UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
ImagineNet Corp.
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(Name of Small Business Registrant in its charter)
Nevada 65-0878035
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(State or other jurisdiction of (I.R.S. Employer Identification no.)
incorporation or organization)
222 Lakeview Ave., # 160-142
West Palm Beach, FL 33401 33401
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 832-5696
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered Each class to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value per share
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(Title of class)
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
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TABLE OF CONTENTS
Part I
Item 1. Description of Business
(a) Business Development
(b) Business of Registrant
General
Business Strategy
Sales and Marketing
Competition
Government Regulation
Facilities
Risk Factors
1. Development Stage Company
2. No Operating History, Revenues or Earnings.
3. Minimal Assets, Working Capital and Net Worth
4. Need for Additional Capital: Going Concern Qualification Expressed by
Auditor
5. Dependence on Management
6. No Existing Customer Base
7. High Risks and Unforeseen Costs Associated with IMAGS's Entry into the
Internet Marketing Industry
8. Competition
9. Absence of Public Market for Shares
10. No Dividends
11. No Cumulative Voting
12. Control by Existing Management and Stockholders
13. Potential Anti-Takeover and Other Effects of Issuance of Preferred Stock
May Be Detrimental to Common Shareholders
14. No Secondary Trading Exemption
15. Possible Adverse Effect of Penny Stock Regulations on Liquidity of Common
Stock in any Secondary Market
Item 2. Management's Discussion and Analysis or Plan of Operation
Plan of Operations
Financial Condition, Capital Resources and Liquidity
Net Operating Losses
Year 2000 Compliance
Forward-Looking Statements
Item 3. Description of Property
Item 4. Security Ownership of Certain Beneficial Owners and Managers
Item 5. Directors, Executive Officers, Promoters & Control Persons
Family Relationships
Business Experience
Item 6. Executive Compensation:
Compensation of Directors
Item 7. Certain Relationships and Related Transactions
Item 8. Description of Securities
Preferred Stock
Transfer Agent
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PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
(a) Market Information.
(b) Holders
(c) Dividends
Item 2. Legal Proceedings
Item 3. Changes in and Disagreements with Accountants
Item 4. Recent Sales of Unregistered Securities
Item 5. Indemnification of Directors and Officers
PART F/S
Part III
PART F/S
INDEX TO AUDITED FINANCIAL STATEMENTS
For the period from November 24, 1998
(date of inception) through October 31, 1999
Independent Auditors' Report...............................F-1
Balance Sheet..............................................F-2
Statement of Operations....................................F-3
Statement of Stockholders' Equity..........................F-4
Statement of Cash Flows....................................F-5
Notes to Financial Statements..............................F-6
Item 1. Index to Exhibits
Signatures
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PART I
Item 1. Description of Business.
(a) Business Development.
IMAGINENET CORP. (hereinafter referred to as the "Company" or "IMAG")
was organized under the laws of the State of Nevada on November 24, 1998. The
Company is a developmental stage company organized by William H. Ragsdale, the
President and Director and sole executive of the Company whose aim is to sell
and distribute musical and related instruments and devices via the Internet to
the general public. The Company's offices are presently located at 222 Lakeview
Avenue, #160-142, West Palm Beach, FL 33401 and its telephone number is (561)
832-5696.
The Company is filing this Form 10-SB on a voluntary basis so that the
public will have access to the required periodic reports on the Company's
current status and financial condition.
The Company generally has been inactive, having conducted no business
operations except organizational and fund raising activities since its
inception. IMAG initially distributed to Mr. William H. Ragsdale a total of
6,000,000 shares of common stock, $0.001 par value per share ( the "Common
Stock). These founders shares were issued pursuant to Section 4(2) of the
Securities Act of 1933 (the "Act"). From November, 1998, through April 1999 IMAG
received gross proceeds of $50,000 from the sale of a total of 1,240,000 shares
of common stock (the "Common Stock"), in an offering conducted pursuant to
Section 3(b) of the Act, and Rule 504 of Regulation D promulgated thereunder
("Rule 504").(See: Part II. Item 4. "Recent Sales of Unregistered Securities).
These offerings were made in the State of Georgia and Florida.
There are no preliminary agreements or understandings between the
Company and its sole executive officer and director or affiliates or lending
institutions with respect to any loan agreements or arrangements.
The Company intends to offer additional securities under Rule 506 of
Regulation D under the Act ("Rule 506) to fund its short and medium term
expansion plans. (See Part I, Item 1. "Description of Business - (b) Business of
Issuer.")
See (b) "Business of Issuer" immediately below for a description of the
Company's proposed business. As of the date hereof, the Company has no other
employees or clients for its services.
(b) Business of Registrant.
General
Since its inception, the Company has conducted no business operations
except for organizational activities and an offering of Common Stock pursuant to
which it has received gross offering proceeds in the amount of $50,000. Further,
the Company has had no employees since its organization. It is anticipated that
the Company's sole executive officer and director will receive a reasonable
salary for services as the sole executive officer at such time as the Company
commences business operations. (See Part I, Item 6. "Executive Compensation.")
This individual will devote such time and effort as may be necessary to
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participate in the day-to-day management of the Company. (See Part I, Item 5.
"Directors, Executive Officers, Promoters and Control Persons - Executive
Officers and Directors.") The Company proposes to sell and distribute musical
and related instruments and devices via the internet to the general public.
The following discussion of the market, as it relates to the Company's
medium and long term business objectives, is of course pertinent only if the
Company is successful in obtaining sufficient debt and/or equity financing to
commence operations.
William H, Ragsdale is a graduate of Oxford with an Associates of Arts
Degree, and from Emory University with a Bachelor of Arts Degree. Mr. Ragsdale
was employed as an assistant Manager during 1992 and 1993 for The Bread Garden,
a landscaping company. From 1993 to the present, Mr. Ragsdale has owned and
operated Russell Landscaping and Maintenance. In addition, Mr. Ragsdale plays
musical instruments with various bands in the Atlanta, Georgia area. This
familiarity with musicians and musical instruments is the training and
experience brought to the business. Mr. Ragsdale does not have any marketing
experience with musical instruments. The Company believes Mr. Ragsdale's unique
creative skills, his special appreciation of music and extensive networking
ability in the music field will expose it to many business opportunities and
sales.
William H. Ragsdale decided to provide through the burgeoning global
ecommerce distribution network an alternative to musical instrument purchasers
which would enable them to make very specific and personal purchasing decisions
at an attractive price point. His creativity and salesmanship when combined with
his musical interests and the global Internet ecommerce marketing and
distribution alternative which will have the advantages of greater availability
of capital and potential for growth through the vehicle of a public company as
compared to a privately-held company. The time required to be devoted by Mr.
Ragsdale to the day-to-day affairs of the Company is presently estimated to be
approximately five to ten hours per week. At such time as ImagineNet obtains
sufficient funding with which to commence its Internet based operations, hire
employees and search for an appropriate site where its executive offices can
located Mr. Ragsdale's time commitment will substantially increase.
In the Company's early Internet web page design stages the Company will
be dependent upon Mr. Ragsdale to initiate negotiations to establish strategic
alliances with musical instrument suppliers and shippers. Mr. Ragsdale has
unique and creative skills which are well suited to achieve lasting strategic
alliances. The Company believes that its commercial viability will be directly
dependent upon Mr. Ragsdale's networking abilities and salesmanship. There can
be no assurance that he will be successful in the future in the negotiation and
formation of critical strategic alliances for the Company.(See: Part I - Item 1.
"Description of Business (b) Business of Issuer - Risk Factors.")
In its initial web page design and strategic alliance negotiations
phase, the Company will operate out of offices provided by Mr. Ragsdale. In the
event the Company requires additional capital during this initial start-up
phase, Mr. Ragsdale has committed to fund the operation until such time as
additional capital is available.
Due to the limited capital available to the Company, the principal
risks during this phase are that the Company is dependent upon Mr. Ragsdale's
efforts, and that the Company will not be able to establish a sufficiently
profitable client base to establish the business. (See Part I, Item 1.
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"Description of Business," (b) "Business of Issuer - Risk Factors.")
To implement the initial plan, the Company intends to initiate a
self-directed private placement under Rule 506 in order to raise an additional
$100,000. In the event such placement is successful, the Company believes that
it will have sufficient operating capital to meet the initial goals and
operating costs for a period of twelve (12) months. In the event the Company is
not successful in raising such funds, the Company believes that it will not be
able to continue operations with existing funds and the financial support of Mr.
Ragsdale beyond a period of nine(9) to twelve(12) months.
Even if the Company is successful at raising this additional money,
there can be no assurance that the sales it generates will be sufficient to
establish a viable business. Furthermore, the Company may face unforeseen costs
associated with entry into musical and related instruments and devices via the
internet market. The Company still will be largely dependent upon Mr. Ragsdale'
ability to find customers on a profitable and timely basis. Although the Company
believes the $100,000 is sufficient to cover operations for the projected
period, there can be no assurance that such funding can cover the additional
risks associated with expansion. (See Part I, Item 1. "Description of Business,"
(b) "Business of Issuer - Risk Factors.")
The Company plans to monitor closely its medium term operations for
approximately one (1) year. (See Part I, Item 1. "Description of Business - (b)
Business of Issuer - Industry Regulation.") If it has been successful in
securing the necessary financing and if its operations are capable of sustaining
itself, the Company intends to seek additional financing in the form of
conventional bank financing, small business administration financing, venture
capital or the private placement of corporate debt for a total of approximately
$1,000,000. There can be no assurance that any of these financing sources will
be available to the Company. The Company believes that such expansion will place
the Company in a position to be a major presence in the musical and related
instrument and device market. If the Company's subsequent expansion is
implemented, Mr. Ragsdale believes he will be able to oversee the entire
operation with minimal additional personnel.
The Company has not sought as of yet any debt financing since it
believes that any qualified venture capital firm will not loan any funds to the
Company until such time as it is fully reporting and has completed at least two
years of operations. Once it has met those criteria, the Company intends to seek
out funds from licensed venture capital firms and to negotiate terms which will
fit the financial capabilities of the Company. Since the Company does not expect
to seek debt financing until such time as it has successfully expanded its
services to additional locations, it believes that it can negotiate appropriate
placement and repayment terms for such borrowings. However, there can be no
assurance that such funds will be available to it or that suitable terms which
are most advantageous to the Company can be negotiated. In addition, the Company
does not, at this time, anticipate that it will require substantial leverage to
fund the expanded operations. However, in the event the Company did receive debt
financing and in the event the Company were not successful in sustaining
operations or meeting such debt and defaulted in its payments on the debt, then
such debt financing could foreclose upon the Company's interests to the
detriment of its shareholders.
Although the Company is authorized to borrow funds, as discussed, it
does not intend to do so until such time as it has been operating for a given
period of time. At such time as the Company seeks borrowed funds, it does not
intend to use the proceeds to make payments to the Company's management (except
as reasonable salaries, benefits and out of pocket expenses). The Company has
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no present intention of acquiring any assets or other property owned by any
promoter, management or their respective affiliates or associates or acquiring
or merging with a business or company in which the Company's promoter,
management or their respective affiliates or associates directly or indirectly
have an ownership interest. Although there is no present potential for a related
party transaction, in the event that any payments are to be made to a promoter
and management such will be disclosed to the security holders and no such
payments will be made in breach of the fiduciary duty such related persons have
to the Company.
There are no arrangements, agreements or understandings between
non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of the Company's affairs. There are no arrangements, agreements or
understandings under which non-management shareholders will exercise their
voting rights to continue to elect the current directors to the Company's Board
of Directors.
As a reporting company the Company is required to file quarterly on
Form 10-QSB and annually on Form 10-KSB and in each case, is required to provide
the financial and other information specified in such forms. In addition, the
Company would be required to file on Form 8-K in the event there was a change of
control, if the Company acquires or disposes of assets, if there is a bankruptcy
or receivership, if the Company changes its certified accountants, upon the
occurrence of other events which may be relevant to the security holders, and
after certain resignations of directors. Being subject to such reporting
requirements reduces the pool of potential acquisitions or merger candidates for
the Company since such transactions require that certified financials must be
provided for the acquiring, acquired or merging candidate within a specified
period of time. That is why the Company intends to expand through internal
operations through the short and medium term. At such time as the Company will
seek acquisitions or mergers, it will limit itself to companies which either
already have certified financial statements or companies whose operations lend
themselves to review for a certified audit within the required time.
Business Strategy
The Company's business strategy, which is dependent upon its obtaining
sufficient financing with which to implement its business plan (of which there
is no assurance), is to profitably participate in the marketing of musical and
related instruments and devices via the internet. Once the Company commences to
actively pursue business operations its revenues will remain dependent upon the
ability of the Company to sell its musical and related instruments and devices.
The Company's primary direct costs will be (i) marketing and sales
expenses related to the company's product marketing, (ii) salaries to Mr.
Ragsdale, and an eventual regional manager and laborers (payroll cost), (iii)
employee costs (i.e payroll taxes) and associated employee benefits. (See Part
I, Item 1, "Description of Business,") Employment related taxes consist of the
employer's portion of payroll taxes required under the Federal Income
Contribution Act ("FICA"), which includes Social Security and Medicare, and
federal and state unemployment taxes. The federal tax rates are defined by the
appropriate federal regulations. State of Georgia unemployment tax rates are
affected by claims experience of which the Company has none at this time. Health
benefits are comprised primarily of medical insurance costs, but also include
costs of other employee benefits such as prescription coverage, vision care,
disability insurance and employee assistance plans.
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The Company's gross profit margin will be determined in part by its
ability to minimize and control operating costs, and specifically labor costs
and to maintain a firm control on marketing, sales and advertising costs. The
Company will also attempt to maximize market penetration of its products in
order to capture a stream of revenue.
Sales and Marketing
The Company plans to market its products through internet sales. The
Company believes that this approach will allow the Company to quickly penetrate
the market and gain brand-name recognition. The Company believes that this
approach will develop national awareness and ultimately allow it to become a
market leader.
The Company anticipates that its initial sales and marketing efforts
will be focused on advertising. Good quality presentations and professional
follow-up with clients will also be critical to the Company's success. This
approach will include various financing alternatives available. The Company
believes the inclusion of "financial alternatives" will, in many cases, provide
a manageable way in which a client can utilize the Company's products where he
may otherwise have none and thereby close the sale.
Competition
The markets in which the Company is engaged are subject to vigorous
competition. Mail order, catalogue, and retail outlets regularly market the same
or similar products. Under such circumstances the competition is intense both as
to price and product quality.
Government Regulation
Overview
As an employer the Company is subject to all federal, state and local
statutes and regulations governing its relationship with its employees and
affecting businesses generally.
Facilities
In its initial phase, the Company will operate out of offices provided
by Mr. Ragsdale. The Company address is 1506 Briarhill Lane NE, Atlanta,
Georgia. Mr. Ragsdale will begin researching the real estate market in order to
determine the most appropriate site to locate IMAG's offices and facilities. In
the event the Company requires additional capital during this phase, Mr.
Ragsdale has committed to fund the operation through its first twelve (12)
months if additional capital is not available.
Risk Factors
Before making an investment decision, prospective investors in the
Company's Common Stock should carefully consider, along with other matters
referred to herein, the following risk factors inherent in and affecting the
business of the Company.
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1. Development Stage Company. IMAG was organized on November 24, 1998,
and accordingly, is in the early form of its development stage and must be
considered promotional. Management's efforts, since inception, have been
allocated primarily to organizational and fund raising activities and the
ability of the Company to establish itself as a going concern is dependent upon
the receipt of additional funds from operations or other sources to continue
those activities. Potential investors should be aware of the difficulties
normally encountered by a new enterprise in its development stage, including
under-capitalization, cash shortages, limitations with respect to personnel,
technological, financial and other resources and lack of a client base and
market recognition, most of which are beyond the Company's control. The
likelihood that the Company will succeed must be considered in light of the
problems, expenses and delays frequently encountered in connection with the
competitive environment in which the Company will operate. The Company's success
depends to a large extent on Mr. Ragsdale's abilities and effectiveness in
successfully building a large and profitable client base. There is no guarantee
that the Company's proposed activities will attain the level of recognition and
acceptance necessary for the Company to become viable. There is intense
competition in the marketplace, several competitors are large public companies
which are already positioned in the business and which are better financed than
the Company. There can be no assurance that the Company, with its very limited
capitalization, will be able to compete with these companies and achieve
profitability. (See Part I, Item 1. "Description of Business.")
2. No Operating History, Revenues or Earnings. As of the date hereof,
the Company has not yet commenced operations and, accordingly, has received no
operating revenues or earnings. Since its inception, most of the time and
resources of IMAG's sole executive officer and director has been spent in
organizing the Company, obtaining interim financing and developing a business
plan. The Company's success is dependent upon its obtaining additional financing
from intended operations, from placement of its equity or debt or from third
party funding sources. The Company's success in the business of internet
marketing depends upon the generation of a sufficient amount of sales to enable
the Company to continue in operation. There is no assurance that IMAG will be
able to obtain additional debt or equity financing from any source. The Company,
during the development stage of its operations, can be expected to sustain
substantial operating expenses without generating any operating revenues or the
operating revenues generated can be expected to be insufficient to cover
expenses. Thus, for the foreseeable future, unless the Company attains
profitable operations, which is not anticipated, the Company's financial
statements will show an increasing net operating loss. (See Part I, Item 1.
"Description of Business.")
3. Minimal Assets, Working Capital and Net Worth. As of October 31,
1999, the Company had total assets in the amount of $49,696, consisting
principally of paid-in capital of $56,000 less accrued expenses. As a result of
its minimal assets, as of October 31, 1999, the Company has very minimal net
worth presently. Further, IMAG's working capital is presently minimal and there
can be no assurance that the Company's financial condition will improve. The
Company is expected to continue to have minimal working capital or a working
capital deficit as a result of current liabilities. Even though management
believes, without assurance, that it will obtain sufficient capital with which
to implement its business plan on a limited scale, the Company is not expected
to continue in operation after twelve (12) months without an infusion of
capital. In order to obtain additional equity financing, management may be
required to dilute the interest of existing shareholders or forego a substantial
portion of its revenues, if any. (See Part I, Item 1. "Description of Business")
4. Need for Additional Capital: Going Concern Qualification Expressed
by Auditor. Without an infusion of capital or profits from operations, the
Company is not expected to continue in operation after the expiration of the
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period of twelve(12) months from the date hereof. Accordingly, the Company is
not expected to become a viable business entity unless additional equity and/or
debt financing is obtained. IMAG's independent certified public accountant has
expressed this as a "going concern" qualification on the Company's financial
statements. The Company does not anticipate the receipt of operating revenues
until management successfully implements its business plan, which is not
assured. Further, IMAG may incur significant unanticipated expenditures which
deplete its capital at a more rapid rate because of among other things, the
development stage of its business, its limited personnel and other resources and
its lack of clients and market recognition. Because of these and other factors,
management is presently unable to predict what additional costs might be
incurred by the Company beyond those currently contemplated.
5. Dependence on Management: The possible success of the Company is
expected to be largely dependent on the continued services of Mr. Ragsdale, the
sole executive and director. Mr. Ragsdale is expected to devote only such time
and effort to the business and affairs of the Company as may be necessary to
perform his responsibilities as the Company's sole executive officer and
director. The loss of the services of Mr. Ragsdale would adversely affect the
conduct of the Company's business and its prospects for the future. The Company
presently holds no key-man life insurance on Mr. Ragsdale, and has no employment
contract or other agreement.
6. No Existing Client Base. The Company was only recently organized.
The Company currently has no existing clients. The very limited funding
currently available to the Company will not permit it to commence business
operations except on a very limited scale. There can be no assurance that the
debt and/or equity financing, which is expected to be required by the Company in
order for IMAG to continue in business after the expiration of the next
twelve(12) months, will be available. The Company has no clients presently and
there can be no assurance that it will be successful in obtaining clients.
Management believes that the Company must, in order to survive, ultimately
generate a large dollar amount of sales from a large volume of clients. The
Company could be expected to experience substantial difficulty in attracting the
high volume of clients. (See Part I, Item 1. "Description of Business," (b)
"Business of Issuer - Business Strategy; and - Sales and Marketing.")
7. High Risks and Unforeseen Costs Associated with IMAG's Entry into
the Internet Marketing Industry. There can be no assurance that the costs
associated with the establishment of a client base, or for the obtaining of a
substantial volume of sales by IMAG will not be significantly greater than those
estimated by the Company. Therefore, the Company may expend significant
unanticipated funds or significant funds may be expended by IMAG without
establishing a business.
8. Competition . The markets in which the Company is engaged is subject
to vigorous competition. The Company's competitors include mail order,
catalogue, and retail outlet companies, many of which are larger and have
greater financial and marketing resources than the Company. To the extent that
such competitors aggressively protect their existing market share through the
reduction of pricing and the providing of other purchasing incentives to the
Company's targeted clients, the Company's financial condition, results of
operations or cash flows could be materially and adversely affected.
9. Absence of Public Market for Shares. The Company's shares of Common
Stock are not registered with the U.S. Securities and Exchange Commission under
the Act. There is no public market for the shares of Common Stock and no
assurance that one will develop. Of such shares, the Company has issued
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6,000,000 shares of common stock to persons affiliated with IMAG pursuant to an
exemption from registration provided by Section 4(2) of the Act and Regulation D
promulgated thereunder. These shares are "restricted securities". Rule 144 of
the Act provides, in essence, that holders of restricted securities, one year
after the acquisition thereof from the Company or an affiliate of the Company,
may, every three months, sell to a market maker or in ordinary brokerage
transactions an amount equal to one percent of the Company's then outstanding
securities. Non-affiliates of the Company who hold restricted securities for a
period of two years may sell their securities without regard to volume
limitations or other restrictions. Resales of the free-trading shares of Common
Stock by "affiliates, control persons and/or underwriters" of IMAG, as those
terms are defined in the Act, will be subject to the volume limitations,
described in paragraph (e) of Rule 144. Any transfer or resale of the shares of
IMAG's Common Stock will be subject, in addition to the Federal securities laws,
to the "blue sky" laws of each state in which such transfer or resale occurs. A
total of 6,000,000 shares of the Company's Common Stock were available for
resale under Rule 144 commencing on November 24, 1999. Sales of shares of Common
Stock under Rule 144 may have a depressive effect on the market price of the
Company's Common Stock, should a public market develop for such stock. Such
sales also might impede future financing by the Company. (See Part I, Item 4.
"Security Ownership of Certain Beneficial Owners and Management.")
10. No Dividends. While payments of dividends on the Common Stock rests
with the discretion of the Board of Directors, there can be no assurance that
dividends can or will ever be paid. Payment of dividends is contingent upon,
among other things, future earnings, if any, and the financial condition of the
Company, capital requirements, general business conditions and other factors
which cannot now be predicted. It is highly unlikely that cash dividends on the
Common Stock will be paid by the Company in the foreseeable future.
11. No Cumulative Voting. The election of directors and other questions
will be decided by a majority vote. Since cumulative voting is not permitted and
less than one-half of the Company's outstanding Common Stock constitute a
quorum, investors who purchase shares of the Company's Common Stock may not have
the power to elect even a single director and, as a practical matter, the
current management will continue to effectively control the Company.
12. Control by Existing Management and Stockholders. The present
shareholders of the Company's Common Stock will, by virtue of their percentage
share ownership and the lack of cumulative voting, be able to elect the entire
Board of Directors, establish the Company's policies and generally direct its
affairs. Accordingly, persons investing in the Company's Common Stock will have
no significant voice in Company management, and cannot be assured of ever having
representation on the Board of Directors. (See Part I, Item 4. "Security
Ownership of Certain Beneficial Owners and Management.")
13. Potential Anti-Takeover and Other Effects of Issuance of Preferred
Stock May Be Detrimental to Common Shareholders. The Company is authorized to
issue up to 10,000,000 shares of preferred stock. $.001 par value per share
(hereinafter referred to as the "Preferred Stock"); none of which shares has
been issued. The issuance of Preferred Stock does not require approval by the
shareholders of the Company's Common Stock. Holders of Preferred Stock may have
the right to receive dividends, certain preferences in liquidation and
conversion and other rights; any of which rights and preferences may operate to
the detriment of the shareholders of the Company's Common Stock. Further, the
issuance of any shares of Preferred Stock having rights superior to those of the
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Company's Common Stock may result in a decrease in the value of market price of
the Common Stock provided a market exists, and additionally, could be used by
the Board of Directors as an anti-takeover measure or device to prevent a change
in control of the Company.
14. No Secondary Trading Exemption. In the event a market develops in
the Company's shares, of which there can be no assurance, secondary trading in
the Common Stock will not be possible in each state until the shares of Common
Stock are qualified for sale under the applicable securities laws of the state
or the Company verifies that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. There can
be no assurance that the Company will be successful in registering or qualifying
the Common Stock for secondary trading, or availing itself of an exemption for
secondary trading in the Common Stock, in any state. If the Company fails to
register or qualify, or obtain or verify an exemption for the secondary trading
of, the Common Stock in any particular state, the shares of Common Stock could
not be offered or sold to, or purchased by, a resident of that state. In the
event that a significant number of states refuse to permit secondary trading in
the Company's Common Stock, a public market for the Common Stock will fail to
develop and the shares could be deprived of any value.
15. Possible Adverse Effect of Penny Stock Regulations on Liquidity of
Common Stock in any Secondary Market. In the event a market develops in the
Company's shares, of which there can be no assurance, then if a secondary
trading market develops in the shares of Common Stock of the Company, of which
there can be no assurance, the Common Stock is expected to come within the
meaning of the term "penny stock" under 17 CAR 240.3a51-1 because such shares
are issued by a small company; are low-priced (under five dollars); and are not
traded on NASDAQ or on a national stock exchange. The Securities and Exchange
Commission has established risk disclosure requirements for broker-dealers
participating in penny stock transactions as part of a system of disclosure and
regulatory oversight for the operation of the penny stock market. Rule 15g-9
under the Securities Exchange Act of 1934, as amended, obligates a broker-dealer
to satisfy special sales practice requirements, including a requirement that it
make an individualized written suitability determination of the purchaser and
receive the purchaser's written consent prior to the transaction. Further, the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990 require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure instrument that provides information about penny
stocks and the risks in the penny stock market. Additionally, the customer must
be provided by the broker-dealer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and the salesperson in the
transaction and monthly account statements showing the market value of each
penny stock held in the customer's account. For so long as the Company's Common
Stock is considered penny stock, the penny stock regulations can be expected to
have an adverse effect on the liquidity of the Common Stock in the secondary
market, if any, which develops.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
Since its inception, the Company has conducted no business operations
except for organizational and capital raising activities. For the period from
inception (November 24, 1998) through October 31, 1999, the Company had no
revenue from operations and accumulated operating expenses amounted to $7,576.
<PAGE>
The Company proposes to aggressively compete in the musical and related
instruments and devices via the internet for sale to the general public.
If the Company is unable to generate sufficient revenue from operations
to implement its plans, management intends to explore all available alternatives
for debt and/or equity financing, including but not limited to private and
public securities offerings. Depending upon the amount of revenue, if any,
generated by the Company, management anticipates that it will be able to satisfy
its cash requirements for the next approximately nine(9) to twelve(12) months
without raising funds via debt and/or equity financing or from third party
funding sources. Accordingly, management expects that it will be necessary for
IMAG to raise additional funds in the event that the Company is unable to
generate any revenue from operations and if only a minimal level of revenue is
generated in accordance with management's expectations.
Mr. Ragsdale, at least initially, will be solely responsible for
developing IMAG's business. However, at such time, if ever, as sufficient
operating capital becomes available, he expects to employ additional staffing.
In addition, the Company expects to continuously engage in market research in
order to monitor new market trends and other critical information deemed
relevant to IMAG's business.
Financial Condition, Capital Resources and Liquidity
At October 31, 1999, the Company had assets totaling $49,696 and
liabilities of $7,576 attributable to accrued legal expenses, organization
expenses and professional fees. Since the Company's inception, it has received
$50,000 in cash contributed as consideration for the issuance of shares of
Common Stock.
IMAG's working capital is presently minimal and there can be no
assurance that the Company's financial condition will improve. The Company is
expected to continue to have minimal working capital or a working capital
deficit as a result of current liabilities. The Company, at inception, issued
6,000,000 shares of the Company's Common Stock to Mr. Ragsdale, the sole
executive officer and director of IMAG, as founders shares. From October through
December, 1998 IMAG received gross proceeds of $50,000 from the sale of a total
of 1,240,000 shares of common stock, $.01 per value per share (the "Common
Stock"), in an offering conducted pursuant to Section 3(b) of the Act, as
amended (the "Act"), and Rule 504 of Regulation D promulgated thereunder ("Rule
504") (See: Part II. Item 4. "Recent Sales of Unregistered Securities). These
offerings were made in the State of Georgia and Florida. Even though management
believes, without assurance, that it will obtain sufficient capital with which
to implement its business plan on a limited scale, the Company is not expected
to continue in operation without an infusion of capital. In order to obtain
additional equity financing, management may be required to dilute the interest
of existing shareholders or forego a substantial interest of its revenues, if
any. (See Part I, Item 1. "Description of Business"; See Part I, Item 4.
"Security Ownership of Certain Beneficial Owners and Management" and Part I,
Item 7. "Certain Relationships and Related Transactions.")
The Company has no potential capital resources from any outside sources
at the current time. In its initial phase, the Company will operate out of the
facility provided by Mr. Ragsdale. In the event the Company requires additional
capital during this phase, Mr. Ragsdale has committed to fund the operation
until such time as additional capital is available. The Company believes that it
will require two (2) to three (3) months in order to determine the market demand
potential.
<PAGE>
The ability of the Company to continue as a going concern is dependent
upon its ability to obtain a sufficiently large and profitable client base to
purchase its products.
To implement such plan, also during this initial phase, the Company
intends to initiate a self- directed private placement under Rule 506 in order
to raise an additional $100,000. In the event such placement is successful, the
Company believes that it will have sufficient operating capital to meet the
initial expansion goals and operating costs for a period of one (1) year. In the
event the Company is not successful in raising such funds, the Company believes
that it will not be able to continue operations past a period of nine(9) to
twelve(12) months.
Net Operating Losses
The Company has net operating loss carry-forwards of $13,880 expiring
at October 31, 2019. The company has a $2,000 deferred tax asset resulting from
the loss carry-forwards, for which it has established a 100% valuation
allowance. Until the Company's current operations begin to produce earnings, it
is unclear as to the ability of the Company to utilize such carry-forwards.
Year 2000 Compliance
The Company is currently in the process of evaluating its information
Technology for Year 2000 compliance. The Company does not expect that the cost
to modify its information Technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of operations. The
Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-SB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
business strategy, expansion and growth of the Company's business and
operations, and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it believes
are appropriate in the circumstances. However, whether actual results or
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-SB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
<PAGE>
Item 3. Description of Property
The Company's executive offices are located at 222 Lakeview Avenue,
#160-142, West Palm Beach, Florida 33401. Its telephone number is (561)
832-5696. The Company pays no rent for this space. The Company owns no real or
personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Managers
The following table sets forth information as of January 10, 2000
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five per cent of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the shares of Common Stock
beneficially owned.
Amount
Name and Address of Beneficially Percent of
Beneficial Owner Owned Class (1)
---------------- ---------- --------
Mr. William H. Ragsdale(1)(2)(3) 6,000,000 82.9%
1506 Briarhill Lane NE
Atlanta, GA
All Executive Officers and Directors 6,000,000 82.9%
as a Group (two persons)
- -------------------
(1) Based upon 7,240,000 shares of the Company's Common Stock issued and
outstanding as of January 10, 2000.
(2) Sole Executive officer of the Company. (3) Sole Member of the Board of
Directors of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons
William H. Ragsdale, President and Director
Mr. William H. Ragsdale is the Company's sole officer, director and is
the Company's driving force. He is a graduate of Oxford with an Associates of
Arts Degree, and from Emory University with a Bachelor of Arts Degree. Mr.
Ragsdale was employed as an assistant Manager during 1992 and 1993 for The Bread
Garden, a landscaping company. From 1993 to the present, Mr. Ragsdale has owned
and operated Russell Landscaping and Maintenance. In addition, Mr. Ragsdale
plays musical instruments with various bands in the Atlanta, Georgia area. This
familiarity with musicians and musical instruments is the training and
experience brought to the business. Mr. Ragsdale does not have any marketing
experience with musical instruments. The Company believes Mr. Ragsdale's unique
creative skills, his special appreciation of music and extensive networking
ability in the music field will expose it to many business opportunities and
sales.
<PAGE>
Management is unable at this time to forecast with any degree of
certainty the acceptance of the Company's funding programs or the expenses of
doing business; however, IMAG intends to market its programs competitively in
the Company's target markets.
Executive Officers and Directors
Set forth below are the names, ages, positions with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
- ---- -- ------------------
Mr. William H. Ragsdale(1)(2)(3) 29 President, Chief Executive Officer,
1506 Briarhill Lane NE Secretary, Treasurer & Director
Atlanta, GA 30324
(4) The above-named person(s) may be deemed to be "promoter(s)" and
"parent(s)" of the Company, as those terms are defined under the Rules and
Regulations promulgated under the Act.
All directors hold office until the next annual meeting of the
Company's shareholders and until their successors have been elected and qualify.
Officers serve at the pleasure of the Board of Director. Mr. Ragsdale will
devote such time and effort to the business and affairs of the Company as may be
necessary to perform his responsibilities as the Company's sole executive
officer and director.
Aside from Mr. Ragsdale, there are no other persons whose activities
will be material to the operations of the Company at this time. Mr. Ragsdale is
the sole "promoter" of the Company as such term is defined under the Act.
Family Relationships
There are no family relationships between or among the executive
officers and director of the Company.
Business Experience
William H. Ragsdale is the Company's sole officer and director and is
the Company's driving force. He is a graduate of Oxford with an Associates of
Arts Degree, and from Emory University with a Bachelor of Arts Degree. Mr.
Ragsdale was employed as an assistant Manager during 1992 and 1993 for The Bread
Garden, a landscaping company. From 1993 to the present, Mr. Ragsdale has owned
and operated Russell Landscaping and Maintenance. In addition, Mr. Ragsdale
plays musical instruments with various bands in the Atlanta, Georgia area. This
familiarity with musicians and musical instruments is the training and
experience brought to the business. Mr. Ragsdale does not have any marketing
experience with musical instruments. The Company believes Mr. Ragsdale's unique
creative skills, his special appreciation of music and extensive networking
ability in the music field will expose it to many business opportunities and
sales.
<PAGE>
Item 6. Executive Compensation:
The Company, in consideration for founders services, issued to Mr.
Ragsdale, the Company's sole executive officer and/or director, 6,000,000 shares
of restricted common stock. Except for the above-described compensation, it is
not anticipated that any executive officer of the Company will receive any cash
or non-cash compensation for his or her services in all capacities to the
Company until such time as the Company commences business operations. At such
time as IMAG commences operations, it is expected that the Board of Directors
will approve the payment of salaries in a reasonable amount to each of its
officers for their services in the positions. At such time, the Board of
Directors may, in its discretion, approve the payment of additional cash or
non-cash compensation to the foregoing for their services to the Company.
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans but has the intention of implementing
such plans in the future.
Compensation of Directors
The Company has no standard arrangements for compensating the directors
of the Company for their attendance at meetings of the Board of Directors.
Item 7. Certain Relationships and Related Transactions:
On November 24, 1998, the Company issued 6,000,000 shares of restricted
Common Stock to Mr. William H. Ragsdale, the President and Director of the
Company and record and beneficial owner of approximately 82.9% of the Company's
outstanding Common Stock, in consideration and exchange therefore for services
in connection with the organization of IMAG performed for the Company by him.
At the current time, the Company has no provision to issue any
additional securities to management, promoters or their respective affiliates or
associates.(See Part I, Item 1. "Description of Business - (b) Business of
Issuer.")
Item 8. Description of Securities.
The Company is authorized to issue 50,000,000 shares of Common
Stock, $0.001 par value. The issued and outstanding shares of Common Stock being
registered hereby are validly issued, fully paid and non-assessable. The holders
of outstanding shares of Common Stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the Board
of Directors may from time to time determine.
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, have one vote per share in all matters to be voted upon
by the stockholders. A majority vote is required on all corporate action.
Cumulative voting in the election of directors is not allowed, which means that
the holders of more than 50% of the outstanding shares can elect all the
directors as they chose to do so and, in such event, the holders of the
remaining shares will not be able to elect any directors. The shares of Common
Stock have no preemptive, subscription, conversion or redemption rights and can
only be issued as fully paid and nonassessable shares. Upon liquidation,
dissolution or winding-up of the Company, the holders of Common Stock are
entitled to receive a pro rata of the assets of the Company which are legally
available for distribution to stockholders.
<PAGE>
Preferred Stock
The Company is authorized to issue 10,000,000 shares of
Preferred Stock, $0.001 par value. Currently there are no issued and outstanding
preferred shares of the Company as of January 10, 2000.
Transfer Agent
The Company is serving as its own transfer agent until it
becomes eligible for quotation with NASD.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
No matter covered by this report was submitted during the last fiscal
year end to a vote of the Company's shareholders through the solicitation of
proxies or otherwise.
(a) Market Information.
There has been no established public trading market for the Common
Stock since the Company's inception on November 24,1998.
(b) Holders.
As of January 10, 2000, the Company had 26 shareholders of record of
its 7,240,000 outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.
Item 2. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 3. Changes in and Disagreements with Accountants
Because the Company has been generally inactive since its inception, it
has had no independent accountant until the retention in November 1998 of
Durland & Company CPA's P.A., 340 Royal Palm Way, 3rd Floor, Palm Beach, Florida
33480. There has been no change in the Company's independent accountant during
the period commencing with the Company's retention of Durland & Company CPA's,
P.A., through the date hereof.
<PAGE>
Item 4. Recent Sales of Unregistered Securities
On November 24, 1998, the Company issued 6,000,000 shares of restricted
Common Stock to Mr. William H. Ragsdale, the President and Director of the
Company and record and beneficial owner of approximately 82.9% of the Company's
outstanding Common Stock, for founders services. The founders shares were issued
pursuant to 4(2) of the Act to its then shareholder and director.
From October through April 1999, the Company issued and sold 1,240,000
shares of unrestricted Common Stock to Georgia and Florida residents for cash
consideration totaling $50,000. No underwriter was employed in connection with
the offering and sale of the shares. The Company claimed the exemption from
registration in connection with each of the offerings provided under Section
3(b) of the Act and Rule 504 of Regulation D promulgated thereunder.
The facts relied upon by the Company to make the federal exemption
available include the following: (i) the aggregate offering price for the
offering of the shares of Common Stock did not exceed $1,000,000, less the
aggregate offering price for all securities sold within the twelve months before
the start of and during the offering of the shares in reliance on any exemption
under Section 3(b) of, or in violation of Section 5(a) of, the Act; (ii) no
general solicitation or advertising was conducted by the Company in connection
with the offering of any of the shares; (iii) the fact that the Company has not
been since its inception (a) subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended; (b) an "investment
Company" within the meaning of the Investment Company Act of 1940, as amended;
or (c) a development stage Company that either has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies, or other entity or
person; and (iv) the required number of manually executed originals and true
copies of Form D were duly and timely filed with the U.S. Securities and
Exchange Commission.
Item 5. Indemnification of Directors and Officers.
Article X of the Company's Articles of Incorporation contains
provisions providing for the indemnification of directors and officers of the
Company as follows:
(a) The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is otherwise serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe his conduct is unlawful. The
termination of any action, suit or proceeding, by judgment, order, settlement,
conviction upon a plea of nolo contendere or its equivalent, shall not of itself
create a presumption that the person did not act in good faith in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe the action was unlawful.
<PAGE>
(b) The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or completed
action or suit by or in the right of the corporation, to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in, or not, opposed to,
the best interests of the corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation, unless, and only to the extent that, the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability, but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnification for such
expenses which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the officer,
director and employee or agent is proper in the circumstances, because he has
met the applicable standard of conduct set forth in Section (a) or (b) of this
Article. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in advance
of the final disposition or such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
(f) The Board of Directors may exercise the corporation's power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under this Article.
<PAGE>
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Articles of Incorporation, the Bylaws, agreements, vote of
the shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office and shall continue as to person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs and personal
representative of such a person.
The Company has no agreements with any of its directors or executive
offices providing for indemnification of any such persons with respect to
liability arising out of their capacity or status as officers and directors.
At present, there is no pending litigation or proceeding involving a
director or executive officer of the Company as to which indemnification is
being sought.
PART F/S
The Financial Statements of IMAG, and Notes to Financial Statements
together with the Independent Auditor's Report of Durland & Company, CPA's,
required by this Item commences on page F-1 hereof and are incorporated herein
by this reference.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report.......................................F-2
Balance Sheet......................................................F-3
Statement of Operations............................................F-4
Statement of Changes in Stockholders' Equity.......................F-5
Statement of Cash Flows............................................F-6
Notes to Financial Statement.......................................F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
ImagineNet Corp.
(A Development Stage Enterprise)
West Palm Beach, Florida
We have audited the accompanying balance sheet of ImagineNet Corp., a
development stage enterprise, as of October 31, 1999, and the related statements
of operations, changes in stockholders' equity and cash flows for the period
from November 24, 1998 (Inception) through October 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 ImagineNet Corp. as of October
31, 1999 and the results of its operations and its cash flows for the period
from November 24, 1998 (Inception) through October 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 5 to the
financial statements, the Company has experienced a loss since inception. The
Company's financial position and operating results raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 5. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Durland & Company
- --------------------------
Durland & Company, CPAs, P.A.
Palm Beach, Florida
December 15, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
ImagineNet Corp.
(A Development Stage Enterprise)
Balance Sheet
October 31, 1999
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 49,696
-------------
Total current assets 49,696
-------------
Total Assets $ 49,696
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade $ 4,812
Related party 2,764
-------------
Total current liabilities 7,576
-------------
Total Liabilities $ 7,576
-------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, authorized 10,000,000
shares, 0 issued and outstanding
Common stock, $0.001 par value, authorized 50,000,000
shares; 7,240,000 issued and outstanding 7,240
Additional paid-in capital 48,760
Deficit accumulated during the development stage (13,880)
-------------
Total stockholders' equity 42,120
-------------
Total Liabilities and Stockholders' Equity $ 49,696
=============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
ImagineNet Corp.
(A Development Stage Enterprise)
Statement of Operations
Period from November 24, 1998 (Inception) through October 31, 1999
<S> <C>
Revenues $ 0
-------------------
General and administrative expenses 304
Accounting fees 4,812
Legal fees - related party 2,764
Services - related party 6,000
-------------------
Total expenses 13,880
-------------------
Net loss $ (13,880)
===================
Loss per weighted average common share $ (.00)
===================
Number of weighted average common shares outstanding 6,870,088
===================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
ImagineNet Corp.
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity Period from
November 24, 1998 (Inception) through October 31, 1999
Deficit
Accumulated
Additional During the Total
Number of Common Paid-In Development Stockholders'
Shares Stock Capital Stage Equity
---------------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
November 24, 1998 (Inception) 0 $ 0 $ 0 $ 0 $ 0
11/98 - founders' shares ($0.001/sh.) 6,000,000 6,000 0 0 6,000
11/98 - cash ($0.01/sh.) 40,000 40 360 0 400
12/98 - cash ($0.01/sh.) 260,000 260 2,340 0 2,600
4/99 - cash ($0.05/sh.) 940,000 940 46,060 0 47,000
Net loss 0 0 0 (13,880) (13,880)
---------------- -------------- --------------- ---------------- ---------------
BALANCE, October 31, 1999 7,240,000 $ 7,240 $ 48,760 $ (13,880)$ 42,120
================ ============== =============== ================ ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
ImagineNet Corp.
(A Development Stage Enterprise)
Statement of Cash Flows
Period from November 24, 1998 (Inception) through October 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $ (13,880)
Adjustments to reconcile net loss to net cash
used by operating activities:
Stock issued for services 6,000
Changes in operating assets and liabilities
Increase in accounts payable - trade 4,812
Increase in accounts payable - related party 2,764
--------------
Net cash used by operating activities (304)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 50,000
--------------
Net cash provided by financing activities 50,000
--------------
Net increase in cash 49,696
--------------
CASH, beginning of period 0
--------------
CASH, end of period $ 49,696
==============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
ImagineNet Corp.
(A Development Stage Enterprise)
Notes to Financial Statements
(1) The Company ImagineNet Corp. (the Company) is a Nevada chartered
development stage corporation which conducts business from its
headquarters in West Palm Beach, Florida. The Company was incorporated
on November 24, 1998.
The Company has not yet engaged in its expected operations. The
Company's future operations include plans to sell and distribute
musical and related instruments and devices via the Internet. Current
activities include raising additional capital and negotiating with
potential key personnel and facilities. There is no assurance that any
benefit will result from such activities. The Company will not receive
any operating revenues until the commencement of operations, but will
nevertheless continue to incur expenses until then.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing
the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
as of the date of the statements of financial condition and revenues
and expenses for the year then ended. Actual results may differ
significantly from those estimates.
b) Start-Up costs Costs of start-up activities, including organization
costs, are expensed as incurred, in accordance with Statement of
Position (SOP) 98-5.
c) Net loss per share Basic loss per weighted average common share is
computed by dividing the net loss by the weighted average number of
common shares outstanding during the period.
d) Stock compensation for services rendered The Company issues shares
of common stock in exchange for services rendered. The costs of the
services are valued according to generally accepted accounting
principles and have been charged to operations.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.001 par value common stock, and 10,000,000 shares of $0.001 par
value preferred stock. Rights and privileges of the preferred stock are
to be determined by the Board of Directors prior to issuance. The
Company had 7,240,000 shares of common stock issued and outstanding at
October 31, 1999. The Company had issued none of its shares of
preferred stock at October 31, 1999. On November 24, 1998, the Company
issued 6,000,000 shares of common stock to its founder and President
for services rendered in connection with the organization of the
Company. During the period ended October 31, 1999, the Company issued
1,240,000 shares of common stock for $50,000 in cash.
(3) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax
and financial reporting purposes. The Company had net operating loss
carry-forwards for income tax purposes of approximately $13,880
expiring at October 31, 2019. The amount recorded as deferred tax
assets as of October 31, 1999 is approximately $2,000, which represents
the amount of tax benefit of the loss carry-forward. The Company has
established a 100% valuation allowance against this deferred tax asset,
as the Company has no history of profitable operations.
(4) Related Parties See Note (2) for shares issued for services.
During the period ended O ctober 31, 1999, a shareholder and general
counsel for the Company performed legal services in the amount of
$2,764 on behalf of the Company. This amount was still outstanding at
October 31, 1999 and is presented in Accounts payable - related party.
F-7
<PAGE>
ImagineNet Corp.
(A Development Stage Enterprise)
Notes to Financial Statements
(5) Going Concern The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The
Company's financial position and operating results raise substantial
doubt about the Company's ability to continue as a going concern, as
reflected by the net loss of $13,880 accumulated from November 24, 1998
(Inception) through October 31, 1999. The ability of the Company to
continue as a going concern is dependent upon commencing operations,
developing sales and obtaining additional capital and financing. The
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern. The
Company is currently seeking additional capital to allow it to begin
its planned operations.
F-8
<PAGE>
Part III
Item 1. Index to Exhibits
3(i).1 Articles of Incorporation of ImagineNet Corp.
(filed November 24, 1998)
3(ii).1 Bylaws
27.1 Financial Data Schedule
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ImagineNet Corp.
(Registrant)
Date: January 13, 2000 By:/s/ William H. Ragsdale
------------------------
William H. Ragsdale, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date Signature Title
---- --------- -----
January 13, 2000 By: /s/ William H. Ragsdale President and Director
------------------------
William H. Ragsdale
Exhibit 3.(i).1
ARTICLES OF INCORPORATION
OF
ImagineNet Corp.
The undersigned subscriber to these Articles of Incorporation, a
natural person competent to contract, hereby forms a corporation under the laws
of the State of Nevada.
ARTICLE I. NAME
The name of the corporation shall be ImagineNet Corp.: The principal
place of business of this corporation shall be 222 Lakeview Avenue, Suite
160-142, West Palm Beach, Florida 33401.
ARTICLE II. NATURE OF BUSINESS
This corporation may engage or transact in any and all lawful
activities or business permitted under the laws of the United States, the State
of Nevada or any other state, country, territory or nation.
ARTICLE III. CAPITAL STOCK
The maximum number of shares of stock that this corporation is
authorized to have outstanding at any one time is 50,000,000 shares of common
stock having a par value of $.001 per share and 10,000,000 shares of preferred
stock having $.001 par value per share.
ARTICLE IV. ADDRESS
The street address of the initial registered office of the corporation
shall be 202 South Minnesota Street, Carson City, NV 89703., and the name of the
registered agent of the corporation at that address is National Registered
Agents, Inc. of Nevada.
ARTICLE V. TERM OF EXISTENCE
This corporation is to exist perpetually.
ARTICLE VI. DIRECTORS
The Governing Board shall be styled as Directors. The first Board of
Directors shall consist of ONE member and the name and address is as follows:
William Harvey Ragsdale 265 Sunrise Avenue, Suite 204, Palm Beach, FL 33480.
ARTICLE VII. SPECIAL AUTHORITY OF BOARD OF DIRECTORS AND WAIVER OF
DISSENTERS RIGHTS
The Board of Directors by a majority vote thereof shall be and are
hereby authorized to enter into on behalf of the corporation and to bind the
corporation without shareholder approval, any and all acts approving (a) the
terms and conditions of a merger and/or a share exchange; and (b) divisions,
combinations and/or splits of shares of any class or series of stock of the
corporation, whether issued or unissued, with or without any change in the
<PAGE>
number of authorized shares; and shareholders affected thereby, shall not be
entitled to dissenters rights with respect thereto under any applicable
statutory dissenters rights provisions.
ARTICLE VII. EFFECTIVE DATE
The corporation shall commence its existence on February 5, 1999.
ARTICLE IX. CONFLICT OF INTEREST
Any related party contract or transaction must be authorized, approved
or ratified at a meeting of the Board of Directors by sufficient vote thereon by
directors not interested therein or the transaction must be fair and reasonable
to the Corporation.
ARTICLE X. INDEMNIFICATION
The Corporation shall indemnify its Officers, Directors, Employees and
Agents in accordance with the following:.
(a) The Corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was otherwise serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in connection with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, has no reasonable cause to believe
his conduct to be unlawful. The termination of any action, suit or proceeding,
by judgment, order, settlement, conviction upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the person did not act
in good faith in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had reasonable cause to believe the action was unlawful.
(b) The Corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or completed
action or suit by or in the right of the Corporation, to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to whether such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the Corporation, unless, and only to the extent that, the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability, but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnification for such
expenses which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
<PAGE>
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the officer,
director, employee or agent is proper under the circumstances, because he has
met the applicable standard of conduct set forth in Section (a) or (b) of this
Article. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for that purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
(f) The Board of Directors may exercise the Corporation's power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Amended Articles of Incorporation, the Bylaws, agreements,
vote of the shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the heirs
and personal representatives of such a person.
ARTICLE XI. SIGNATURES OF INCORPORATIONS
The name and street address of the Incorporator signing the Articles of
Incorporation is:
Corporation Creations International Inc. Subscribed and sworn to before me
941 Fourth Street, #200 this 24th November, 1998
Miami Beach, FL 33139
/s/ Geg K. Kuroda /s/ Luis Uriarte
--------------------------- -----------------
CORPORATE CREATIONS INTERNATIONAL, INC.
Greg K. Kuroda Vice President
ARTICLE XII. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF
REGISTERED AGENT
National Registered Agents, Inc. of Nevada hereby accepts appointment
as Resident Agent for the above named corporation.
/s/ Luis Uriarte Date: 11/24/98
----------------- -----------
Luis A. Uriarte, Assistant Secretary
Exhibit 3(ii).1
BY-LAWS OF
ImagineNet Corp.
ARTICLE I
OFFICES
The principal office of the Corporation in the State of
Florida shall be located in the City of Palm Beach. The Corporation may have
such other offices, either within or without the State of Florida, as the
business of the Corporation may require from time to time.
The Registered Office of the Corporation (now in Nevada) may
be, but need not be, identical with its principal office in the State of Florida
and the address of the Registered Office may be changed from time to time by the
Board of Directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders
shall be held in the month of July of each year, beginning with the year 1998 on
such date, at such time and place as the Board of Directors shall determine for
the purpose of electing directors and for the transaction of such other business
as may come before the meeting. If the election of directors shall not be held
on the day designated for any annual meeting, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a special meeting of
the shareholders to be held as soon thereafter as may be convenient.
SECTION 2. SPECIAL MEETING. Special meetings of the
shareholders may be called by the President, by the Board of Directors or any
member thereof, or by the holders of not less than one-fifth (1/5) of the voting
power of all shareholders of the Corporation.
SECTION 3. PLACE OF MEETING. The Board of Directors may
designate any place within or without the State of Florida as the place of
meeting for any annual meeting, or any place either within or without the State
of Florida as the place of meeting for any special meeting called by the Board
of Directors.
A waiver of notice signed before or after the meeting by all
shareholders may designate any place, either within or without the State of
Florida as the place for the holding of such meeting. If no such designation is
made, or if a special meeting is called by any person other than the Board of
Directors, the place of meeting shall be the principal office of the Corporation
in the State of Florida, except as otherwise provided in Section 5 of this
Article.
SECTION 4. NOTICE OF MEETINGS AND WAIVER. Written or printed
notice stating the place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) nor more than sixty (60) days before the date
of the meeting, either personally or by mail, by or at the direction of the
<PAGE>
Chairman of the Board, the President, or the 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 in a sealed envelope
addressed to the shareholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Notice of any shareholders' meeting
may be waived in writing by any shareholder at any time before or after the
meeting.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the
shareholders shall meet at any time and place, either within or without the
State of Florida, and consent to the holding of a meeting, such meeting shall be
valid without call or notice, and at such meeting any corporate action may be
taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD
DATE. The Board of Directors of the Corporation may close its stock transfer
books for a period not exceeding sixty (60) (but, if closed, for not less than
ten (10)) days prior to the date of any meeting of shareholders, or the date for
the payment of any dividend or for the allotment of rights, or the date when any
exchange or reclassification of shares shall be effective; or in lieu thereof,
may fix in advance a date, not exceeding sixty (60) and not less than ten (10)
days prior to the date of any meeting of shareholders, or to the date for the
payment of any dividend or for the allotment of rights, or to the date when any
exchange or reclassification of shares shall be effective, as the record date
for the determination of shareholders entitled to receive payment of any such
dividend or to receive any such allotment of rights, or to exercise rights in
respect of any exchange or reclassification of shares; and the shareholders of
record on such date shall be the shareholders entitled to notice of and to vote
at, such meeting, or to receive payment of such dividend or to receive such
allotment of rights, or to exercise such rights, in the event of an exchange or
reclassification of shares, as the case may be. If the transfer books are not
closed and no record date is fixed by the Board of Directors, the date on which
notice of the meeting is mailed shall be deemed to be the record date for the
determination of shareholders entitled to vote at such meeting. Transferees of
shares which are transferred after the record date shall not be entitled to
notice of or to vote at such meeting.
SECTION 7. VOTING LISTS. The officer or agent having charge of
the transfer book for shares of the Corporation shall make, at least ten (10)
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, with the
address and the number of shares held by each shareholder, which list, for a
period of ten (10) days prior to such meeting, shall be kept on file at the
office of the Corporation and shall be subject to inspection by any shareholder
at any time during usual business hours. Such list shall be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any shareholder during the whole time of the meeting. The original share
ledger or stock transfer book, or a duplicate thereof kept in this State, shall
be prima facie evidence as to who are the shareholders entitled to examine such
list or share ledger or stock transfer book or to vote at any meeting of
shareholders.
SECTION 8. QUORUM. A majority of the outstanding shares of the
Corporation, represented in person or by proxy, shall constitute a quorum at any
meeting of shareholders; provided, that if less than a majority of the
outstanding shares are represented at said meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
<PAGE>
SECTION 9. PROXIES. At all meetings of shareholders, a
shareholder may vote by proxy executed in writing by the shareholder 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. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy, and such proxy may be withdrawn at any time.
SECTION 10. VOTING OF SHARES. Each outstanding share of Common
Stock shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares
standing in the name of another corporation, domestic or foreign, may be voted
by such officer, agent or proxy as the By-Laws of such corporation may
prescribe, or, in the absence of such provision, as the Board of Directors of
such corporation may determine.
Shares standing in the name of a deceased person may be voted
by his administrator or executor, either in person or by proxy. Shares standing
in the name of a guardian, conservator, or trustee may be voted by such
fiduciary, either in person or by proxy.
Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the joint names of four (4) or more
fiduciaries shall be voted in the manner determined by the majority of such
fiduciaries, unless the instrument or order appointing such fiduciaries
otherwise directs.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority to do so
is contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares (except that if the right to vote be expressly given in writing
to the pledgee and notice thereof delivered to the Corporation in writing by the
pledgee, the shareholder shall not have the right to vote the shares so pledged)
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action
required to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
SECTION 13. ADJOURNMENTS. If a meeting is adjourned to another
time or place, notice of the adjourned meeting need not be given if the time and
place thereof are announced at the meeting at which the adjournment is taken.
The Corporation may transact any business which might have been transacted at
<PAGE>
the original meeting. If the adjournment is for more than thirty (30) days or a
new record is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each shareholder of record entitled to vote at the meeting.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS AND EXECUTIVE COMMITTEE. The
business and affairs of the Corporation shall be managed by its Board of
Directors. The Board of Directors may, by resolution passed by a majority of the
whole Board, designate two (2) or more of its number to constitute an Executive
Committee, who, to the extent provided in the resolution, shall have and
exercise the authority of the Board of Directors in the management of the
Corporation.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors which shall constitute the whole Board of Directors shall be fixed
from time to time by resolution passed by the Board or by the shareholders (any
such resolution of either the Board of Directors or shareholders being subject
to any later resolution by either of them) but in no event shall such number be
less than one. No resolution shall have the effect of shortening the term of any
incumbent director. Directors shall be elected at the annual meeting of
shareholders and shall continue in office until their successors shall have been
elected and qualified. Directors need not be residents of Florida nor need they
be the holder of any shares of the capital stock of the Corporation.
SECTION 3. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held without other notice than this By-Law, immediately
after, and at the same place as, the annual meeting of shareholders. The Board
of Directors may provide, by resolution, the time and place, either within or
without the State of Florida, for holding of additional regular meetings without
other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
President or any two (2) directors. The person or persons authorized to call
special meetings of the Board of Directors may fix any place, either within or
without the State of Florida, as the place for holding any special meeting of
the Board of Directors called by them.
SECTION 5. NOTICE. Written notice of any special meeting shall
be given to each director at least two (2) days before the meeting, either by
personal delivery or by mail, telegram or cablegram. Any director may waive
notice of any meeting. The attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, and a waiver of any and all
objections to the place of meeting, the time of meeting, or the manner in which
it was called or convened, 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. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver or notice of such a
meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed
by or in the manner prescribed in the By-Laws of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board
<PAGE>
of Directors, provided, that if less than a majority of the directors are
present at that 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 majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 8. INFORMAL ACTION BY DIRECTORS. Any action required
to be taken at a meeting of the Directors of a corporation or any action which
may be taken at such meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all directors and
such consent shall have the same effect as a unanimous vote.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of
Directors or in a directorship to be filled by reason of an increase in the
number of directors, may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office or until the next succeeding annual meeting of
shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the Board of Directors for a
term of office continuing only until the next election of the directors by the
shareholders.
SECTION 10. COMPENSATION. Directors, as such, shall not
receive any stated salaries for their services, but by resolution of the Board
of Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors;
provided, that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefore.
SECTION 11. REMOVAL. At a meeting or shareholders called
expressly for that purpose, directors may be removed, with or without cause, by
a vote of the majority of the shares then entitled to vote at an election of
directors.
ARTICLE IV
OFFICERS
SECTION 1. CLASSES. The officers of the Corporation shall be a
President, a Treasurer, and a Secretary, and such other officers and assistant
officers as from time to time may be deemed necessary by the Board of Directors
and elected in accordance with the provisions of this Article. Any two (2) or
more offices may be held by the same person, except that the offices of
President and Secretary may not be held by the same person if there is more than
one shareholder. The failure to elect a President, Secretary or Treasurer shall
not affect the existence of this Corporation.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Vacancies may be
<PAGE>
filled or new offices created and filled at any meeting of the Board of
Directors. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified or until his death, his resignation or his
removal from office in the manner hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board of Directors whenever, in
its judgment, the best interests of the Corporation would be served thereby, but
such removal shall be without prejudice to the 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 Board
of Directors for the unexpired portion of the term.
SECTION 5. PRESIDENT. The President shall be the principal
executive officer of the Corporation and shall in general supervise and control
all of the business and affairs of the Corporation. He shall preside at all
meetings of the shareholders and of the Board of Directors. He may sign, with
the Secretary or any other proper officer of the Corporation thereunto
authorized by the Board of Directors, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
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 Board of Directors from time to time.
SECTION 6. VICE PRESIDENT. In the absence of the President or
in the event of his inability or refusal to act, the Vice President 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 Vice
President shall perform such other duties as from time to time may be assigned
to him by the President or by the Board of Directors.
SECTION 7. TREASURER. If required by the Board of 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 Board of Directors shall determine.
He shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation; (b) receive and give receipts for monies due and
payable to the Corporation from any source whatsoever, and deposit all such
monies in the name of the Corporation in such banks, trust companies, or other
depositories as shall be selected in accordance with the provisions of Article V
of these By-Laws; and (c) in general perform all the duties as from time to time
may be assigned to him by the President or the Board of Directors.
SECTION 8. SECRETARY. The Secretary shall: (a) keep the
minutes of the shareholders' and of the Board of Directors' meetings in one or
more books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all certificates for shares prior
to the issue thereof and to all documents, the execution of which on behalf of
<PAGE>
the Corporation under this seal is duly authorized in accordance with the
provisions of these By-Laws; (d) keep a register of the post office address of
each shareholder which shall be furnished to the Secretary by such shareholder;
(e) sign with the President, or Vice President, certificates for shares of the
Corporation, the issue of which shall have been authorized by resolution of the
Board of Directors; (f) sign with the President, or Vice President, certificates
for shares for the Corporation, the issue of which shall have been authorized by
resolution of the Board of Directors; (g) have personal charge of the stock
transfer books of the Corporation; and (h) in general perform all 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 the Board of Directors.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
The Assistant Treasurers shall respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries, as and if authorized by the Board of Directors, may sign with the
President or Vice President certificates for shares of the Corporation, the
issue of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers and Assistant Secretaries in general shall
perform such duties as shall be assigned to them by the Treasurer or Secretary,
respectively, or by the President or the Board of Directors.
SECTION 10. SALARIES. The salaries of the officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
ARTICLE V
CONTRACTS, LOANS, CHECK AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instruments 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 evidence of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority may
be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for 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 Board of 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 Board of
Directors may select.
<PAGE>
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing
shares of the Corporation shall be in such form as may be determined by the
Board of Directors. Such certificates shall be signed by the President and shall
be sealed with the seal of the Corporation. All certificates for shares shall be
consecutively numbered. The name of the persons owning the shares represented
thereby with the number of shares and date of issue shall be entered on the
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, except that in the case of a lost, destroyed or mutilated
certificate, a new one may be issued therefor upon such terms and indemnity to
the Corporation as the Board of Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the
Corporation shall be made only by the registered holder thereof or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary of the Corporation, and on surrender for cancellation of the
certificate for such share. The person in whose name shares stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the
resolution of the Board of Directors.
ARTICLE VIII
DIVIDENDS
The Board of 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 and its Articles of Incorporation.
ARTICLE IX
SEAL
The Board of Directors shall provide a corporate seal which shall be in
the form of a circle and shall have inscribed thereon appropriate wording.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of these By-Laws, or under the provisions of the Articles of
Incorporation, or under the provisions of the corporation laws of the State of
Florida, 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.
<PAGE>
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power and authority to alter,
amend or rescind the ByLaws of the Corporation at any regular or special meeting
at which a quorum is present by a vote of a majority or the whole Board of
Directors, subject to the power of the shareholders to change or repeal such
By-Laws at any annual or special meeting of shareholders at which a quorum is
present, by a vote of a majority of the stock represented at such meeting,
provided, that the notice of such meeting shall have included notice of any
proposed alteration, amendment or rescission.
I certify that these are the By-Laws adopted by the Board of Directors
of the Corporation.
/s/ William H. Ragsdale
----------------------------
William Harvey Ragsdale, Secretary
Dated: November 24, 1998
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