisition.
Agreement
NOW, THEREFORE, on the stated premises and for and in
consideration of the mutual covenants and agreements hereinafter
set forth and the mutual benefits to the parties to be derived herefrom, it
is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
SUFFIELD
As an inducement to and to obtain the reliance of Top 10, Suffield
represents and warrants as follows:
Section 1.1 Organization. Suffield is a
corporation duly organized, validly existing, and in good standing
under the laws of Florida and has the corporate power and is duly
authorized, qualified, franchised and licensed under all
applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry
on its business in all material respects as it is now being
conducted, including qualification to do business as a foreign
corporation in the jurisdiction in which the character and
location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in the Suffield
Schedules (as hereinafter defined) are complete and correct copies
of the articles of incorporation, bylaws and amendments thereto of Suffield
as in effect on the date hereof. The execution and
delivery of this Agreement does not and the consummation of the
transactions contemplated by this Agreement in accordance with the
terms hereof will not violate any provision of Suffield's articles
of incorporation or bylaws. Suffield has full power, authority
and legal right and has taken all action required by law, its
articles of incorporation, its bylaws or otherwise to authorize
the execution and delivery of this Agreement.
Section 1.2 Capitalization. The
authorized capitalization of Suffield consists of 50,000,000 Common Shares,
$0.0001 par value per share, and 10,000,000 Preferred Shares, $0.0001 par
value per share. As of the date hereof, Suffield has 3,325,000 common
shares issued and outstanding, of which 1,800,000 are unrestricted. Suffield
is not presently a public company. Within ninety (90) days after the
closing herein, it intends to file Form 211 for the purpose of
being traded on the NASDAQ OTC Bulletin Board.
As of the Closing Date hereof, no shares of Preferred Stock will
be issued or outstanding. All issued and outstanding shares are
legally issued, fully paid and nonassessable and are not issued in
violation of the preemptive or other rights of any person. Suffield has no
other securities, warrants or options authorized or issued.
Section 1.3 Subsidiaries and Predecessor
Corporations.
Suffield does not have any other subsidiaries and does not own,
beneficially or of record, any shares of any other corporation.
Section 1.4 Options and Warrants. There
are no existing options, warrants, calls or commitments of any
character to which Suffield is a party and by which it is bound.
Section 1.5 Financing. Suffield
undertook a Regulation D, 504 Offering, whereby Suffield raised
$70,000 and issued 1,800,000 shares of Suffield to such investors.
Such shares are included in the issued and outstanding shares as
set forth in Section 1.2 hereinabove.
Section 1.6 Litigation and Proceedings.
To the best of Suffield's knowledge and belief, there are no
actions, suits, proceedings or investigations pending or
threatened by or against Suffield or affecting Suffield or its
properties, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign or
before any arbitrator of any kind that would have a material
adverse affect on the business, operations, financial condition or
income of Suffield. Suffield does not have any knowledge of any
default on its part with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court,
arbitrator or governmental agency or instrumentality or of any
circumstances which, after reasonable investigation, would result
in the discovery of such a default.
Section 1.7 Material Contract Defaults.
To the best of Suffield's knowledge and belief, Suffield is not in
default in any material respect under the terms of any outstanding
contract, agreement, lease or other commitment which is material
to the business, operations, properties, assets or condition of Suffield, and
there is no event of default in any material respect
under any such contract, agreement, lease or other commitment in
respect of which Suffield has not taken adequate steps to
prevent such a default from occurring.
Section 1.8 No Conflict With Other Instruments.
The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the
breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust or
other material contract, agreement or instrument to which Suffield
is a party or to which any of its properties or operations are
subject.
Section 1.9 Governmental Authorizations.
To the best of Suffield's knowledge, Suffield has all licenses,
franchises, permits or other governmental authorizations legally
required to enable Suffield to conduct its business in all
material respects as conducted on the date hereof. Except for
compliance with federal and state securities and corporation laws,
as hereinafter provided, no authorization, approval, consent or
order of, or registration, declaration or filing with, any court
or other governmental body is required in connection with the
execution and delivery by Suffield of this Agreement and the
consummation of Suffield of the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF TOP 10
As an inducement to, and to obtain the reliance of Suffield, Top 10
represents and warrants as follows:
Section 3.1 Organization. Top 10 is a
corporation duly organized, validly existing and in good standing
under the laws of Virginia and has the corporate power and is duly
authorized, qualified, franchised and licensed under all
applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry
on its business in all material respects as it is now being
conducted, including qualification to do business as a foreign
entity in the country or states in which the character and
location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in the Top 10
Schedules (as hereinafter defined) are complete and correct copies
of the articles of incorporation, bylaws and amendments thereto of
Top 10 as in effect on the date hereof. The execution and
delivery of this Agreement does not and the consummation of the
transactions contemplated by this Agreement in accordance with the
terms hereof will not, violate any provision of Top 10's
certificate of incorporation or bylaws. Top 10 has full power,
authority and legal right and has taken all action required by
law, its articles of incorporation, bylaws or otherwise to
authorize the execution and delivery of this Agreement.
Section 3.2 Capitalization. The
authorized capitalization of Top 10 consists of 100,000 shares, no
par value. As of the date hereof, there are 100 Shares issued and
outstanding to the following: David L. Smith, Jr.- 100. All
issued and outstanding Top 10 shares have been legally issued,
partially paid, are nonassessable and will be fully paid as of May
, 1998.
Section 3.3 Subsidiaries. Top 10 has no
subsidiary companies.
Section 3.4 Tax Matters; Books & Records
(a) The books and records, financial and others, of
Top 10 are in all material respects complete and correct and have
been maintained in accordance with good business accounting
practices; and
(b) Top 10 has no liabilities with respect to the
payment of any country, federal, state, county, local or other
taxes (including any deficiencies, interest or penalties).
Section 3.5 Information. The information
concerning Top 10 as set forth in this Agreement and in the Top 10
Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit
to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not
misleading.
Section 3.6 Absence of Certain Changes or Events.
Except as described herein or in the Top 10 Schedules,
since December 31, 1997:
(a) Top 10 has not: (i) amended its certificate
of incorporation or bylaws; (ii) waived any rights of value
which in the aggregate are extraordinary or material
considering the business of Top 10; (iii) made any material
change in its method of management, operation or accounting;
or (iv) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee;
(b) Top 10 has not: (i) granted or agreed to
grant any options, warrants or other rights for its certificates,
bonds or other corporate securities
calling for the issuance thereof, which option, warrant or other
right has not been canceled as of the Closing Date; (ii) borrowed
or agreed to borrow any funds or incurred or become subject to,
any material obligation or liability (absolute or contingent)
except liabilities incurred in the ordinary course of business;
and
(c) to the best knowledge of Top 10, it has not
become subject to any law or regulation which materially and
adversely affects, or in the future may adversely affect, the
business, operations, properties, assets or condition of Top 10.
Section 3.7 Title and Related Matters.
Top 10 has good and marketable title to and is the sole and
exclusive owner of all of its properties, inventory, interests in
properties and assets, real and personal (collectively, the
"Assets") which are reflected in the most recent Top 10 balance
sheet and the Top 10 Schedules or acquired after that date (except
properties, interests in properties and assets sold or otherwise
disposed of since such date in the ordinary course of business),
free and clear of all liens, pledges, charges or encumbrances.
Except as set forth in the Top 10 Schedules, Top 10 owns free and
clear of any liens, claims, encumbrances, royalty interests or
other restrictions or limitations of any nature whatsoever and all
procedures, techniques, marketing plans, business plans, methods
of management or other information utilized in connection with Top
10's business. Except as set forth in the Top 10 Schedules, no
third party has any right to, and Top 10 had not received any
notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade
secrets, know-how, proprietary techniques, trademarks, service
marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a materially adverse affect on the business,
operations, financial conditions or income of Top 10 or any
material portion of its properties, assets or rights.
Section 3.8 Litigation and Proceedings.
There are no actions, suits or proceedings pending or, to the best
of Top 10's knowledge and belief, threatened by or against or
affecting Top 10, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign or
before any arbitrator of any kind that would have a material
adverse effect on the business, operations, financial condition,
income or business prospects of Top 10. Top 10 does not have any
knowledge of any default on its part with respect to any
judgement, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator or governmental agency or
instrumentality.
Section 3.9 Contracts. On the Closing Date:
(a) There are no material contracts, agreements,
franchises, license agreements, or other commitments to which Top
10 is a party or by which it or any of its properties are bound;
(b) Top 10 is not a party to any contract,
agreement, commitment or instrument or subject to any charter or
other corporate restriction or any judgment, order, writ,
injunction, decree or award which materially and adversely
affects, or in the future may (as far as Top 10 can now foresee)
materially and adversely affect, the business, operations,
properties, assets or conditions of Top 10; and
(c) Top 10 is not a party to any material oral or
written: (i) contract for the employment of any officer or
employee; (ii) profit sharing, bonus, deferred compensation,
stock option, severance pay, pension, benefit or retirement plan,
agreement or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) agreement,
contract or indenture relating to the borrowing of money; (iv)
guaranty of any obligation for the borrowing of money or
otherwise, excluding endorsements made for collection and other
guaranties of obligations, which, in the aggregate exceeds $1,000;
(v) consulting or other contract with an unexpired term of more
than one year or providing for payments in excess of $10,000 in
the aggregate; (vi) collective bargaining agreement; (vii)
contract, agreement, or other commitment involving payments by it
for more than $10,000 in the aggregate.
Section 3.10 No Conflict With Other Instruments.
The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the
breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust or
other material contract, agreement or instrument to which Top 10
is a party or to which any of its properties or operations are
subject.
Section 3.11 Material Contract Defaults.
To the best of Top 10's knowledge and belief, Top 10 is not in
default in any material respect under the terms of any outstanding
contract, agreement, lease or other commitment which is material
to the business, operations, properties, assets or condition of
Top 10, and there is no event of default in any material respect
under any such contract, agreement, lease or other commitment in
respect of which Top 10 has not taken adequate steps to prevent
such a default from occurring.
Section 3.12 Governmental Authorizations.
To the best of Top 10's knowledge, Top 10 has all licenses,
franchises, permits and other governmental authorizations that are
legally required to enable it to conduct its business operations
in all material respects as conducted on the date hereof. Except
for compliance with federal and state securities or corporation
laws, no authorization, approval, consent or order of, or
registration, declaration or filing with, any court or other
governmental body is required in connection with the execution and
delivery by Top 10 of the transactions contemplated hereby.
Section 3.13 Compliance With Laws and
Regulations.
To the best of Top 10's knowledge and belief, Top 10 has complied
with all applicable statutes and regulations of any
federal, state or other governmental entity or agency thereof,
except to the extent that noncompliance would not materially and
adversely affect the business; operations, properties, assets or
condition of Top 10 or would not result in Top 10's incurring any
material liability.
Section 3.14 Insurance. All of the
insurable properties of Top 10 are insured for Top 10's benefit in
accordance with the insurance policies disclosed in the Top 10
Schedules under valid and enforceable policy or policies
containing substantially equivalent coverage and will be
outstanding and in full force at the Closing Date.
Section 3.15 Approval of Agreement. The
holders of a majority of the Common Voting Shares outstanding of
Top 10 have authorized the execution and delivery of the Agreement
by Top 10 and have approved the transactions contemplated hereby.
Section 3.16 Material Transactions or
Affiliations. As of the Closing Date, there will exist no
material contract, agreement or arrangement between Top 10 and any
person who was at the time of such contract, agreement or
arrangement an officer, director or person owning of record, or
known by Top 10 to own beneficially, ten percent (10%) or more of
the issued and outstanding Common Shares of Top 10 and which is to
be performed in whole or in part after the date hereof. Top 10
has no commitment, whether written or oral, to lend any funds to,
borrow any money from or enter into any other material
transactions with, any such affiliated person.
Section 3.17 Labor Relations. Top 10 has
never had a work stoppage resulting from labor problems.
Section 3.18 Top 10 Schedules. Upon
execution hereof, Top 10 shall deliver to Suffield the following
schedules, which are collectively referred to as the "Top 10
Schedules" which are dated the date of this Agreement, all
certified by an officer of Top 10 to be complete, true and
accurate:
(a) complete and correct copies of the certificate of
incorporation, bylaws and amendments thereto of Top 10 as in
effect as of the date of this Agreement;
(b) copies of financial statement of Top 10 since incorporation
of Top 10 in November, 1997;
(c) copies of income and any other tax returns of Top 10 since
incorporation of Top 10 in November, 1997 ;
(d) all contracts of Top 10 presently in effect;
(e) Disclosure Statement, and Officers and Directors
Questionnaires, both required for filing Form 211 with the NASD
for purposes of applying to the NASDAQ OTC Bulletin Board;
(f) the description of any material adverse change in the
business, operations, property, assets, or condition of Top 10
since December 31, 1997 required to be provided pursuant to
Section 2.5; and
(g) any other information, together with any required copies of
documents, required to be disclosed in the Top 10 Schedules by
Sections 3.1 through 3.17.
Top 10 shall cause the Top 10 Schedules and the
instruments to be delivered to Suffield hereunder to be updated
after the date hereof up to and including the Closing Date.
ARTICLE IV
EXCHANGE PROCEDURE AND OTHER CONSIDERATION
Section 4.1 Share Exchange/Delivery of Top 10
Securities. On the Closing Date, the holders of Top 10
Common Shares shall deliver to Suffield (i) certificates or other
documents evidencing all of the issued and outstanding Top 10
Common Shares, duly endorsed in blank or with executed power
attached thereto in transferrable form. On the Closing Date, all
previously issued and outstanding Common Shares of Top 10 shall be
canceled and all rights in respect thereof shall cease and Suffield shall
receive such shares in Top 10, so that Top 10 shall
become a wholly owned subsidiary of Suffield. Top 10's legal
counsel shall take all appropriate action in North Carolina to
confirm such transaction.
Section 4.2 Issuance of Top 10 Common Shares.
In exchange for all of the Top 10 Common Shares tendered
pursuant to Section 4.1, Suffield shall issue an aggregate of
500,000 "restricted" Suffield Common Shares to David L. Smith, Jr.
Such shares shall be "restricted" for two (2) years from issuance.
Section 4.3 Other Consideration. Top 10 shall receive
the following additional consideration:
(a) $50,000.00 payable at the Closing Date;
(b) $17,500.00 per month for an eleven (11) month period
commencing ninety (90) days after the Closing Date;
(c) David L. Smith, Jr. shall have the ability to borrow
up to 25% of retained earnings of the surviving corporation in
fiscal year 1998 or the first two quarters of fiscal year 1999.
Such borrowings shall be secured by his restricted stock received
in this transaction at a 75% discount value to market.
Repayment shall be for a two year period at a 5% annual interest
rate.
(d) David L. Smith, Jr. shall be provided with a two (2)
year employment agreement by the surviving corporation with the
following terms: salary not to exceed $10,000 per month (with not
more than a 3% salary increase provided the surviving corporation
is profitable by at least twice the amount of the salary
increase); quarterly bonus of 30% of net income before income tax
of surviving corporation; standard non-competition clause; an
option to renew the employment agreement for an additional two
year term, upon notice to the surviving company within two months
of the end of the current term (provided he is not in default
under the employment agreement); and the following management
incentives: for fiscal year ending September 30, 1998 (commencing
with the date of closing herein) - 100,000 "restricted" shares if
the surviving corporation has $1,000,000 in gross revenues; for
fiscal year ending September 30, 1999 - (a) 100,000 "restricted"
shares if the surviving corporation has $2,000,000 in gross
revenues; (b) 100,000 "restricted" shares if the surviving
corporation has $400,000 in after tax earnings.
Section 4.3 Events Prior to Closing. Upon
execution hereof or as soon thereafter as practical, management of
Top 10 and Suffield shall execute, acknowledge and deliver (or
shall cause to be executed, acknowledged and delivered) any and
all certificates, opinions, financial statements, schedules,
agreements, resolutions rulings or other instruments required by
this Agreement to be so delivered, together with such other items
as may be reasonably requested by the parties hereto and their
respective legal counsel in order to effectuate or evidence the
transactions contemplated hereby, subject only to the conditions
to Closing referenced
hereinbelow.
Section 4.4 Closing. The closing
("Closing") of the transactions contemplated by this Agreement
shall be on or about May 28, 1998 ("Closing Date").
Section 4.5 Termination.
(a) This Agreement may be terminated by the
board of directors or majority interest of Shareholders of either Suffield or
Top 10, respectively, at any time prior to the Closing Date if:
(i) there shall be any action or
proceeding before any court or any governmental body which
shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement and which, in the
judgement of such board of directors, made in good faith and based
on the advice of its legal counsel, makes it inadvisable to
proceed with the exchange contemplated by this Agreement; or
(ii) any of the transactions contemplated
hereby are disapproved by any regulatory authority whose approval
is required to consummate such transactions.
In the event of termination pursuant to this paragraph
(a) of this Section 4.5, no obligation, right, or liability shall
arise hereunder and each party shall bear all of the expenses
incurred by it in connection with the negotiation, drafting and
execution of this Agreement and the transactions herein
contemplated;
(b) This Agreement may be terminated at any
time prior to the Closing Date by action of the board of directors
of Suffield if Top 10 shall fail to comply in any material respect
with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of Top 10
contained herein shall be inaccurate in any material respect,
which noncompliance or inaccuracy is not cured after 20 days
written notice thereof is given to Top 10. If this Agreement is
terminated pursuant to this paragraph (b) of this Section 4.5,
this Agreement shall be of no further force or effect and no
obligation, right or liability shall arise hereunder.
Section 4.6 Directors of Suffield After
Acquisition. Upon the Closing, the Board of Directors of Suffield
shall be the following: James Lee and David L. Smith, Jr. Each
director shall hold office until his successor shall have been
duly elected and shall have qualified or until his earlier death,
resignation or removal.
Section 4.7 Officers of Suffield. Upon
the closing, the following persons shall be elected as officers of Suffield in
accordance with procedures set forth in the Suffield bylaws:
NAME OFFICE
---- -------
David L. Smith, Jr. President
James Lee Chief Executive
Officer, Secretary and
Treasurer
Section 4.8 Post Closing Requirements of Surviving
Company. Subsequent to closing of this transaction, the surviving
company (wholly-owned subsidiary of Suffield) shall undertake the
following: (i) provide all financial information to James
Lee on a bi-weekly basis; (ii) maintain a separate operating bank
accounts in North Carolina (Mr. Smith shall be the sole signatory)
and Florida (Mr. Lee shall be the sole signatory; and (iv) provide
Mr. Lee with duplicate monthly banking statements. Top 10 and the
Top 10 Shareholder shall cooperate fully with Suffield regarding
same.
ARTICLE V
SPECIAL COVENANTS
Section 5.1 Access to Properties and Records.
Prior to closing, Top 10 and Suffield will each afford to the
officers and authorized representatives of the other full access
to the properties, books and records of Top 10, Suffield and as
the case may be, in order that each may have full opportunity to
make such reasonable investigation as it shall desire to make of
the affairs of the other and each will furnish the other with such
additional financial and operating data and other information as
to the business and properties of Top 10, Suffield and as the
case may be, as the other shall from time to time reasonably
request.
Section 5.2 Availability of Rule 144.
Each of the parties acknowledge that the stock of both Suffield
and to be issued pursuant to this Agreement will be "restricted
securities, " as that term is defined in Rule 144 promulgated
pursuant to the Securities Act. Suffield and are under no
obligation to register such shares under the Securities Act, or
otherwise. The stockholders of Suffield and holding restricted
securities of Suffield as of the date of this Agreement and their
respective heirs, administrators, personal representatives,
successors and assigns, are intended third party beneficiaries of
the provisions set forth herein. The covenants set forth in this
Section 5.2 shall survive the Closing and the consummation of the
transactions herein contemplated. All "restricted" shares issued
in accordance with this Agreement shall be restricted in
accordance with Rule 144 for two (2) years from the date of
issuance.
Section 5.3 Special Covenants and Representations
Regarding the Top 10 Common Shares to be Issued in the Exchange.
The consummation of this Agreement, including the issuance of
the Suffield and Common Shares to the Shareholders of Top 10 as
contemplated hereby, constitutes the offer and sale of securities
under the Securities Act, and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from
the registration and prospectus delivery requirements of such
statutes which depend, inter alia, upon the circumstances under
which the Top 10 Shareholders acquire such securities.
Section 5.4 Third Party Consents. Top 10
and Suffield and agree to cooperate with each other in order to
obtain any required third party consents to this Agreement and the
transactions herein contemplated.
Section 5.5 Actions Prior and Subsequent to
Closing.
(a) From and after the date of this
Agreement until the Closing Date and except as set forth in the
Top 10 Schedules or as permitted or contemplated by this
Agreement, Top 10 will each use its best efforts to:
(i) carry on its business in
substantially the same manner as it has heretofore;
(ii) maintain and keep its properties
in states of good repair and condition as at present, except for
depreciation due to ordinary wear and tear and damage due to
casualty;
(iii) maintain in full force and effect
insurance comparable in amount and in scope of coverage to that
now maintained by it;
(iv) perform in all material respects
all of its obligations under material contracts, leases and
instruments relating to or affecting its assets,
properties and business;
(v) maintain and preserve its business
organization intact, to retain its key employees and to maintain
its relationship with its material suppliers and customers; and
(vi) fully comply with and perform in
all material respects all obligations and duties imposed on it by
all federal and state laws and all rules,
regulations and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this
Agreement until the Closing Date, Top 10 will not,
without the prior consent of Suffield:
(i) except as otherwise specifically
set forth herein, make any change in its articles of incorporation
or bylaws;
(ii) declare or pay any dividend on its
outstanding Common Shares, except as may otherwise be required by
law, or effect any stock split or otherwise change its
capitalization, except as provided herein;
(iii) enter into or amend any
employment, severance or agreements or arrangements with any
directors or officers;
(v) grant, confer or award any options,
warrants, conversion rights or other rights not existing on the
date hereof to acquire any Common Shares; or
(vi) purchase or redeem any Common
Shares.
Section 5.6 Indemnification.
(a) Top 10 and David L. Smith, Jr.,
individually, hereby agree to indemnify Suffield and each of the
officers, agents and directors of Suffield
as of the date of execution of this Agreement including, but not
limited to James Lee, against any loss, liability, claim, damage
or expense (including, but not limited to, any and all expense
whatsoever reasonably incurred in investigating, preparing or
defending against and litigation, commenced or threatened or any
claim whatsoever), to which it or they may become subject arising
out of or based on any inaccuracy appearing in or
misrepresentation made in this Agreement, including, but not
limited to, misrepresentations . The indemnification provided
for in this paragraph shall survive the Closing and consummation
of the transactions contemplated hereby and termination of this
Agreement; and
(b) Suffield and its officers and
directors hereby agrees to indemnify Top 10 and each of the
officers, agents, directors and current shareholders of Top 10 as
of the Closing Date against any loss, liability, claim, damage or
expense (including, but not limited to, any and all expense
whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened or any
claim whatsoever), to which it or they may become subject arising
out of or based on any inaccuracy appearing in or
misrepresentation made in this Agreement and
particularly the representation regarding no liabilities referred
to in Section 3.4 (b). The indemnification provided for in this
Section shall survive the Closing and consummation of the
transactions contemplated hereby and termination of this
Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF SUFFIELD
The obligations of Suffield under this Agreement are
subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 6.1 Accuracy of Representations.
The representations and warranties made by Top 10 in this
Agreement were true when made and shall be true at the Closing
Date with the same force and effect as if such representations and
warranties were made at the Closing Date (except for changes
therein permitted by this Agreement), and Top 10 shall have
performed or compiled with all covenants and conditions required
by this Agreement to be performed or complied with by Top 10 prior
to or at the Closing. Suffield and shall be furnished with a
certificate, signed by a duly authorized officer of Top 10 and
dated the Closing Date, to the foregoing effect.
Section 6.2 Shareholder Approval. All of
the Shareholders of Top 10 shall have approved this Agreement and
the transactions contemplated herein.
Section 6.3 Officer's Certificate.
Suffield shall have been furnished with a certificate dated the
Closing Date and signed by a duly authorized officer of Top 10 to
the effect that: (a) the representations and warranties of Top
10 set forth in the Agreement and in all Exhibits, Schedules and
other documents furnished in connection herewith are in all
material respects true and correct as if made on the Effective
Date; (b) Top 10 has performed all covenants, satisfied all
conditions, and complied with all other terms and provisions
of this Agreement to be performed, satisfied or complied with
by it as of the Effective Date; (c) since such date and
other than as previously disclosed to Suffield, and Top 10 have
not entered into any material transaction other than transactions
which are usual and in the ordinary course if its business; and
(d) No litigation, proceeding, investigation or inquiry is pending
or, to the best knowledge of Top 10, threatened, which might
result in an action to enjoin or prevent the consummation of
the transactions contemplated by this Agreement or, to the
extent not disclosed in the Top 10 Schedules, by or against
Top 10 which might result in any material adverse change in any of
the assets, properties, business or operations of Top 10.
Section 6.4 No Material Adverse Change.
Prior to the Closing Date, there shall not have occurred any
material adverse change in the financial condition, business or
operations of nor shall any event have occurred which, with the
lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business or
operations or Top 10.
Section 6.5 Opinion of Counsel to Top 10.
Suffield shall receive an opinion dated the Closing date of May
28, 1998, counsel to Top 10, in substantially the following form:
(a) Top 10 is a corporation duly organized,
validly existing, and in good standing under the laws of Virginia
and has the corporate power and is duly authorized, qualified,
franchised and licensed under all material applicable laws,
regulations, ordinances and orders of public authorities to own
all of its properties and assets and to conduct its business as
now conducted, including qualification to do business as a foreign
corporation in the states in which the character and location
of the assets owned by it or the nature of the business transacted
by it requires qualifications;
(b) To the best knowledge of such legal
counsel, the execution and delivery by Top 10 of this Agreement
and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not conflict
with or result in the breach of any term or provision of Top 10's
certificate of incorporation or Bylaws or violate any court order,
writ, injunction or decree applicable to Top 10, or its properties
or assets;
(c) All issued and outstanding Share
Certificates are legally issued, fully paid and nonassessable.
Except as set forth in the Top 10 Schedules, to the best knowledge
of such legal counsel, there are no outstanding subscriptions,
options, rights, warrants, convertible securities or other
agreements or commitments obligating Top 10 to issue any
additional Share Certificates.
(d) This Agreement has been duly and validly
authorized, executed and delivered by Top 10;
(e) To the best knowledge of such legal
counsel, except as set forth in the Top 10 Schedules, there are no
actions, suits or proceedings pending or threatened by or
against or affecting Top 10 or its properties, at laws or in
equity, before any court or other governmental agency or
instrumentality, domestic or foreign or before any arbitrator of
any kind;
(f) Top 10 has taken all actions required by
the applicable laws of Virginia to permit the acquisition of the
outstanding shares of Top 10 into Suffield.
Section 6.6 Other Items. Suffield shall
have received such further documents, certificates or instruments
relating to the transactions contemplated hereby as Suffield may
reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF TOP 10
The obligations of Top 10 under this Agreement are
subject to the satisfaction, at or before the Closing date
(unless otherwise indicated herein), of the following conditions:
Section 7.1 Accuracy of Representations.
The representations and warranties made by Suffield in this
Agreement were true when made and shall be true as of the Closing
Date (except for changes therein permitted by this Agreement) with
the same force and effect as if such representations and
warranties were made at and as of the Closing Date, and Suffield
shall have performed and complied with all covenants and
conditions required by this Agreement to be
performed or complied with by Suffield prior to or at the Closing.
Top 10 shall have been furnished with a certificate, signed by a
duly authorized executive officer of Suffield and dated the
Closing Date, to the foregoing effect.
Section 7.2 Officer's Certificate. Top 10
shall be furnished with a certificate dated the Closing date and
signed by a duly authorized officer of Suffield to the effect
that: (a) the representations and warranties of Suffield set
forth in the Agreement and in all Exhibits, Schedules and other
documents furnished in connection herewith are in all material
respects true and correct as if made on the Effective Date; and
(b) Suffield had performed all covenants, satisfied all
conditions, and complied with all other terms and provisions of
the Agreement to be performed, satisfied or complied with by it as
of the Effective Date.
Section 7.3 No Material Adverse Change.
Prior to the Closing Date, there shall not have occurred any
material adverse change in the financial condition, business or
operations or nor shall any event have occurred which, with the
lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business or
operations of Suffield.
Section 7.4 Opinion of Counsel to Suffield.
Top 10 shall receive an opinion dated the Closing Date of
Richard I. Anslow & Associates, counsel to Suffield, in
substantially the following form:
(a) Suffield is a corporation duly
organized, validly existing, and in good standing under the laws
of the state of Florida and has the corporate power and is duly
authorized, qualified, franchised, and licensed under all
applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry
on its business in all material respects as it is now being
conducted, including qualification to do business as a foreign
corporation in the states in which the character and location of
the assets owned by it or the nature of the business transacted by
it requires qualification;
(b) To the best knowledge of such legal
counsel, the execution and delivery by Suffield of this Agreement
and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not conflict
with or result in the breach of any term or provision of
Suffield's articles of incorporation or bylaws or constitute a
default or give rise to a right of termination, cancellation or
acceleration under any material mortgage, indenture, deed of
trust, license agreement or other obligation or violate any court
order, writ, injunction or decree applicable to Suffield or its
properties or assets;
(c) The authorized capitalization of
Suffield consists of 50,000,000 shares of Common Stock, par value
$0.0001 per share and 10,000,000 shares of Preferred Stock, par
value $0.0001 per share. As of the Closing Date, there will be
the following issued and outstanding common shares of Suffield:
3,325,000 common shares of which 1,525,000 are "restricted"
shares. In addition, in accordance with the terms of this
Agreement, the Top 10 Shareholder shall obtain 500,000 Suffield
"restricted" common shares under Rule 144, restricted for a two
(2) year period.
There are no Preferred Shares issued and outstanding.
All issued and outstanding shares are legally issued, fully paid
and nonassessable and issued in violation of the preemptive rights
of any person;
(d) The Suffield Common Shares to be
issued to the Top 10 Shareholders pursuant to the terms of this
Agreement will be, when issued in accordance with the terms
hereof, legally issued, fully paid and non-assessable;
(e) This Agreement has been duly and
validly authorized, executed, and delivered and constitutes the
legal and binding obligation of Suffield, except as limited by
bankruptcy and insolvency laws and by other
laws affecting the rights of creditors generally;
(f) To the best knowledge of such
counsel, there are no actions, suits or proceedings pending or
threatened by or against Suffield or affecting
Suffield's properties, at law or in equity, before any court or
other governmental agency or instrumentality, domestic or foreign
or before any arbitrator of any kind; and
(g) Suffield has taken all actions
required by the applicable laws of the state of Florida to permit
the issuance of the Suffield Common Shares to the Top 10
Shareholder.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Brokers and Finders. Each
party hereto hereby represents and warrants that it is under no
obligation, express or implied, to pay certain finders in
connection with the bringing of the parties together in the
negotiation, execution, or consummation of this Agreement. The
parties each agree to indemnify the other against any claim by any
third person not listed in Schedule 7.1 for any commission,
brokerage or finder's fee or other payment with
respect to this Agreement or the transactions contemplated hereby
based on any alleged agreement or understanding between the
indemnifying party and such third person, whether express or
implied from the actions of the indemnifying party.
Section 8.2 Law, Forum and Jurisdiction.
This Agreement shall be construed and interpreted in accordance
with the laws of the State of New York, United States of America.
Section 8.3 Notices. Any notices or other
communications required or permitted hereunder shall be
sufficiently given if personally delivered to it or sent by
registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to Suffield and : Richard I. Anslow & Associates
4255 Route 9, Suite D
Freehold, New Jersey 07728
If to Top 10: Outten, Barrett, Burr & Sharrett, P.C.
314 South Main Street
P.O. Box 232
Emporia, Virginia 23847
or such other addresses as shall be furnished in writing by any
party in the manner for giving notices hereunder, and any such
notice or communication shall be deemed to have given as of the
date so delivered, mailed or telegraphed.
Section 8.4 Attorneys' Fees. In the event
that any party institutes any action or suit to enforce this
Agreement or to secure relief from any default hereunder or breach
hereof, the breaching party or parities shall reimburse the non-breaching party
or parties for all costs, including reasonable attorneys' fee, incurred in
connection therewith and in enforcing or collecting any judgment rendered
therein.
Section 8.5 Confidentiality. Each party
hereto agrees with the other parties that, unless and until the
reorganization contemplated by this Agreement has been
consummated, they and their representatives will hold in strict
confidence all data and information obtained with respect to
another party or any subsidiary thereof from any representative,
officer, director or employee, or from any books or records or
from personal inspection, of such other party, and shall not used
such data or information or disclose the same to others, except:
(i) to the extent such data is a matter of public knowledge or is
required by law to be published; and (ii) to the extent that such
data or information must be used or disclosed in order to
consummate the transactions contemplated by this Agreement.
Section 8.6 Schedules; Knowledge. Each
party is presumed to have full knowledge of all information set
forth in the other party's schedules delivered pursuant to this
Agreement.
Section 8.7 Third Party Beneficiaries.
This contract is solely among Top 10, Top 10 Shareholders and Suffield and
except as specifically provided, no director,
officer, stockholder, employee, agent, independent contractor or
any other person or entity shall be
deemed to be a third party beneficiary of this Agreement.
Section 8.8 Entire Agreement. This
Agreement represents the entire agreement between the parties
relating to the subject matter hereof. This Agreement alone fully
and completely expresses the agreement of the parties relating to
the subject matter hereof. There are no other courses of dealing,
understanding, agreements, representations or warranties, written
or oral, except a set forth herein. This Agreement may not be
amended or modified, except by a written agreement signed by all
parties hereto.
Section 8.9 Survival; Termination. The
representations, warranties and covenants of the respective
parties shall survive the Closing Date and the consummation of the
transactions herein contemplated for 18 months.
Section 8.10 Counterparts. This
Agreements may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall
be but a single instrument.
Section 8.11 Amendment or Waiver. Every
right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in
equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other
shall be construed as a waiver of the same or any other default
then, theretofore, or thereafter occurring or existing. At any
time prior to the Closing Date, this Agreement may be amended by a
writing signed by all parties hereto, with respect to any of the
terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be
extended by a writing signed by the party or parties for whose
benefit the provision is intended.
Section 8.12 Incorporation of Recitals.
All of the recitals hereof are incorporated by this reference and
are made a part hereof as though set forth at length herein.
Section 8.13 Expenses. Each party herein
shall bear all of their respective cost s and expenses incurred in
connection with the negotiation of this Agreement and in the
consummation of the transactions provided for herein and the
preparation thereof.
Section 8.14 Headings; Context. The
headings of the sections and paragraphs contained in this
Agreement are for convenience of reference only and do not form a
part hereof and in no way modify, interpret or construe the
meaning of this Agreement.
Section 8.15 Benefit. This Agreement
shall be binding upon and shall insure only to the benefit of the
parties hereto, and their permitted assigns hereunder. This
Agreement shall not be assigned by any party without the prior
written consent of the other party.
Section 8.16 Public Announcements. Except
as may be required by law, neither party shall make any public
announcement or filing with respect to the transactions provided
for herein without the prior consent of the other party hereto.
Section 8.17 Severability. In the event
that any particular provision or provisions of this Agreement or
the other agreements contained herein shall for any reason
hereafter be determined to be unenforceable, or in violation of
any law, governmental order or regulation, such unenforceability
or violation shall not affect the remaining provisions of such
agreements, which shall continue in full force and effect and be
binding upon the respective parties hereto.
Section 8.18 Failure of Conditions; Termination.
In the event of any of the conditions specified in this
Agreement shall not be fulfilled on or before the Closing Date,
either of the parties have the right either to proceed or, upon
prompt written notice to the other, to terminate and rescind this
Agreement without liability to any other party. The election to
proceed shall not affect the right of such electing party
reasonably to require the other party to continue to use its
efforts to fulfill the unmet conditions.
Section 8.19 No Strict Construction. The
language of this Agreement shall be construed as a whole,
according to its fair meaning and intendment, and not strictly for
or against wither party hereto, regardless of who drafted or was
principally responsible for drafting the Agreement or terms or
conditions hereof.
Section 8.20 Execution Knowing and Voluntary.
In executing this Agreement, the parties severally acknowledge
and represent that each: (a) has fully and carefully read and
considered this Agreement; (b) has been or has had the
opportunity to be fully apprized of its attorneys of the legal
effect and meaning of this document and all terms and conditions
hereof; and (c) is executing this Agreement voluntarily, free from
any influence, coercion or duress of any kind.
IN WITNESS WHEREOF, the corporate parties hereto have
caused this Agreement to be executed by their respective officers,
hereunto duly authorized, and entered into as of the date first
above written.
SUFFIELD TECHNOLOGIES CORP.
ATTEST:
/s/ James Lee
- --------------------------- By: /s/ James Lee
----------------------------
James Lee, Secretary James Lee, President
ATTEST: TOP 10 PROMOTIONS, INC.
/s/ David L. Smith, Jr. /s/ David L. Smith, Jr.
- --------------------------- By:-----------------------------
David L. Smith, Jr., Secretary David L. Smith, Jr., President
TOP 10 SHAREHOLDER:
WITNESS:
/s/ David L. Smith, Jr.
- ---------------------------
DAVID L. SMITH, JR.
EXHIBIT "A"
------------------------
LIST OF TOP 10 SHAREHOLDERS *
------------------------
Name % of Shares
-------- ------------
DAVID L. SMITH, JR. 100%
TOTAL 100%
------------
------------
EXHIBIT 10.3
ARTICLES OF MERGER
OF
TOP 10 PROMOTIONS, INC.
AND
ROANOKE TECHNOLOGY CORP.
(formerly known as Suffield Technologies Corp.)
To the State Corporation Commission
Commonwealth of Virginia
Pursuant to the provisions of the Virginia Stock Corporation
Act governing the merger of a domestic corporation authorized
by law to issue shares with and into a foreign corporation
authorized by law to issue shares, the corporations
hereinafter named do hereby submit the following articles of
merger.
1. The names of merging corporation are Top 10 Promotions,
Inc., which is a corporation authorized by law to issue
shares, organized under the laws of the Commonwealth of
Virginia and Roanoke Technology Corp. , which is a corporation
authorized by law to issue shares, organized under the laws of
the State of Florida.
2. Annexed hereto and made a part hereof is the Plan of Merger
for merging Top 10 Promotions, Inc. with and into Roanoke
Technology Corp. as approved by resolution of the Board of
Directors of each of said corporations.
3. The Plan of Merger was adopted by the unanimous written
consent of the shareholders of Top 10 Promotions, Inc.
pursuant to the provisions of Section 13.1-657 of the Virginia
Stock Corporation Act.
The total number of votes cast for the Plan of Merger by
said voting group is 100 and the total number of shares
cast against the Plan of Merger is -0-.
The number of votes cast for the Plan of Merger by said
voting group was sufficient for approval by the said voting
group.
4. The laws of the jurisdiction of organization of Roanoke
Technology Corp. permit the merger of a corporation
authorized by law to issue shares of another jurisdiction
with and into a corporation authorized by law to issue
shares of the jurisdiction of organization of Roanoke
Technology Corp.; and the merger of Top 10 Promotions, Inc.
with and into Roanoke Technology Corp. is in compliance
with the laws of the jurisdiction of organization of
Roanoke Technology Corp.
5. Roanoke Technology Corp. does hereby appoint the Clerk of
the State Corporation Commission of the Commonwealth of
Virginia as its agent for service of process in a
proceeding to enforce any obligation or the rights of
dissenting shareholders of Top 10 Promotions, and does
hereby agree that it will promptly pay to the dissenting
shareholders of Top 10 Promotions, Inc. the amount, if any,
to which they are entitled under the provisions of
Article 15 of the Virginia Stock Corporation Act.
Roanoke Technology Corp.
(formerly known as Suffield Technologies Corp.)
By: /s/ James Lee
--------------------------------
JAMES LEE
PRESIDENT
Executed on June 12, 1998
Top 10 Promotions, Inc.
By: /s/ David L. Smith, Jr.
-----------------------------------
DAVID L. SMITH, JR.
PRESIDENT
Executed on June 12, 1998
PLAN OF MERGER approved on May 28, 1998 by Top 10 Promotions,
Inc. a corporation authorized by law to issue shares organized
under the laws of the Commonwealth of Virginia , and by
resolution adopted by its Board of Directors on said date, and
approved on May 28, 1998 by Roanoke Technology Corp. (formerly
known as Suffield Technologies Corp.), a corporation
authorized by law to issue shares organized under the laws of
the State of Florida and by resolution adopted by its Board of
Directors of said date.
1. Top 10 Promotions, Inc. and Roanoke Technology Corp. shall,
pursuant to the provisions of the Virginia Stock Corporation
Act and the provisions of the Florida Business Corporation Act
be merged with and into a single corporation, to wit, Roanoke
Technology Corp., which shall be the surviving corporation at
the effective time and date of the merger and which is
sometimes hereinafter referred to as the "surviving
corporation", and which shall continue to exist as said
surviving corporation under its present name pursuant to the
provisions of the Florida Business Corporation Act. The
separate existence of Top 10
Promotions, Inc. which is sometimes hereinafter referred to
as the "terminating corporation", shall cease at the
effective time and date of the merger in accordance with
the provisions of the Virginia Stock Corporation Act.
2. The Certificate of Incorporation of the surviving
corporation at the effective time and date of the merger in
the jurisdiction of its organization shall be the Certificate
of Incorporation of said surviving corporation, and said
Certificate of Incorporation shall continue in full force and
effect until amended and changed in the manner prescribed by
the provisions of the Florida Business Corporation Act.
3. The present bylaws of the surviving corporation will be the
bylaws of said surviving corporation and will continue in full
force and effect until changed, altered, or amended as therein
provided and in the manner prescribed by the provisions of the
Florida Business Corporation Act.
4. The directors and officers in office of the surviving
corporation at the effective time and date of the merger shall
be the members of the first Board of Directors and the first
officers of the surviving corporation, all of whom shall hold
their directorships and offices until the election and
qualification of their respective successors or until their
tenure is otherwise terminated in accordance with the bylaws
of the surviving corporation.
5. Each issued share of the terminating corporation
immediately prior to the effective time and date of the merger
shall, at the effective time and date of the merger, be
converted into shares of the surviving corporation. The
issued shares of the surviving corporation shall not be
converted or exchanged in any manner, but each said share
which is issued when the merger becomes effective shall
continue to represent one issued share of the surviving
corporation.
6. In the event that the merger of the terminating corporation
with and into the surviving corporation shall have been fully
authorized in accordance with the provisions of the Virginia
Stock Corporation Act and in accordance with the provisions of
the Florida Business Corporation Act, the terminating
corporation and the surviving corporation hereby stipulate
that they will cause to be executed and filed and/or recorded
any documents or documents prescribed by the laws of the
Commonwealth of Virginia and the State of Florida, and that
they will cause to be performed all necessary acts therein
and elsewhere to effectuate the merger.
7. The Board of Directors and the proper officers of the
terminating corporation and of the surviving corporation,
respectively, are hereby authorized, empowered, and directed
to do any and all acts and things, and to make, execute,
deliver, file and/or record any and all instruments, papers,
and documents which shall be or become necessary, proper, or
convenient to carry out or put into effect any of the
provisions of this Plan of Merger or of the merger herein
provided for.
ROANOKE TECHNOLOGY CORPORATION
Financial Statements Table of Contents
For The Six Months Ended, April 30, 1999
FINANCIAL STATEMENTS Page #
- --------------------- --------
Independent Auditor's Report 1
Balance Sheet 2 - 3
Statement of Income 4
Statement of Capital Surplus 5
Cash Flow Statement 6
Notes to the Financial Statements 7-16
ROANOKE TECHNOLOGY
CORPORATION
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED APRIL 30, 1999
TOGETHER WITH
INDEPENDENT AUDITOR'S REPORT
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
----------------------------------------------------
To the Board of Directors and Stockholders
Roanoke Technology Corporation
Roanoke Rapids, North Carolina
We have audited the accompanying balance sheet of Roanoke
Technology Corporation, as of April 30, 1999, and the related
statements of income, retained earnings and cash flows for the six
months 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
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. In our opinion,
the financial statements referred to above present fairly, in all
material respects, the financial position of Roanoke Technology
Corporation, as of April 30, 1999 and the results of its
operations and its cash flows for the six months then ended in
conformity with generally accepted accounting principles.
Varma and Associates
Certified Public Accountants
May 19, 1999
ROANOKE TECHNOLOGY CORPORATION
BALANCE SHEET
As of April 30, 1999
ASSETS
------
<TABLE>
<S> <C> <C>
CURRENT ASSETS
- --------------
Cash $ 119,811
Employee advances 800
Deferred tax asset 48,791
----------
Total Current Assets 169,402 $ 169,402
PROPERTY AND EQUIPMENT
- -----------------------
Equipment and leasehold improvements 105,966
Less: accumulated depreciation 8,639
-------
Total Property and Equipment 97,327 97,327
OTHER ASSETS
- ------------
Organization costs 1,000
Goodwill 19,614
Capitalized software costs 622,000
Less: accumulated amortization 11,274
-------
Net tangibles 631,340
Deposits 1,500
Stockholder loan 62,324
-------
Total Other Assets 695,164 695,164
-------
TOTAL ASSETS $ 961,893
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 25,091
Current maturity of long-term debt 8,571
Credit cards payable 3,284
-----
Total current liabilities 36,946 36,946
LONG TERM LIABILITIES
- ---------------------
Long term debt 15,721
Less: current portion 8,571
------
Total long term liabilities 7,150 7,150
-----
TOTAL LIABILITIES 44,096
STOCKHOLDERS' EQUITY
---------------------
STOCKHOLDERS' EQUITY
- --------------------
Common stock - $.0001 par value; 50,000,000 shares
authorized; 9,000,000 issued and outstanding 900
Additional paid-in capital 1,221,228
Retained earnings <304,331>
----------
Total stockholders' equity 917,797 917,797
-------
TOTAL LIABILITIES AND EQUITY $ 961,893
----------
----------
PLEASE READ AUDITOR'S REPORT
ROANOKE TECHNOLOGY CORPORATION
STATEMENT OF INCOME
For the Six Months Ended April 30, 1999
REVENUE
- -------
Sales $ 452,450
Cost of sales 292,221
-----------
GROSS PROFIT 160,229 $ 160,229
- ------------
GENERAL AND ADMINISTRATIVE EXPENSES
- -----------------------------------
Advertising 4,078
Bank charges 196
Dues and subscriptions 1,357
Insurance 5,038
Legal and accounting 38,492
Meals and entertainment 4,036
Office salaries and expense 34,361
Rent 13,750
Salaries - officers 230,967
Repairs and maintenance 1,436
Travel 7,363
-------
Total general and administrative expenses 341,074 341,074
-------
INCOME (LOSS) FROM OPERATION (180,845)
- ----------------------------
OTHER INCOME AND (EXPENSE)
- --------------------------
Depreciation and amortization expense (23,472)
Interest expense (1,609)
--------
Total other income and expense (25,081) (25,081)
--------
INCOME (LOSS) BEFORE TAX BENEFIT (205,926)
- --------------------------------
Tax benefit 27,971
---------
NET INCOME (LOSS) $(177,955)
----------
----------
</TABLE>
PLEASE READ AUDITOR'S REPORT
<TABLE>
ROANOKE TECHNOLOGY CORPORATION
STATEMENT OF CAPITAL SURPLUS
As of April 30, 1999
<S> <C> <C> <C> <C>
COMMON STOCK ADDITIONAL
PAID
SHARES AMOUNT CAPITAL DEFECIT TOTAL
----------------------------------------------
Issuance of common stock 3,825,000 $ 383 $148,593 $ - $148,976
Net loss for the year (126,376)(126,376)
-----------------------------------------------
Balance at October 31, 1998 3,825,000 $ 383 $148,593 $(126,376)$148,976
Officer Compensation 750,000 75 149,925 150,000
Asset acquisition 999,111 99 629,901 630,000
Issuance of common stock 3,425,889 343 292,809 293,152
Net loss for the year (177,955)(177,955)
----------------------------------------------
Balance at April 30, 1999 9,000,000 $900 $1,221,228$(304,331)$ 917,797
PLEASE READ AUDITOR'S REPORT
</TABLE>
ROANOKE TECHNOLOGY CORPORATION
STATEMENT OF CASH FLOWS
For the Six Months Ending April 30, 1999
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income (loss) $(177,955)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization $ 23,472
Stock based compensation 150,000
(Increase) decrease in deferred tax asset (27,971)
(Increase) decrease in employee advance 200
Increase (decrease) in deposits (1,500)
Increase (decrease) in payables for expense 20,991
------------
Total adjustments to net income 165,192 165,192
-------
Net cash provided by (used in) operating activities (12,763)
CASH FLOWS FROM INVESTING ACTIVITIES
- -------------------------------------
Capital expenditures on equipment (60,201)
Loan to Stockholder (62,324)
--------
Net cash flows provided by (used in) invest (122,525) (122,525)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from issuance of common stock 232,500
Increase in long term debt created 8,804
-------
Net cash provided by (used in) financing activities 241,304 241,304
-------
CASH RECONCILIATION
- --------------------
Net increase (decrease) in cash 106,016
Cash at beginning of year 13,795
--------
CASH BALANCE AT END OF YEAR $ 119,811
---------
---------
PLEASE READ AUDITOR'S REPORT
</TABLE>
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
-------------------------------------
(See Audit Report)
1. Summary of significant accounting policies:
-------------------------------------------
Industry Roanoke Technology Corporation (The Company) was
- --------
incorporated December 11, 1997 as Suffield Technologies Corp., its
original name, under the laws of the State of Florida. The
Company is headquartered in Roanoke Rapids, North Carolina and
does business as Top-10 Promotions, Inc. The Company is engaged
in the design, development, production, and marketing of
technology to provide enhanced internet marketing capabilities.
Revenue Recognition and Service Warranty Revenues resulting from
- ----------------------------------------
technology consulting services is recognized as such services are
performed and paid. Services are paid for in advance of the
service being performed. The services performed are completed by
a software program leaving the time when a service is paid for and
the time the service is performed immaterial. The Company has no
extended maintenance contracts and warrants its consulting
services to meet the consulting service contract guarantee. No
provision for estimated future costs relating warranties have been
made as these costs have been historically immaterial.
Cash and Cash Equivalents The Company considers cash on hand and
- -------------------------
amounts on deposit with financial institutions which have original
maturities of three months or less to be cash and cash
equivalents.
Short-Term Investments Short-term investments ordinarily consist
- ----------------------
of short-term debt securities acquired with cash not immediately
needed in operations. Such amounts have maturities of less than
one year.
Basis of Accounting- The Company's financial statements are
- -------------------
prepared in accordance with generally accepted accounting
principles. Specific to computer software costs, The Company
capitalizes and amortizes these costs as guided by Financial
Accounting Standard 86. All costs associated with software
development are expensed as Research and Development costs until
such time as technological feasibility has been established, after
which material software development costs are capitalized and
amortized over the estimated time of benefit.
Property and Equipment Property and equipment are recorded at
- ----------------------
cost. Depreciation is computed using the straight-line method
over the estimated useful lives of the various classes of assets
as follows:
Machinery and equipment 2 to 10 years
Furniture and fixtures 5 to 10 years
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
1. Summary of significant accounting policies continued:
------------------------------------------
Leasehold improvements are amortized on the straight-line basis
over the lessor of the life of the asset or the term of the lease.
Maintenance and repairs, as incurred, are charged to expenses;
betterments and renewals are capitalized in plant and equipment
accounts. Cost and accumulated depreciation applicable to items
replaced or retired are eliminated from the related accounts; gain
or loss on the disposition thereof is included as income.
Intangibles Goodwill represents the excess of purchase price
- -----------
over the fair value of business acquired and is amortized on a
straight-line basis over 5 years.
Other acquired intangibles principally include core technology in
the form of software programs and are amortized over their
estimated lives of primarily 3 to 5 years., existing Organization
costs are being amortized by the straight-line method over 5
years. Goodwill is being amortized by the straight-line method.
Software development costs incurred in the development of products
after technological feasibility is attained are capitalized and
amortized using the straight-line method over the estimated
economic lives of the related products, not to exceed 3 years.
The Company considers technological feasibility to be established
when the Company has completed all planning, designing, coding and
testing activities as are necessary to establish design
specifications including function, features and technological
performance requirements. Capitalization of product design costs
ceases and amortization of such costs begins when a product or
technology is available for general release to customers for use
by The Company.
Research and Development Research and development costs incurred
- ------------------------
in the discovery of new knowledge and the resulting translation of
this new knowledge into plans and designs for new products, prior
to the attainment of the related products' technological
feasibility, are recorded as expenses in the period incurred.
Income Taxes The Company utilizes the asset and liability method
- ------------
to measure and record deferred income tax assets and liabilities.
Deferred tax assets and liabilities reflect the future income tax
effects of temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and are measured using enacted tax rates that
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax
assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
1. Summary of significant accounting policies continued:
------------------------------------------
Fair Value of Financial Instruments The Company's financial
- -----------------------------------
instruments include cash and cash equivalents, short-term
investments, accounts receivable, accounts payable and liabilities
to banks and shareholders. The carrying amount of long-term debt
to banks approximates fair value based on interest rates that are
currently available to The Company for issuance of debt with
similar terms and remaining maturaties. The carrying amounts of
other financial instruments approximate their fair value because
of short-term maturities.
Earnings Per Share Basic earnings per share ("EPS") is computed
- ------------------
by dividing earnings available to common shareholders by the
weighted-average number of common shares outstanding for the
period as required by the Financial Accounting Standards Board
(FASB) under Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Shares". Diluted EPS reflects the
potential dilution of securities that could share in the earnings.
Basic Earnings per Share for the period was a loss of $.027 per
share.
Concentrations of Credit Risk Financial instruments which
- -----------------------------
potentially expose The Company to concentrations of credit risk
consist principally of operating demand deposit accounts. The
Company's policy is to place its operating demand deposit accounts
with high credit quality financial institutions.
No customer represented 10 % or more of The Company's total sales
as of the current reporting period.
Stock-Based Compensation In accordance with the recommendations
- ------------------------
in SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS
No. 123"), The Company's management has accounted for the stock
bonus of 750,000 shares of restricted stock given to the President
of the company as compensation. The bonus was accounted for in
the current period in order to match the compensation expense with
the time in which it was earned. In accordance with the tax
accounting, the compensation will not be deductible until the
President sells those shares. The shares are restricted from sale
for a period of two years from the date of issuance.
Recently Adopted Accounting Standards In June 1997, the FASB
- -------------------------------------
issued SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No.
130") effective for fiscal years beginning after December 15,
1997. SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a statement that is displayed
with the same prominence as other financial statements. SFAS No.
130 does not require a specific format for that financial
statement but requires that an entity display an amount
representing total comprehensive income for the period in that
statement.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
1. Summary of significant accounting policies continued:
------------------------------------------
SFAS No. 130 requires that an entity classify items of other
comprehensive income by their nature in a financial statement.
For example, other comprehensive income may include foreign
currency and unrealized gains and losses on certain investments in
debt and equity securities. In addition, the accumulated balance
of other comprehensive income must be displayed separately from
retained earnings and additional paid in capital in the equity
section of a statement of financial position. The Company adopted
this accounting standard at inception as required.
In October 1997 the American Institute of Certified Public
Accountants issued Statement of position 97-2, "Software Revenue
Recognition" (SOP 97-2). SOP 97-2 provides guidance on applying
generally accepted accounting principles in recognizing revenue on
software transactions and is effective for transactions entered
into in fiscal years beginning after December 15, 1997. The
Company adopted SOP 97-2 at inception as required. Adoption of
this SOP 97-2 did not have a material effect on the financial
statements.
In February 1997, the FASB issued SFAS No. 132, "Employer's
Disclosure about Pensions and Other Postretirement Benefits"
("SFAS No. 132"), effective for fiscal years beginning after
December 15, 1997. SFAS 132 revises employer disclosures about
pension and other postretirment benefit plans. It does not change
the measurement or recognition of those plans. This statement
standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and
fair values of plan assets that will facilitate financial analysis
and eliminates certain disclosures. Adoption of SFAS 132 did not
have a material impact on the financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", effective for
fiscal years beginning after June 15, 1999. SFAS 133 requires
companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting
from changes in the values of those derivatives would be accounted
for depending on the use of the derivative and whether it
qualifies for hedge accounting. The Company's management believes
that adoption of SFAS 133 will not have a material impact on the
financial statements.
2. Related Party Transactions and Going Concern:
--------------------------------------------
The Company's financial statements have been presented on the
basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
2. Related Party Transactions and Going Concern continued:
--------------------------------------------
The Company has suffered losses from operations and may require
additional capital to continue as a going concern as The Company
develops its market. Management believes The Company will
continue as a going concern and is actively marketing its products
and services which would enable The Company to meet its
obligations and provide additional funds for continued new product
development. In addition, management is currently negotiating
several additional contracts for its services and products.
Management is also embarking on other strategic initiatives to
expand its business opportunities. However, there can be no
assurance these activities will be successful.
The President of The Company draws from a stockholders loan
account. The account has been set up to monitor draws in
coordination with the employment contract and incentive commitment
as defined in footnote number 11. There is no interest charged on
the account. The Company's management plans to clear the account
by this fiscal year end.
3. Accounts Receivable and Customer Deposits:
-----------------------------------------
Accounts receivable historically has been immaterial as The
Company's policy is to have the software that it sells paid for in
advance. As of the balance sheet date there were no deposits paid
in advance.
4. Use of Estimates:
-----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
5. Revenue and Cost Recognition:
-----------------------------
The Company uses the accrual basis of accounting for financial
statement reporting. Revenues are recognized when products are
shipped and expenses realized when obligations are incurred.
6. Accounts Payable and accrued expenses:
--------------------------------------
Accounts payable and accrued expenses consist of trade payables
and accrued payroll and payroll taxes created from normal
operations of the business.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
7. Long - Term Debt continued:
----------------
Long term debt consists of:
Note payable to a finance company which bears interest at 16.53%.
The note is collateralized by equipment and requires that monthly
payments of $197 be made through the maturity date of June, 2003.
Capital Lease with a finance company which bears an interest rate
of 13.61%. The lease is collateralized by equipment and requires
that monthly payments of $534 be made through the maturity date of
April, 2002.
Aggregate maturities of long term debt over the next five years
are as follows:
YEAR AMOUNT
---- ----------
2000 $ 8,571
2001 5,215
2002 5,951
8. Operating Lease Agreements:
--------------------------
The Company rents office space with monthly payments of $2,500.
The lease term for this space is ninety months beginning on May 1,
1999 and ending on November 1, 2006.
The Company also rents a house for the convenience of Company
employees that are relocating to the area and out of town business
guests. The house also serves as a satellite office as added
security for computer system continuation in the event that the
main office should encounter problems with their system. The
house has monthly payments of $1,200. The lease term is eighteen
months beginning March 1, 1999 and ending on August 31, 2001.
The Company also leases its phone systems, internet lines and
various equipment . The lease terms range from month to month
leases to leases with a term of sixty months. All long - term
leases include an upgrade clause of which management intends to
upgrade technology when available. For this reason, The Company
considers all of these types of lease arrangements as operating.
Currently the lease costs are at $33,800 per year and shown as
part of cost of sales.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
9. Stockholders' Equity:
---------------------
Preferred Stock
---------------
The Company has been authorized 10,000,000 shares of preferred
stock at $.0001 par value. As of January 31, 1999, none of these
shares had been issued and the limitations, rights, and
preferences were yet to be determined by the Board of Directors.
Common Stock
- ------------
During the period ending October 1998, the Board of Directors
issued 1,525,000 shares of restricted common stock to The
Company's officer's, and legal counsel in exchange for services,
and issued 500,000 shares of restricted common stock in the
acquisition of Top-10 Promotions, Inc.
In addition to the restricted shares issued, The Company sold
common stock through two separate private offerings during the
period. In the initial offering 800,000 shares were sold each at
a price of $0.025. In the second offering 1,000,000 shares were
sold each at a price of $0.05.
On October 15, 1998, the majority shareholders of The Company
undertook a Regulation D, Rule 504, offering whereby it sold
2,000,000 shares of common stock, $.0001 par value per share or an
aggregate of $200,000. In addition, each investor in the offering
received an option to purchase, for a twelve month period
commencing on the date of this offering, an additional one share
of The Company at $1.00 per share for each eight (8) shares
purchased in the original offering (or $250,000). In addition,
each investor received an option to purchase for an eighteen
month period commencing on the date of this offering an additional
one (1) share of The Company for each 8.88 shares previously
purchased at $2.00 per share or an aggregate of 225,000 shares (or
$450,000).
The Company also approved of the investment by Arthur Harrison &
Associates in the offering provided that such investment in The
Company was in lieu of monies owed to Arthur Harrison & Associates
by The Company for two (2) promissory notes dated September 22,
1998 and October 10, 1998. Further more, Arthur Harrison &
Associates agreed to waive its rights to any interest on
promissory notes.
10. Acquisitions:
-------------
On March 30, 1999 The Company acquired the assets of Offshore
Software Development Ltd. ("Offshore") in an exchange of assets
for 999,111 shares of The Company issued to offshore shareholders.
The Company's management has valued the transaction at $630,000.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
10. Acquisitions - continued:
------------
As of the balance sheet date and the date of the audit the assets
of Offshore were in transport to the North Carolina office of The
Company. The assets consist of four computers and the rights to
the program code for two software products that are intended to
enhance The Company's ability to market and increase the speed of
computer operations.
Effective May 29, 1998, The Company acquired all the outstanding
common stock of Top-10 Promotions, Inc., consisting of 100 shares,
effective. These shares were redeemed and cancelled. The shares
of Top-10 Promotions, Inc. were acquired in exchange for 500,000
"restricted" shares of The Company's common stock issued to David
Smith, the sole shareholder of Top-10 Promotions, Inc. This
transaction has been accounted for using the purchase method of
accounting. The operations of Top-10 Promotions, Inc., as of the
prior fiscal year, have been included as The Company's.
Simultaneous with the acquisition, The Company purchased all of
the remaining authorized shares of Top-10 Promotions, Inc. for
$50,000 payable at closing and
$17,500 per month payable over an eleven month period. Also, the
former owner of Top-10 Promotions, Inc. was given the right to
borrow up to 25% of retained earnings of Roanoke Technologies
Corporation in fiscal year 1998 or the first two quarters of
fiscal 1999. Such borrowings shall be secured by his restricted
stock received in the acquisition at a 75% discount value to
market. Repayment shall be for a two-year period at a 5% annual
interest rate. The Company also entered into an employment
contract with the former owner of Top-10 Promotions.
11. Employment Contract and Incentive Commitments:
----------------------------------------------
The Company has entered into a two year employment contract with
the former owner of Top-10 Promotions. The contract provides
for: salary not to exceed $10,000 per month (with not more than a
3% salary increase provided The Company is profitable by at least
twice the amount of the salary increase); quarterly bonus of 30%
of the net income before income tax of The Company; standard non-competition
clause; an option to renew the employment agreement
for an additional two year term (provided he is not in default
under the employment agreement); and the following management
incentives: for fiscal year ending September 30, 1999 (a) 100,000
"restricted" shares if the surviving corporation has $2 million in
gross revenues; (b) 100,000 "restricted" shares if The Company has
$400,000 in after tax earnings.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
11. Employment Contract and Incentive Commitments continued:
---------------------------------------------
At November 1, 1998 The Company's management approved the issuance
of 750,000 shares of restricted common shares of The Company to
the former owner of Top-10 Promotions for attaining gross revenues
in excess $200,000.00 or more in sales for the first three month
period of 1999. The shares have been issued and management values
the compensation at $150,000 in accordance with FAS No. 123. The
Company's management has elected the treatment of stock
compensation under FAS No. 123 rather than disclosing pro-forma
results of this transaction and accounting for the transaction
under APB-25 as required by public companies.
The Company has entered into an employment agreement with The
Company's Director of Operations on March 1, 1999. The agreement
calls for a contract period of four years upon which The Director
will be paid an annual salary of $60,000 with standard company
commissions and bonuses. The salary will adjust to $80,000 at
June 4th 1999. In addition the director's salary shall increase
to $100,000 at the time The Company's gross revenues exceed
$1,000,000 during any twelve month period and $120,000 once The
Company's gross revenues exceed $2,000,000 during any twelve month
period. Upon the director's salary increasing to $80,000 or
above, the director shall no longer be entitled to commissions and
bonuses.
In addition to the above mentioned, the director will be granted
stock options in The Company at an exercise price of $1.00 per
share of common stock in the amount of 50,000 shares per year for
a four year period. Such shares will be restricted for a two year
period from the date of issuance. Other conditions are included
in this employment agreement, but remain immaterial to the
financial statements.
12. Payroll Taxes Payable and Deferred Tax Assets and Liabilities:
-------------------------------------------------------------
The Company accrues payroll and income taxes. The Company,
currently a C-Corporation, accounts for income taxes in
accordance with Statements on Financial Accounting Standards 109.
Management is reasonably assured of The Company's ability to use
its tax benefits in the future. As of April 30, 1999, The Company
had a deferred tax assets in the amount of $48,791 that is derived
from a net operating tax loss carryforward. The deferred tax
assets will expire during the years ending October 31, 2018 and
2019 in the amounts of $20,820 and $15,471 respectively. The
Company also has a deferred tax asset related to officer
compensation in the amount of $22,500. It is uncertain as to when
this compensation will be deductible as it can only be deducted
for tax purposes when the officer sells those shares.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
13. Required Cash Flow Disclosure for Interest and Taxes Paid:
---------------------------------------------------------
The Company paid interest in the amount of $1,609 during the six
months ending April 30, 1999. The Company at April 30, 1999 has
no income tax payments due and did not pay any income tax amounts
during the period ending April 30, 1999.
Non-cash transactions included $150,000 in stock based employee
compensation, the $630,000 acquisition of the assets of Offshore
Software Development Ltd. For stock in The Company and the
retirement of $146,480 of note payables.
14. Contingent Liabilities:
-----------------------
The Company has invested significant resources in the latest
information technologies regarding the effect of Year 2000 issues.
The Company's management feels it has minimized the effects of
these issues; however, there can be no assurance that the systems
of other companies on which The Company relies will be timely
corrected, or that any failure by another company to correct such
systems would not have a material adverse effect on The Company.
Contingency plans are currently being developed to be implemented
in the event any information technology system, non-information
technology system, third party or supplier is not Year 2000
compliant in a timely manner.
ROANOKE TECHNOLOGIES CORPORATION
Financial Statements Table of Contents
For the Six Months Ended, April 30, 1999
FINANCIAL STATEMENTS Page #
Independent Auditor's Report 1
Balance Sheet 2 - 3
Statement of Income 4
Statement of Capital Surplus 5
Cash Flow Statement 6
Notes to the Financial Statements 7-14
ROANOKE TECHNOLOGY
CORPORATION
FINANCIAL STATEMENTS
FROM DECEMBER 11, 1997 (INCEPTION)
THROUGH OCTOBER 31, 1998
TOGETHER WITH
INDEPENDENT AUDITOR'S REPORT
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
----------------------------------------------------
To the Board of Directors and Stockholders
Roanoke Technologies Corporation
New York, New York
We have audited the accompanying balance sheet of Roanoke
Technologies Corporation, as of October 31, 1998, and the related
statements of income, retained earnings and cash flows from
December 11, 1997 (inception) through October 31, 1998. 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. In our opinion,
the financial statements referred to above present fairly, in all
material respects, the financial position of Roanoke Technologies
Corporation, at October 31, 1998, and the results of its
operations and its cash flows from December 11, 1997 (inception)
through October 31, 1998 in conformity with generally accepted
accounting principles.
Varma and Associates
Certified Public Accountants
March 3, 1999
ROANOKE TECHNOLOGY CORPORATION
BALANCE SHEET
As of October 31, 1998
ASSETS
------
<TABLE>
<S> <C> <C>
CURRENT ASSETS
- --------------
Cash $ 13,795
Employee advances 1,000
Deferred tax asset 20,820
----------
Total Current Assets 35,615 $ 35,615
PROPERTY AND EQUIPMENT
- -----------------------
Equipment and leasehold improvements 37,765
Less: accumulated depreciation 2,954
-------
Total Property and Equipment 34,811 34,811
OTHER ASSETS
- ------------
Intangible Assets 29,019
Less: Accumulated amortization 1,646
-------
Total Other Assets 27,373 27,373
-------
TOTAL ASSETS $ 97,799
-------------
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,934
Current maturity of long-term debt 1,170
Credit cards payable 5,450
-----
Total current liabilities 8,554 8,554
LONG TERM LIABILITIES
- ---------------------
Long term debt 67,815
Less: current portion 1,170
------
Total long term liabilities 66,645 66,645
-------
TOTAL LIABILITIES 75,199
STOCKHOLDERS' EQUITY
---------------------
STOCKHOLDERS' EQUITY
- --------------------
Common stock - $.0001 par value; 50,000,000 shares
authorized; 9,000,000 issued and outstanding 383
Additional paid-in capital 148,593
Retained earnings <126,376>
----------
Total stockholders' equity 22,600 22,600
-------
TOTAL LIABILITIES AND EQUITY $ 97,799
----------
----------
PLEASE READ AUDITOR'S REPORT
ROANOKE TECHNOLOGY CORPORATION
STATEMENT OF INCOME
From December 11, 1997 (inception)
Through October 31, 1998
REVENUE
- -------
Sales $ 109,809
Cost of sales 56,083
-----------
GROSS PROFIT 53,726 $ 53,726
- ------------
GENERAL AND ADMINISTRATIVE EXPENSES
- -----------------------------------
Advertising 1,322
Bank charges 971
Dues and subscriptions 1,275
Legal and accounting 25,889
Meals and entertainment 1,278
Office expense 7,526
Postage 1,024
Rent 9,350
Salaries - officers 134,389
Telephone 8,330
Travel 161
Utilities 4,110
-------
Total general and administrative expenses 195,625 195,625
-------
INCOME (LOSS) FROM OPERATION (141,899)
- ----------------------------
OTHER INCOME AND (EXPENSE)
- --------------------------
Depreciation and amortization expense ( 4,600)
Interest expense ( 697)
--------
Total other income and expense ( 5,297) ( 5,297)
--------
INCOME (LOSS) BEFORE TAX BENEFIT (147,196)
- --------------------------------
Tax benefit 20,820
---------
NET INCOME (LOSS) $(126,376)
----------
----------
</TABLE>
PLEASE READ AUDITOR'S REPORT
<TABLE>
ROANOKE TECHNOLOGY CORPORATION
STATEMENT OF CAPITAL SURPLUS
As of October 31, 1998
<S> <C> <C> <C> <C>
COMMON STOCK ADDITIONAL
PAID
SHARES AMOUNT CAPITAL DEFECIT TOTAL
----------------------------------------------
Issuance of common stock 3,825,000 $ 383 $148,593 $ - $148,976
Net loss for the year (126,376)(126,376)
-----------------------------------------------
Balance at October 31, 1998 3,825,000 $ 383 $148,593 $(126,376)$ 22,600
PLEASE READ AUDITOR'S REPORT
</TABLE>
ROANOKE TECHNOLOGY CORPORATION
STATEMENT OF CASH FLOWS
From December 11, 1997 (inception)
Through October 31, 1998
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income (loss) $(126,376)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization $ 4,600
(Increase) decrease in deferred tax asset (20,820)
(Increase) decrease in employee advance (1,000)
Increase (decrease) in accrued expenses 1,934
Increase (decrease) in payables for expense 5,450
------------
Total adjustments to net income (9,836) (9,836)
-------
Net cash provided by (used in) operating activities (136,212)
CASH FLOWS FROM INVESTING ACTIVITIES
- -------------------------------------
Capital expenditures on purchase of
Subsidiary and improvements (66,784)
--------
Net cash flows provided by (used in) invest ( 66,874) ( 66,784)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from issuance of common stock 148,976
Increase in long term debt created from expense 67,815
-------
Net cash provided by (used in) financing
activities 216,791 216,791
-------
CASH RECONCILIATION
- --------------------
Net increase (decrease) in cash 13,795
Cash at beginning of year -
--------
CASH BALANCE AT END OF YEAR $ 13,795
---------
---------
PLEASE READ AUDITOR'S REPORT
</TABLE>
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(See Audit Report)
1. Summary of significant accounting policies:
------------------------------------------
Industry - Roanoke Technology Corporation (The Company) was
incorporated December 11, 1997 as Suffield Technologies Corp., its
original name, under the laws of the State of Florida. The
Company is headquartered in Roanoke Rapids, North Carolina and
does business as Top-10 Promotions, Inc. The Company is engaged
in the design, development, production, and marketing of
technology to provide enhanced internet marketing capabilities.
Revenue Recognition and Service Warranty - Revenues resulting from
- ----------------------------------------
technology consulting services is recognized as such services are
performed and paid. Services are paid for in advance of the
service being performed. The services performed are completed by
a software program leaving the time when a service is paid for and
the time the service is performed immaterial. The Company has no
extended maintenance contracts and warrants its consulting
services to meet the consulting service contract guarantee. No
provision for estimated future costs relating warranties have been
made, as these costs have been historically immaterial.
Cash and Cash Equivalents - The Company considers cash on hand and
- -------------------------
amounts on deposit with financial institutions which have original
maturities of three months or less to be cash and cash
equivalents.
Short-Term Investments - Short-term investments ordinarily consist
- ----------------------
of short-term debt securities acquired with cash not immediately
needed in operations. Such amounts have maturities of less than
one year.
Basis of Accounting - The Company's financial statements are
- -------------------
prepared in accordance with generally accepted accounting
principles. Specific to computer software costs, The Company
capitalizes and amortizes these costs as guided by Financial
Accounting Standard 86. All costs associated with software
development are expensed as Research and Development costs until
such time as technological feasibility has been established, after
which material software development costs are capitalized and
amortized over the estimated time of benefit.
Property and Equipment - Property and equipment are recorded at
- ----------------------
cost. Depreciation is computed using the straight-line method
over the estimated useful lives of the various classes of assets
as follows:
Machinery and equipment............................ 2 to 10 years
Furniture and fixtures............................ 5 to 10 years
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(See Audit Report)
1. Summary of significant accounting policies - continued:
------------------------------------------
Leasehold improvements are amortized on the straight-line basis
over the lessor of the life of the asset or the term of the lease.
Maintenance and repairs, as incurred, are charged to expenses;
betterments and renewals are capitalized in plant and equipment
accounts. Cost and accumulated depreciation applicable to items
replaced or retired are eliminated from the related accounts; gain
or loss on the disposition thereof is included as income.
Intangibles - Goodwill represents the excess of purchase price
- -----------
over the fair value of business acquired and is amortized on a
straight-line basis over 5 years.
Other acquired intangibles principally include core technology in
the form of software programs and are amortized over their
estimated lives of primarily 3 to 5 years., existing Organization
costs are being amortized by the straight-line method over 5
years. Goodwill is being amortized by the straight-line method.
Software development costs incurred in the development of products
after technological feasibility is attained are capitalized and
amortized using the straight-line method over the estimated
economic lives of the related products, not to exceed 3 years.
The Company considers technological feasibility to be established
when The Company has completed all planning, designing, coding and
testing activities as are necessary to establish design
specifications including function, features and technological
performance requirements. Capitalization of product design costs
ceases and amortization of such costs begins when a product or
technology is available for general release to customers for use
by The Company.
Research and Development - Research and development costs incurred
- ------------------------
in the discovery of new knowledge and the resulting translation of
this new knowledge into plans and designs for new products, prior
to the attainment of the related products' technological
feasibility, are recorded as expenses in the period incurred.
Income Taxes - The Company utilizes the asset and liability method
- ------------
to measure and record deferred income tax assets and liabilities.
Deferred tax assets and liabilities reflect the future income tax
effects of temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and are measured using enacted tax rates that
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax
assets are reduced by a valuation allowance when in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(See Audit Report)
1. Summary of significant accounting policies - continued:
------------------------------------------
Fair Value of Financial Instruments The Company's financial
- -----------------------------------
instruments include cash and cash equivalents, short-term
investments, accounts receivable, accounts payable and liabilities
to banks and shareholders. The carrying amount of long-term debt
to banks approximates fair value based on interest rates that are
currently available to The Company for issuance of debt with
similar terms and remaining maturities. The carrying amounts of
other financial instruments approximate their fair value because
of short-term maturities.
Concentrations of Credit Risk - Financial instruments which
- -----------------------------
potentially expose The Company to concentrations of credit risk
consist principally of operating demand deposit accounts. The
Company's policy is to place its operating demand deposit accounts
with high credit quality financial institutions.
No customer represented 10 % or more of The Company's total sales
as of the current reporting period.
Stock-Based Compensation - In accordance with the recommendations
- ------------------------
in SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS
No. 123"), The Company's management accounts for stock-based
compensation to match the compensation expense with the time in
which it was earned. In accordance with the tax accounting,
restricted stock compensation will not be deductible until the
sale of those shares.
Recently Adopted Accounting Standards - In June 1997, the FASB
- -------------------------------------
issued SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No.
130") effective for fiscal years beginning after December 15,
1997. SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a statement that is displayed
with the same prominence as other financial statements. SFAS No.
130 does not require a specific format for that financial
statement but requires that an entity display an amount
representing total comprehensive income for the period in that
statement.
SFAS No. 130 requires that an entity classify items of other
comprehensive income by their nature in a financial statement.
For example, other comprehensive income may include foreign
currency and unrealized gains and losses on certain investments in
debt and equity securities. In addition, the accumulated balance
of other comprehensive income must be displayed separately from
retained earnings and additional paid in capital in the equity
section of a statement of financial position. The Company adopted
this accounting standard at inception as required.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(See Audit Report)
1. Summary of significant accounting policies - continued:
------------------------------------------
In October 1997 the American Institute of Certified Public
Accountants issued Statement of position 97-2, "Software Revenue
Recognition" (SOP 97-2). SOP 97-2 provides guidance on applying
generally accepted accounting principles in recognizing revenue on
software transactions and is effective for transactions entered
into in fiscal years beginning after December 15, 1997. The
Company adopted SOP 97-2 at inception as required. Adoption of
this SOP 97-2 did not have a material effect on the financial
statements.
In February 1997, the FASB issued SFAS No. 132, "Employer's
Disclosure about Pensions and Other Postretirement Benefits"
("SFAS No. 132"), effective for fiscal years beginning after
December 15, 1997. SFAS 132 revises employer disclosures about
pension and other postretirment benefit plans. It does not change
the measurement or recognition of those plans. This statement
standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and
fair values of plan assets that will facilitate financial analysis
and eliminates certain disclosures. Adoption of SFAS 132 did not
have a material impact on the financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", effective for
fiscal years beginning after June 15, 1999. SFAS 133 requires
companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting
from changes in the values of those derivatives would be accounted
for depending on the use of the derivative and whether it
qualifies for hedge accounting. The Company's management believes
that adoption of SFAS 133 will not have a material impact on the
financial statements.
2. Related Party Transactions and Going Concern:
--------------------------------------------
The Company's financial statements have been presented on the
basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business.
The Company has suffered losses from operations and may require
additional capital to continue as a going concern as the company
develops its market. Management believes the company will
continue as a going concern and is actively marketing its products
and services which would enable the company to meet its
obligations and provide additional funds for continued new product
development. In addition, management is currently negotiating
several additional contracts for its services and products.
Management is also embarking on other strategic initiatives to
expand its business opportunities. However, there can be no
assurance these activities will be successful.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(See Audit Report)
3. Accounts Receivable and Customer Deposits:
-----------------------------------------
Accounts receivable historically has been immaterial, as The
Company's policy is to have the software that it sells paid for in
advance. As of the balance sheet date there were no deposits paid
in advance.
4. Use of Estimates:
-----------------
Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenue and
expenses.
5. Revenue and Cost Recognition:
-----------------------------
The Company uses the accrual basis of accounting for financial
statement reporting. Revenues are recognized when products are
shipped and expenses realized when obligations are incurred.
6. Accounts Payable and accrued expenses:
--------------------------------------
Accounts payable and accrued expenses consist of trade payables
and accrued payroll and payroll taxes created from normal
operations of the business.
7. Long - Term Debt:
-----------------
Long - term debt consists of a note payable to a finance company,
which bears interest at 16.53%. The note is collateralized by
equipment and requires that monthly payments of $197 be made
through the maturity date of June, 2003. Principal payments of
$1,170 are due during the year ending October 31, 1999, $1,379 in
2000, $1,625 in 2001, $1,915 in 2002, and $1,658 in 2003.
8. Operating Lease Agreements:
---------------------------
The Company rents office space under a month-to-month operating
lease agreement and a twelve-month operating lease arrangement in
the amounts of $900 and $450, respectively. All long - term leases
include an upgrade clause of which management intends to upgrade
technology when available. For this reason, The Company considers
all of these types of lease arrangements as operating. The lease
terms range from month to month to leases with a term of sixty
months. Currently the lease costs are at $46,900 per year and
shown as part of cost of sales.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(See Audit Report)
9. Stockholders' Equity:
---------------------
Preferred Stock
The Company has been authorized 10,000,000 shares of preferred
stock at $.0001 par value. As of October 31, 1998, none of these
shares had been issued and the limitations, rights, and
preferences were yet to be determined by the Board of Directors.
Common Stock
During the period ending October 31, 1998, the Board of Directors
issued 1,525,000 shares of restricted common stock to The
Company's officer's, and legal counsel in exchange for services,
and issued 500,000 shares of restricted common stock in
acquisition of Top-10 Promotions, Inc.
In addition to the restricted shares issued, the company sold
common stock through two separate private offerings during the
period. In the initial offering 800,000 shares were sold each at
a price of $0.025. In the second offering 1,000,000 shares were
sold each at a price of $0.05.
Summary of shares issued Additional
Par Paid-in
Purpose Shares Value Capital Total
------- ------ ----- ------- -----
Services 1,525,000 $153 $59,323 $59,476
Acquisition 500,000 50 19,450 19,500
First offering 800,000 80 19,920 20,000
Second offering 1,000,000 100 49,900 50,000
--------- ------ ------
Total 3,825,000 383 148,593 148,976
10. Acquisitions:
-------------
Effective May 29, 1998, The Company acquired all the outstanding
common stock of Top-10 Promotions, Inc., consisting of 100 shares,
effective. These shares were redeemed and cancelled. The shares
of Top-10 Promotions, Inc. were acquired in exchange for 500,000
"restricted" shares of The Company's common stock issued to David
Smith, the sole shareholder of Top-10 Promotions, Inc. This
transaction has been accounted for using the purchase method of
accounting. The operations of Top-10 Promotions, Inc., as of the
prior fiscal year, have been included as The Company's.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(See Audit Report)
10. Acquisitions continued:
------------
Simultaneous with the acquisition, The Company purchased all of
the remaining authorized shares of Top-10 Promotions, Inc. for
$50,000 payable at closing and $17,500 per month payable over an
eleven month period. Also, the former owner of Top-10 Promotions,
Inc. was given the right to borrow up to 25% of retained earnings
of Roanoke Technologies Corporation in fiscal year 1998 or the
first two quarters of fiscal 1999. Such borrowings shall be
secured by his restricted stock received in the acquisition at a
75% discount value to market. Repayment shall be for a two-year
period at a 5% annual interest rate. The Company also entered
into an employment contract with the former owner of Top-10
Promotions.
11. Employment Contract and Incentive Commitments:
----------------------------------------------
The Company has entered into a two year employment contract with
the former owner of Top-10 Promotions. The contract provides
for: salary not to exceed $10,000 per month (with not more than a
3% salary increase provided The Company is profitable by at least
twice the amount of the salary increase); quarterly bonus of 30%
of the net income before income tax of The Company; standard non-competition
clause; an option to renew the employment agreement
for an additional two year term (provided he is not in default
under the employment agreement); and the following management
incentives: for fiscal year ending September 30, 1999 (a) 100,000
"restricted" shares if the surviving corporation has $2 million in
gross revenues; (b) 100,000 "restricted" shares if The Company has
$400,000 in after tax earnings.
12. Payroll Taxes Payable and Deferred Tax Assets and Liabilities:
-------------------------------------------------------------
The Company accrues payroll and income taxes. The Company,
currently a C-Corporation, accounts for income taxes in accordance
with Statements on Financial Accounting Standards 109. Management
is reasonably assured of The Company's ability to use its tax
benefits in the future. As of December 31, 1998, The Company had
a deferred tax asset in the amount of $21,960 that is derived from
a net operating tax loss carryforward that will expire during the
fiscal year ended October 31, 2018. The Company has a deferred
tax liability in the amount of $1,140 derived from taking an
accelerated depreciation amount of certain assets in accordance
with the Internal Revenue Tax Code in excess of that taken for
financial statement purposes. The Company's current tax assets
and liabilities are considered current by The Company's
management.
13. Required Cash Flow Disclosure for Interest and Taxes Paid:
----------------------------------------------------------
The company did pay interest in the amount of $697.00 during the
six months ending December 31, 1998. The Company at December 31,
1998 has no income tax payments due and did not pay any tax income
amounts during the period ending December 31, 1998.
ROANOKE TECHNOLOGY CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(See Audit Report)
14. Subsequent events:
------------------
At November 1, 1998 The Company's management approved the issuance
of 750,000 shares of restricted common shares of The Company to
the former owner of Top-10 Promotions for attaining gross revenues
in excess $200,000.00 or more in sales for the first three month
period of 1999. The shares have been issued and management values
the compensation at $150,000 in accordance with FAS No. 123. The
Company's management has elected the treatment of stock
compensation under FAS No. 123 rather than disclosing pro-forma
results of this transaction and accounting for the transaction
under APB-25 as required by public companies.
On October 15, 1998, the majority shareholders of The Company
undertook a Regulation - D, Rule 504, offering whereby it sold
2,000,000 shares of common stock, $.0001 par value per share or an
aggregate of $200,000. In addition, each investor in the offering
received an option to purchase, for a twelve month period
commencing on the date of this offering, an additional one share
of The Company at $1.00 per share for each eight (8) shares
purchased in the original offering (or $250,000). In addition,
each investor received an option to purchase for an eighteen
month period commencing on the date of this offering an additional
one (1) share of The Company for each 8.88 shares previously
purchased at $2.00 per share or an aggregate of 225,000 shares (or
$450,000).
The Company also approved of the investment by Arthur Harrison &
Associates in the offering provided that such investment in The
Company was in lieu of monies owed to Arthur Harrison & Associates
by The Company for two (2) promissory notes dated September 22,
1998 and October 10, 1998. Further more, Arthur Harrison &
Associates agreed to waive its rights to any interest on
promissory notes.
At October 31, 1998 The Company had 3,825,000 shares issued and
outstanding. At January 31, 1999 The Company had 7,880,000 issued
and outstanding.
15. Earnings Per Share:
-------------------
Basic earnings per share ("EPS") is computed by dividing earnings
available to common shareholders by the weighted-average number of
common shares outstanding for the period as required by the
Financial Accounting Standards Board (FASB) under Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per
Shares". Diluted EPS reflects the potential dilution of
securities that could share in the earnings. Basic Earnings per
Share for the period was a loss of $.04 per share.
EXHIBIT 27 FINANCIAL DATA SCHEDULE
ROANOKE TECHNOLOGY CORPORATION
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AS OF APRIL 30, 1999
AND THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED APRIL 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] OCT-31-1998
[PERIOD-END] APR-30-1999
[CASH] 119,811
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
<EMPLOYEE ADVANCES> 800
<DEFERRED TAX ASSET> 48,791
[CURRENT-ASSETS] 169,402
[PP&E] 105,966
[DEPRECIATION] 8,639
<NET INTANGIBLES> 631,340
[DEPOSITS] 1,500
<STOCKHOLDER LOAN> 62,324
[TOTAL-ASSETS] 961,893
[CURRENT-LIABILITIES] 36,946
[BONDS] 0
[COMMON] 900
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 916,897
[TOTAL-LIABILITY-AND-EQUITY] 961,893
[SALES] 452,450
[TOTAL-REVENUES] 452,450
[CGS] 292,221
[TOTAL-COSTS] 292,221
<GENERAL EXPENSES> 341,074
[OTHER-EXPENSES] 23,472
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 1,609
[INCOME-PRETAX] (205,926)
<INCOME-TAX BENEFIT> 27,971
[INCOME-CONTINUING] (177,955)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (177,955)
[EPS-BASIC] (.027)
[EPS-DILUTED] 0
</TABLE>
