SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant To Section 12(g) of the Securities Exchange Act of 1934
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Editworks, Ltd.
December 15, 1999
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Nevada 88-0403070
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
24843 Del Prado Suite 318 Dana Point CA 92629
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 248-9561
The following Securities are to be registered pursuant to Section 12(g) of the
Act:
Class-A Common Voting Equity Stock
7,104,200
The EXHIBIT INDEX is located at page 36 of this Registration Statement
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PART I
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Unnumbered Item: Introduction
This registration statement is voluntarily filed pursuant to Section 12(g)
of the Securities Exchange Act of 1934, in order to comply with the requirements
of National Association of Securities Dealers for submission for quotation on
the Over-the-Counter Bulletin Board, often called "OTCBB". This Registrant's
common stock is not presently quoted on the OTCBB or elsewhere and has never
traded in brokerage transactions. The requirements of the OTCBB are that the
financial statements and information about the Registrant be reported
periodically to the Commission and be and become information that the public can
access easily. This Registrant wishes to report and provide disclosure
voluntarily, and will file periodic reports in the event that its obligation to
file such reports is suspended under the Exchange Act. If and when this 1934 Act
Registration is effective and clear of comments by the staff, this Registrant
will be eligible for consideration for the OTCBB upon submission of one or more
NASD members for permission to publish quotes for the purchase and sale of the
shares of the common stock of the Registrant.
This Registrant may be the subject of a "Reverse Acquisition". A reverse
acquisition is the acquisition of a private ("Target") company by a public
("Registrant") company, by which the private company's shareholders acquire
control of the public company. While no negotiations are in progress, and no
potential targets have been identified, the business plan of this Registrant is
to find such a target or targets, and attempt to acquire them for stock. While
no such arrangements or plans have been adopted or are presently under
consideration, it would be expected that a reverse acquisition of a target
company or business would be associated with some private placements and/or
limited offerings of common stock of this Registrant for cash. Such placements,
or offerings, if and when made or extended, would be made with disclosure and
reliance on the businesses and assets to be acquired, and not upon the present
condition of this Registrant.
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Item 1. Description of Business.
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(a) Business Development.
(1) Form and Year of Organization. This Corporation, Editworks, Ltd. was
incorporated in the State of Nevada on August 20, 1998, for the purpose of
establishing a computer aided, post-production editing service for various media
businesses, using 3-D capable computer equipment developed by the Stratosphere
Digital Editing System. The Stratosphere is the only disk-based digital
nonlinear video workstation to feature real-time, full-motion alpha keys for two
independent 3-D video channels, the equivalent of four video channels.
On October 15, 1998, the Registrant authorized its initial issuances:
6,042,200 shares to seven founders pursuant to section 4(2) of the Securities
Act of 1933 at par value of $0.001.
Also on October 15, 1998, the Registrant offered a maximum of 300 units at
$1,000.00 per unit. Each unit consisted of 4,000 shares of common stock and one
warrant to purchase up to an additional 4,000 shares of common stock for $0.75
within eighteen months of the offering date. This translates to an offering of
1,200,000 shares and 1,200,000 warrants, at a per share price of $0.25. The
Registrant placed 1,062,000 shares, and a like number of shares, to 27 highly
sophisticated investors, with pre- existing relationships to management,
pursuant to Regulation D, Rule 504, as then in force, promulgated by the
Securities and Exchange Commission pursuant to section 3(b) of the Act;
The result of these issuances is a total issued and outstanding total of
7,104,200 shares of common stock and 1,062,200 eighteen month warrants. No
warrants have been exercised, and no present incentive exists for the exercise
of any warrants. The Warrants may be called by the Registrant at any time, with
30 days notice, at par value of, a price of one tenth of one cent ($0.001).
The Officers and Directors were Frank Sarcinello and Jena M. Harry. On
September 30, 1999, President Director Frank Sarcinello resigned and retired
from Office. On that date J. Dan Sifford was appointed second Director and
elected President of this Registrant. In connection with this
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withdrawal of Mr. Sarcinello, he transferred the 5,994,800 of his founders stock
to Mr. Sifford, thus effecting a change of control of this Registrant.
(2) Bankruptcy, Receivership or Similar Proceeding. None from inception to
date.
(b) Business of the Registrant. This Company has launched its current business
and established a computer aided, post-production editing service for various
media businesses. Its business plan is to seek to find additional customers for
its services, and service its exiting contracts.
(1) Principal Products or Services and their Markets. This Company has
launched its current business and established a computer aided, post-production
editing service for various media businesses, using 3-D capable computer
equipment developed by the Stratosphere Digital Editing System. The Stratosphere
is the only disk-based digital nonlinear video workstation to feature real-
time, full-motion alpha keys for two independent 3-D video channels, the
equivalent of four video channels. It has had two contract customers to date,
one of which is current.
(2) Distribution Methods of the products or services. None.
(3) Status of any publicly announced new product or service. None.
(4) Competitive business conditions and the small business Registrant's
competitive position in the industry. This Registrant has had only two customers
since its inception. In each case, the customer was introduced privately, as a
result of pre-existing relationships with management. Its second and present
customer is its sole customer. This Registrant has yet to advertise or engage in
programs to promote public awareness of its services. It has limited personnel,
namely a single non- administrative employee performing its technical editing
services. Accordingly, this Registrant does not now compete with other firms
offering technical, digital editing and post-productions services. The industry
in which this Registrant operates includes numerous suppliers of services
similar to this Registrant's, from very large and well known firms, such as
Pixar and Industrial Light and Magic, at the top of the chain, and less well
known, moderate, and smaller firms, occupying various niches, from large to
small, from extremely expensive, to competitive for small producers. The advent
of advanced digital technology has made entry into this competitive arena
considerably more practical for new start-up operations, with moderate financial
investment. It is therefore the conclusion of Management, based upon these
considerations, that this Registrant has no competitive position in the
industry, at this time.
(5) Sources of and availability of raw Materials and the names of principal
suppliers. Not Applicable.
(6) Dependence on one or a few major customers. The Registrant has one
current contract customer, namely Reliant Interactive Media Corp. It is
accordingly highly dependent at present on the good will of a single principal
customer. Please see EXHIBIT 6.1.
(7) Patents, Trademarks, licenses, franchises, concessions, royalty
agreements or labor contracts. None.
(8) Need for any government approval of principal products or services and
status. Not Applicable.
(9) Effect of existing or probable governmental regulations on the
business. Not Applicable. However, this Registrant would expect to maintain its
corporate status with the State of its incorporation, and would file its tax
returns and reports required to be filed with the Commission. This Registrant
wishes to report and provide disclosure voluntarily, and will file periodic
reports in the event that its obligation to file such reports is suspended under
the Exchange Act. If and when this 1934 Act Registration is effective and clear
of comments by the staff, this Registrant will be eligible for consideration for
the OTCBB upon submission of one or more NASD members for permission to publish
quotes for the purchase and sale of the shares of the common stock of the
Registrant. In connection with such submission and any continuation on the
OTCBB, this Registrant would expect to comply with NASD regulations, to the
extent that any such regulations are applicable to the conduct of the
Registrant's affairs.
(10) Estimate of amount spent on research and development in each of last
two years. None.
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(11) Costs and effects of compliance with environmental laws. Not
Applicable.
(12) Number of total employees and full-time employees. One full time
employee serves in Florida, operating the Registrant's editing operations. The
President serves without compensation and is not considered an employee at this
time. The services of the Secretary/Treasurer are provided on a contract basis
with her principal employer, Oasis Entertainment Corporation.
(13) Year 2000 Compliance, effect on customers and suppliers. None. The
Registrant has no computers or digital equipment of its own, no suppliers or
customers. Accordingly, the Registrant has determined that it is faced with no
year 2000 compliance issues other than those shared by the public in general.
(14) Reverse Acquisition Transactions Possible. While it has no present
plans to engage in Reverse Acquisition transactions, such transactions are
possible and forseeable, and for that reason, additional disclosure regarding
such an eventuality is provided. The reasons why this possibility is deemed
forseeable is discussed in Item 2 of this Part, MANAGEMENT'S DISCUSSION AND
ANALYSIS.
Registrant's competitive position with respect to Reverse Acquisition.
Other better capitalized firms are engaged in the search for acquisitions or
business combinations which firms may be able to offer more and may be more
attractive to acquisition candidates. This Registrant became a candidate for
reverse acquisition transactions only this past October. Management, in
evaluating market conditions and unsolicited proposals, has formed the estimate
that the selection of a business combination is probable within the next twelve
months. There is no compelling reason why this Registrant should be preferred
over other reverse-acquisition public corporation candidates. It has no
significant pool of cash it can offer and no capital formation incentive for its
selection. It has a limited shareholder base insufficient for acquisition target
wishing to proceed for application to NASDAQ. In comparison to other "public
shell companies" this Registrant is unimpressive, in the judgement of
management, and totally lacking in unique features which would make it more
attractive or competitive than other "public shell companies". While management
believes that the competition of other "public shell companies" is intense and
growing, it has no basis on which to quantify its impression. Please See the
Item 2 of this part, MANAGEMENT DISCUSSION AND ANALYSIS, for more information
and disclosure.
This Registrant is not actively engaged in its intended search to find a
business partner, and its management has determined that it could not presently
find an opportunity of superior value and potential. There can be no assurance
that this Registrant will ever prove competitively attractive to the kinds of
transactions it may seek or will ever participate in a Reverse Acquisition. As a
practical matter, no such inquiry could begin until this Registrant has
qualified its common stock for trading on the OTCBB. Please see MANAGEMENT'S
DISCUSSION AND ANALYSIS, Item 2 of this part, for an expanded discussion of
these and related subjects of disclosure.
Limited Scope and Number of Possible Acquisitions: The Company does not
intend to restrict its consideration to any particular business or industry
segment, and the Company may consider, among others, finance, brokerage,
insurance, transportation, communications, research and development, service,
natural resources, manufacturing or high-technology. Of course, because of the
Company's limited resources, the scope and number of suitable candidate business
ventures available would be limited accordingly, and most likely the Company
would not be able to participate in more than a single business venture.
Accordingly, it is anticipated that the Company would not be able to diversify,
but may be limited to one merger or acquisition because of limited financing.
This lack of diversification would not permit the Company to offset potential
losses from one business opportunity against profits from another. To a large
extent, a decision to participate in a specific business opportunity may be made
upon management's analysis of the quality of the other firm's management and
personnel, the anticipated acceptability of new products or marketing concepts,
the merit of technological changes and numerous other factors which are
difficult, if not impossible, to analyze through the application of any
objective criteria. In many instances, it is anticipated that the historical
operations of a specific firm may not necessarily be indicative of the potential
for the future because of the necessity to substantially shift a marketing
approach, expand operations, change product emphasis, change or substantially
augment management, or make other changes. The Company would be dependent upon
the management of a business opportunity to identify such problems and to
implement, or be primarily responsible for the implementation of, required
changes. Because the Company may participate in a business opportunity with a
newly organized firm or with a firm which is entering a new phase of growth, it
should be emphasized
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that the Company may incur further risk due to the failure of the target's
management to have proven its abilities or effectiveness, or the failure to
establish a market for the target's products or services, or the failure to
prove or predict profitability.
Probable Industry Segments for Acquisition. While the Company does not
intend to rule out its consideration to any particular business or industry
segment, Management has determined to focus its principal interest in evaluating
development stage companies in the electronic commerce, high- technology,
communication technologies, information services and internet industry segments.
It is nevertheless possible that an outstanding opportunity may develop in other
industry segments, such as finance, brokerage, insurance, transportation,
communications, research and development, service, natural resources,
manufacturing or other high-technology areas.
Reporting under the 1934 Act. Following the effectiveness of this 1934 Act
Registration of the common stock of this Registrant, certain periodic reporting
requirements will be applicable. First and foremost, a 1934 Registrant is
required to file an Annual Report on Form 10-K or 10-K-SB, 90 days following the
end of its fiscal year. The key element of such annual filing is the Audited
Financial Statement prepared in accordance with standards established by the
Commission. A 1934 Act Registrant also reports on the share ownership of
affiliates and 5% owners, initially, currently and annually. In addition to the
annual reporting, a Registrant is required to file quarterly reports on Form
10-Q or 10-Q-SB, containing audited or un-audited financial statements, and
reporting other material events. Some events are deemed material enough to
require the filing of a Current Report on Form 8- K. Any events may be reported
currently, but some events, like changes or disagreements with auditors,
resignation of directors, major acquisitions and other changes require
aggressive current reporting. All reports are filed and become public
information. The practical effects of the foregoing requirements on the criteria
for selection of a target company are two-fold: first, the target must have
audited or auditable financial statements, and the target must complete an audit
for filing promptly upon the consummation of any acquisition; and, second, that
the target management must be ready, willing and able to carry forth those
reporting requirements or face de-listing from the OTCBB, if listed, and
delinquency and possible liability for failure to report.
Transactions with Management. There is no present or foreseeable potential
that this Registrant will acquire a target business or company in which its
present management or principal shareholder, or affiliates, have an ownership
interest. Consideration has been given to corporate policy in this regard, and
it has been determined not to permit any transaction in other than an arm's
length acquisition of business assets owned and controlled by unrelated third
party interests. The basis for this policy is two fold: first, that related
party transactions are unnecessary in the judgment of management and involve
risks not necessary to invite; and second that related party transactions do not
offer the potential profitability for shareholders, that management believes
exists presently in the market place for public issuers amenable to reverse
merger transactions.
Finders fees for Management. No finder's fees will be payable to Management
in connection with any forseeable reverse acquisition. Management is identified
with the principal shareholder. The Principal Shareholder's remaining share
ownership following any reverse acquisition, and the Principal Shareholder might
be expected to sell its controlling interest for consideration from the
acquiring shareholders of the acquisition target. Depending on the quality of
the target company, the principal shareholder may sell all, some or none of the
control block, as matters for arm's length deal-making, when it comes to that
stage. Additionally, the Principal Shareholder is the Principal Consultant and
provides, has provided and may provide corporate services to the Registrant,
billable hourly in an established and customary manner. No finders fees,
commissions or other bonuses to Management, Principal Shareholder, or
affiliates, for securing or in connection with any acquisition, will be paid or
payable, as a matter of both current economic conditions and corporate policy.
Management has determined that in its view of the current market for such
transactions, such fees or bonuses are not justifiable.
Loan Financing not anticipated. There are no foreseeable circumstances
under which loan financing will be sought or needed during Registrant's present
development stage.
Dependence on Management. This Company is required to rely on Management's
skill, experience and judgement, both in regard to extreme selectivity, and in
any final decision to pursue any particular business venture, as well as the
form of any business combination, should agreement be reached at some point to
acquire or combine. Please see Item 2 of this Part, MANAGEMENTS
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DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, and also Item 7 of this Part,
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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Item 2. Managements Discussion and Analysis or Plan of Operation.
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(a) Plan of Operation. This Registrant has launched its current business and
established a computer aided, post-production editing service for various media
businesses, using 3-D capable computer equipment developed by the Stratosphere
Digital Editing System. The Stratosphere is the only disk- based digital
nonlinear video workstation to feature real-time, full-motion alpha keys for two
independent 3-D video channels, the equivalent of four video channels. It has
had only two contract customers to date. The Registrant has one current contract
customer, namely Reliant Interactive Media Corp. It is accordingly highly
dependent at present on the good will of a single principal customer. Please see
EXHIBIT 6.1. While it has no present plans to engage in Reverse Acquisition
transactions, such transactions are possible and forseeable.
(1) Plan of Operation for the next twelve months. The Registrant will
continue to services its exiting contract with Reliant Interactive Media Corp.
It may seek additional customers at some indefinite future time, but its present
resources do not permit extensive advertising or promotion. It is accordingly
dependent upon word of mouth and favorable referrals from its existing and
previous customers and from such other business acquaintances as may provide
such referrals. The Registrant has no plans to pursue any Reverse Acquisition at
any time, but as a practical matter it could not do so before obtaining
quote-ability on the OTCBB. It is not foreseeable that it might begin to plan
along these lines at any time before November of 2000, if its present business
activity does not appear to provide indications of profitability at that time.
To understand the reasons for this uncertainty, please see Item 7 of this Part,
RELATIONSHIPS AND RELATED TRANSACTIONS, for a discussion of the agreement
between this Registrant and its sole customer Reliant Interactive Media Corp.
Briefly summarized here, it is material that the agreement has an initial
one-year term, but may be extended for two additional terms for a total of three
years. It is an open question whether, at the end of the term, Reliant will
choose to purchase the Registrant's equipment, pursuant to agreement, or whether
Registrant will retain it. Thus, the Registrant may be in continuous operation
for the next three years or may have an election to make in one year, whether to
purchase new equipment and continue in its present business, or whether then to
seek an acquisition, most likely, a reverse acquisition transaction.
Cash Requirements and Need for additional funds, twelve months. This
Company has no immediate or forseeable need for additional funding, from sources
outside of its circle of shareholders, if at all, during the next twelve months.
It expects its revenues to fund current operations adequately, and may exceed
them substantially, although there can be no guaranties about future results.
This optimistic statement must be qualified by the reality that its revenues to
date from Reliant are receivables unpaid, and that the timing of payment of
accrued receivables from Reliant may depend to some degree on the monthly
liquidity of Reliant, in terms of its collection of its receivables. Reliant
Interactive Media Corp. is a public reporting corporation. Its reports and
financial statements are accessible by the public as public information from
standard sources including EDGAR.
Short-term advances by the principal shareholder may be made in the case
that realization of receivables fall short of current expenses, in the short
term. The nature and sources of these expected revenues are more fully disclosed
in detail in Item 7 of this Part, RELATIONSHIPS AND RELATED TRANSACTIONS. That
discussion provides disclosure of the agreement between this Registrant and its
sole customer Reliant Interactive Media Corp.
The stabilized monthly expenses of this Registrant are expected to follow
the following established pattern, of about $8,000.00 per month. The table which
follows provides a breakdown of those normal monthly expenses
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Expenses Monthly Annualized
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Services:
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One Employee $5,000 $60,000
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Contract Services 500 6,000
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Rent:
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Office 1,000 12,000
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Editing Facilities 200 2,400
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Other:
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Insurance on Equipment 275 3,300
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Utilities 300 3,600
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Telephone 250 3,000
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Shipping 100 1,200
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TOTALS $7,625 $91,500
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It would follow that the Registrant would require revenues to exceed
$100,000.00 annually to approach substantial profitability. While such a goal is
believed to be achievable in the next twelve months, a cautionary consideration
is appropriate. Increased business activity may engender increased costs. There
is no assurance, therefore, that this Registrant will achieve substantial
profitability in the next twelve months.
There are certain other corporate expenses not included in the foregoing
tabular analysis; namely, the expenses of auditing the corporation, legal and
professional requirements, including expenses in connection with this 1934 Act
Registration of its common stock, and periodic and other reports required to be
filed by 1934 Act reporting companies, the expenses, mostly legal and
professional, of corresponding with NASD, as may be required, in response to its
comments on any submission of the common stock of this Registrant for quotation
on the OTCBB. It is the estimate of management that these supplementary expenses
may approach, but will not exceed $20,000.00 in the next twelve months.
Reference is made to Note 4, DEVELOPMENT STAGE COMPANY, of the Registrant's
Audited Financial Statements: "The Company is a development stage company as
defined in Financial Accounting Standards Board Statement No.7. It is
concentrating substantially all of its efforts in raising capital and developing
its business operations in order to generate significant revenues." The
Registrant has no present plans to seek a profitable business combination. No
current fund raising programs are being conducted or contemplated at this time,
and would not be considered, unless the current business of the Registrant
indicates sufficient future profitability to justify an offering to existing
shareholders or new investors. In the event of an acquisition or combination,
any such capital formation would be offered to investors based upon the assets
and businesses to be acquired, and not on this Registrant in its present
condition.
This Registrant may be forced to effect some advances from its Principal
Shareholder, for costs involved in maintenance of corporate franchise and filing
reports as may be required, when and if this 1934 Act registration is effective.
Should this become necessary, the maximum amount of such advances is estimated
not to exceed $20,000.00. No agreement by the Principal shareholder to make such
advances is in place, and no guarantee can presently be given that additional
funds, if needed, will be available. It is by far more likely that advances will
take the form of providing services on a deferred compensation basis. Should
further auditing be required, such services by the Independent Auditor may not
be the subject of deferred compensation. The expenses of independent Audit
cannot be deferred or compensated in stock or notes, or otherwise than direct
payment of invoices in cash.
This Registrant does not anticipate any contingency upon which it would
voluntarily cease filing reports with the SEC, even though it may cease to be
required to do so. It is in the compelling interest of this Registrant to report
its affairs quarterly, annually and currently, as the case may be, generally to
provide accessible public information to interested parties, and also
specifically to
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maintain its qualification for the OTCBB, if and when the Registrant's intended
application for submission may be effective.
Summary of Product Research and Development. None. This Registrant is not
engaged in research and development.
Expected purchase or sale of plant and significant equipment. None.
However, please refer to Item 7 of this Part, RELATIONSHIPS AND RELATED
TRANSACTIONS for disclosure of the contingencies which might result in the sale
of Registrant's equipment on or after September 30, 2000.
Expected significant change in the number of employees. None. It is
possible, however that a significant increase in the business of its sole
customer would result in the increase of the editing staff of this Registrant
from its present single employee.
(b) Discussion and Analysis of Financial Condition and Results of Operations.
Operations and Results for the past two fiscal years. None. This Company
was incorporated on August 20, 1998, for the purpose of establishing a computer
aided, post-production editing service for various media businesses, using 3-D
capable computer equipment developed by the Stratosphere Digital Editing System.
It had some limited operations during its first fiscal year ended July 31, 1999.
From inception on August 20, 1998 through July 31, 1999, the Registrant's first
fiscal year, it enjoyed revenues of $72,663, with first-year general and
administrative and total expenses of $169,213, for a net loss of $96,550 ($0.014
per share) for its first fiscal year.
More recently, for the four months and fifteen days ended December 15,
1999, Revenues were $34,000, and total expenses were $76,124, for a net loss of
$41,224.
Its first customer was Oasis Entertainment's Fourth Movie Project, Inc. for
which it provided digital editing services. The arrangement resulted in revenues
of $32,000.00.
Its current arrangement with Reliant Interactive Media Corp. is presently
productive, but may impose interim limitations on Registrant's ability to expand
current operations. Pursuant to this arrangement, the Registrant has placed
substantially all of its equipment in Florida, in facilities provided by
Reliant, and has stationed its employee at that location. Reliant is the
producer of infomercial marketing audio-visual products, principally infomercial
video programs to be aired on commercial television. For these services, the
Registrant is to receive a monthly fee of $10,000.00 of which $2,500.00 monthly
is an accumulating investment by Reliant in the Registrant's Equipment. The
Registrant also accrues a royalty of one quarter of one percent of Reliant's
gross sales, less shipping, handling, returns and taxes on all infomercials for
which the Registrant provides services.
There are other material terms of the relationship between this Registrant
and Reliant. Please refer to Item 7 of this Part, RELATIONSHIPS AND RELATED
TRANSACTIONS for more disclosure.
Future Prospects. The Registrant is unable to predict the ultimate
direction of its future prospects. It is to be hoped that its arrangement with
Reliant would generate introductions and referrals of new business for the
Registrant's editing services. The extent to which this Registrant can project
itself as a true going concern for the future, beyond the scope of its
single-customer base, will depend upon this eventuality.
(c) Reverse Acquisition Candidate. A mature and businesslike evaluation of the
affairs of this Registrant require the consideration of certain possible
eventuality, which, although uncertain, and which may not occur, are none the
less the kind of events which must be considered sufficiently foreseeable to
require consideration, discussion and disclosure. It is possible that this
Registrant will attract sufficient referrals from its service arrangement with
Reliant to provide an incentive to continue with its present business plan, to
acquire additional equipment and possibly establish a new and different location
for its operations. It is also reasonable to consider that a continuing
relationship with Reliant would result in Reliant's becoming the substantial
owner of all or most all of the Registrant's equipment, and that this Registrant
may not acquire additional equipment and continue to seek customers for it
services as presently described. In that case it would continue to own the
diminishing assets of royalties from Reliant, but would not be engaged in
generating new revenues.
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The logical outcome of the second eventuality would be to seek a profitable
business opportunity. The acquisition of such an opportunity could and likely
would result in some change in control of the Registrant at such time. This
would likely take the form of a reverse acquisition. That means that this
Registrant would likely acquire businesses and assets for stock in an amount
that would effectively transfer control of this Registrant to the acquisition
target company or ownership group. It is called a reverse-acquisition because it
would be an acquisition by this Registrant in form, but would be an acquisition
of this Registrant in substance. Capital formation issues for the future of this
Registrant would arise only when targeted businesses or assets have been
identified. Until such time, this Registrant has no basis upon which to propose
any substantial infusion of capital from sources outside of its circle of
affiliates.
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Item 3. Description of Property.
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The Registrant has substantial electronic editing equipment presently
located in Florida, in the facilities of Reliant Interactive Media Corp., its
sole customer. The Registrant rents administrative office space facilities in
California, for $1,000.000 per month. The Registrant pays $200.00 per month to
Reliant for its use of Reliant's facilities in Florida, for housing its
operational editing equipment.
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Item 4. Security Ownership of Certain Beneficial Owners and Management.
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(a) Security Ownership of Management. To the best of Registrant's knowledge and
belief the following disclosure presents the total beneficial security ownership
of all Directors and Nominees, naming them, and by all Officers and Directors as
a group, without naming them, of Registrant, known to or discoverable by
Registrant. Please refer to explanatory notes if any, for clarification or
additional information.
(b) Security Ownership of Certain Beneficial Owners. To the best of Registrant's
knowledge and belief the following disclosure presents the total security
ownership of all persons, entities and groups, known to or discoverable by
Registrant, to be the beneficial owner or owners of more than five percent of
any voting class of Registrant's stock. Please refer to explanatory notes if
any, for clarification or additional information.
TABLE A/B
COMMON STOCK
OFFICERS AND DIRECTORS AND OWNERS OF 5% OR MORE
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NAME AND ADDRESS OF BENEFICIAL OWNER ACTUAL
OWNERSHIP %
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J. DAN SIFFORD JR. (1) President 5,943,800 83.67
3131 South West Freeway, #42
Houston TX 77098
- --------------------------------------------------------------------------------
JENA M. HARRY (1) Secretary -0- 0.00
3 San Bittern
Aliso Viejo CA 92656
================================================================================
All Officers and Directors as a Group 5,943,800 83.67
================================================================================
================================================================================
Total Shares Issued and Outstanding 7,104,200 100.00
================================================================================
(1) Please see Item 7, Relationships and Transactions, for more disclosure.
(c) Changes in Control. There are no arrangements known to Registrant, including
any pledge by any persons, of securities of Registrant, which may at a
subsequent date result in a change of control of the Registrant. The Registrant
is not presently searching for a profitable business opportunity. The
acquisition of such an opportunity, should one occur in future, could and likely
would result in some change in control of the Registrant at such time.
9
<PAGE>
- --------------------------------------------------------------------------------
Item 5. Directors, Executive Officers, Promoters and Control Persons.
- --------------------------------------------------------------------------------
The following persons are the Directors of Registrant, having taken office
from the inception of the Registrant, to serve until their successors might be
elected or appointed. The time of the next meeting of shareholders has not been
determined and is not likely to take place before a targeted acquisition or
combination is determined.
J. Dan Sifford, Jr., has been President of the Registrant since September
30, 1999. He grew up in Coral Gables, Florida, where he attended Coral Gables
High School and the University of Miami. After leaving the University of Miami,
Mr. Sifford formed a wholesale consumer goods distribution company which
operated throughout the southeastern United States and all of Latin America. In
1965, as an extension of the operations of the original company, he founded
Indiasa Corporation (Indiasa), a Panamanian company which was involved in supply
and financing arrangements with many of the Latin American Governments, in
particular, their air forces and their national airlines. As customer
requirements dictated, separate subsidiaries were established to handle specific
activities. During each of the past five years he has served as President of
Indiasa, which serves only as a holding company owning: 100% of Indiasa Aviation
Corp. (a company which owns aircraft but has no operations); 100% of Overseas
Aviation Corporation (a company which owns Air Carrier Certificates but has no
operations); 50% of Robmar International, S.A. (a company operates a
manufacturing plant in Argentina and Brazil, but in which Mr. Sifford holds no
office). In addition to his general aviation experience, Mr. Sifford, an Airline
Transport rated pilot, has twenty two years experience in the airline business,
and is currently the President of Airline of the Virgin Islands, Ltd. a commuter
passenger airline operating in the Caribbean, and has been its president
continuously during each of the past five years.
For the past several years Mr. Sifford has served as United States Managing
Director of Intrepid International, S.A. a Panama Corporation, providing
consulting services to international private companies in approaching the United
States public market place for products, financing and securities.
Mr. Sifford is not and has never been a broker-dealer. He has acted
primarily as consultant, and in some cases has served as an interim officer and
director of public companies in their development stage. The following
disclosure identifies those public companies: Air Epicurean, Inc., All American
Aircraft, Earth Industries, Ecklan Corporation, EditWorks, Ltd., Market., Market
Formulation & Research, Inc., NetAir.com, Inc., NSJ Mortgage Capital
Corporation, Inc., North American Security & Fire, Oasis 4th Movie Project,
Professional Recovery Systems, Inc., Richmond Services, Inc., Telecommunications
Technologies, Ltd., and World Staffing II, Inc. Of these last mentioned
companies, he is currently serving in this Registrant, in Ecklan Corporation, in
Oasis Entertainment's 4th Movie Project, Inc. in Richmond Services, Inc, and in
NetAir.com, Inc.
Jena M. Harry is Secretary/Treasurer of the Registrant. She has been working in
the administrative and operations division of motion picture production and
theatrical production for the last three years. She has been the Production
Manager and Accountant for four feature films, one documentary, and four
infomercials. She has also been the Producer and Co-Director for three
theatrical productions. Ms. Harry is currently the Operations and Production
Manager for an independent film company, Oasis Entertainment Corp. Her previous
business experience includes Hospitality Sales and Marketing, Medical Equipment
Manufacturer Marketing, Catering Sales and Operations and Graphic Design. Ms.
Harry has a Bachelors Degree in Marketing and a minor in Psychology from Johnson
& Wales University. As Secretary/Treasurer of the Registrant she will manage all
production, supervise marketing activities, and oversee graphic design services,
and be responsible for controlling the payables and receivables and managing the
day-to-day operations of the Company.
10
<PAGE>
- --------------------------------------------------------------------------------
Item 6. Executive Compensation.
- --------------------------------------------------------------------------------
There is no present program of executive compensation, and no plan or
compensation is expected to be adopted or authorized at any time before an
acquisition is effected, except as disclosed in this Item. Mr. Sifford presently
serves without compensation. Ms. Jena M. Harry is not compensated directly, or
personally by this Registrant; however her services to this Registrant are
compensated hourly at about $500.00 per month to Oasis Entertainment Corp.,
which private entity is the provider of her services as Secretary/Treasurer of
this Registrant. It is appropriate to disclose the salary paid to the former
President Frank Sarcinello during the Registrants first fiscal year, ended
September 30, 1999; namely a total of $34,000.00, calculated at $4,000.00 per
month.
- --------------------------------------------------------------------------------
Item 7. Certain Relationships and Related Transactions.
- --------------------------------------------------------------------------------
The Initial Officers and Directors were Frank Sarcinello and Jena M. Harry.
On September 30, 1999, President Director Frank Sarcinello resigned and retired
from Office. On that date J. Dan Sifford was appointed second Director and
elected President of this Registrant. In connection with this withdrawal of Mr.
Sarcinello, he transferred the 5,994,800 of his founders stock to Mr. Sifford,
thus effecting a change of control of this Registrant. There was no
consideration for this transfer. Mr. Sifford reports that at all times material
to the affairs of the corporation, he had dispositive control of the 5,994,800.
The Registrant has reported that it had one former customer and has one
present customer. There are material relationships requiring disclosure in each
case.
This Registrant provided editing services to Oasis Entertainment's Fourth
Movie Project, Inc., a Nevada Corporation, on a time fee basis. Mr. Sifford, the
President and controlling shareholder of this Registrant is an affiliate of
Oasis Entertainment's Fourth Movie Project, Inc. These services were concluded
about September 30, 1999. Revenues were generated to this Registrant as a result
of this relationship, in the amount of $32,000.00.
Oasis Entertainment Corp., is a private Nevada corporation. It is an
affiliate of Oasis Entertainment's Fourth Movie Project, Inc., this Registrant's
initial customer. Ms. Jena M. Harry's services as Secretary of this Registrant
are compensated hourly at about $500.00 per month to Oasis Entertainment Corp.,
which private entity is the provider of her services as Secretary of this
Registrant.
This Registrant currently enjoys a very complex relationship with Reliant
Interactive Media Corp. pursuant to that certain EDITWORKS LTD. SERVICE
AGREEMENT of October, 1999, EXHIBIT 6.1. As a practical matter, this
relationship makes Reliant the sole customer of this Registrant for the
immediate future. For a monthly fee of $10,000.00, beginning October 1, 1999,
Editworks Ltd., this Registrant, has relocated all of its editing equipment to
Reliant's facilities in Florida, and performs editing, production and
post-production services to Reliant, in connection with Reliant's business of
producing Infomercial media marketing programs. Of that $10,000.00 per month,
$2,500.00 has been allocated by the parties as a tentative acquisition by
Reliant of an equity interest in the equipment. The term of the contract is for
one year, but may be extended for two additional one-year terms. If the contract
is terminated by Reliant at the end of one year, Editworks Ltd. will repurchase
the Reliant equity in the equipment for half the payments applied to it; or, in
the alternative, Reliant may purchase the equipment outright for a lump sum
payment of $100,000 at the end of one year, or $50,000 at the end of two years,
or $25,000 at the end of three years. The purpose and effect of these provisions
is that at the end of the first year, Reliant has an incentive to either
terminate then or proceed for a full three years, for the reason that, should
Reliant terminate after the end of the first one-year term, its tentative credit
for equity shall have lapsed, and the equipment shall be owned by the Registrant
unless Reliant purchases it.
As a matter distinct from those amounts and agreed payments, Editworks
shall pay to Reliant an amount of $200 per month as rent for the use of the
facilities provided by Reliant
As a further complexity of this Relationship, Reliant shall pay to
Registrant a royalty equal to one quarter of one percent (0.25%) on Reliant's
gross sales (as defined by GAAP accounting) less shipping, handling, returns and
taxes, on all Infomercials for which EditWorks provides or has provided services
pursuant to the agreement. The royalties shall be paid for as long as there are
11
<PAGE>
revenues realized on the particular infomercial; however, the royalties shall be
paid only on an aggregate of the first $50,000,000 in revenues as defined
previously. As these royalties may be paid, one-half of such royalties shall be
credited to Reliant's earning new investment restricted shares of Editworks
common stock, on the basis of one such share per $5.00 of credited payments.
Such shares entitlement shall accumulate, such that actual issuance shall be in
no less than 100 share blocks
Editworks shall pay Reliant one-half of all net profits (again as defined
by GAAP) realized from post-production contracts with third parties facilitated
by Reliant.
The agreement expressly provides that neither party is the agent of the
other, that they are not partners, nor joint-venture participants, but principal
parties dealing at arm's length.
There is an additional matter requiring disclosure in connection with the
relationship between this Registrant and Reliant. Reliant has certain consulting
relationships with Intrepid International S.A., a Panama Corporation, and its
United States Subsidiary, Intrepid International, Ltd, a Nevada corporation.
These consulting relationships are unrelated to the relationship between this
Registrant and Reliant. However, it is appropriate to disclose that Mr. Sifford
of this Registrant is an Officer and affiliate of the Intrepid entities.
- --------------------------------------------------------------------------------
Item 8. Description of Securities.
- --------------------------------------------------------------------------------
The Registrant's Capital Authorized and Issued. The Registrant is authorized to
issue 50,000,000 shares of a single class of Common Voting Stock, of par value
$0.001, of which 7,104,200 are issued and outstanding, along with 1,062,200
eighteen month warrants exercisable on or before April 15, 2000. No warrants
have been exercised, and no present incentive exists for the exercise of any
warrants. The Warrants may be called by the Registrant at any time, with 30 days
notice at par value, a price of one tenth of one cent ($0.001).
Common Stock. All shares of Common Stock when issued were fully paid for and
nonassessable. Each holder of Common Stock is entitled to one vote per share on
all matters submitted for action by the stockholders. All shares of Common Stock
are equal to each other with respect to the election of directors and cumulative
voting is not permitted; therefore, the holders of more than 50% of the
outstanding Common Stock can, if they choose to do so, elect all of the
directors. The terms of the directors are not staggered. Directors are elected
annually to serve until the next annual meeting of shareholders and until their
successor is elected and qualified. There are no preemptive rights to purchase
any additional Common Stock or other securities of the Registrant. The owners of
a majority of the common stock may also take any action without prior notice or
meeting which a majority of shareholders could have taken at a regularly called
shareholders meeting, giving notice to all shareholders thereafter of the action
taken. In the event of liquidation or dissolution, holders of Common Stock are
entitled to receive, pro rata, the assets remaining, after creditors, and
holders of any class of stock having liquidation rights senior to holders of
shares of Common Stock, have been paid in full. All shares of Common Stock enjoy
equal dividend rights. There are no provisions in the Articles of Incorporation
or By-Laws which would delay, defer or prevent a change of control.
Secondary Trading refers to the marketability to resell the securities of this
Registrant in brokerage transactions, and that marketability is generally
governed by Rule 144, promulgated by the Securities and Exchange Commission
pursuant to ss.3 of the Securities Act of 1933. Securities which have not been
registered pursuant to the Securities Act of 1933, but were exempt from such
registration when issued, are generally "Restricted Securities" as defined by
Rule 144(a). The impact of the restrictions of Rule 144 are (a) a basic one year
holding period from purchase; and (b) a limitation of the amount any shareholder
may sell during the second year, as to non-affiliates of the Registrant;
however, as to shares owned by affiliates of the Registrant, the second-year
limitation of amounts attaches and continues indefinitely, at least until such
person has ceased to be an affiliate for 90 days or more. The limitation of
amounts is generally 1% of the total issued and outstanding in any 90 day
period.
Unrestricted Shares of Common Stock. 7,104,200 shares are issued and
outstanding. 5,994,800 shares are held by a single controlling affiliate of the
Registrant. 47,400 shares are owned by other initial founders. The 6,042,200
founders shares were when issued restricted securities as defined by Rule 144(a)
and are all more than one year old. Accordingly these shares are no longer
subject to
12
<PAGE>
the basic one year holding period of Rule 144(d). They remain subject to the
limitations of Rule 144(e) with respect to sales in limited amounts. Now, the
5,994,800 shares of control are shares held by an affiliate and will remain
subject to Rule 144(e)(1) indefinitely; however the 47,400 shares are held by
investors who, though founders, were not and are not affiliates of the issuer by
reason of the fact that they do not engage in management of the Registrant and
do not own shares amounting to 10% of any class of Registrant's securities.
These non-affiliate founder shares are presently limited by Rule 144(e)(2), and
will remain so until October 16, 2000. However, none of these non-affiliate
founders own 1% of the Registrant's common stock, so that these 47,400 shares
might be resold in brokerage transactions in compliance with Rule 144(e)(2). The
1,062,000 are owned by original non-affiliates, and shares were issued pursuant
to Rule 504 on or before April 6, 1999. They were not, when issued, restricted
securities as defined in Rule 144(a). These shares are owned by non-affiliates
of the Registrant and might be resold in brokerage transactions without
restriction of Rule 144.
Options and Derivative Securities. There are no outstanding options or
derivative securities of this Registrant. There are no shares issued or reserved
which are subject to options or warrants to purchase, or securities convertible
into common stock of this Registrant. There are, as mentioned previously, the
1,062,200 eighteen month warrants exercisable on or before April 15, 2000.
Risks of "Penny Stock." The Company's common stock may be deemed to be "penny
stock" as that term is defined in Reg.Section 240.3a51-1 of the Securities and
Exchange Commission. Penny stock are stocks (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national exchange;
(iii) whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ) listed stocks must still meet requirement (i) above); or (iv) in
issuers with net tangible assets less than $2,000,000 (if the issuer has been in
continuous operation for at least three years) or $5,000,000 (if in continuous
operation for less than three years), or with average revenues of less than
$6,000,000 for the last three years.
Section 15(g) of the Securities Exchange Act of 1934, as amended, and Reg.
Section 240.15g-2 of the Securities and Exchange Commission require
broker-dealers dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction in a
penny stock for the investor's account. Potential investors in the Company's
common stock are urged to obtain and read such disclosure carefully before
purchasing any shares that are deemed to be "penny stock."
Moreover, Reg. Section 240.15g-9 of the Securities and Exchange Commission
requires broker/dealers in penny stocks to approve the account of any investor
for transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.
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13
<PAGE>
- --------------------------------------------------------------------------------
PART II
================================================================================
Item 1.
Market Price of and Dividends on Registrant's Common Equity
and Shareholder Matters.
- --------------------------------------------------------------------------------
(a) Market Information. The Common Stock of this Registrant has never traded
Over the Counter on the Bulletin Board ("OTCBB"), or the Pink Sheets, nor
otherwise. There is therefore no market activity to report or disclose
(b) Holders. There are 34 shareholders of the common stock of this Registrant.
(c) Dividends. No cash or other dividends have been paid by the Company on its
Common Stock or other Stock and no such payment is anticipated in the
foreseeable future.
- --------------------------------------------------------------------------------
Item 2. Legal Proceedings.
- --------------------------------------------------------------------------------
There are no proceedings, legal, enforcement or administrative, pending,
threatened or anticipated involving or affecting this Registrant.
- --------------------------------------------------------------------------------
Item 3. Changes in and Disagreements with Accountants.
- --------------------------------------------------------------------------------
There have been no disagreements of any sort or kind with Auditors or
Accountants respecting any matter or item reflected in the financial statements
of this Registrant.
- --------------------------------------------------------------------------------
Item 4. Recent Sales of Unregistered Securities.
- --------------------------------------------------------------------------------
The following disclosure presents: (a) The date, title and amount of
securities sold; (b) There were no underwriters or underwritings, no discounts
or commissions; (c) The persons or class of persons to whom the small business
issuer sold the securities; (c) For securities sold for cash, the total offering
price and the total underwriting discounts or commissions; For securities sold
other than for cash, describe the transaction and the type and amount of
consideration received; and (d) The Section of the Securities Act or the rule of
the Commission under which the small business issuer claimed exemption from
registration and the facts relied upon to make the exemption available. (e) No
securities sold are convertible or exchangeable into equity securities. There
are no warrants or options representing equity securities except as disclosed as
follows: certain warrants are described in this Item, and please see Item 7 of
Part I, RELATIONSHIPS AND RELATED TRANSACTIONS, for disclosure of the royalty,
share purchase agreement between this Registrant and Reliant Interactive Media
Corp.
Reference is made to the following table of issuances:
=============================================================
ISSUANCES/EXEMPTIONS FROM 1933 ACT SHARES
-------------------------------------------------------------
Founders shares, at par value, for organizational
costs;ss.4(2) of the 1933 Securities Act 6,042,200
-------------------------------------------------------------
27 Sophisticated investors at $0.05 (Rule 504) 1,062,000
-------------------------------------------------------------
TOTAL COMMON STOCK ISSUED AND OUTSTANDING 7,104,200
=============================================================
On October 15, 1998, the Registrant authorized its initial issuances:
6,042,200 shares to seven founders pursuant to section 4(2) of the Securities
Act of 1933 at par value of $0.001.
Also on October 15, 1998, the Registrant offered a maximum of 300 units at
$1,000.00 per unit (each unit consisting of 4,000 shares of common stock and one
warrant to purchase up to an additional 4,000 shares of common stock for $0.75
within eighteen months of the offering date. This translates to an offering of
1,200,000 shares and 300 warrants, at a per share price of $0.25. The Registrant
placed 1,062,000 shares, and warrants for the purchase of a like number of
shares, to 27 highly sophisticated investors, with pre-existing relationships to
management, pursuant to
14
<PAGE>
Regulation D, Rule 504, as then in force, promulgated by the Securities and
Exchange Commission pursuant to section 3(b) of the Act;
The result of these issuances is a total issued and outstanding total of
7,104,200 shares of common stock and 1,062,200 eighteen month warrants. No
warrants have been exercised, and no present incentive exists for the exercise
of any warrants. The Warrants may be called by the Registrant at any time, with
30 days notice, at par value of, a price of one tenth of one cent ($0.001).
- --------------------------------------------------------------------------------
Item 5. Indemnification of Officers and Directors.
- --------------------------------------------------------------------------------
There is no provision in the Articles of Incorporation, nor the By-Laws of
the Corporation, nor any Resolution of the Board of Directors, providing for
indemnification of Officers or Directors. The Registrant is aware of no
provision of Nevada Corporate Law which creates or imposes any provision for
indemnity of Officers or Directors.
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15
<PAGE>
PART F/S
- --------------------------------------------------------------------------------
Selected Financial Information
===========================================================
12/15/99 7/31/99
===========================================================
===========================================================
Total Assets $ 192,678 $ 196,505
-----------------------------------------------------------
Revenues 34,900 72,663
-----------------------------------------------------------
Operating Expenses 76,124 169,213
-----------------------------------------------------------
Net Earnings or (Loss) (41.224) (96,550)
-----------------------------------------------------------
Per Share Earnings
or (Loss) (0.00576) (0.01449)
-----------------------------------------------------------
Average Common
Shares Outstanding 7,158,200 6,661,700
===========================================================
Financial Statements
================================================================================
F-1 AUDITED FINANCIAL STATEMENTS Page
for the year ended July 31, 1999, and from inception 19
- --------------------------------------------------------------------------------
F-2 UN-AUDITED FINANCIAL STATEMENTS Page
for the four months and fifteen days ended December 15, 1999 29
================================================================================
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16
<PAGE>
- --------------------------------------------------------------------------------
F-1
AUDITED FINANCIAL STATEMENTS
for the year ended July 31, 1999,
and from inception
17
<PAGE>
C O N T E N T S
Independent Auditors' Report ............................................... 3
Balance Sheet .............................................................. 4
Statement of Operations .................................................... 5
Statement of Stockholders' Equity .......................................... 6
Statement of Cash Flows .................................................... 7
Notes to the Financial Statements .......................................... 8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Editworks, Ltd.
We have audited the accompanying balance sheet of Editworks, Ltd. (a Development
Stage Company) as of July 31, 1999 and the related statements of operations,
stockholders' equity and cash flows from inception on August 20, 1998 through
July 31, 1999. 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 Editworks, Ltd. (a Development
Stage Company) as of July 31, 1999 and the results of its operations and cash
flows from inception on August 20, 1998 through July 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company's
operating loss and lack of working capital raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to those
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ CROUCH BIERWOLF & CHISHOLM
Salt Lake City, Utah
October 5, 1999
<PAGE>
Editworks, Ltd.
(a Development Stage Company)
Balance Sheet
Assets
July 31,
1999
---------
Current assets
Cash $ 165
Accounts receivable 37,886
---------
Total Current Assets 38,051
---------
Property & Equipment, Net (Note 3) 153,541
---------
Other assets
Organization Costs 4,913
---------
Total Other Assets 4,913
---------
Total Assets $ 196,505
=========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 21,513
---------
Total Current Liabilities 21,513
---------
Total Liabilities 21,513
---------
Stockholders' Equity
Common Stock, authorized
100,000,000 shares of $.001 par value,
issued and outstanding 7,104,200 7,104
Additional Paid in Capital 264,438
Deficit Accumulated During the
Development Stage (96,550)
---------
Total Stockholders' Equity 174,992
---------
Total Liabilities and Stockholders' Equity $ 196,505
=========
4
The accompanying notes are an integral part of these financial statements
<PAGE>
Editworks, Ltd.
(a Development Stage Company)
Statement of Operations
From inception on
August 20, 1998
through
July 31,
1999
-----------
Revenues: $ 72,663
Expenses:
General and administrative 169,213
-----------
Total Expenses 169,213
-----------
Net Loss $ (96,550)
===========
Net Loss Per Share $ (.014)
===========
Weighted average shares outstanding 6,661,700
===========
5
The accompanying notes are an integral part of these financial statements
<PAGE>
Editworks, Ltd.
(a Development Stage Company)
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount capital Stage
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balances at August 20, 1998 -- $ -- $ -- $ --
Common stock issued to organizers for
organizational costs valued at $6,042 6,042,200 6,042 -- --
Stock issued for cash at $.25 per share 1,062,000 1,062 264,438 --
Net loss for the year ended July 31, 1999 -- -- -- (96,550)
--------- --------- --------- ---------
Balance, July 31, 1999 7,104,200 $ 7,104 $ 264,438 $ (96,550)
========= ========= ========= =========
</TABLE>
6
The accompanying notes are an integral part of these financial statements
<PAGE>
Editworks, Ltd.
(a Development Stage Company)
Statement of Cash Flows
From inception on
August 20, 1998
through
July 31,
1999
---------
Cash Flows form Operating
Activities
Net loss $ (96,550)
Adjustments to reconcile
net loss to net cash
provided by operations:
Depreciation & Amortization 23,960
Increase in receivables (37,886)
Increase in payables 21,513
---------
Net Cash (Used) Provided by
Operating Activities (88,963)
---------
Cash Flows from Investment
Activities:
Purchase of Equipment (176,372)
---------
Net Cash (Used) Provided by
Investing Activities (176,372)
---------
Cash Flows from Financing
Activities:
Issued common stock for cash 265,500
---------
Net Cash (Used) Provided by
Financing Activities 265,500
---------
Net increase (decrease) in cash 165
Cash, beginning of year --
---------
Cash, end of year $ 165
=========
7
The accompanying notes are an integral part of these financial statements
<PAGE>
Editworks, Ltd.
(a Development Stage Company)
Notes to the Financial Statements
July 31, 1999
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Editworks, Ltd. (the Company) was organized under the laws of the
State of Nevada on August 20, 1998. The Company is currently engaged in the
establishment of a computer-aided editing service.
b. Accounting Method
The Company recognizes income and expense on the accrual basis of
accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
e. Fiscal Year End
The Company has elected a July 31 fiscal year end.
f. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating
loss carryforwards totaling approximately $96,550 that will be offset
against future taxable income. These NOL carryforwards begin to expire in
the year 2014. No tax benefit has been reported in the financial statements
because the Company believes there is a 50% or greater chance the
carryforward will expire unused.
Deferred tax assets and the valuation account is as follows at July
31, 1999.
Deferred tax asset:
NOL carrryforward $ 33,000
Valuation allowance (33,000)
--------
Total $ --
========
g. Organization Costs
Organization expenses are recorded at cost and are being amortized on
a straight line basis over five years.
h. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and expenses during the reporting period. In these
financial statements, assets, liabilities and expenses involve extensive
reliance on management's estimates. Actual results could differ from those
estimates.
8
<PAGE>
Editworks, Ltd.
(a Development Stage Company)
Notes to the Financial Statements
July 31, 1999
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has no operations
and is dependent upon financing to continue operations. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty. It is management's plan to continue pursuing
operating companies to merge with, thus creating necessary operating
revenue.
NOTE 3 - Property and Equipment
Property and Equipment consists of the following at July 31, 1999:
Editing Equipment $ 176,372
Accumulated Depreciation (22,831)
---------
Total Property & Equipment $ 153,541
=========
The provision for depreciation is calculated using the straight-line
method over the estimated useful lives of the assets. Depreciation expense
for the period ended July 31, 1999 was $22,831.
NOTE 4 - Development Stage Company
The Company is a development stage company as defined in Financial
Accounting Standards Board Statement No. 7. It is concentrating
substantially all of its efforts in raising capital and defining its
business operation in order to generate significant revenues.
NOTE 5 - Equity
In August of 1998 the Company issued 6,042,200 shares of common stock
to organizers in exchange for organizational costs valued at $6,042.
During January 1999, the Company issued 1,062,000 shares of common
stock for cash of $265,500.
NOTE 6 - Related Party Transactions
Oasis Entertainment Corporation, a corporation under common ownership,
paid expenses on behalf of the Company in the amount of $59,462. The amount
was reimbursed to Oasis Entertainment Corporation.
The Company received revenue of $32,200 from Oasis Entertainment 4th
Movies Project, Inc. a corporation under common ownership.
9
<PAGE>
- --------------------------------------------------------------------------------
F-2
Un-Audited Financial Statements
for the four months and fifteen days
ended December 15, 1999
<PAGE>
EDITWORKS, LTD.
BALANCE SHEET (UNAUDITED)
for the Fiscal Year ended July 31, 1999
and the period ended December 15, 1999
<TABLE>
<CAPTION>
December 15, July 31,
1999 1999
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 47 $ 165
Accounts receivable 46,685 37,886
--------- ---------
TOTAL CURRENT ASSETS 46,732 38,051
OTHER ASSETS
Organizational Costs 4,913
Editing equipment 186,045 176,372
Depreciation (40,099) (22,831)
--------- ---------
TOTAL OTHER ASSETS 145,946 158,454
TOTAL ASSETS $ 192,678 $ 196,505
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 32,910 $ 21,513
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value; authorized 50,000,000
shares; issued and outstanding, 7,104,200 shares
and 7,312,200 shares respectively 7,312 7,104
Additional Paid-In Capital 290,230 264,438
Accumulated Equity (Deficit) (137,774) (96,550)
Total Stockholders' Equity 159,768 174,992
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 192,678 $ 196,505
========= =========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
page F-2
<PAGE>
EDITWORKS, LTD.
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT (UNAUDITED)
for the
Fiscal Year ended July 31, 1999
and the period ended December 15, 1999
December 15, July 31,
1999 1999
----------- -----------
Revenues $ 34,900 $ 72,663
General and administrative expenses 76,124 169,213
Net Loss from Operations (41,224) (96,550)
Net Income (Loss) (41,224) (96,550)
=========== ===========
Loss per Share $ (0.00576) $ (0.01449)
=========== ===========
Weighted Average
Shares Outstanding 7,158,200 6,661,700
=========== ===========
The accompanying notes are an integral part of
these financial statements.
page F-3
<PAGE>
EDITWORKS, LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
for the period from inception of the Development Stag
on August 20, 1998,
through July 31, 1999
and the period ended December 15, 1999
<TABLE>
<CAPTION>
Additional Accumulated Total Stock-
Common Par Paid-In Equity holders' Equity
Stock Value Capital (Deficit) (Deficit)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Common Stock issued at inception 6,042,200 $ 6,042 $ 0 $ 0 $ 6,042
Sale of Common Stock 1,062,000 1,062 264,438
Net (loss) during period (96,550)
---------- ---------- ---------- ---------- ----------
Balance at September 30, 1999 7,104,200 $ 7,104 $ 264,438 $ (96,550) $ 174,992
Sale of Common Stock 208,000 208 25,792
Net (loss) during period (41,224)
---------- ---------- ---------- ---------- ----------
Balance at December 15, 1999 7,312,200 $ 7,312 $ 290,230 $ (137,774) $ 159,768
</TABLE>
The accompanying notes are an integral part of
these financial statements.
page F-4
<PAGE>
EDITWORKS, LTD.
STATEMENTS OF CASH FLOW (UNAUDITED)
for the Fiscal Year ended July 31, 1999
and the period ended December 15, 1999
<TABLE>
<CAPTION>
December 15, July 31,
1999 1999
--------- ---------
<S> <C> <C>
Operating Activities
Net Income (Loss) $ (41,224) $ (96,550)
Less items not effecting cash (amortization) 23,960
Less items not effecting cash (organizational expense) 4,913
--------- ---------
Net Cash from Operations (36,311) (72,590)
Cash Increase (Decrease) Sale of Stock 26,000 265,500
Cash Increase (Decrease) Investment in
computerized editing equipment (9,673) (176,372)
Cash Increase (Decrease) Accounts payable 11,397 21,513
Cash Increase (Decrease) Accounts receivable 8,799 (37,886)
--------- ---------
Beginning Cash 165 -0-
Ending Cash $ 47 $ 165
========= =========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
page F-5
<PAGE>
EDITWORKS, LTD.
NOTES TO FINANCIAL STATEMENTS
for the fiscal year ended July 31, 1999
and for the period ended December 15, 1999
1-FORMATION AND OPERATIONS OF THE COMPANY
EditWorks, Ltd. (the Company) was incorporated in the state of Nevada
on August 20, 1998. The Company operates a computer aided,
post-production editing service for the TV, video and movie business
using 3D capable computer equipment developed by the Stratasphere
Digital Editing System. The Company is authorized to issue 50,000,000
Common Shares each with a par value of $0.001. During the fiscal year
ended July 31, 1999 the Board of Directors and Shareholders of the
Company authorized the issuance of a minimum of 900,000, and a maximum
of 1,200,000 of its Common Shares in a Regulation D, 504 offering. As
of the date of these statements 1,062,000 shares have been sold
pursuant to that offering. During the period ended December 15, 1999
the Company sold 208,000 of its Common Shares.
2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING
Accounting records of the Company and financial statements are
maintained and prepared on an accrual basis.
(b) FISCAL YEAR
The Company's proposed fiscal year end for accounting and tax purposes
is July 31.
(c) ORGANIZATION COSTS
The Company incurred $6,042 of organization costs in 1998. These
costs, which were paid by shareholders of the Company and which were
exchanged for 6,042,200 shares of common stock having a par value of
$6,042, were being amortized on a straight line method over a 60 month
period through the end of the fiscal year ended July 31, 1999. The
remaining organization costs in the amount of $4,913 were expensed in
the fiscal year beginning August 1, 1999 due to a change in accounting
principals which became effective on January 1, 1999.
(d) CASH EQUIVALENTS
For Financial Accounting Standards purposes, the Statement of Cash
Flows, Cash Equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less. Whatever cash amount included on
the Company's Statements of Cash Flow, however, will be comprised
exclusively of cash.
page F-6
<PAGE>
EditWorks, Ltd.
Notes to Financial Statements
for the fiscal year ended July 31, 1999
and for the period ended December 15, 1999
continued
3-PROPERTY AND EXECUTIVE COMPENSATION
(a) PROPERTY:
The Company's offices and all of its records are located at 24843 Del
Prado, Suite 318, Dana Point, California 92629.
(b) EXECUTIVE COMPENSATION:
From inception through February 1999, the Company paid no cash
compensation to its officers or directors. Officers of the Company
were reimbursed for out-of-pocket expenses. Beginning in February
1999, and continuing to the date of these financial statements, the
Company's President has been receiving compensation in the amount of
$4,000 per month. In addition, other Officers may receive compensation
for services performed on behalf of the Company. The terms of any such
compensation will be determined on the basis of the nature and extent
of the services which may be required and will be no less favorable to
the Company than the charges for similar services made by independent
third parties who are similarly qualified. No officer or director,
other than the President, is required to make any specific amount or
percentage of his business time available to the Company.
5-STOCKHOLDERS' EQUITY.
The Company is authorized to issue 50,000,000 shares of common stock
having a par value of $0.001. In August 1998, 6,042,200 shares of
Common Stock, were issued in exchange for organizational costs which
were valued by management at a total of $6,042. In January 1999,
1,062,000 shares of Common Stock, were issued in exchange for $265,500
in cash. In November and December 1999, 208,000 shares of Common
Stock, were issued in exchange for $26,000 in cash.
page F-7
<PAGE>
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
Exhibit Index
================================================================================
EXHIBIT TABLE CATEGORY / DESCRIPTION OF EXHIBIT PAGE
TABLE NUMBER
#
- --------------------------------------------------------------------------------
[2] ARTICLES/CERTIFICATES OF INCORPORATION, AND BY-LAWS
- --------------------------------------------------------------------------------
2.1 Articles/Certificate of Incorporation: 38
- --------------------------------------------------------------------------------
2.2 By-Laws 41
- --------------------------------------------------------------------------------
[6] MATERIAL CONTRACTS/ACQUISITION
- --------------------------------------------------------------------------------
6.1 Editworks Ltd. Service Agreement 50
================================================================================
33
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to signed on its behalf by the undersigned, thereunto
authorized.
Editworks, Ltd.
December 15, 1999
by
/s/ /s/
- -------------------------- --------------------------
J. Dan Sifford Jena M. Harry
PRESIDENT/DIRECTOR SECRETARY/DIRECTOR
34
- --------------------------------------------------------------------------------
Exhibit 2.1
Articles of Incorporation
- --------------------------------------------------------------------------------
<PAGE>
ARTICLES OF INCORPORATION
OF
EditWorks, Ltd.
Article I. The name of the Corporation is EditWorks, Ltd.
Article II. Its principal office in the State of Nevada is 774 Mays Blvd.
#10, Incline Village NV 89452. The initial resident agent for services of
process at that address is N&R Ltd. Group, Inc..
Article III. The purposes for which the corporation is organized are to
engage in any activity or business not in conflict with the laws of the State of
Nevada or of the United States of America. The period of existence of the
corporation shall be perpetual.
Article IV. The corporation shall have authority to issue an aggregate of
50,000,000 shares of common voting equity stock of par value one mil ($0.001)
per share, and no other class or classes of stock, for a total capitalization of
$50,000. The corporation's capital stock may be sold from time to time for such
consideration as may be fixed by the Board of Directors, provided that no
consideration so fixed shall be less than par value.
Article V. No shareholder shall be entitled to any preemptive or
preferential rights to subscribe to any unissued stock or any other securities
which the corporation may now or hereafter be authorized to issue, nor shall any
shareholder possess cumulative voting rights at any shareholders meeting, for
the purpose of electing Directors, or otherwise.
Article VI. The name and address of the Incorporator of the corporation is
WILLIAM STOCKER, Attorney at Law, 34700 Pacific Coast Highway, Suite 303,
Capistrano Beach CA 92624, PHONE (949) 248-9561, FAX (949) 248-1688. The affairs
of the corporation shall be governed by a Board of Directors of not less than
one (1) nor more than (7) persons. The Incorporator shall act as Sole Initial
Director.
Article VII. The Capital Stock, after the amount of the subscription price
or par value, shall not be subject to assessment to pay the debts of the
corporation, and no stock issued, as paid up, shall ever be assessable or
assessed.
Article VIII. The initial By-laws of the corporation shall be adopted by
its Board of Directors. The power to alter, amend or repeal the By-laws, or
adopt new By-laws, shall be vested in the Board of Directors, except as
otherwise may be specifically provided in the By-laws.
<PAGE>
ARTICLES OF INCORPORATION OF
EditWorks, Ltd.
August 19, 1998
I THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a corporation pursuant the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have set my hand hereunto this Day,
Dated: August 19, 1998.
/s/
----------------
WILLIAM STOCKER
ATTORNEY AT LAW
INCORPORATOR
- --------------------------------------------------------------------------------
Exhibit 2.2
By-Laws
- --------------------------------------------------------------------------------
<PAGE>
By-Laws
OF
Eidtworks, Ltd.
A NEVADA CORPORATION
Article I
CORPORATE OFFICES
The principal office of the corporation in the State of Nevada shall be
located at 774 Mays Blvd. Suite 10, Incline Village NV 89451. The corporation
may have such other offices, either within or without the State of incorporation
as the board of directors may designate or as the business of the corporation
may from time to time require.
Article II
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the State unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
Section 2. Annual Meetings
The time and date for the annual meeting of the shareholders shall be set
by the Board of Directors of the Corporation, at which time the shareholders
shall elect a Board of Directors and transact any other proper business. Unless
the Board of Directors shall determine otherwise, the annual meeting of the
shareholders shall be held on the second Monday of March in each year, if not a
holiday, at Ten o'clock A.M., at which time the shareholders shall elect a Board
of Directors and transact any other proper business. If this date falls on a
holiday, then the meeting shall be held on the following business day at the
same hour.
Section 3. Special Meetings
Special meetings of the shareholders may be called by the President, the
Board of Directors, by the holders of at least ten percent of all the shares
entitled to vote at the proposed special meeting, or such other person or
persons as may be authorized in the Articles of Incorporation.
Section 4. Notices of Meetings
Written or printed notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) days nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
the direction of the president, or secretary, or the officer or persons calling
the meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the stockholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid.
Closing of Transfer Books or Fixing Record Date.
(a) For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case twenty (20) days. If the stock transfer books be
closed for the purpose of determining stockholders entitled to notice or to vote
at a meeting of stockholders, such books shall be closed for at least twenty
(20) days immediately preceding such meeting.
<PAGE>
Eidtworks, Ltd.
BY-LAWS page 2
(b) In lieu of closing the stock transfer books, the directors may
prescribe a day not more than sixty (60) days before the holding of any such
meeting as the day as of which stockholders entitled to notice of the and to
vote at such meeting must be determined. Only stockholders of record on that day
are entitled to notice or to vote at such meeting
(c) The directors may adopt a resolution prescribing a date upon which the
stockholders of record are entitled to give written consent to actions in lieu
of meeting. The date prescribed by the directors may not precede nor be more
than ten (10) days after the date the resolution is adopted by directors.
Section 5. Voting List.
The officer or agent having charge of the stock transfer books for the
shares of the corporation shall make, at least ten (10) days before each meeting
of stockholders, a complete list of stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and number of shares held by each, which list, for a period of ten
(10) days prior to such meeting, shall be kept on file at the principal office
of the corporation and shall be subject to inspection by any stockholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the whole time of the meeting. The original stock
transfer book shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer books or to vote at the meeting of
stockholders.
Section 6. Quorum.
At any meeting of stockholders, a majority of fifty percent plus one vote,
of the outstanding shares of the corporation entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders. If
less than said number of the outstanding shares are represented at a meeting, a
majority of the outstanding shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting originally notified. The stockholders present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
Section 7. Proxies.
At all meetings of the stockholders, a stockholder may vote by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the corporation before or
at the time of the meeting. Such proxies may be deposited by electronic
transmission.
Section 8. Voting.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such shareholder. Upon the demand of any stockholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of Nevada.
Section 9. Order of Business.
The order of business at all meetings of the stockholders, shall be as
follows:
a. Roll Call.
b. Proof of notice of meeting or waiver of notice.
c. Reading of minutes of preceding meeting.
d. Reports of Officers.
e. Reports of Committees.
f. Election of Directors.
g. Unfinished Business.
h. New Business.
<PAGE>
Eidtworks, Ltd.
BY-LAWS page 3
Section 10. Informal Action by Stockholders.
Unless otherwise provided by law, any action required to be taken, or any
other action which may be taken, at a meeting of the stockholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the stockholders entitled to vote with respect to the
subject matter thereof. Unless otherwise provided by law, any action required to
be taken, or any other action which may be taken, at a meeting of the
stockholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by a Majority of all of the
stockholders entitled to vote with respect to the subject matter thereof at any
regular meeting called on notice, and if written notice to all shareholders is
promptly given of all action so taken.
Section 11. Books and Records.
The Books, Accounts, and Records of the corporation, except as may be
otherwise required by the laws of the State of Nevada, may be kept outside of
the State of Nevada, at such place or places as the Board of Directors may from
time to time appoint. The Board of Directors shall determine whether and to what
extent the accounts and the books of the corporation, or any of them, other than
the stock ledgers, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account or book or document of
this Corporation, except as conferred by law or by resolution of the
stockholders or directors. In the event such right of inspection is granted to
the Stockholder(s) all fees associated with such inspection shall be the sole
expense of the Stockholder(s) demanding the inspection. No book, account, or
record of the Corporation may be inspected without the legal counsel and the
accountants of the Corporation being present. The fees charged by legal counsel
and accountants to attend such inspections shall be paid for by the Stockholder
demanding the inspection.
Article III
BOARD OF DIRECTORS
Section 1. General Powers.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
Section 2. Number, Tenure, and Qualifications.
The number of directors of the corporation shall be a minimum of one (l)
and a maximum of nine (7), or such other number as may be provided in the
Articles of Incorporation, or amendment thereof. Each director shall hold office
until the next annual meeting of stockholders and until his successor shall have
been elected and qualified.
Section 3. Regular Meetings.
A regular meeting of the directors, shall be held without other notice than
this by-law immediately after, and at the same place as, the annual meeting of
stockholders. The directors may provide, by resolution, the time and place for
holding of additional regular meetings without other notice than such
resolution.
Section 4. Special Meetings.
Special meetings of the directors may be called by or at the request of the
president or any two directors. The person or persons authorized to call special
meetings of the directors may fix the place for holding any special meeting of
the directors called by them.
Section 5. Notice.
Notice of any special meeting shall be given at least one day previously
thereto by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. The attendance of a director at a meeting shall constitute a
waiver of notice
<PAGE>
Eidtworks, Ltd.
BY-LAWS page 4
of such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
Section 6. Quorum.
At any meeting of the directors fifty (50) percent shall constitute a
quorum for the transaction of business, but if less than said number is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
Section 7. Manner of Acting.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
Section 8. Newly Created Directorships and Vacancies.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of the majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
Section 9. Removal of Directors.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
Section 10. Resignation.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
Section 11. Compensation.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 12. Executive and Other Committees.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of one (l) or more directors.
Each such committee shall serve at the pleasure of the board.
Article IV
OFFICERS
Section 1. Number.
The officers of the corporation shall be the president, a secretary and a
treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the directors.
Section 2. Election and Term of Office.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided. In the event that no election of officers be held by the directors at
that time, the existing officers shall be deemed to have been confirmed in
office by the directors.
<PAGE>
Eidtworks, Ltd.
BY-LAWS page 5
Section 3. Removal.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgement the best interest of the
corporation would be served thereby, but such removal shall be without prejudice
to contract rights, if any, of the person so removed.
Section 4. Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
Section 5. President.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the
directors or by these by-laws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the directors from time to time.
Section 6. Chairman of the Board.
In the absence of the president or in the event of his death, inability or
refusal to act, the chairman of the board of directors shall perform the duties
of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The chairman of the board of
directors shall perform such other duties as from time to time may be assigned
to him by the directors.
Section 7. Secretary.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
the duties incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the directors.
Section 8. Treasurer.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
Section 9. Salaries.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of fact that he is also a director of the corporation.
<PAGE>
Eidtworks, Ltd.
BY-LAWS page 6
Article V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts.
The directors may authorize any officer or officers, agent or agents to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
Section 2. Loans.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
Section 3. Checks, Drafts, etc.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be signed
by such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by resolution of the directors.
Section 4. Deposits.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the directors may select.
Article VI
FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of January in
each year, or on such other day as the Board of Directors shall fix.
Article VII
DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
Article VIII
SEAL
The directors may provide a corporate seal which shall have inscribed
thereon the name of the corporation, the state of incorporation, year of
incorporation and the words, "Corporate Seal".
Article IX
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
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Eidtworks, Ltd.
BY-LAWS page 7
Article X
AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted in the same manner as their adoption, by the Board of Directors if so
adopted; by a vote of the stockholders representing a majority of all the shares
issued and outstanding, if so adopted or adopted by the Board of Directors; or,
in any case, at any annual stockholders' meeting or at any special stockholders'
meeting when the proposed amendment has been set out in the notice of such
meeting.
CERTIFICATION
The Secretary of the Corporation hereby certifies that the foregoing is a
true and correct copy of the By-Laws of the Corporation named in the title
thereto and that such By-Laws were duly adopted by the Board of Directors of
said Corporation on the date set forth below.
Executed, and Corporate Seal affixed, this day of August 20, 1998.
/s/
--------------
Jena M. Harry
Secretary
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Exhibit 6.1
Editworks Ltd. Service Agreement
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<PAGE>
Eidtworks, Ltd.
Services Agreement page 1
EDITWORKS, LTD.
SERVICES AGREEMENT
THIS SERVICES AGREEMENT is entered into as of October 1, 1999, between Reliant
Interactive Media Corp., a Nevada corporation ("RIMC") and EditWorks, Ltd., a
Nevada corporation, ("EditWorks"), and is made with reference to the following
facts. This Agreement shall commence on or about October 1, 1999.
WHEREAS, RIMC produces and exploits Short-Form Commercials and Infomercial
Productions (individually and collectively referred to as the "Infom- ercials").
WHEREAS, RIMC has requested EditWorks to perform certain services and to provide
certain equipment for the production and editing of Infomercials; and
WHEREAS, to that end, EditWorks has arranged for the delivery of certain editing
equipment owned by EditWorks for the benefit of RIMC; and
WHEREAS, RIMC desires to avail itself of the services offered by EditWorks on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. Provision of Editing Equipment and Services.
a. Equipment. EditWorks shall deliver to the offices of RIMC an editing
system known as the AVID MC9000 Non-Linear editing system and
peripheral accessories and software all as more fully shown on the
attached EditWorks Inventory. The office facility for the EditWorks
Inventory shall have sufficient electrical and cooling capacity for
the optimum operation of the AVID editing system. The EditWorks
Inventory shall be delivered to this location for the benefit of RIMC
as described herein, and RIMC shall accrue an equity interest in same
as more fully described herein. The EditWorks Inventory will be
maintained and upgraded upon the mutual agreement and at the equal
expense of the parties. EditWorks will provide and maintain all
insurance coverage for loss or damage to those items shown on the
EditWorks Inventory and provide proof of insurance to RIMC upon
request.
<PAGE>
Eidtworks, Ltd.
Services Agreement page 2
b. Editing Services. EditWorks shall as a primary responsibility provide
or supervise editing services for Infomercial productions subject to
the direction and specifications of RIMC.
2. Film and Directorial Services. EditWorks shall provide suitable personnel
to operate a camera and/or supervise the camera work in the filming of
Infomercials or to direct same. The parties shall mutually agree on a
schedule that permits these duties to be fulfilled. In connection with
these duties to RIMC, the EditWorks employees shall be provided the use of
office space at the offices of RIMC or such other accommodations as are
necessary to fulfill these duties.
3. Consideration and Fees.
a. Obligations of RIMC:
(i) Monthly Fee. A fee of $10,000 per month shall be paid by RIMC to
EditWorks beginning October 1, 1999 and monthly thereafter for
the term of this contract. The amount of $2,500 of this monthly
fee shall be in consideration of RIMC obtain- ing an equity
interest in the equipment described in the EditWorks inventory.
EditWorks shall be responsible for the payment of all of its
operating expenses, including the sala- ries of its employees.
However, RIMC may choose to hire additional editors at their sole
expense to operate the editing equipment under the direction of
EditWorks.
(ii) Royalty. RIMC shall pay to EditWorks a monthly royalty equal to
one quarter of one percent (.25%) on their gross sales (as
defined by GAAP accounting) less shipping, han- dling, returns
and taxes on all Infomercials for which EditW- orks provides
services pursuant to this Agreement. This royalty shall be due
and payable within one month of the end of each calendar month
for such gross sales received in that previous calendar month.
The royalties shall be payable for as long as there are revenues
realized on the particular infomerc- ial, however the royalties
shall only be paid on an aggregate of the first $50,000,000 in
sales as defined above. Royalties shall only be paid on new
productions and shall not be paid on re-edits of previously
produced Infomercials or on sales from any Infomercials for the
sales of computer equipment or software. Royalties shall not be
payable on any income received by RIMC from editing services
fees, whether this income is paid from EditWorks to RIMC or
directly to RIMC by third party clients.
<PAGE>
Eidtworks, Ltd.
Services Agreement page 3
(iii) Moving Expenses. RIMC shall pay one-half of the moving expenses
(subject to a maximum payment of $4,000) for the EditWorks
Inventory.
b. Obligations of EditWorks.
(i) Fees for Third-Party Referrals. EditWorks shall pay to RIMC
one-half of all net profits (as defined by GAAP accounting)
realized from post-production contracts facilitated by RIMC with
outside parties. In the event that RIMC receives a pay- ment
directly from a third party for editing services, EditWo- rks
shall provide to RIMC an accounting of its expenses associated
with that particular contract and RIMC shall then remit to
EditWorks the amount of those expenses plus one- half of the net
profits thereon.
(ii) EditWorks Stock. As royalties are paid pursuant to section
4a.(ii) herein, one-half of these royalty payments shall be
credited to RIMC earning restricted stock of EditWorks on the
basis of one share per $5.00 of credited payments. This stock
will be issued within one month of the receipt of royal- ties
from RIMC, however certificates will not be issued until a
minimum of 100 shares have been earned in any particular period.
The price per share of stock shall be proportionately adjusted
for any increase or decrease in the number of issued shares of
EditWorks resulting from: (x) a subdivision or con- solidation of
shares; (y) the payment of a stock dividend; or (z) any other
increase or decrease in the number of such shares effected
without receipt of consideration by EditWorks. Any fraction of a
share resulting from an adjustment in the number of shares issued
shall be rounded up to the next whole share.
(iii) Monthly Rent. EditWorks shall pay to RIMC rent for use of the
office facility provided by RIMC for the EditWorks Inventory of
$200 per month.
4. Status of Parties: The parties hereto expressly agree, each for the other,
that the relationship between them hereunder is that of two principals
dealing with each other as independent contractors for the sole and
specific purpose that EditWorks shall provide and deliver services
described herein in connec- tion with the production of Infomercials,
subject to the terms and conditions of this Agreement. At no time, past,
present or future, shall the relationship of the parties herein be deemed
or intended to constitute a relationship with the characteristics of an
agency, partnership, joint venture, or of a collabora- tion for the
purposes of sharing any profits or ownership in common. Neither
<PAGE>
Eidtworks, Ltd.
Services Agreement page 4
party shall have the right, power or authority at any time to act on behalf
of, or represent, the other party, but each party hereto shall be
separately and entirely liable for its own respective debts in all
respects. This Agreement is not for the benefit of any person who is not a
party signatory hereto or specifically named as a beneficiary herein. RIMC
may assign or license its rights hereunder in whole or in part to any
person, firm or corporation. Except for assignment to RIMC, EditWorks may
not assign or license any of its rights or obligations hereunder, or under
any agreement entered into by EditWorks with any third party. Subject to
the foregoing, the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, administrators, executors, successors and assigns, and any
past, present or future parent, subsidiary or affiliate company.
5. Notices: Any and all notices, communications and demands required or
desired to be given hereunder by either party hereto shall be in writing
and shall be validly given or made if served either personally or if
deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested. If such notice or demand be served
personally, service shall be conclusively deemed made at the time of such
personal service. If such notice or demand be served by registered or
certified mail in the manner herein provided, service shall be conclusively
deemed made two business days after the deposit thereof in the United
States mail addressed to the party to whom such notice or demand is to be
given as hereinafter set forth:
RIMC: Reliant Interactive Media Corp.
13535 Feather Sound Drive, Suite 220
Clearwater, FL 33762
EditWorks: EditWorks, Ltd.
34700 Pacific Coast Hwy., Suite 300
Capistrano Beach, CA 92624
Any party hereto may change its address for the purpose of receiving
notices or demands as herein provided by a written notice given in the
manner aforesaid to the other party hereto, which notice of change of
address shall not become effective, however, until the actual receipt
thereof by the other party.
4. Term and Purchase Rights at End of Term. This Agreement shall be for a
primary term of one year, and may be extended by RIMC for two additional
one-year terms. If this contract is terminated by RIMC at the end of one
year, EditWorks will repurchase the EditWorks Inventory for an amount equal
to one- half of the RIMC payments that were applied to its equity interest
in the equipment. In the alternative RIMC shall have the option to purchase
all right and title interest in and to the EditWorks Inventory for a lump
sum payment of
<PAGE>
Eidtworks, Ltd.
Services Agreement page 5
$100,000 at the end of one year, $50,000 at the end of two years or $25,000
at the end of three years.
5. Miscellaneous:
(a) This Agreement shall be construed, interpreted and enforced in
accordance with and shall be governed by the laws of the State of
Nevada applicable to agreements entered into and wholly to be
performed therein. In the event of any conflict between any provisions
hereof and any applicable laws to the contrary, the latter shall
prevail, but this Agreement shall be deemed modified only to the
extent necessary to remove such conflicts.
(b) Each of the parties hereto shall execute and deliver any and all
additional documents, and shall do any and all acts and things
reasonably required in connection with the performance of the
obligations undertaken hereunder and to effectuate the extent of the
parties thereto.
(c) This Agreement constitutes the entire agreement of the parties hereto
and supersedes all oral and written agreements and understandings made
or entered into by the parties hereto prior to the date hereof. No
amendment, change or modification of this Agreement shall be valid
unless it is made in writing and signed by both parties hereto, and
any waiver of a failure to perform or breach shall not operate to
waive any subsequent failure to perform or breach
(d) The captions appearing at the commencement of the paragraphs hereof
are descriptive only and for convenience in reference to this
Agreement and should there be any conflict between any such heading
and the paragraph at the head of which it appears, the paragraph
thereof and not such heading shall control and govern in the
construction of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
(signatures for EditWorks, Ltd. Service Agreement)
Reliant Interactive Media Corp.
/s/
- --------------------------------------
By: Tim Harrington, President
EditWorks, Ltd.
/s/
- --------------------------------------
By: J. Dan Sifford, President
