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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR 12(g)
INFORMATION-HIGHWAY.COM, INC.
(Name of small business issuer as specified in its charter)
Florida 65-0154103
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
185 - 10751 Shellbridge Way
Richmond, British Columbia V6X 2W8, Canada
(Address, including postal code, of registrant's principal executive offices)
(604) 278-5996
(Telephone number including area code)
Securities to be registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g)
of the Exchange Act: Common Stock
________________________________________________________________________________
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INFORMATION-HIGHWAY.COM, INC.
FORM 10-SB
TABLE OF CONTENTS
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PART I Page
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Item 1. Description of Business........................................................... 1
Item 2. Management's Discussion and Analysis or Plan of Operations........................ 7
Item 3. Property.......................................................................... 14
Item 4. Security Ownership of Certain Beneficial Owners and Management.................... 15
Item 5. Directors, Executive Officers, Promoters and Control Persons of the Company....... 16
Item 6. Executive Compensation............................................................ 17
Item 7. Certain Relationships and Related Transactions.................................... 18
Item 8. Description of Securities......................................................... 18
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity
and Other Shareholder Matters..................................................... 20
Item 2. Legal Proceedings................................................................. 20
Item 3. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................................... 20
Item 4. Recent Sales of Unregistered Securities........................................... 20
Item 5. Indemnification of Directors and Officers......................................... 21
PART F/S
Index to Consolidated Financial Statements................................................. 23
PART III
Item 1. Index to Exhibits................................................................. 24
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PART I
Item 1. Description of Business
(a) Business Development
The Company was incorporated in Florida in December 1988 as Florida Venture
Fund, Inc. Its name was changed to Information-Highway.com, Inc. on
February 23, 1999. On February 17, 1999, the Company and Information
Highway, Inc., a Washington corporation formed in 1996 ("PrivCo"), entered
into an Agreement and Plan of Reorganization (the "Agreement") whereby the
Company issued 3,235,000 shares of its common stock in exchange for
3,235,000 shares of PrivCo common stock representing 57% control of PrivCo.
It is the Company's intention to exchange shares of its common stock for
the remaining 43% of the outstanding shares of PrivCo. The only business of
the Company is the business currently operated by PrivCo. The Company,
through PrivCo, holds 100% interests in Blue Crow Internet Company, Ltd.
("Blue Crow"), which PrivCo acquired in December 1996; YesIC,
Communications, Inc. ("YesIC'), which PrivCo acquired in February 1997; and
World Tel, Internet (Toronto) Ltd. ("World Tel"), which PrivCo acquired in
February 1997. These companies are engaged in the business of providing
residential and corporate access to the Internet and providing services,
including online web development and hosting to subscribers.
The Company has launched its Executive Club portal which is more fully
described later (the "Executive Site")
The Company's executive offices are located at 10751 Shellbridge Way, Suite
185, Richmond, British Columbia V6X 2W8, Canada. Its telephone number is
(604) 278-7494 and its facsimile number is (604) 278-3409.
(b) Business of the Company
Introduction
The Company will operate the business currently operated by PrivCo. For the
past four years PrivCo has developed expertise as an Internet Service
Provider ("ISP") in Toronto and Vancouver. Through this experience PrivCo
has seen the emergence of the market for content development. With PrivCo's
hardware, software and expertise in the industry, the Company believes it
is well positioned to emerge as a leader in content and portal development
throughout North America.
The Company's goal is to expand its ISP business and virtual ISP access and
at the same time provide localized and portal content catering to business
professionals. Through research, design, programming, co-branding, and
licensing, the Company has compiled Internet services and content in the
Executive Site that are useful to companies, associations, and
professionals. The intent is to provide friendly, easy to navigate
interfaces, which are designed specifically for each targeted group. The
Company's goal is to market its Executive Site throughout North America and
internationally, starting with its over 20,000 ISP customers and to offer
its commercial clients the ability to market their products and services to
the users of the Executive Site through its newly developed Virtual Mall.
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The Executive Site targets business professionals. Many business
professionals don't use the Internet because of the overwhelming amount of
information and services available. As well, most business professionals
don't have hours to waste finding the information that they need. The
Executive Site has assembled a functional business site so people can
immediately find what they need. The Executive Site members will be able to
monitor and research the stock market, plan and book their next business
trip, check the local news and weather, participate in online forums, or
simply find a suitable restaurant in their area and, more importantly,
carry out electronic transactions via e-commerce.
On March 2, 1999 the Company announced that it had entered into a five year
agreement with MetroNet Communications/AT&T selecting MetroNet/AT&T as its
primary supplier for voice and data communications services. Utilizing
MetroNet/AT&T's state-of-the-art DMS-500 telephone switches, the Company's
customers can connect to the Internet using MetroNet/AT&T's ISP-PRI service
and high-speed, fiber-optic ATM links from cities across Canada. This has
enabled the Company to enter the Virtual ISP market without purchasing
additional equipment for each site and allows it to deploy its Executive
Site in every major city in North America, as well as provide e-commerce
capabilities.
On March 9, 1999 the Company announced that it had entered into a two year
licensing and multicasting agreement with broadcast.com. The Company will
sell broadcast.com services to associations, local ISP's, Executive Site
users, local dial-up, and national virtual ISP customers. Services will
include audio and video hosting, and live event broadcasting (multicasting)
including multimedia presentations, trade shows and conferences. The
Company will receive a percentage of revenues generated by these services
for a period of two years and will have the option to renew this contract
annually. broadcast.com offers a large and comprehensive selection of
multicast programming including sports, talk and music radio, television,
business events, and new broadcasts on the Internet 24 hours a day, seven
days a week. broadcast.com has broadcast over 16,000 live events including
the last three NFL superbowl games, NCAA basketball tournaments, the
Stanley Cup playoffs, the premier event for the "Titanic" movie and
backstage interviews from the 1998 Academy Awards webcast. In addition,
live continuous programming includes the BBC world service, CNN
audioselect, Court TV and NASA TV.
The Company has a number of other agreements that supply content for its
Executive Site, including agreements providing access to a stock quote
system, a business directory, a travel reservation system, chat rooms and
weather. The Company anticipates entering into similar agreements in the
future to fully develop and expand the content in the Executive Site.
The Internet
Industry Background
The Internet is a global collection of thousands of interconnected computer
networks that enables commercial organizations, educational institutions,
governmental agencies and individuals to communicate electronically, access
and share information and conduct commerce. Unlike other public and private
telecommunications networks that are managed by businesses, governmental
agencies or other entities, the Internet is a cooperative interconnection
of many such public and private networks. The networks that comprise the
Internet are connected in a variety of ways, including the public-switched
telephone network and dedicated high-speed leased lines. Open
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communications on the Internet are enabled by TCP/IP, the common Internet
communications protocol, which enables communication across the Internet
regardless of the hardware and software used.
Recent technological advances, combined with cultural changes and evolving
business practices, have led to integration of the Internet into the
activities of individuals and the operations and strategies of commercial
organizations. Use of the Internet by individuals and relatively small
businesses and other organizations has been accelerated by dramatic
increases in cost-effective processing power and data storage capabilities
in personal computers, as well as widespread availability of multimedia,
fax/modem, and networking capabilities to the home computing market. Much
of the recent growth in Internet use by businesses and individuals has been
driven by the emergence of a network of servers and information available
on the worldwide web. The worldwide web, which is based on a client/server
model and a set of standards for information access and navigation, can be
accessed using software that allows non-technical users to exploit the
capabilities of the Internet. The worldwide web enables users to find,
retrieve and link information on the Internet easily and consistently. The
development of worldwide web technology and associated easy-to-use software
has made the Internet easier to navigate and more accessible to a larger
number of users and for a broader range of applications.
Until recently, individuals could access the Internet only through an
organization with a direct Internet connection, or through traditional
online services employing closed, proprietary networks that allow Internet
access only to limited Internet resources. With the growth and increasing
commercialization of the Internet, a number of ISPs, including the Company,
have emerged to provide Internet software and direct access to individuals.
Traditional online services also have begun to increase the scope and
capacity of their access to the Internet. Access providers vary widely in
geographic coverage, subscriber focus and levels of Internet access. For
example, access providers may concentrate on certain types of subscribers
(such as businesses or individuals) that differ substantially in the type
of service and support required. Providers may also differ according to
whether they provide direct or non-direct access to the Internet. Direct
access through Internet protocol such as PPP (Point-to-Point Protocol),
enable users to establish direct connections to other computers on the
Internet, including worldwide web sites or computers operated by other
users, and thereby have access to the full range of Internet resources. The
Company, like most regional and national ISPs, offers direct Internet
access. To compete with these direct ISPs, consumer online services, such
as America OnLine, have introduced Internet access gateways.
Evolution of the Internet
In "The Whole Internet" (published by O'Reilly & Associates, 1 (S)94), Ed
Crol described the Internet as a global computer network made up of
thousands of smaller networks that link computers located around the world.
This network provides a number of tools that enable users to send and
receive files, share data, and other computing resources. Many features are
available, from online newspapers to real-time discussion services which
allow users to talk live via computer with people around the world. News
and the weather services provide up-to-date information on changing world
conditions. Shopping services allow a user to shop from an individual
computer terminal.
Thus far the industry has focused on providing high speed access to the
Internet and has largely neglected the lucrative content development
market. The greatest difficulty in content development is encouraging
people to pay for the information they need. Companies like the New York
Times, or Slate, have attempted to charge for this information. They will
likely fail. Information itself can
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always be found free on the Internet - copies of every New York Times cover
story proliferate. The New York Times speaks to a general audience - they
are in direct competition with the free services of Time Warner, New York
Post, City Search, and Microsoft Sidewalk.
But while information must be given free, the Company believes that the
tools required to organize this information can be sold and will be
purchased. While people will not pay for raw information, they will pay for
convenience, organization, relevance, and meaningful communication.
Internet content is now aimed at broad target markets doing little to
customize information to users needs. The Executive Site aims to provide
content customized to the needs of specific interest groups, companies, and
associations.
Size of the Internet Market
According to a study by Forester Research, at the end of 1997 approximately
22 million households, or 19% of all U.S. households, were online. By the
end of 2001, according to this study, almost 80 million households, or 72%
of all U.S. households, are expected to be online--an increase of about
400%. Consistent with this anticipated surge in demand, the Company
believes that a key to its future success is its continued ability to
expand its base of subscribers while retaining existing ones.
A study by IDC indicates that, nationwide, the market of small and medium-
sized businesses currently is comprised of approximately 7.2 million
businesses, of which 29% have Internet access. IDC also projects that the
number of businesses in this market will increase at an annual rate of 2.2%
into the next century and that the percentage of such companies with
Internet access will rise to 72% by the year 2000.
OVERVIEW OF OPERATIONS
The Company is presently in its initial growth stage. It has now developed
and launched version II of its Executive Site, The initial management team
is in place as are additional staff members providing administrative,
developmental, and technical assistance. Commercial operations have
commenced in Toronto and Vancouver. Additional employees are being
recruited to meet operational demands resulting from the increased growth.
Key strategic developments to date have included equipment, software and
robust network infrastructure acquisitions, acquisitions of licenses for
web content, research and development and marketing plan development. The
Company possesses what management considers to be the latest in high-end
computer and management systems. Hardware systems have been installed,
tested, and are operating with full redundancy and contingency plans. The
Company can easily increase hardware storage capabilities due to the
modular nature of the equipment and without system downtime.
THE EXECUTIVE SITE BUSINESS PLAN
The Company offers Internet content to ISPs, dial-up business
professionals, communities, companies, interest groups, and associations
across North America and plans to develop customized Executive Sites for
ISPs and associations, as well as providing e-commerce capabilities.
Executive Summary
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While the Internet is certain to be tomorrow's marketplace, remarkably few
understand how they can make profits from this new medium. The typical
Internet business attempts to attract attention with compelling information
and then resell that attention through advertising.
Management believes that the Executive Site has a better model. First,
through research, design, programming, co-branding, and licensing, a
collection of the most compelling and functional Internet services is
compiled. These services are then synthesized into a single web interface.
Finally this web interface is customized to function as a dedicated service
for dial-up communities, interest groups, associations, and companies, who
in turn sell access to the service to their members, associates, or
employees. In other words, the Executive Site compiles some of the
Internet's best stock quote systems, travel reservation systems, shopping
networks, chat technologies, and then adds information and directories
unique to any given group or organization. In some cases its networks may
even form the backbone of a corporate Intranet.
The Company believes it will profit not only by selling these customized
information networks to associations and companies, but also by selling
advertising space on its Executive Site and providing Virtual ISP access
throughout North America and adding e-commerce solutions.
The Executive Site targets business professionals. Through the Executive
site visitors will be able to monitor and research the stock market, plan
and book their next business trip, obtain local news and weather,
participate in online forums, or simply find a suitable restaurant in their
area. The Company plans to expand the Executive Site across North America
and internationally through dial-up communities, beginning with the
Company's own dial-up communities in Vancouver and Toronto.
On March 4, 1999 the Company announced that it had licensed its Executive
Site portal to MediaComm Broadcasting Systems an ISP in Englewood,
Colorado. The Company developed a private-labeled version of the Executive
Site for MediaComm's Internet access customers in the Denver, Colorado area
at http://denver.theexecutive.com. MediaComm will pay a set up and monthly
maintenance fee and share in advertising and commerce revenues generated on
the site's pages with the Company.
Development Plan
The following represents the Company's anticipated phases of development
over the course of the next two years.
Phase One: Expand the Company's ISP operations from Vancouver and Toronto
to Virtual ISP's in major cities across Canada in conjunction with
MetroNet/AT&T. It is expected that over the next 12 months, Virtual ISP's
will be set up in Calgary, Winnipeg, Edmonton, Montreal, Ottawa, London,
Kitchener, Waterloo and Quebec.
Phase Two: License the Executive Site in major cities in North America to
existing ISPs and associations and/or offer partnerships with local
businesses and individuals to acquire license rights to the Executive Site.
Phase Three: Solicit advertising on the Executive Sites to businesses and
individuals to promote their products and services to users on a national
basis, giving the best price possible.
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Phase Four: Expand the Company's Virtual ISP business throughout the United
States of America.
Phase Five: Expand the Company's Virtual ISP business internationally and
license the Executive Site internationally.
Content Suppliers
The Executive Site will purchase, license or co-brand from the following
sources.
Stock Quote System - Telescan Inc.
Description: In December 1997, PrivCo and Telescan Inc. entered into an
agreement to develop and manage a co-branded Internet financial service for
inclusion in the Executive Site. The Telescan Stock Quote System is a
comprehensive stock system on the Internet. There are three levels of
service: 1) The Standard package which includes the basic quote system,
symbol lookup, mutual fund tracker, etc. 2) The Premium package which
includes the complete comprehensive delayed quote system including personal
portfolio, Zack's reports, etc. 3) the RealTime Package which includes all
features of the Premium package, but in RealTime.
Business Directory - Furle/Powertrader
Description: Business directories and search engines on the Internet
Travel Reservation System - Internet Travel Network
Description: In December 1997, PrivCo entered in to an agreement with
Internet Travel Network to provide a comprehensive travel reservation
system, travel related transactions and advertising on the Executive Site
Chat System - Ichat Rooms
Description: One of the Internet's best chat technologies. Supports both
HTML and Java web based chat. Used by Yahoo! and Pathfinder.
Weather Information - WeatherLabs, Inc.
Description: In July 1998, PrivCo entered into a license agreement with
WeatherLabs, Inc. to provide weather data, weather content and related
weather services for over 1,400 major cities internationally, which
information is updated hourly.
This represents only a small sample of planned future content. The Company
anticipates entering into similar agreements in the future to fully develop and
expand the content in the Executive Site. New content suppliers are constantly
being identified for existing and potential executive sites. Additional content
will also be developed by associations and companies and by members themselves.
Marketing Plan
Overview
The Company's marketing plan will highlight the need for bundled Internet
services directory based websites. The Company recognizes that some sites suffer
from conflicting goals: (1) to provide a broad spectrum of information and (2)
to make that information relevant and easily accessible to the user. In the
compromise necessary to achieve these goals, end users have taken on too much of
the burden of
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filtering out content that is irrelevant to them. The Company's goal is to
distribute relevant information not only to business professionals, but to
communities and interest groups.
Executive Site Products
The Executive Site targets a group with a common interest, being business, and
provides them with relevant, accessible information while connecting them to
others with the same interest. The Company takes many of the same components
and offers them to businesses and associations as the basis of their customized
intranets or executive sites.
The Executive Site offers local news and weather, a basic stock quote system,
travel reservation system, access to the Executive Site Chat Zone, multicasting
and other services offered by broadcast.com and ultimately will offer a virtual
mall.
Customized Executive Sites
An initial development and licensing fee, together with monthly maintenance
fees, will be charged for the development of a customized Executive Site. Each
customized site will also consist of the services outlined above in Content
Suppliers.
Marketing
The Company intends to market the Executive Site as follows:
1. Attract Members to the Executive Site. The first step of the marketing
plan will be to attract members to the Executive Site. The Company will
undertake a print and Internet advertising campaign first in Canada and
then in the United States of America.
2. Attract Business Advertisers. The Company will contact the selected
businesses to present them with the opportunity of buying advertising space
on the Executive Site.
3. Customized Executive Site. Market customized Executive Sites to ISPs,
associations and companies.
4. National Marketing Campaign. The Company will launch a national marketing
campaign targeting the business and technology news media intended to
increase the name recognition of the Executive Site.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with the
Company's Financial Statements and Notes thereto and other financial information
included elsewhere in this Form 10-SB. This Form 10-SB contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in this Form 10-SB.
Overview
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The Company is engaged in the business of providing residential and corporate
access to the Internet and providing services, including online web development
and hosting to subscribers. The Company offers Internet content to ISPs, dial-up
business professionals, communities, companies, interest groups, and
associations across North America and plans to develop customized Executive
Sites for ISPs and associations, as well as providing e-commerce capabilities.
The Company conducts its business through three Canadian subsidiaries of
Information Highway, Inc. (herein "PrivCo"), a private Washington corporation.
The Company has acquired 57% of the issued and outstanding shares of PrivCo and
has offered to exchange one share of the Company for one share of PrivCo for the
remaining 43% of the issued and outstanding shares of PrivCo. Pursuant to an
Agreement and Plan of Reorganization entered into on February 17, 1999 and
closed on February 23, 1999 between the Company, PrivCo and certain shareholders
of PrivCo, the Company acquired 3,235,000 common shares of PrivCo out of a total
of 5,639,650 issued and outstanding common shares in exchange for 3,235,000
common shares of the Company. It is the Company's intention to exchange shares
of its common stock for the remaining 2,404,650 issued and outstanding common
shares of PrivCo. The Company has undertaken exchange offerings to effect a
similar share for share exchange. As of March 31, 1999, 2,335,284 of the
2,404,650 PrivCo shares had been exchanged for the same number of Company
shares. As part of the Agreement and Plan of Reorganization the Company caused
1,659,833 of its 1,979,500 common shares that were issued and outstanding prior
to the closing to be cancelled and assumed the obligations of PrivCo to issue
common shares pursuant to warrants and stock options issued by PrivCo. PrivCo
paid $100,000 to the controlling shareholder of the Company as a finders fee and
to effect the Agreement and Plan of Reorganization.
For accounting purposes the acquirer is PrivCo as 94.6% of the issued and
outstanding common shares of the Company will be owned by the shareholders of
PrivCo and the entire Board of Directors of the Company is now comprised of the
entire Board of Directors of PrivCo. As PrivCo is the legal subsidiary of the
Company the nature of the business combination is a reverse takeover whereby the
control of the assets and the business of the Company is acquired by PrivCo and
the consolidated financial statements are issued under the name of the Company
but described in the notes and elsewhere as a continuation of PrivCo and not the
Company. The legal capital structure remains that of the Company but the
shareholders' equity of PrivCo will replace the shareholders' equity of the
Company.
Consideration paid to shareholders of the Company:
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$
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Cash paid to controlling shareholder of the Company 100,000
(finders fee)
Net liabilities of the Company assumed at book value 4,121
Value attributed to the 319,667 shares of the Company not cancelled 8,050
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112,171
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The excess of cost over book values of the Company, being $112,171, has been
treated for accounting purposes as a reduction of additional paid in capital and
not to goodwill as the nature of the transaction
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was for PrivCo to obtain a listing on the OTC Bulletin Board by way of reverse
takeover. The cost is associated with publicly listing shares and not with any
business associated with the Company.
Prior to acquiring PrivCo, the Company had not conducted any business since
inception in 1988. PrivCo commenced operations by acquiring three operating
Canadian private companies: Blue Crow Internet Company, Ltd. ("Blue Crow"),
which PrivCo acquired in December 1996; YesIC, Communications, Inc. ("YesIC'),
which PrivCo acquired in February 1997; and World Tel, Internet (Toronto) Ltd.
("World Tel"), which PrivCo acquired in February 1997. The following discussion
will be based on PrivCo's pro forma combined statements of operations for the
years ended May 31, 1996 and 1997 as disclosed in Note 11 to the audited
financial statements of PrivCo and the consolidated statement of operations for
the year ended May 31, 1998. PrivCo has incurred operating losses, net losses
and negative operating cash flow for each month since inception. As of November
30, 1998 PrivCo had an accumulated deficit of $1.0 million. PrivCo had
substantially increased operating expenses and capital expenditures during the
two years ended May 31, 1996 and 1997 in an effort to rapidly expand
infrastructure and network services and develop the Executive Site. The Company
expects to incur substantial operating losses, net losses and negative cash flow
during the network build-out and initial penetration of each new market entered.
These losses are expected to continue for at least the next fiscal year to May
31, 1999.
Factors Affecting Ongoing Operations
Revenue
The following factors affect the Company's revenue:
Service Offering - The Company derives a majority of its operating revenue
from its dial up customers in Toronto and Vancouver.
Penetration of Target Markets - The Company bases its target market
assessment on two years of research and development through its involvement
in the Internet industry.
Turnover - To date, customer turnover has been minimal. The Company expects
this to increase in the future as competition intensifies.
Network and Service Costs
The Company's network and service costs for Vancouver and Toronto have
included equipment installation and ongoing service and maintenance charges.
As the Company introduces its Virtual ISP presence in additional cities, each
city will represent an increased lease charge under the Company's agreement
with MetroNet Communications/AT&T.
Selling, General and Administrative Expenses
The Company's selling, general and administrative expenses include customer
service and technical support, information systems, billing and collections,
general management and overhead, and administrative functions. Head count in
functional areas, such as customer service, engineering and operations, will
increase as the Company expands its network, and if the number of customers
increases.
Results of Operations
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Management believes that a discussion of revenues, general and administrative
expenses (including network servicing), depreciation and amortization, and
income taxes on a category by category basis rather than a period-to-period
basis provides the best analysis of its results of operations.
Revenue
See Note 11 to the audited consolidated financial statements for revenue
recognized on a pro forma basis as if the acquired businesses were combined as
at June 1, 1995. The first revenues were recognized in late fiscal 1996 from
the Toronto-based business but were negligible. Revenues increased steadily
through fiscal 1997 to $420,000 from additional subscribers. During fiscal
1998 revenues more than doubled to $860,000 from additional subscribers.
During the six months ended November 30, 1998 revenues were $500,000 from the
Toronto-based business and the start of revenues recognized from the launch of
the Executive Site. Assuming management's assumptions about demand for its ISP
services and the Executive Site are reasonably accurate, management
anticipates that the dollar amount of future revenues will increase
significantly over the $860,000 of revenue in fiscal 1998.
General and Administrative Including Network Servicing
See Note 11 to the audited consolidated financial statements for general and
administrative expenses on a pro forma basis as if the acquired businesses
were combined as at June 1, 1995. During the year ended May 31, 1996 general
and administrative expenses of $120,000 included administrative consulting
services and wages totalling $60,000 paid to a few individuals in the start up
phase in Toronto. Basic travel, accounting, advertising and office expenses
totalling $60,000 was paid in its initial year.
The year ended May 31, 1997 was the first year of full operation but was still
in the developmental stage and substantial expenses were incurred to improve
the services provided and to increase the number of subscribers to the
service. Administrative consulting services and wages increased from $60,000
in 1996 to $285,000 in 1997 which represents more than 50% of total general
and administrative expenses for the year. Telephone and network servicing
costs increased from $12,000 in 1996 to $100,000 in 1997 because of the
increase in subscribers and the cost of leasing telephone equipment.
The year ended May 31, 1998 saw an increase of 104% in revenue from monthly
subscribers while general and administrative expenses increased by 124% to
$1,200,000 or 140% of revenue. Telephone and Internet fees were $534,000 or
62% of revenue. The increase over the prior year was $424,000 or 385%. The
majority of the fees were one-time charges for new subscribers as well as
developmental charges and one-time license fees paid for third party products
packaged with the service provided by the Company. Some of these expenses are
not expected to occur in the future. Administrative consulting services and
wages increased from $285,000, or 68% of revenue, to $400,000, or 47% of
revenues. The increase was for additional personnel needed to support the
service and to continue to improve and development new services. Some
consulting fees will not occur in the future as they were one-time costs for
development of the service.
The six months ended November 30, 1998 as compared to the six months ended
November 30, 1997 saw an increase of 25% in revenue from monthly subscribers
while general and administrative expenses increased by 47% to $687,000 or 138%
of revenue. Telephone and Internet fees were $275,000 or 55% of revenue. The
increase over the prior year was $70,000 or 34%. The majority of the fees were
one-time charges for new subscribers as well as developmental charges and one-
time license fees paid for third party products packaged with the service
provided by the Company. Some of these expenses are not expected to occur in
the future. Administrative consulting services and wages increased from
$169,000, or 42% of revenue, to $181,000, or 36% of revenues. The increase was
for additional personnel needed to support the service and to continue to
improve and development new services. Some consulting fees will not occur in
the future as they were one-time costs for development of the service.
Depreciation and Amortization
Depreciation from network equipment and software has been taken at 30% per
annum. Some of this equipment is currently leased for $2,000 per month. The
Company anticipates entering into operating leases for any network equipment
and software in the future with minimal capital expenditures. Amortization of
purchased goodwill is amortized over its estimated useful life of three years
to reflect the short term life of the related business because of
technological advancements and obsolescence in the industry. Depreciation and
amortization was $4,000 for the year ended May 31, 1996 as goodwill was not
acquired until the middle of fiscal 1997, and $60,000 for the year ended May
31, 1997 and $220,000 for the year ended May 31, 1998 and $108,000 for the six
months ended November 30, 1998. Amortization of goodwill is $14,000 per month
and will be fully amortized in February, 2000.
Income Taxes
The Company generated US and Canadian net operating loss ("NOL") carry
forwards of $1 million from inception to November 30, 1998. The Company
expects some consolidated losses for the foreseeable future which will
generate additional NOL carry forwards. However, the Company's ability to use
NOLs depends on generating profits in the future and may also be subject to
annual limitations. In addition, income taxes may be payable during this time
due to operating income in certain tax jurisdictions. In the future, if the
Company achieves operating profits and the NOL's have been exhausted or have
expired, the Company may experience significant tax expense. The Company
recognized no provision for taxes because it operated at a loss from inception
through to November 30, 1998.
10
<PAGE>
Net loss for the Period
As disclosed in Note 10 to the consolidated financial statements, the Company's
net losses have come mainly from start up operations in Toronto, Ontario, Canada
and Vancouver, British Columbia, Canada. The only operating activities conducted
in the United States thus far were expenses incurred in the going public process
including investor relations, professional fees and overhead expenses. The
Company's fully operational subsidiary in Toronto, Ontario, Canada has produced
a profit of $80,000 on sales of $449,000 during the six months ended November
30, 1998 as compared to a net profit of $14,000 on sales of $370,000 for the
comparative period. This subsidiary incurred a net loss of $114,000 for the year
ended May 31, 1996 on sales of $16,000 a net loss of $56,000 for the year ended
May 31, 1997 on sales of $399,000, and a net profit of $41,000 on sales of
$789,000 for the year ended May 31, 1998. The operating subsidiary in Vancouver,
British Columbia, Canada has not produced a profit for any month from inception
to November 30, 1998 as it is still in the developmental stage."
Liquidity and Capital Resources
The Company has historically satisfied its capital needs by cash generated from
operations, by borrowing from affiliates and by issuing equity securities. The
development and expansion of the Company's business may require incremental
interim capital commitments. The principal capital expenditures incurred to date
related to putting networks in place in Toronto and Vancouver. With the
Company's ability now to create a Virtual ISP presence in a new market (i.e., a
North American city) pursuant to its agreement with MetroNet
Communications/AT&T, the Company will not have to commit capital to build out a
network in each new market. The Company may need to commit working capital,
however, to fund increased lease payments to MetroNet Communications/AT&T until
revenues from new subscribers begin to cover the increase in monthly lease costs
attributable to the new market.
Capital expenditures were $25,000 for the year ended May 31, 1996, $165,000
during the year ended May 31, 1997 and $110,000 during the year ended May 31,
1998 and virtually no capital expenditures for the first six months of fiscal
1999. The Company expects its capital expenditures to continue in future periods
as necessary, arising primarily from the purchase of infrastructure equipment
necessary for the development and expansion of its defined businesses. The
amount of goodwill acquired, being the excess purchase price of over book values
of the three subsidiaries, totaling $.5 million does not represent an outlay of
cash.
Through November 30, 1998, the Company financed its operations primarily through
private placements of equity totaling $1.1 million and loans from affiliates
totaling $160,000. As of November 30, 1998, the Company had an accumulated
deficit of $1 million which includes depreciation of $.1 million and
amortization of $.3 million, yielding an accumulated cash deficit of $.6
million. Net working capital as at November 30, 1998 was $.15 million including
cash reserves of $.4 million to fund ongoing operations.
The Company plans to satisfy the capital needs of its business plan partially
from cash generated by operations and also from a private offering of Units that
commenced April 1, 1999, and the anticipation of the exercise of 873,650
warrants to raise $873,650. The Company believes that these sources will satisfy
its capital needs for the next twelve to fifteen months.
The Company's capital requirements may vary based upon the timing and success of
its rollout and as a result of regulatory, technological and competitive
developments or if demand for the Company's services or its anticipated cash
flow from operations is less or more than expected; the Company's development
plans or projections change or prove to be inaccurate; it engages in any
acquisitions; or accelerates deployment of its network services or otherwise
alter the schedule or targets of its rollout plan. The Company is not presently
considering any specific business acquisition.
Equity or debt financing may not be available to the Company on favorable terms
or at all. The Company will need additional funds, which it may not be able to
obtain.
Outlook: Issues and Uncertainties
The Company's success is dependent on a number of factors which should be
considered by prospective investors. The Company has only recently acquired Blue
Crow, Internet; World Tel Internet; and YesIC which constitute its principal
assets. The Company is a relatively young company and does not yet have
11
<PAGE>
a long history of earnings or profit and there is no assurance that it will
operate profitably in the future. As such, there is no assurance that the
Company will provide a return on investment in the future.
Business Risks
The Company operates in a highly competitive business which has a number of
inherent risks. These may be summarized as follows:
1. Competition: The Company's services compete against those of other
established companies, some of which have greater financial, marketing and
other resources than those of the Company. These competitors may be able to
institute and sustain price wars, or imitate the features of Company's
services, resulting in a reduction of Company's share of the market. In
addition, there are no significant barriers to new competitors entering the
market place.
2. Need for a Broad Customer Base: The Company will need to build and sustain
a large customer base and if it cannot do so this will have an adverse impact
on its revenues.
3. Reliance on New Products and Services: The Company's business and
financial plan focuses on products and services which are relatively new.
There can be no assurance that existing sales levels, which are still quite
small, can be maintained or that increased sales levels can be achieved.
Internal cash generated by operations may not permit the level of research and
development spending required to maintain the stream of new service
improvements that may become necessary and outside financing may not be
available. The Company is using certain relatively new software products and
the developers of this software are, in some cases, still working to improve
certain essential features of the software including a feature to allow the
transfer of data to be done on a secure and confidential basis.
4. Obsolescence: The Company is at risk if it does not continue to upgrade
and improve its services. Typically, the high technology industry is
characterized by a consistent flow of new improved products and services which
render existing products and services obsolete.
5. Marketplace: The marketplace for the Company's services is relatively new
and will be undergoing rapid and constant change. As a result, it is
difficult to predict the continued demand for the Company's services.
6. Cost Control: Success will be largely predicated upon the Company's
ability to develop, and sustain a large customer base for its services.
Failure to do so may result in smaller profit margins or losses.
7. Management: The Company is dependent on a relatively small number of key
employees, the loss of any of whom could have an adverse effect on the Company
and the Company does not have any key man insurance with respect to such
employees.
8. Marketing Plan: The Company's internal marketing plan including Executive
Site is based on a number of assumptions which may or may not prove valid.
Marketing expenditures are to be funded partly from the proceeds of this
offering and cash flow from operations. Poor market acceptance of the
Company's services or other unanticipated events may result in lower revenues
than anticipated, making the planned expenditures on marketing and promotion
unachievable.
12
<PAGE>
9. Growth in Volume: The growth in volume of Internet traffic may create
instabilities in its structure such as shortages in Internet addresses and
overworked search engines. Such instabilities may have an adverse affect on
the Company' s operations and business if they are not addressed.
10. Personnel and Resources: Limitations on the Company's personnel and
resources may affect the ability of the Company to provide the required
quality service and technical support to achieve and maintain a competitive
market position.
11. Third Parties: The Company utilizes the services of third party
contractors to provide certain technical services, telecommunications
hardware, computers, software and communication lines. Therefore, the
performance of the Company will be affected by the quality of the goods and
services provided by, and the reputations of, such third parties.
12. Insurance Risks: The Company has not acquired liability insurance with
respect to the provision of services by the Company.
13. Regulatory Risk: The communications, computer and publishing services
provided by the Company, including the access to the Internet, are relatively
new services and, in the future, these services could be subject to additional
regulation at local, state, provincial, federal and international levels.
Such regulation could affect the costs of the services provided by the Company
and its ability to deliver the services. Any such regulatory changes could
have an adverse effect on the Company.
14. Requirement of New Capital: As a growing business, the Company typically
needs more capital than it has available to it or can expect to generate
through the sale of its services. In its short history, the Company has had
to raise, by way of debt and equity financing, considerable funds to meet its
needs. There is no guarantee that the Company will be able to continue to
raise the funds needed for the Company's business. Failure to raise the
necessary funds in a timely fashion will limit the Company's growth.
15. Year 2000 Issues: The Company's products do not require any significant
modifications for the Year 2000. However, the Company may face Year 2000
issues as it seeks to coordinate with other entities with which it interacts
electronically, including suppliers, customers and distribution partners.
Although the Company is not currently aware of any material problems, an
assessment has not been made of the anticipated costs, problems and
uncertainties associated with the Year 2000 consequences.
16. General Factors: The Company's areas of business may be affected from
time to time by such matters as changes in general economic conditions,
changes in laws and regulations, taxes, tax laws, prices and costs; and other
factors of a general nature which may have an adverse effect on the Company's
business.
Risks Related to the Company's Securities
1. Issuance of Additional Shares: The substantial portion of the 50,000,000
authorized shares of Common Stock of the Company are unissued. The Board of
Directors has the power to issue such shares without shareholder approval.
None of the 10,000,000 authorized shares of Class A Preferred Stock have been
issued. The Class A Preferred Stock may be issued in series from time to time
with such designation, rights, preferences and limitations as the Board of
Directors may determine by resolution and without shareholder approval. There
are outstanding warrants and options whose
13
<PAGE>
holders may acquire additional shares of Common Stock. The Company fully
intends to issue additional shares of Common Stock or shares of Preferred
Stock if necessary in order to acquire products, properties, capital,
businesses or for any other corporate purposes. Any additional issuances by
the Company from its authorized but unissued shares would have the effect of
further diluting the percentage interest of existing shareholders.
2. Cumulative Voting and Preemptive Rights: There are no preemptive rights in
connection with the Company's Common Stock. Cumulative voting in the election
of directors is not permitted. Accordingly, the holders of a majority of the
shares of Common Stock, present in person or by proxy, will be able to elect
all of the Company's Board of Directors.
3. Concentration of Ownership: The Executive Officers and Directors own or
exercise full or partial control over more than 50% of the Company outstanding
shares. As a result, other investors in the Company's Common Stock may not
have any influence on corporate decisionmaking.
4. Estimates and Financial Statements: Some of the information in this Form
10-SB consists of and relies upon evaluations and estimates made by management
and other professionals. Even though management believes in good faith that
such estimates are reasonable, based upon market studies and data provided by
sources knowledgeable in the field, there can be no assurance that such
estimates will ultimately be found to be accurate or even based upon accurate
evaluations. Any management errors in evaluations or estimates could have a
significant negative effect upon the Company's profitability or even its
viability.
5. No Foreseeable Dividends: The Company has not paid dividends on its Common
Stock and does not anticipate paying dividends on its Common Stock in the
foreseeable future.
6. Possible Volatility of Securities Prices: The market for the Company's
stock is highly volatile and will likely continue to behave in this manner in
the future. Additionally, market prices for securities of many smaller
companies have experienced wide fluctuations not necessarily related to the
operating performance of the companies themselves.
7. Requirements of SEC With Regard to Low-Priced Securities: The Company's
securities are subject to Rule 15g-9 under the 1934 Act, which imposes
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and "accredited
investors" (generally, individuals with net worths in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses).
For transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, the rule may
adversely affect the ability of broker-dealers to sell the Company's
securities and may adversely affect the ability of shareholders to sell their
shares in the secondary market.
Item 3. Property
The Company's headquarters and executive offices are located at #185-10751
Shellbridge Way, Richmond, British Columbia V6X 2W8 and the telephone number is
(604)278-5996. The Company leases, on a month-to-month basis, approximately 200
square feet of space at the aforementioned office from SMR Investments Ltd., a
private British Columbia company owned by Susanne Robertson, the wife of John G.
Robertson. The monthly rent fee is $500.00.
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<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, assuming exchange of all shares of PrivCo for
shares of the Company as of February 23, 1999, the outstanding Common Stock of
the Company owned of record or beneficially by each Executive Officer and
Director and by each person who owned of record, or was know by the Company to
own beneficially, more than 5% of the Company's Common Stock, and the
shareholdings of all Executive Officers and Directors as a group.
<TABLE>
<CAPTION>
Percentage of
Name Shares Owned Shares Owned
- ---------------------------------------------------------------------------------------
<S> <C> <C>
John G. Robertson (1)(2) President and member of
the Board of Directors 3,271,000 53.2%
- ---------------------------------------------------------------------------------------
Jennifer Lorette (1)(3)
Executive Vice President, Secretary/Treasurer,
Chief Financial Officer and Principal Accounting
Officer, and member of the Board of Directors 200,000 3.3%
- ---------------------------------------------------------------------------------------
James L. Vandeberg (1)(3), member of the Board of
Directors 76,000 1.3%
- ---------------------------------------------------------------------------------------
Robertson Family Trust (4) 2,976,000 49.6%
- ---------------------------------------------------------------------------------------
Access Information Systems Inc. (5) 564,000 9.4%
- ---------------------------------------------------------------------------------------
Kevin Brook (6) 450,000 7.4%
- ---------------------------------------------------------------------------------------
Jack Wasserman (6) 450,000 7.4%
- ---------------------------------------------------------------------------------------
ALL EXECUTIVE OFFICERS & DIRECTORS
AS A GROUP (Three Individuals) (7) 3,547,000 56.8%
- ---------------------------------------------------------------------------------------
</TABLE>
Except as noted below, all shares are held of record and each record shareholder
has sole voting and investment power.
(1) These individuals are the Executive Officers and Directors of the Company
and may be deemed to be "parents or founders" of the Company as that term
is defined in the Rules and Regulations promulgated under the 1933 Act.
(2) Includes 2,976,000 shares owned or controlled by the Robertson Family
Trust, 70,000 shares owned of record by SMR Investments, Ltd, a corporation
controlled by Susanne Robertson, wife of Mr. Robertson, 20,000 shares owned
of record by Mrs. Robertson, and 150,000 options that are currently
exercisable. Mr. Robertson is one of three trustees of the Robertson
Family Trust, which acts by the majority vote of the three trustees. Mr.
Robertson disclaims beneficial ownership of the shares owned or controlled
by the Robertson Family Trust. Mr. Robertson's address is the same as the
Company's.
(3) Includes 50,000 options that are currently exercisable. Ms. Lorette's
address is the same as the Company's. Mr. Vandeberg's address is Vandeberg
Johnson & Gandara, One Union Square, Suite 2424, Seattle, Washington.
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<PAGE>
(4) Includes 564,000 shares owned of record by Access Information Services, a
corporation owned by the trust. The address of the Robertson Family Trust
is 185 - 10751 Shellbridge Way, Richmond, British Columbia V6X 2W8, Canada.
(5) Access Information Services is a corporation owned by the Robertson Family
Trust. Its address is 185 - 10751 Shellbridge Way, Richmond, British
Columbia V6X 2W8, Canada.
(6) Includes 75,000 options that are currently exercisable. Messrs. Brook's
and Wasserman's address is the same as the Company's.
(7) Includes 250,000 options that are currently exercisable. Also see Note (2)
above regarding share ownership attributed to Mr. Robertson.
Item 5. Directors, Executive Officers, Promoters and Control Persons of the
Company
Directors and Executive Officers
The following table sets forth the name, age and position of each Director of
the Company:
<TABLE>
NAME AGE POSITION
- ------------------------------------------------------------------------------------
<S> <C> <C>
John G. Robertson 57 President, Principal Executive Officer and a member of
the Board of Directors
- ------------------------------------------------------------------------------------
Jennifer Lorette 26 Executive Vice President, Secretary/Treasurer, Principal
Accounting Officer and Chief financial Officer and a
member of the Board of Directors
- ------------------------------------------------------------------------------------
James L. Vandeberg 55 Director, partner in Vandeberg Johnson & Gandara, the
Company's legal counsel
- ------------------------------------------------------------------------------------
</TABLE>
Mr. Robertson and Ms. Lorette have served as directors of PrivCo since the June
1997 Annual Meeting. Mr. Vandeberg was elected a director of PrivCo in January
1999. All were elected directors of the Company in February 1999. Each director
will serve until the next annual meeting of shareholders and their respective
successors are elected and qualified. All officers currently devote part-time to
the operation of the Company.
Executive Officers, Directors and Other Significant Employees of the Company:
John G. Robertson - President, Principal Executive Officer and a member of the
Board of Directors
Mr. Robertson is a founder, President, Principal Executive Officer and a member
of the Board of Directors of PrivCo. Since October 1984, Mr. Robertson has been
President and a Director of Reg Technologies, Inc., a British Columbia
corporation trading on the Vancouver Stock Exchange that, in cooperation with
certain controlled affiliates, is engaged in developing a rotary engine and
other devices utilizing Rand Cam Technology. Since May 1980, Mr. Robertson has
been President and a Director of Teryl Resources Corp., a British Columbia
corporation trading on the Vancouver Stock Exchange and engaged in exploring and
developing gold properties. Since February 1979, Mr. Robertson has been
President and Director of Flame Petro-Minerals Corp., a British Columbia
corporation trading on The Alberta Stock Exchange and engaged in exploration of
oil, gas and gold properties. Mr. Robertson is President, a director and CEO of
IAS Communications, Inc., an Oregon corporation traded over the
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<PAGE>
counter in the United States that has developed a television antenna which is
14" in diameter and only 2 inches high that can replace existing outside log
periodic antennas and has the capability of receiving local television stations
within a 60-mile radius.
Jennifer Lorette - Executive Vice President, Secretary/Treasurer, Principal
Financial Officer and Principal Accounting Officer
Ms. Lorette is a founder, Secretary/Treasurer, Principal Financial Officer and
Principal Accounting Officer of PrivCo. Since April 1994, Ms. Lorette has been
Vice President of Administration of Reg Technologies Inc. Since June 1994, Ms.
Lorette has been a Vice President of REGI U.S. and Chief Financial Officer and
Vice President of Flame Petro-Minerals Corp. From February 1994 to April 1994,
Ms. Lorette was an executive assistant at Reg Technologies, Inc. Ms. Lorette is
also Secretary/Treasurer of IAS Communications, Inc.
James L. Vandeberg - Director
Mr. Vandeberg is a partner in the Seattle, Washington law firm of Vandeberg
Johnson & Gandara. He has served as counsel to the Company since 1996. Mr.
Vandeberg graduated cum laude from the University of Washington with a Bachelor
of Arts degree in accounting in 1966, and from New York University School of Law
in 1969, where he was a Root-Tilden Scholar. He became a member of the
Washington Bar Association in 1969 and of the California Bar Association in
1973. Mr. Vandeberg's practice focuses on the corporate finance area, and he
specializes in securities and acquisitions. He is a member and former director
of the American Society of Corporate Secretaries. Mr. Vandeberg was previously
general counsel and secretary of two NYSE companies and is a director of IAS
Communications, Inc.
Cristian Rodriguez - Manager of Information Systems and Senior Network System
Administrator
Mr. Rodriguez is 28 years old. He is the Manager of Information Systems and
Senior Network System Adminstrator of the Company, and has held that position
since joining the Company in 1996. Prior to that Mr. Rodriguez was a private
consultant assisting clients with Internet services, networking and computer
hardware. Mr. Rodriguez attended Vancouver Film School and received a
Certificate for 3D Animation.
Kevin Brook - President Toronto Operating Unit
Mr. Brook is 40 years old. He is President of the Toronto operating unit, and
has held that position since joining the Company in 1997. Prior to joining the
Company he was a vice president at Bell Canada in the Global Link division.
Jack Wasserman - Vice-President Toronto Operating Unit
Mr. Wasserman is 50 years old. He is Vice-President of the Toronto operating
unit and has held that position since joining the Company in 1995. Prior to that
Mr. Wasserman was an accountant with World Tel (Toronto) Internet, Inc. Mr.
Wasserman received his accounting designation with Arthur Andersen and Company,
in 1976 in the province of Ontario.
Item 6. Executive Compensation
John Robertson served as President and Principal Executive Officer of the
Company for all of its fiscal year ended May 31, 1998 without any direct
compensation. The Company paid Access Information Services, Inc., a corporation
owned by a trust of which Mr. Robertson is one of three voting trustees, a
management fee of $2,500.00 per month and an additional $1,500.00 per month for
rent and secretarial services for each month of the Company's existence since
inception (October 15, 1996). No employee of the Company earned salary and
bonus of $100,000 or more in fiscal year 1998.
During fiscal year 1998 the Company granted Mr. Robertson options to purchase
150,000 shares of common stock at $0.50 per share, the Company's good faith
estimate of the fair market value of the stock on the date of grant. The
options are fully vested and must be exercised by January 26, 2003. They
represent 28.8% of all options granted to employees in fiscal year 1998.
17
<PAGE>
Mr. Robertson did not exercise any of his stock options in fiscal year 1998. In
total, at the end of fiscal year 1998 Mr. Robertson had options to purchase
150,000 shares of the Company's common stock, all of which were fully vested and
exercisable. The aggregate dollar value of Mr. Robertson's unexercised options
at May 31, 1998 was zero, based on a market price of $0.50 per share for the
Company's common stock, the price at which it was then selling shares in a
private placement.
Mr. Robertson did not receive any long-term incentive plan award.
Directors receive no compensation for their service as such, although they do
receive reimbursement for reasonable expenses incurred in attending meetings of
the Board of Directors. In addition to the options granted to Mr. Robertson,
Ms. Lorette and Mr. Vandeberg each were granted options to purchase 50,000
shares of the Company's common stock, due in part to their service as directors.
Ms. Lorette's options are fully vested, have an exercise price of $0.50 per
share and must be exercised by January 26, 2003. Mr. Vandeberg's options, which
were granted after fiscal year 1998, are fully vested, have an exercise price of
$0.75 per share and must be exercised by January 18, 2004. The Company has no
obligation or policy to grant stock options to directors.
The Company does not have an employment contract with Mr. Robertson and it has
no obligation to provide compensation to him in the event of his resignation,
retirement or termination, or a change in control.
The Company may in the future create retirement, pension, profit sharing,
insurance and medical reimbursement plans covering its Executive Officers and
Directors. At the present time, no such plans exist. No advances have been
made or are contemplated by the Company to any of its Officers or Directors.
Item 7. Certain Relationships and Related Transactions
At November 30, 1998, the Company owed $158,927 to affiliated companies. The
indebtedness is unsecured and non-interest bearing.
Mr. Robertson and Ms. Lorette could be considered promoters of the Company.
Their interests in the Company, including the details of their stock options,
are disclosed above. See "Security Ownership of Certain Beneficial Owners and
Management" and "Executive Compensation".
Item 8. Description of Securities
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, $0.0001 par value per share and 10,000,000 shares of Class A
Preferred Stock, $0.0001 par value per share.
The holders of shares of common stock are entitled to dividends, out of funds
legally available therefore, when and as declared by the Board of Directors.
The Board of Directors has never declared a dividend and does not anticipate
declaring a dividend in the future. Each outstanding share of common stock
entitles the holder thereof to one vote per share on all matters and cumulative
voting is not provided for in connection with the election of the Board of
Directors. The holders of the shares of common stock have no preemptive or
subscription rights.
The holders of shares of common stock of the Company do not have cumulative
voting rights, which means that the holders of more than 50% of such outstanding
shares, voting for the election of directors,
18
<PAGE>
can elect all of the directors to be elected, if they so choose, and, in such
event, the holders of the remaining shares will not be able to elect any of the
Company's directors.
The Class A Preferred Stock may be issued in series from time to time with such
designation, rights, preferences and limitations as the Board of Directors may
determine by resolution. The Board of Directors could use an issuance of Class
A Preferred Stock with dilutive or voting preferences to delay, defer or prevent
a change in control of the Company. In addition, the concentration of control
over the Company's common stock in the Directors and Executive Officers could
prevent any change in control of the Company not acceptable to the existing
Directors and Executive Officers.
19
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters
There is a limited public market for the Common Stock of the Company which
currently trades on the NASD OTC Bulletin Board under the symbol "IHWY" where it
has been traded since February 24, 1999. The Company's Common Stock has traded
at between $3.50 and $12.81 per share since February 24, 1999. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
As of March 16, 1999, there were 5,535,717 shares of Common Stock outstanding,
held by 139 shareholders of record and by various broker/dealers on behalf of an
indeterminate number of street name shareholders.
To date the Company has not paid any dividends on its Common Stock and does not
expect to declare or pay any dividends on such Common Stock in the foreseeable
future. Payment of any dividends will be dependent upon future earnings, if
any, the financial condition of the Company, and other factors as deemed
relevant by the Company's Board of Directors.
Item 2. Legal Proceedings
To the knowledge of the Company's Executive Officers and Directors, the Company
is not a party to any legal proceeding or litigation and none of its property is
the subject of a pending legal proceeding. Further, the Officers and Directors
know of no threatened or contemplated legal proceedings or litigation
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 4.Recent Sales of Unregistered Securities
Set forth below is information regarding the issuance and sales of securities of
the Company without registration since formation of the Company. No such sales
involved the use of an underwriter and no commissions were paid in connection
with the sale of any securities.
(a) On April 1, 1999, the Company commenced an offering of up to 400,000 Units
exempt from registration under Rule 506 of the Act and Section 4(2) of the
Securities Act of 1933, as amended. Each "Unit" consists of one share of
common stock and one warrant to purchase one share of common stock on or
before April 1, 2000. The Company intends to ensure the exemption from
registration by furnishing to purchasers in a timely manner an Offering
Memorandum and financial information, by limiting the manner of the
offering, by promptly filing notices of sales, and by limiting the number
of non-accredited investors to 35 investors who, either alone or with a
qualified representative, are capable of evaluating the merits and risks of
an investment in the Company.
(b) On February 23, 1999 the Company issued a total of 499,000 shares of common
stock to certain shareholders of PrivCo in exchange for 499,000 shares of
PrivCo. The issuance of the common
20
<PAGE>
stock was exempt from registration under Rule 504 of Regulation D and
Section 3(b) of the Securities Act of 1933, as amended. The Company's
shares were valued at $0.75 per share, the price per Unit that PrivCo had
obtained in its most recent offering of securities, in which PrivCo offered
Units consisting of one share of unrestricted common stock and one warrant
for $0.75 per Unit. If the exemption under Rule 504 of Regulation D is not
available, the Company believes that this offering was also exempt under
Regulation S and Sections 3(b) and 4(2) under the Securities Act of 1933,
as amended, due to the foreign nationality of the relevant shareholders of
PrivCo, their prior contacts with PrivCo and its management, and the
limited number of investors (four).
(c) On February 23, 1999, the Company issued a total of 2,736,000 shares of
common stock to certain shareholders in exchange for 2,736,000 shares of
PrivCo common stock. The issuance of the shares was exempt from
registration under Rule 506 of Regulation D, Regulation S and Section 3(b)
and 4(2) of the Securities Act of 1933, as amended, due to the foreign
nationality of the relevant shareholders of PrivCo, their prior contacts
with PrivCo and its management, and the limited number of investors (six).
(d) On February 23, 1999 the Company began an offer to certain shareholders of
PrivCo to exchange 834,000 shares of their unrestricted PrivCo common stock
for 834,000 shares of the Company's common stock exempt from registration
under Rule 504 of Regulation D and Section 3(b) of the Securities Act of
1933, as amended. The Company's shares were valued at $0.75 per share, the
price per Unit that PrivCo had obtained in its most recent offering of
securities, in which PrivCo offered Units consisting of one share of
unrestricted common stock and one warrant for $0.75 per Unit. If the
exemption under Rule 504 of Regulation D is not available, the Company
believes that this offering will also be exempt under Rule 506 of
Regulation D, Regulation S and Sections 3(b) and 4(2) of the Securities Act
of 1933, as amended. The Company intends to ensure the exemption from
registration by furnishing to purchasers in a timely manner an Exchange
Offering Memorandum and financial information, by limiting the manner of
the offering, by promptly filing notices of sales, and by limiting the
number of domestic non-accredited investors to fewer than 35 investors who,
either alone or with a qualified representative, are capable of evaluating
the merits and risks of an investment in the Company.
(e) On February 23, 1999, the Company began an offer to certain shareholders of
PrivCo to exchange 1,570,650 shares of their restricted PrivCo common stock
for 1,570,650 shares of the Company's common stock exempt from registration
under Rule 506 of Regulation D, Regulation S and Section 3(b) and 4(2) of
the Securities Act of 1933, as amended. The Company intends to ensure the
exemption from registration by furnishing to purchasers in a timely manner
an Exchange Offering Memorandum and financial information, by limiting the
manner of the offering, by promptly filing notices of sales, and by
limiting the number of domestic non-accredited investors to fewer than 35
investors who, either alone or with a qualified representative, are capable
of evaluating the merits and risks of an investment in the Company.
Item 5. Indemnification of Directors and Officers
The Company's Articles of Incorporation provide that the Company must indemnify
its directors and officers, to the fullest extent permitted under the Florida
Business Corporation Act against all liabilities incurred by reason of the fact
that the person is or was a director or officer of the Company or a fiduciary of
an employee benefit plan, or is or was serving at the request of the Company as
a director or officer,
21
<PAGE>
or fiduciary of an employee benefit plan, of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.
The effect of these provisions is potentially to indemnify the Company's
directors and officers from all costs and expenses of liability incurred by them
in connection with any action, suit or proceeding in which they are involved by
reason of their affiliation with the Company.
22
<PAGE>
PART F/S
Consolidated Financial Statements
Index to Consolidated Financial Statements
<TABLE>
<S> <C>
Report of Independent Auditors............................................................ F-1
Consolidated Balance Sheets as of November 30, 1998 (unaudited), May 31, 1998 and 1997.... F-2
Consolidated Statements of Operations For the Six Months Ended November 30, 1998
and 1997 (unaudited) and For the Year Ended May 31, 1998 and the Period from
October 15, 1996 (Date of Inception) to May 31, 1997...................................... F-3
Consolidated Statements of Changes in Stockholders' Equity Accumulated
from October 15, 1996 (Date of Inception) to May 31, 1998................................. F-4
Consolidated Statements of Cash Flows for the Six Months Ended November 30, 1998
and 1997 (unaudited) and For the Year Ended May 31, 1998 and the Period from
October 15, 1996 (Date of Inception) to May 31, 1997...................................... F-5
Notes to the Consolidated Financial Statements (unaudited as to information
subsequent to May 31, 1998)............................................................... F-6 - F-10
</TABLE>
Pro forma Consolidated Financial Statements
Index to Pro forma Consolidated Financial Statements
<TABLE>
<S> <C>
Pro forma Consolidated Balance Sheet (unaudited) and
Pro forma Consolidated Statement of Changes in Stockholders' Equity (unaudited)........... F-11
Notes to the Pro forma Financial Statements............................................... F-12 - F-13
</TABLE>
23
<PAGE>
PART III
Item 1. Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- -------------- -------------------------------------------------------------------- ---------
<S> <C> <C>
2.1 Articles of Incorporation, restated as amended on February 23, 1999
and November 1, 1989
2.2 Bylaws
3.1 Specimen Share Certificate for Common Stock
3.2 Form of Warrants
3.3 Stock Option Plan
3.4 Form of Stock Option Agreement
8.1 Agreement and Plan of Reorganization between the Company and
Information Highway, Inc.
27.1 Financial Data Schedule
27.2 Financial Data Schedule
</TABLE>
24
<PAGE>
SIGNATURES
Pursuant to the requirements Section 12 of the Securities Exchange Act of 1934,
the Registrant has duly caused this report or amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
INFORMATION-HIGHWAY.COM, INC.
By: /s/ John G. Robertson
---------------------
John G. Robertson, President
Chief Executive Officer and Director
Dated: April 13, 1999
25
<PAGE>
F-1
Report of Independent Auditors'
-------------------------------
To: Board of Directors and Stockholders
Information Highway, Inc.
We have audited the accompanying consolidated balance sheets of Information
Highway, Inc. as of May 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year ended
May 31, 1998 and the period from October 15, 1996 (Date of Inception) to May 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with U.S. 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 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, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Information Highway,
Inc. as of May 31, 1998 and 1997, and the results of their operations and their
cash flows for the year ended May 31, 1998 and the period from October 15, 1996
(Date of Inception) to May 31, 1997 in conformity with U.S. generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not achieved profitable operations since
inception and has a working capital deficit. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plan in regard to these matters are also discussed in Note 1. These financial
statements do not include any adjustments which might result from the outcome of
this uncertainty.
"Elliott, Tulk, Pryce, Anderson"
Elliott, Tulk, Pryce, Anderson
Chartered Accountants
Vancouver, British Columbia, Canada
September 24, 1998 except as to Note 9
which is as of February 22, 1999
<PAGE>
F-2
Information Highway, Inc.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
November 30, May 31
------------ ---------------------
1998 1998 1997
(unaudited)
$ $ $
<S> <C> <C> <C>
Assets
Current Assets
Cash 367,655 35,699 4,947
Accounts receivable 6,563 4,442 1,628
Prepaid expenses 5,300 3,001 5,276
- --------------------------------------------------------------------------------------------------------------
379,518 43,142 11,851
Fixed Assets (Note 5) 174,249 209,353 157,981
Goodwill (Note 4) 194,724 274,598 434,343
- --------------------------------------------------------------------------------------------------------------
748,491 527,093 604,175
==============================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 229,660 206,608 59,475
Unearned revenue - - 4,495
- --------------------------------------------------------------------------------------------------------------
229,660 206,608 63,970
Advances from Affiliated Companies (Note 6) 158,927 239,542 120,448
Advances from Directors (Note 6) - 22,242 30,991
- --------------------------------------------------------------------------------------------------------------
338,587 468,392 215,409
- --------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 1 and 8)
- --------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common Stock (Notes 7 and 9), no par value, 100,000,000 shares
authorized, 5,039,250, 4,766,000 and 3,667,000 issued
and outstanding respectively 905,897 700,960 391,460
Paid for but unissued, for 600,400, 82,650 and 776,000
shares respectively 450,300 61,988 148,000
Preferred Stock, no par value, 50,000,000 shares
authorized, none issued - - -
Translation adjustments 7,938 3,654 -
- --------------------------------------------------------------------------------------------------------------
1,364,135 766,602 539,460
Deficit (1,004,231) (707,901) (150,694)
- --------------------------------------------------------------------------------------------------------------
359,904 58,701 388,766
- --------------------------------------------------------------------------------------------------------------
748,491 527,093 604,175
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
F-3
Information Highway, Inc.
Consolidated Statements of Operations
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
Six months Six months Twelve months Period from
ended ended ended October 15, 1996 to
November 30, November 30, May 31, May 31,
------------ ------------ ------------- -------------------
1998 1997 1998 1997
(unaudited) (unaudited)
$ $ $ $
<S> <C> <C> <C> <C>
Revenue 498,895 400,741 859,184 145,449
- -------------------------------------------------------------------------------------------------------------------------
Expenses
Advertising and instruction guides 31,248 22,743 60,242 8,451
Amortization of goodwill 79,874 79,874 159,745 44,900
Bad debts 1,593 1,497 - -
Bank and credit card charges 10,320 8,703 18,456 2,522
Depreciation 28,109 28,638 57,611 14,335
Equipment rental 22,608 8,253 16,075 -
Foreign exchange (4,614) (181) 2,992 897
Internet and license fees 131,327 41,215 159,441 5,744
Investor relations 75,156 2,408 7,417 2,946
Management and consulting fees 91,215 88,811 230,080 58,849
Office 14,643 12,280 30,069 11,726
Professional fees 39,699 9,522 57,243 5,065
Rent 29,010 19,587 58,939 15,730
Royalties - - - 20,696
Salaries and benefits 90,091 79,692 170,933 65,385
Telephone 143,958 164,233 374,132 34,194
Transfer agent and regulatory fees 1,152 - - -
Travel and promotion 9,836 8,173 13,016 4,703
- -------------------------------------------------------------------------------------------------------------------------
795,225 575,448 1,416,391 296,143
- -------------------------------------------------------------------------------------------------------------------------
Net loss 296,330 174,707 557,207 150,694
=========================================================================================================================
Basic loss per share .06 .04 .14 .10
=========================================================================================================================
Weighted average shares outstanding 4,774,000 4,355,000 3,896,000 1,519,000
=========================================================================================================================
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
F-4
Information Highway, Inc.
Consolidated Statement of Changes in Stockholders' Equity
Accumulated from October 15, 1996 (Date of Inception) to November 30, 1998
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
Common Stock Common Stock
Issued Subscribed for
------------------ ------------------
<S> <C> <C> <C> <C> <C>
Shares Shares Deficit
# $ # $ $
Balance as at October 15, 1996 (Date of Inception) - - - - -
Issued for cash:
$0.10 per share pursuant to a subscription
received in October, 1996 15,000 1,500 - - -
$0.50 per share pursuant to a subscription
received in April, 1997 1,000 500 - - -
Issued for settlement of debt:
$0.365 per share agreed price - February, 1997 24,000 8,760 - - -
$0.50 per share - April, 1997 45,000 22,500 - - -
Issuance of stock in acquisitions of subsidiaries (Note 4):
December, 1996 at a deemed value of $0.10 per
share to acquire a 100% interest in Blue Crow
Internet Co. Ltd. 125,000 12,500 - - -
February, 1997 at a deemed value of $0.10 per
share to acquire a 100% interest in:
World-Tel Internet (Toronto) Ltd. 342,000 34,200 - - -
YESIC Communications Inc. 3,115,000 311,500 - - -
Net loss for the period - - - - (150,694)
- -------------------------------------------------------------------------------------------------------------------
Balance as at May 31, 1997 3,667,000 391,460 - - (150,694)
Issued for cash:
$0.10 per share pursuant to subscriptions received
in December, 1996 600,000 60,000 - - -
$0.50 per share pursuant to subscriptions received
from February, 1997 to January, 1998 499,000 249,500 - - -
Net loss for the year - - - - (557,207)
- -------------------------------------------------------------------------------------------------------------------
Balance as at May 31, 1998 4,766,000 700,960 - - (707,901)
Shares paid for but unissued pursuant to a Rule 504 private
placement at $0.75 per share (Issued December 31, 1998) - - 600,400 450,300 -
Issued for cash pursuant to a Rule 504 private
placement at $0.75 per share 133,600 100,200 - - -
Issued for cash pursuant to a Rule 506 private
placement at $0.75 per share 139,650 104,737 - - -
Net loss for the six months (unaudited) - - - - (296,330)
- -------------------------------------------------------------------------------------------------------------------
Balance as at November 30, 1998 5,039,250 905,897 600,400 450,300 (1,004,231)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
F-5
Information Highway, Inc.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
Six months Six months Twelve months Period from
ended ended ended October 15, 1996 to
November 30, November 30, May 31, May 31,
------------ ------------ ---------------------------------------
1998 1997 1998 1997
(unaudited) (unaudited)
$ $ $ $
<S> <C> <C> <C> <C>
Cash Flows to Operating Activities
Net loss (296,330) (174,707) (557,207) (150,694)
Adjustments to reconcile net loss to cash
Depreciation 28,109 28,638 57,611 14,335
Amortization of goodwill 79,874 79,874 159,745 44,900
Royalty expenses settled by issuing shares - - - 20,696
Change in non-cash working capital items
(Increase) decrease in accounts receivable (2,121) (116) (2,814) 83
(Increase) decrease in prepaid expenses (2,299) 1,525 2,275 (5,037)
Increase in accounts payable 23,052 (36,152) 147,133 18,199
Increase (decrease) in unearned revenue - 1,925 (4,495) 4,495
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (169,715) (99,013) (197,752) (53,023)
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Common stock issued and subscribed for 593,249 60,750 223,488 150,000
Increase (decrease) in advances from
affiliated companies (80,615) 62,881 119,094 (7,043)
Increase (decrease) in advances from directors (22,242) (4,007) (8,749) 1,898
Translation adjustment 12,875 489 3,654 -
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash from Financing Activities 503,267 120,113 337,487 144,855
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows to Investing Activities
Increase in capital assets acquired (1,596) (28,831) (108,983) (66,560)
Acquisition of subsidiaries (Note 4) - - - (20,325)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash to Investing Activities (1,596) (28,831) (108,983) (86,885)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash during the period 331,956 (7,731) 30,752 4,947
Cash - beginning of period 35,699 4,947 4,947 -
- ----------------------------------------------------------------------------------------------------------------------------
Cash (deficiency) - end of period 367,655 (2,784) 35,699 4,947
============================================================================================================================
Non-Cash Financing Activities
The Company issued 3,582,000 shares at
a deemed value of $0.10 per share to acquire
subsidiaries (Note 4) - - - 358,200
The Company issued 69,000 shares to
settle debts - - - 31,260
- ----------------------------------------------------------------------------------------------------------------------------
- - - 389,460
============================================================================================================================
Supplemental cash flow information:
Cash paid for interest - - - -
Cash paid for income taxes - - - -
============================================================================================================================
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
F-6
Information Highway, Inc.
Notes to the Consolidated Financial Statements
1. Nature of operations and continuance of business
The Company was incorporated in the State of Washington on October 15, 1996.
See Note 4 regarding acquisition of three Canadian operating subsidiaries in
the business of providing access to the Internet and providing services,
including on-line publishing, to individual and corporate subscribers.
The Company has emerged from being a development stage company. In a
development stage company, management devoted most of its activities to
establishing the business. Planned principal activities have started
producing significant revenues; however, the Company has experienced start-up
losses in 1997 and 1998 and has a serious working capital deficiency. The
ability of the Company to continue as a going concern is dependent upon its
successful efforts to raise additional equity financing (see Note 9) and
further develop the market for its products.
2. Significant accounting policies
Cash and cash equivalents
Cash and cash equivalents include cash on hand, in banks and all highly
liquid investments with a maturity of 90 days or less when purchased.
Financial instruments
The fair value of the Company's current assets and current liabilities were
estimated to approximate their carrying values due to the immediate or short-
term maturity of these financial instruments. The Company operates in Canada
giving rise to significant exposure to market risks from changes in foreign
currency rates. The financial risk is the risk to the Company's operations
that arise from fluctuations in foreign exchange rates and the degree of
volatility of these rates. Currently, the Company does not use derivative
instruments to reduce its exposure to foreign currency risk.
Fixed assets
Fixed assets are recorded at cost. Deprecation is computed utilizing the
declining balance method over an estimated useful life of the related asset
category. Computer equipment is depreciated at 30% per annum and furniture
and office equipment at 20%. Leasehold improvements are amortized to
operations over ten years utilizing the straight-line method.
Goodwill
Goodwill represents the excess of purchase consideration over fair market
value of net identifiable assets acquired, and is amortized on a straight-
line basis over three years. Goodwill is evaluated in each reporting period
to determine if there were events or circumstances which would indicate a
possible inability to recover the carrying amount. Such evaluation is based
on various analyses including undiscounted cash flow and profitability
projections which necessarily involves significant management judgement.
Revenue recognition
Revenue is recognized at the time services are provided. All related costs
are recognized in the period in which they occur.
<PAGE>
F-7
2. Significant accounting policies (continued)
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
Basic and diluted net income (loss) per share
The Company computes net income (loss) per share in accordance with SFAS No.
128, "Earnings per Share" (SFAS 128). SFAS 128 requires presentation of both
basic an diluted earnings per share (EPS) on the face of the income
statement. Basic EPS is computed by dividing net income (loss) available to
common shareholders (numerator) by the weighted average number of common
shares outstanding (denominator) during the period. Diluted EPS gives effect
to all dilutive potential common shares outstanding during the period
including stock options, using the treasury stock method, and convertible
preferred stock, using the if-converted method. In computing Diluted EPS, the
average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or
warrants. Diluted EPS excludes all dilutive potential common shares if their
effect is anti dilutive.
Foreign exchange
All of the Company's Canadian operating subsidiaries are operationally
independent of the parent and are considered self-sustaining. As such, the
current rate method is used whereby assets and liabilities are translated
into United States dollars at exchange rates in effect at the balance sheet
dates. Shareholder's equity accounts are translated using historical exchange
rates. Income and expense items are translated at average exchange rates for
the periods. Accumulated net translation adjustments are included as a
separate component of shareholders' equity.
Current monetary assets and liabilities of the Company which are denominated
in foreign currencies are translated at the exchange rate in effect at the
balance sheet dates. Revenues and expenses are translated at rates of
exchange prevailing on the transaction dates. Exchange gains or losses are
recognized currently in earnings.
Income taxes
The Company has adopted the provisions of Financial Accounting Standards
Board Statement No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109
requires that deferred taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts. At the date of adoption of SFAS 109, there was
no material effect on the Company's financial statements.
Pursuant to SFAS 109 the Company is required to compute tax asset benefits
for net operating loss carry forwards. Potential benefit of net operating
losses has not been recognized in the financial statements because the
Company cannot be assured that it is more likely than not that it will
utilize the net operating loss carry forwards in future years.
The components of the net deferred tax asset, the statutory tax rate, the
effective tax rate and the elected amount of the valuation allowance are
scheduled below:
1998 1997
$ $
Net Operating Loss 280,000 60,000
Statutory Tax Rate $22,500+ 39% $7,500+ 25%
in excess of in excess of
$100,000 $50,000
Effective Tax Rate - -
Deferred Tax Asset 93,000 10,000
Valuation Allowance (93,000) (10,000)
--------- ---------
Net Deferred Tax Asset - -
========= =========
<PAGE>
F-8
2. Significant accounting policies (continued)
Income taxes
The Company's Canadian subsidiaries have Canadian tax losses of $307,000 to
offset future years Canadian taxable income. These losses expire as follows:
$
2002 29,000
2003 69,000
2004 70,000
2005 139,000
3. Consolidated financial statements
These financial statements include the accounts of the Company, and its 100%
owned Canadian subsidiaries: Blue Crow Internet Co. Ltd. ("Blue Crow");
World-Tel Internet (Toronto) Ltd. ("World-Tel); and YESIC Communications Inc.
("Yesic"). As Blue Crow was acquired on December 11, 1996, results of
operations include only the period from December 11, 1996 to May 31, 1997. As
World-Tel and Yesic were acquired on February 23, 1997, results of operations
include only the period from February 23, 1997 to May 31, 1997. See Note 4
regarding accounting for these business acquisitions.
For the year ended May 31, 1998 and the six months ended November 30, 1998
business operations included the Company and its three subsidiaries.
4. Business acquisitions
On December 11, 1996, the Company acquired 100% of Blue Crow and on February
23, 1997 the Company acquired 100% of World-Tel and Yesic. See Note 1
regarding nature of their business. The acquisitions were accounted for using
the purchase method of accounting for business combinations. The Company
issued 3,582,000 common shares at a deemed fair market value of $0.10 per
share and US$27,380 as cash consideration for all three acquisitions. In
total, the Company assumed net liabilities of $93,663. The excess of the
purchase price over the fair market value of net liabilities assumed,
totalling $479,243 was allocated to goodwill. Details of liabilities assumed
and assets acquired are as follows:
$
(i) Consideration
Capital stock issued (3,582,000 at $.10) 358,200
Cash paid 27,380
------------------------------------------------------------------
385,580
------------------------------------------------------------------
(ii) Net liabilities assumed
Liabilities assumed
Accounts payable 43,080
Loans from directors 37,853
Loans from affiliated companies 127,491
------------------------------------------------------------------
208,424
Assets acquired
Cash received in combination (7,055)
Accounts receivable (1,711)
Capital assets (105,995)
------------------------------------------------------------------
(114,761)
Net liabilities assumed 93,663
------------------------------------------------------------------
(iii) Excess of costs over book values 479,243
------------------------------------------------------------------
<PAGE>
F-9
4. Business acquisitions
The excess of costs over book values were allocated to goodwill as there were
no other fair market value adjustments to non-monetary assets or other
identifiable intangible assets. Goodwill has been capitalized and is being
amortized over its estimated useful life of three years. Amortization of
$44,900 was charged to operations in 1997 and $159,745 was charged in 1998.
5. Fixed assets
<TABLE>
<CAPTION>
Fixed assets are stated at cost less accumulated depreciation.
1998 1997
Accumulated Net Book Net Book
Cost Amortization Value Value
$ $ $ $
<S> <C> <C> <C> <C>
Computer equipment and software 252,075 79,248 172,827 135,469
Office furniture and equipment 33,984 7,869 26,115 22,512
Leasehold improvements 11,567 1,156 10,411 -
- -----------------------------------------------------------------------------------------------
297,626 88,273 209,353 157,987
===============================================================================================
Depreciation per class of asset:
1998 1997
$ $
Computer equipment and software 51,833 12,263
Office furniture and equipment 4,622 2,072
Leasehold improvements 1,156 -
- -----------------------------------------------------------------------------------------------
57,611 14,335
===============================================================================================
</TABLE>
6. Related party balances and transactions
Amounts owing to the President and director and affiliated companies will not
be demanded prior to November 30, 1999, are unsecured and non-interest
bearing. The Company intends on repaying a portion of these debts in the next
fiscal year.
The President and director of the Company was also President and director of
World-Tel and Chief Executive Officer and director of Yesic prior to their
acquisition. (See Note 4).
7. Stock option plan
On June 30, 1997 the Company reserved 1,000,000 common shares pursuant to a
stock option plan. On January 26, 1998 the Company granted stock options to
certain directors and employees to acquire 725,000 shares at $0.50 per share
expiring January 26, 2003.
The options are granted for services provided to the Company. Statement of
Financial Accounting Standards No. 123 ("SFAS 123") requires that an
enterprise recognize, or at its option, disclose the impact of the fair value
of stock options and other forms of stock based compensation in the
determination of income. The Company has elected under SFAS 123 to continue
to measure compensation cost on the intrinsic value basis set out in APB
Opinion No. 25. As options are granted at exercise prices based on the market
price of the Company's shares at the date of grant, no compensation cost is
recognized. However, under SFAS 123, the impact on net income and income per
share of the fair value of stock options must be measured and disclosed on a
fair value based method on a pro forma basis.
The fair value of the employee's purchase rights under SFAS 123, was
estimated using the Black-Scholes model with the following assumptions used
for grants on January 26, 1998: risk free interest rate was 4.8%, expected
volatility of 1% being a non-public entity, an expected option life of six
months and no expected dividends.
If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for fiscal 1998 would have been as
follows:
$
Net loss
As reported (557,207)
Pro forma (566,207)
Basic net loss per share
As reported (.14)
Pro forma (.14)
8. Commitment
The Company is committed to making monthly operating lease payments to March
15, 2000 of $1,947 for computer equipment.
<PAGE>
F-10
9. Subsequent events
Private placements
The Company approved and completed a Rule 506 private placement financing
for 139,650 units at $0.75 per unit to raise $104,738. These units were
issued in October, 1998. Each unit contained one share and one warrant to
acquire one additional share at $1.00 if exercised within one year after
issuance.
The Company approved and completed a Rule 504 private placement financing
for 734,000 units at $0.75 per unit to raise $550,500. Each unit will
contain one share and one warrant to acquire one additional share at $1.00
if exercised within one year after issuance. A total of 133,600 units were
issued in October, 1998 and the balance of 600,400 units were issued on
December 31, 1998.
The proceeds of $0.75 per share was allocated 100% to the common shares
issued; no amount was allocated to warrants as the warrant price was set
higher than fair market value and there is a one year hold period on these
shares and no market for the warrants.
Stock options granted and cancelled
Stock options granted to certain employees to acquire 135,000 common shares
at $0.50 per share were cancelled.
Stock options were granted to certain directors and employees to acquire
295,000 common shares at $0.75 per share expiring five years after grant
date being between August 14, 2003 and February 22, 2004.
10. Segmented information
The business of the Company is carried on in one industry segment: the
providing of access to the Internet and providing services, including on-
line publishing, to individual and corporate subscribers.
The Company operates in two geographic segments as follows:
<TABLE>
<CAPTION>
November 30, 1998 November 30, 1997
-------------------------------------- -----------------------------------
(unaudited) (unaudited)
United United
Canada States Total Canada States Total
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Sales - unaffiliated 492, 091 6,804 498,895 399,397 1,344 400,741
-------------------------------------------------------------------------------------------------------------------------
Inter-area sales - - - - - -
-------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) 8,490 (304,820) (296,330) (39,282) (135,425) (174,704)
-------------------------------------------------------------------------------------------------------------------------
Identifiable assets 138,942 414,825 553,767 137,452 25,411 162,863
Goodwill - 194,724 194,724 - 354,469 354,469
-------------------------------------------------------------------------------------------------------------------------
Total assets 138,942 609,549 748,491 137,452 379,880 517,332
=========================================================================================================================
May 31, 1998 May 31, 1997
-------------------------------------- -----------------------------------
United United
Canada States Total Canada States Total
$ $ $ $ $ $
Sales - unaffiliated 855,987 3,197 859,184 145,449 - 145,449
-------------------------------------------------------------------------------------------------------------------------
Inter-area sales - - - - - -
-------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) (117,951) (439,256) (557,207) (44,735) (105,959) (150,694)
-------------------------------------------------------------------------------------------------------------------------
Identifiable assets 207,053 45,442 252,495 161,602 8,230 169,832
Goodwill - 274,598 274,598 - 434,343 434,343
-------------------------------------------------------------------------------------------------------------------------
Total assets 207,053 320,040 527,093 161,602 442,573 604,175
=========================================================================================================================
</TABLE>
11. Pro forma combined statement of operations (Unaudited)
The following statements of operations represents a combination of the
statements of operations for 1996 and 1997 of the Company and its three
subsidiaries on the assumption that the purchases occurred on June 1, 1995.
<TABLE>
<CAPTION>
Year to Year to
May 31, May 31,
1997 1996
$ $
<S> <C> <C>
Revenue 421,346 15,611
--------------------------------------------------------------
Expenses
General and administrative 534,903 120,041
Royalties 20,696 5,081
Amortization of goodwill 138,718 48,175
Depreciation 29,905 4,226
--------------------------------------------------------------
(724,222) (177,523)
--------------------------------------------------------------
Net Loss (302,876) (161,912)
--------------------------------------------------------------
Net Loss per share (0.08) (0.05)
--------------------------------------------------------------
Weighted average shares outstanding 3,612,000 3,457,000
==============================================================
</TABLE>
<PAGE>
F-11
Information-Highway.com, Inc. (formerly Florida Venture Fund, Inc.)
<TABLE>
<CAPTION>
Pro forma Consolidated Balance Sheet
(Unaudited)
Information-
Highway.com, Inc. Pro forma
(formerly Florida Information Adjustment Pro forma
Venture Fund, Inc.) Highway, Inc. (Note 5) Total
$ $ $ $
<S> <C> <C> <C> <C>
Current assets 1,446 379,518 (100,000) 280,964
Non-current assets - 368,973 - 368,973
- -----------------------------------------------------------------------------------------------------------------------
Total assets 1,446 748,491 (100,000) 649,937
=======================================================================================================================
Current liabilities 5,567 229,660 - 235,227
Non-current liabilities - 158,927 - 158,927
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 5,567 388,587 - 394,154
- -----------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock 8,050 1,356,197 (112,171) 1,252,076
Deficit (12,171) (1,004,231) 12,171 (1,004,231)
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (4,121) 351,966 (100,000) 247,845
Translation adjustments - 7,938 - 7,938
- -----------------------------------------------------------------------------------------------------------------------
(4,121) 359,904 (100,000) 255,783
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 1,446 748,491 (100,000) 649,937
=======================================================================================================================
</TABLE>
Pro forma Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
---------------------------------------------
Additional
No. of Par Value Paid-in
Shares $.0001 Capital Total Deficit Total
$ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 1,979,500 198 7,852 8,050 (12,171) (4,121)
Pro forma adjustments (Note 5)
Cancellation of shares for no
consideration (Note 2) (1,659,833) (166) 166 - - -
Issuance of shares to effect
reverse takeover (Note 2) 3,235,000 324 777,614 777,938 - 777,938
Shares to be issued for balance
of transaction (Note 2) 2,404,650 240 578,019 578,259 - 578,259
Cost of reverse takeover
transaction (Note 4) - - (112,171) (112,171) - (112,171)
Deficit of Information Highway,
Inc. as at November 30, 1998 - - - - (1,004,231) (1,004,231)
Elimination of deficit of Company - - - - 12,171 12,171
- -----------------------------------------------------------------------------------------------------------------------
Pro forma balance at December 31, 1998 5,959,317 596 1,251,480 1,252,076 (1,004,231) 247,845
=======================================================================================================================
</TABLE>
(See accompanying notes to the pro forma financial statements)
<PAGE>
F-12
Information-Highway.com, Inc. (formerly Florida Venture Fund, Inc.)
Notes to the Pro forma Financial Statements
1. Purpose of pro forma financial statements
These pro forma consolidated financial statements have been prepared to
disclose the impact of Information-Highway.com, Inc. (formerly Florida
Venture Fund, Inc.), herein "the Company" or "FVFI", acquiring 100% of the
issued and outstanding shares of a private Washington State Corporation,
Information Highway, Inc., herein "IHI". IHI is in the business of
providing access to the Internet and providing services, including on-line
publishing, to individual and corporate subscribers.
2. Agreement and Plan of Reorganization
Pursuant to an Agreement and Plan of Reorganization entered into on
February 17, 1999 and closing on February 23, 1999 between the Company, IHI
and the shareholders of IHI, the Company acquired 3,235,000 common shares
of IHI out of a total of 5,639,650 issued and outstanding common shares by
issuing 3,235,000 common shares of the Company. The remaining 2,404,650
issued and outstanding common shares of IHI will be acquired in a similar
share for share exchange. As part of the Agreement and Plan of
Reorganization the Company caused 1,659,833 of its 1,979,500 issued and
outstanding common shares to be cancelled and has assumed the obligations
of IHI to issue common shares pursuant to warrants and stock options issued
by IHI. IHI paid $100,000 to the controlling shareholder of the Company as
a finders fee and to effect the Agreement and Plan of Reorganization.
3. Business acquisition by way of reverse takeover
For accounting purposes the acquirer is IHI as 94.6% of the issued and
outstanding common shares of the Company will be owned by the shareholders
of IHI and the entire Board of Directors of the Company is now comprised of
the entire Board of Directors of IHI. As IHI is the legal subsidiary of the
Company the nature of the business combination is a reverse takeover
whereby the control of the assets and the business of the Company is
acquired by IHI and the consolidated financial statements are issued under
the name of the Company but described in the notes and elsewhere as a
continuation of IHI and not the Company. The legal capital structure
remains that of the Company but the shareholders' equity of IHI will
replace the shareholders' equity of the Company.
4. Cost of reverse takeover transaction
Consideration paid to shareholders of FVFI:
<TABLE>
<CAPTION>
$
<S> <C>
Cash paid to controlling shareholder of FVFI (finders fee) 100,000
Net liabilities of FVFI assumed at book value 4,121
Value attributed to the 319,667 shares of FVFI not cancelled 8,050
-------
112,171
=======
</TABLE>
The excess of cost over book values of FVFI, being $112,171 has been
treated for accounting purposes as a reduction of additional paid in
capital and not to goodwill as the nature of the transaction was for IHI to
obtain a listing on the OTC Bulletin Board by way of reverse takeover. The
cost is associated with publicly listing shares and not with any business
associated with FVFI.
<PAGE>
F-13
5. Pro forma adjustment and pro forma statement presentation
The pro forma consolidated financial statements consists of a balance sheet
as at December 31,1998 and a statement of stockholders' equity. The balance
sheet is comprised of FVFI at its fiscal year end of December 31,1998
(audited) combined with IHI as at November 30, 1998 (unaudited) adjusted
for the $100,000 cash payment, the elimination of FVFI deficit of $12,171
and the reduction of additional paid in capital of $112,171. It was not
thought to be meaningful to present a pro forma balance sheet as at May 31,
1998 being IHI's audited fiscal year end. The statement of stockholders'
equity is comprised of FVFI's stockholders' equity as at December 31, 1998
adjusted for the reverse takeover transaction which, when adjusted, is that
of IHI as the continuing business less the consideration paid allocated as
a reduction of paid in capital. A pro forma statement of income has not
been presented as there was no business conducted by FVFI from inception
forward and there were no purchase price adjustments affecting income or
earnings per share. The comparative figures that will be presented pro
actively will be that of IHI and not FVFI.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- --------------------------------------------------
2.1 Articles of Incorporation, restated as amended on February
23, 1999 and November 1, 1989
2.2 Bylaws
3.1 Specimen Share Certificate for Common Stock
3.2 Form of Warrants
3.3 Stock Option Plan
3.4 Form of Stock Option Agreement
8.1 Agreement and Plan of Reorganization between the Company and
Information Highway, Inc.
27.1 Financial Data Schedule
27.2 Financial Data Schedule
<PAGE>
EXHIBIT 2.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
INFORMATION HIGHWAY.COM, INC.
The undersigned, for the purpose of forming a corporation under the Florida
General Corporation Act, hereby adopts the following Articles of Incorporation.
ARTICLE I
The name of the corporation shall be Information Highway.com, Inc.
ARTICLE II
The term of existence of the corporation is perpetually.
ARTICLE III
The corporation may transact any and all lawful business for which
corporations may be incorporated under the Florida General Corporation act.
ARTICLE IV
The Company is authorized to issue 50,000,000 shares of Common Stock having
a par value of $.0001 each. Additionally, the Company is authorized to issue
10,000,000 shares of Class A Preferred Stock, having a par value of $.0001 each.
The Preferred Stock may be issued in series from time to time with such
designation, rights, preferences and limitations as the Board of Directors of
the Company may determine by resolution. The rights, preferences and
limitations of separate series of Preferred Stock may differ with respect to
such matters as may be determined by the Board of Directors, including, without
limitation, the rate of dividends, method and nature of payment of dividends,
terms of redemption, amounts payable on liquidation, sinking fund provisions (if
any), conversion rights (if any), and voting rights.
ARTICLE V
The street address of the initial registered office of the corporation is
11891 U.S. Highway 1, North Palm Beach, Florida 33408, and the name of the
initial registered agent at such address is Robert C. Hackney.
ARTICLE VI
The Corporation shall have one director, initially. The number of
directors may be increased or decreased from time to time, by bylaws adopted by
the stockholders, but shall never be less than one.
ARTICLE VII
The name and post office address of the member of the first Board of
Directors is:
Robert C. Hackney 11891 U.S. Highway 1
North Palm Beach, Florida 33408
<PAGE>
ARTICLE VIII
The name and address of the incorporator is:
Robert C. Hackney 11891 U.S. Highway 1
North Palm Beach, Florida 33408
ARTICLE IX
The Corporation shall be deemed to commence its existence upon the date of
filing of these Articles of Incorporation.
<PAGE>
EXHIBIT 2.2
BYLAWS
OF
FLORIDA VENTURE FUND, INC.
as of December 5, 1983
ARTICLE I - OFFICES
Section 1. The registered office of the corporation in the State of
Florida shall be at 150 South Pine Island Road, Suite 100, Plantation, Florida
33324.
The registered agent in charge thereof shall be Florida Incorporators, Inc.
Section 2. The corporation may also have offices at such other places as
the Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name of the
corporation the year of its organization and the words "Corporate Seal,
Florida".
ARTICLE III - STOCKHOLDERS' MEETINGS
Section 1. Meetings of stockholders shall be held at the registered office
of the corporation in this state or at such place, either within or without this
state, as may be selected from time to time by the Board of Directors.
Section 2. ANNUAL MEETINGS: The annual meeting of the stockholders shall
be held on such date as is determined by the Board of Directors for the purpose
of electing directors and for the transaction of such other business as may
property be brought before the meeting.
Section 3. ELECTION OF DIRECTORS: Elections of the directors of the
corporation shall be by written ballot.
Section 4. SPECIAL MEETINGS: Special meetings of the stockholders may be
called at any time by the President, or the Board of Directors, or stockholders
entitled to cast at least one-fifth of the votes which all stockholders are
entitled to cast at the particular meeting. At anytime, upon written request of
any person or persons who have duly called a special meeting, it shall be the
duty of the Secretary to fix the date of the meeting, to be held not more than
sixty days after receipt of the request, and to give due notice thereof. If the
Secretary shall neglect or refuse to fix the date of the meeting and give notice
thereof, the person or persons calling the meeting may do so.
Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto, unless all stockholders
entitled to vote are present and consent.
<PAGE>
Written notice of a special meeting of stockholders stating the time and
place and object thereof, shall be given to each stockholder entitled to vote
thereat at least ten days before such meeting, unless a greater period of notice
is required by statute in a particular case.
Section 5. QUORUM: A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If a majority of the
outstanding shares entitled to vote is represented at a meeting, a majority of
the shares so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 6. PROXIES: Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. All
proxies shall be filed with the Secretary of the meeting before being voted
upon.
Section 7. NOTICE OF MEETINGS: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
Unless otherwise provided by law, written notice of any meeting shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
Section 8. CONSENT IN LIEU OF MEETINGS: Any action required to be taken
at any annual or special meeting of stockholders of a corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, 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. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 9. LIST OF STOCKHOLDERS: The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in
<PAGE>
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. No share of stock upon
which any installment is due and unpaid shall be voted at any meeting. The list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE IV - DIRECTORS
Section 1. The business and affairs of this corporation shall be managed
by its Board of Directors, no less than one in number or such other minimum
number as is required by law. The directors need not be residents of this state
or stockholders in the corporation. They shall be elected by the stockholders
of the corporation or in the case of a vacancy by remaining directors, and each
director shall be elected for the term of one year, and until his successor
shall be elected and shall qualify or until his earlier resignation or removal.
Section 2. REGULAR MEETINGS: Regular meetings of the Board shall be held
without notice other than this by-law immediately after, and at the same place
as, the annual meeting of stockholders. The directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
Section 3. SPECIAL MEETINGS: Special Meetings of the Board may be called
by the President or any director upon two day notice. The person or persons
authorized to call special meetings of the directors may fix the place for
holding any special meeting of the directors called by them.
Section 4. QUORUM: A majority of the total number of directors shall
constitute a quorum for the transaction of business.
Section 5. CONSENT IN LIEU OF MEETING: Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
The Board of Directors may hold its meetings, and have an office or offices,
outside of this state.
Section 6. CONFERENCE TELEPHONE: One or more directors may participate in
a meeting of the Board, of a committee of the Board or of the stockholders, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other,
participation in this manner shall constitute presence in person at such
meeting.
Section 7. COMPENSATION: Directors as such, shall not receive any stated
salary for their services, but by resolution of the Board, a fixed sum and
expenses of attendance, if any,
<PAGE>
may be allowed for attendance at each regular or special meeting of the Board
provided, that nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 8. REMOVAL: Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except that when cumulative voting
is permitted, if less than the entire Board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors, or, if there be classes of directors, at an election of the class of
directors of which he is a part.
ARTICLE V - OFFICERS
Section 1. The executive offices of the corporation shall be chosen by the
directors and shall be a President, Secretary and Treasurer. The Board of
Directors may also choose a Chairman, one or more Vice Presidents and such other
officers as it shall deem necessary. Any number of offices may be held by the
same person.
Section 2. SALARIES: Salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 3. TERM OF OFFICE: The officers of the corporation shall hold
office for one year and until their successors are chosen and have qualified.
Any officer or agent elected or appointed by the Board may be removed by the
Board of Directors whenever in its judgment the best interest of the corporation
will be served thereby.
Section 4. PRESIDENT: The President shall be the chief executive officer
of the corporation; he shall preside at all meetings of the stockholders and
directors; he shall have general and active management of the business of the
corporation, shall see that all orders and resolutions of the Board are carried
into effect, subject, however, to the right of the directors to delegate any
specific powers, except such as may be by statute exclusively conferred on the
President, to any other officer or officers of the corporation. He shall
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the corporation. He shall be EX-OFFICIO a member of all committees, and shall
have the general power and duties of supervision and management usually vested
in the office of President of a. corporation.
Section 5. SECRETARY: The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and act as clerk thereof, and record
all the votes of the corporation and the minutes of all its transactions in a
book to be kept for that purpose, and shall perform like duties for all
committees of the Board of Directors when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, and under whose supervision he shall be. He shall
keep in safe custody the corporate seal of the corporation, and when authorized
by the Board, affix the same to any instrument requiring it.
<PAGE>
Section 6. TREASURER: The Treasurer shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall keep the moneys
of the corporation in a separate account to the credit of the corporation. He
shall disburse the funds of the corporation as may be ordered by the Board,
taking proper vouchers for such disbursements, and shall render to the President
and directors, at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and of the financial
condition of the corporation.
ARTICLE VI - VACANCIES
Section 1. Any vacancy occurring in any office of the corporation by
death, resignation, removal or otherwise, shall be filled by the Board of
Directors. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. If at any time, by reason of death or resignation or other
cause, the corporation should have no directors in office, then any officer or
any stockholder or an executor, administrator, trustee or guardian of a
stockholder or other fiduciary entrusted with like responsibility for the person
or estate of a stockholder, may call a special meeting of stockholders in
accordance with the provisions of these By-Laws.
Section 2. RESIGNATIONS EFFECTIVE AT FUTURE DATE: When one or more
directors shall resign from the Board, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective.
ARTICLE VII - CORPORATE RECORDS
Section 1. Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other books
and records, and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder.
In every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in this state or at its principal
place of business.
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
Section 1. The stock certificates of the corporation shall be numbered and
registered in the share ledger and transfer books of the corporation as they are
issued. They shall bear the corporate seal and shall be signed by the
president.
Section 2. TRANSFERS: Transfers of shares shall be made on the books of
the corporation upon surrender of the certificates therefor, endorsed by the
person named in the
<PAGE>
certificate or by attorney, lawfully constituted in writing. No transfer shall
be made which is inconsistent with law.
Section 3. LOST CERTIFICATE: The corporation may issue a new certificate
of stock in the place of any certificate theretofore signed by it, alleged to
have been lost, stolen or destroyed, and the corporation may require the owner
of the lost, stolen or destroyed certificate, or his legal representative to
give the corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
Section 4. RECORD DATE: In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. If no record
date is fixed:
(a) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed.
(c) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
(d) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 5. DIVIDENDS: The Board of Directors may declare and pay
dividends upon the outstanding shares of the corporation, from time to time and
to such extent as they deem advisable, in the manner and upon the terms and
conditions provided by statute and the Certificate of Incorporation.
Section 6. RESERVES: Before payment of any dividend there may be set
aside out of the net profits of the corporation such sum or sums as the
directors, from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve in the manner in
which it was created.
<PAGE>
ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. CHECKS: All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 2. FISCAL YEAR: The fiscal year shall begin on the first day of
January.
Section 3. NOTICE: Whenever written notice is required to be given to any
person, it may be given to such person, either personally or by sending a copy
thereof through the mail, or by telegram, charges prepaid, to his address
appearing on the books of the corporation, or supplied by him to the corporation
for the purpose of notice. If the notice is sent by mail or by telegraph, it
shall be deemed to have been given to the person entitled thereto when deposited
in the United States mail or with a telegraph office for transmission to such
person. Such notice shall specify the place, day and hour of the meeting and,
in the case of a special meeting of stockholders, the general nature of the
business to be transacted.
Section 4. WAIVER OF NOTICE: Whenever any written notice is required by
statute, or by the Certificate or the By-Laws of this corporation a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Except in the case of a special meeting of
stockholders, neither the business to be transacted at nor the purpose of the
meeting need be specified in the waiver of notice of such meeting. Attendance
of a person either in person or by proxy, at any meeting shall constitute a
waiver of notice of such meeting, except where a person attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting was not lawfully called or convened.
Section 5. DISALLOWED COMPENSATION: Any payments made to an officer or
employee of the corporation such as a salary, commission, bonus, interest, rent,
travel or entertainment expense incurred by him, which shall be disallowed in
whole or in part as a deductible expense by the Internal Revenue Service, shall
be reimbursed by such officer or employee to the corporation to the full extent
of such disallowance. It shall be the duty of the directors, as a Board, to
enforce payment of each such amount disallowed. In lieu of payment by the
officer or employee, subject to the determination of the directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the corporation has been recovered.
Section 6. RESIGNATIONS: Any director or other officer may resign at any
time, such resignation to be in writing and to take effect from the time of its
receipt by the corporation, unless some time be fixed in the resignation and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE X - ANNUAL STATEMENT
Section 1. The President and the Board of Directors shall present at each
annual meeting a full and complete statement of the business and affairs of the
corporation for the preceding
<PAGE>
year. Such statement shall be prepared and presented in whatever manner the
Board of Directors shall deem advisable and need not be verified by a Certified
Public Accountant.
ARTICLE XI - INDEMNIFICATION AND INSURANCE
Section 1. (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Florida Statutes, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
paragraph (b) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in this Section shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition: provided, however, that, if the Florida
Statutes requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is tendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing, indemnification of directors
and officers.
(b) RIGHT OF CLAIMANT TO BRING SUIT: If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards
<PAGE>
of conduct which make it permissible under the Florida Statutes for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Florida Statutes, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard or conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard or conduct.
(e) INDEMNIFICATION: Notwithstanding any limitation to the contrary
contained in sub-paragraphs (a) and 8 (b) of this section, the corporation
shall, to the fullest extent permitted by Florida Statute 607.014, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-law, agreement, vote of stockholders 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 director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(d) INSURANCE: The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Florida Statutes.
ARTICLE XII - AMENDMENTS
Section 1. These By-Laws may be amended or repealed by the vote of
directors.
<PAGE>
EXHIBIT 3.1
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
NUMBER SHARES
Information Highway.com, Inc.
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.0001
THIS CERTIFIES THAT
SAMPLE
IS THE RECORD HOLDER OF
--Shares of INFORMATION HIGHWAY.COM, INC. Common Stock--
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, THE TRANSFER
QUALIFIES FOR AN EXEMPTION FROM OR EXEMPTION TO THE REGISTRATION PROVISIONS
THEREOF.
Witness the facsimile seal of the Corporation and the facsimile signature
of its duly authorized officers.
Dated:
/s/ John G. Robertson
---------------------
President
[CORPORATE SEAL]
/s/ Jennifer Lorette
--------------------
Secretary
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
Countersigned Registered:
NEVADA AGENCY AND TRUST COMPANY
50 WEST LIBERTY STREET, SUITE 883 By ___________________
RENO, NEVADA 89501 Authorized Signature
<PAGE>
EXHIBIT 3.2
WARRANT CERTIFICATE
THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID
AT 4:00 P.M. (VANCOUVER TIME) ON DECEMBER 30TH, 1999
______ SHARE PURCHASE WARRANTS
TO PURCHASE _______ COMMON SHARES OF
INFORMATION HIGHWAY, INC.
incorporated in the State of Washington
THIS IS TO CERTIFY THAT ____________, of _______________________, (the "Holder")
has the right to purchase, upon and subject to the terms and conditions
hereinafter referred to, up to _____ fully paid and non-assessable common shares
(the "Shares") of INFORMATION HIGHWAY, INC. (the "Company") on or before 4:00
p.m. (Vancouver time) on December 30th, 1999 (the "Expiry Date").
1. ONE WARRANT AND $1.00 U.S. ARE REQUIRED TO PURCHASE ONE SHARE. THIS
CERTIFICATE REPRESENTS _______ WARRANTS.
2. These Warrants are issued subject to the Terms and Conditions attached to
the Warrants issued by the Company (the "Terms and Conditions") and dated
October 15, 1998, and the Warrant Holder may exercise the right to purchase
Shares only in accordance with those Terms and Conditions.
3. A copy of the Terms and Conditions may be obtained from the head office of
the Company at #185, 10751 Shellbridge Way, Richmond, British Columbia, V6X
2W8.
4. Nothing contained herein or in the Terms and Conditions will confer any
right upon the Holder hereof or any other person to subscribe for or
purchase any Shares at any time subsequent to the Expiry Date, and from and
after such time, this Warrant and all rights hereunder will be void and of
no value.
5. These Warrants are not validly created until this Warrant certificate is
countersigned by Nevada Agency and Trust Company.
IN WITNESS WHEREOF the Company has caused its seal to be affixed and this
Warrant to be signed by the undersigned, this 30th day of December, 1998.
INFORMATION HIGHWAY, INC. NEVADA AGENCY AND TRUST COMPANY
Per:____________________________ c/s Per:______________________
President Authorized Signatory
PLEASE NOTE THAT ALL CERTIFICATES MUST BE LEGENDED AS FOLLOWS:
THE SHARES TO BE ACQUIRED UPON EXERCISE OF THESE WARRANTS HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE
"ACT") AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY
THE HOLDER, UNLESS REGISTERED UNDER THE ACT OR UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, THE
<PAGE>
TRANSFER QUALIFIES FOR AN EXEMPTION FROM OR EXEMPTION TO THE
REGISTRATION PROVISIONS THEREOF.
<PAGE>
TERMS AND CONDITIONS dated October 15, 1998, attached to the Warrant
Certificates issued by INFORMATION HIGHWAY, INC. for an aggregate of 600,000
Warrants.
ARTICLE 1 - INTERPRETATION
- --------------------------
SECTION 1.1 - DEFINITIONS
In these Terms and Conditions, unless there is something in the subject matter
or context inconsistent therewith:
(a) "COMPANY" means INFORMATION HIGHWAY, INC. until a successor
corporation will have become such as a result of consolidation,
amalgamation or merger with or into any other corporation or
corporations, or as a result of the conveyance or transfer of all or
substantially all of the properties and estates of the Company as an
entirety to any other corporation and thereafter "Company" will mean
such successor corporation;
(b) "COMPANY'S AUDITORS" means an independent firm of accountants duly
appointed as auditors of the Company;
(c) "DIRECTOR" means a director of the Company for the time being, and
reference, without more, to action by the directors means action by
the directors of the Company as a Board, or whenever duly empowered,
action by an executive committee of the Board;
(d) "HEREIN", "HEREBY" and similar expressions refer to these Terms and
Conditions as the same may be amended or modified from time to time;
and the expression "ARTICLE" and "SECTION", followed by a number refer
to the specified Article or Section of these Terms and Conditions;
(e) "PERSON" means an individual, corporation, partnership, trustee or any
unincorporated organization and words importing persons have a similar
meaning;
(f) "SHARES" means the common shares in the capital stock of the Company
as constituted at the date hereof and any shares resulting from any
subdivision or consolidation of the shares;
(g) "TRANSFER AGENT" means Nevada Agency & Trust Company, at its head
office in Reno, Nevada or its successors;
(h) "WARRANT HOLDERS" or "HOLDERS" means the holders of the Warrants;
<PAGE>
and
(i) "WARRANTS" means the warrants of the Company issued and presently
authorized, as set out in Section 2.01 hereof and for the time being
outstanding.
SECTION 1.2 - GENDER
Words importing the singular number include the plural and vice versa and words
importing the masculine gender include the feminine and neuter genders.
SECTION 1.3 - INTERPRETATION NOT AFFECTED BY HEADINGS
The division of these Terms and Conditions into Articles and Sections, and the
insertion of headings are for convenience of reference only and will not affect
the construction or interpretation thereof.
SECTION 1.4 - APPLICABLE LAW
The Warrants will be construed in accordance with the laws of the State of
Washington and the laws of the United States of America applicable thereto and
will be treated in all respects as Washington contracts.
ARTICLE 2 - ISSUE OF WARRANTS
- -----------------------------
SECTION 2.1 - ISSUE OF WARRANTS
Warrants entitling the Holders thereof to purchase up to an aggregate of 600,000
common shares are authorized to be issued by the Company. The Warrant
certificates represent an aggregate of 600,000 Warrants.
SECTION 2.2 - ADDITIONAL WARRANTS
The Company may at any time and from time to time issue additional warrants or
grant options or similar rights to purchase shares of its capital stock.
SECTION 2.3 - WARRANT TO RANK PARI-PASSU
All Warrants and additional warrants, options or similar rights to purchase
shares from time to time issued or granted by the Company, will rank pari-passu
whatever may be the actual dates of issue or grant thereof, or of the dates of
the certificates by which they are evidenced.
SECTION 2.4 - ISSUE IN SUBSTITUTION FOR LOST WARRANTS
(1) In case a Warrant becomes mutilated, lost, destroyed or stolen, the
Company, at its discretion, may issue and deliver a new Warrant of like
date and tenor as the one
<PAGE>
mutilated, lost, destroyed or stolen, in exchange for and in place of and
upon cancellation of such mutilated Warrant, or in lieu of, and in
substitution for such lost, destroyed or stolen Warrant and the substituted
Warrant will be entitled to the benefit hereof and rank equally in
accordance with its terms with all other Warrants issued or to be issued by
the Company.
(2) The applicant for the issue of a new Warrant pursuant hereto will bear the
cost of the issue thereof and in case of loss, destruction or theft furnish
to the Company such evidence of ownership and of loss, destruction, or
theft of the Warrant so lost, destroyed or stolen as will be satisfactory
to the Company in its discretion and such applicant may also be required to
furnish indemnity in an amount and form satisfactory to the Company in its
discretion, and will pay the reasonable charges of the Company in
connection therewith.
SECTION 2.5 - WARRANT HOLDER NOT A SHAREHOLDER
The holding of a Warrant will not constitute the holder thereof a shareholder of
the Company, nor entitle him to any right or interest in respect thereof except
as in the Warrant expressly provided.
ARTICLE 3 - NOTICE
- ------------------
SECTION 3.1 - NOTICE TO WARRANT HOLDERS
Any notice to be given to the Holders will be sent by prepaid registered post
and will be deemed to have been received by the Holder on the fourth day
following the mailing thereof. Any such notice will be addressed to the Holder
at the address of the Holder appearing on the Holder's Warrant or to such other
address as the Holder may advise the Company by notice in writing.
SECTION 3.2 - NOTICE TO THE COMPANY
Any notice to be given to the Company will be sent by prepaid registered post
addressed to the Company at its registered office and will be deemed to have
been received by the Company on the fourth day following the mailing thereof,
provided that if there shall be at the time of mailing or between the time of
mailing and the actual receipt of the notice a labour dispute, slow down, or
other disruption which might effect the normal delivery of such notice by the
mails, then such notice shall only be effective if and when received by the
Company.
ARTICLE 4 - EXERCISE OF WARRANTS
- --------------------------------
SECTION 4.1 - METHOD OF EXERCISE OF WARRANTS
The right to purchase shares conferred by the Warrants may be exercised by the
Holder of such Warrant surrendering it, with a duly completed and executed
subscription form attached
<PAGE>
to the Warrant certificate, together with cash or a certified cheque payable to
or to the order of the Company, at par, in Richmond, British Columbia, for the
purchase price applicable at the time of surrender in respect of the shares
subscribed for in lawful money of the United States of America, to the Company
at its head office in Richmond, British Columbia.
SECTION 4.2 - EFFECT OF EXERCISE OF WARRANTS
(1) Upon surrender and payment as aforesaid the shares so subscribed for will
be deemed to have been issued and such person or persons will be deemed to
have become the holder or holders of record of such shares on the date of
such surrender and payment, and such shares will be issued at the
subscription price in effect on the date of such surrender and payment.
(2) Within ten business days after surrender and payment as aforesaid, the
Company will forthwith cause to be delivered to the person or persons in
whose name or names the shares so subscribed for are to be issued as
specified in such subscription or mailed to him or them at his or their
respective addresses specified in such subscription, a certificate or
certificates for the appropriate number of shares not exceeding those which
the Warrant Holder is entitled to purchase pursuant to the Warrant
surrendered.
SECTION 4.3 - SUBSCRIPTION FOR LESS THAN ENTITLEMENT
The holder of any Warrant may subscribe for and purchase a number of shares less
than the number which he is entitled to purchase pursuant to the surrendered
Warrant. In the event of any purchase of a number of common shares less than the
number which can be purchased pursuant to a Warrant, the holder thereof upon
exercise thereof will in addition be entitled to receive a new Warrant in
respect of the balance of the shares which he was entitled to purchase pursuant
to the surrendered Warrant and which were not then purchased.
SECTION 4.4 - WARRANTS FOR FRACTIONS OF SHARES
To the extent that the holder of any Warrant is entitled to receive on the
exercise or partial exercise thereof a fraction of a common share, such right
may be exercised in respect of such fraction only in combination with another
Warrant or other Warrants which in the aggregate entitle the holder to receive a
whole number of such common shares.
SECTION 4.5 - EXPIRATION OF WARRANTS
After the expiration of the period within which a Warrant is exercisable, all
rights thereunder will wholly cease and terminate and such Warrant will be void
and of no effect.
SECTION 4.6 - TIME OF ESSENCE
Time will be of the essence hereof.
SECTION 4.7 - SUBSCRIPTION PRICE
<PAGE>
One Warrant and $1.00 U.S. are required to subscribe for each share.
SECTION 4.8 - ADJUSTMENT OF EXERCISE PRICE
The exercise price and the number of common shares deliverable upon the exercise
of the Warrants will be subject to adjustment in the event and in the manner
following:
(1) If and whenever the shares at any time outstanding are subdivided into a
greater or consolidated into a lesser number of shares the exercise price
will be decreased or increased proportionately as the case may be; upon any
such subdivision or consolidation the number of shares deliverable upon the
exercise of the Warrants will be increased or decreased proportionately as
the case may be.
(2) (a) In case of any capital reorganization or of any reclassification of
the capital of the Company or in the case of the consolidation, merger
or amalgamation of the Company with or into any other Company
(hereinafter collectively referred to as a "Reorganization"), each
Warrant will after such Reorganization confer the right to purchase
the number of shares or other securities of the Company (or of the
Company's resulting from such Reorganization) which the Warrant Holder
would have been entitled to upon Reorganization if the Warrant Holder
had been a shareholder at the time of such Reorganization;
(b) In any such case, if necessary, appropriate adjustments will be made
in the application of the provisions of this Article Four relating to
the rights and interest thereafter of the holders of the Warrants so
that the provisions of this Article Four will be made applicable as
nearly as reasonably possible to any shares or other securities
deliverable after the Reorganization on the exercise of the Warrants;
(c) The subdivision or consolidation of shares at any time outstanding
into a greater or lesser number of shares (whether with or without par
value) will not be deemed to be a Reorganization for the purposes of
this paragraph 4.8(2);
(3) The adjustments provided for in this Section are cumulative and will
become effective immediately after the record date or, if no record
date is fixed, the effective date of the event which results in such
adjustments.
SECTION 4.9 - DETERMINATION OF ADJUSTMENTS
If any questions will at any time arise with respect to the exercise price or
any adjustment provided for in Section 4.8, such questions will be conclusively
determined by the Company's Auditors, or, if they decline to so act any other
firm of chartered accountants, in Vancouver, British Columbia that the Company
may designate and who will have access to all appropriate records and such
determination will be binding upon the Company and the holders of the Warrants.
<PAGE>
ARTICLE 5 - COVENANTS BY THE COMPANY
- ------------------------------------
SECTION 5.1 - RESERVATION OF SHARES
The Company will reserve and there will remain unissued out of its authorized
capital a sufficient number of shares to satisfy the rights of purchase provided
for herein and in the Warrants should the holders of all the Warrants from time
to time outstanding determine to exercise such rights in respect of all shares
which they are or may be entitled to purchase pursuant thereto and hereto.
SECTION 5.2 - COMPANY MAY PURCHASE
The Company may from time to time offer to purchase and purchase, for
cancellation only, any Warrants in such manner, from such persons and on such
terms and conditions as it determines.
ARTICLE 6 - WAIVER OF CERTAIN RIGHTS
- ------------------------------------
SECTION 6.1 - IMMUNITY OF SHAREHOLDERS, ETC.
The Warrant Holder, as part of the consideration for the issue of the Warrants,
waives and will not have any right, cause of action or remedy now or hereafter
existing in any jurisdiction against any past, present or future incorporator,
shareholder, Director or Officer (as such) of the Company for the issue of
shares pursuant to any Warrant or on any covenant, agreement, representation or
warranty by the Company herein contained or in the Warrant.
ARTICLE 7 - MODIFICATION OF TERMS, MERGER, SUCCESSORS
- -----------------------------------------------------
SECTION 7.1 - MODIFICATION OF TERMS AND CONDITIONS FOR CERTAIN PURPOSES
From time to time the Company may, subject to the provisions of these presents,
modify the Terms and Conditions hereof, for the purpose of correction or
rectification of any ambiguities, defective provisions, errors or omissions
herein.
SECTION 7.2 - TRANSFERABILITY
The Warrant and all rights attached to it are not transferable or assignable.
DATED this 15th day of October, 1998.
INFORMATION HIGHWAY, INC.
<PAGE>
By:
___________________________
Director
<PAGE>
EXHIBIT 3.3
INFORMATION HIGHWAY, INC.
STOCK OPTION PLAN
1. Purpose. The purpose of this Plan is to provide additional incentives
to key employees, officers, directors and consultants of Information Highway,
Inc., and any of its Subsidiaries, thereby helping to attract and retain the
best available personnel for positions of responsibility with those corporations
and otherwise promoting the success of the business activities of such
corporations. It is intended that Options issued under this Plan constitute
either "incentive stock options" within the meaning of Section 422 of the Code
or nonqualified stock options.
2. Definitions. As used herein, the following definitions apply:
(a) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" means the Board of Directors of the Employer.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the Employer's common stock.
(e) "Committee" means the Board or the Committee appointed by the
Board in accordance with Section 4(a).
(f) "Continuous Status as an Employee" means the absence of any
interruption or termination of service as an Employee; Continuous Status as
an Employee will not be considered interrupted in the case of sick leave,
military leave, or any other approved leave of absence.
(g) "Employee" means any person employed by or serving as an employee,
consultant, officer or director of the Employer or any Subsidiary of the
Employer which is hereafter organized or acquired by the Employer.
(h) "Employer" means Information Highway, Inc., a Washington
corporation.
(i) "Nonemployee Director" has the meaning set forth in Rule 16b-3
under the 1934 Act.
(j) "Option" means a stock option granted under the Plan, which may
constitute either Incentive Stock Options (as provided for under Section
422 of the Code), or Nonqualified Stock Options.
(k) "Optioned Stock" means the Common Stock subject to an Option.
(l) "Optionee" means an Employee who receives an Option.
(m) "Plan" means this Employee Stock Option Plan.
1
<PAGE>
(n) "Shareholder-Employee" means an Employee who owns stock
representing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Employer or of any Subsidiary; for this
purpose, the attribution of stock ownership rules provided in Section 424
of the Code apply.
(o) "Subsidiary" means any bank or other corporation of which not less
than fifty percent (50%) of the voting shares are held by the Employer or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Employer or a Subsidiary.
3. Stock Subject to Options.
(a) Number of Shares Reserved. The maximum number of shares which may
be optioned and sold under the Plan is one million (1,000,000) shares of
Common Stock of the Employer, subject to adjustment as provided in Section
6(i). During the term of this Plan, the Employer will at all times reserve
and keep available a sufficient number of shares of its Common Stock to
satisfy the requirements of the Plan.
(b) Expired Options. If any outstanding Option expires or becomes
unexercisable for any reason without having been exercised in full, the
shares of Common Stock allocable to the unexercised portion of such Option
will again become available for other Option grants.
4. Administration of the Plan.
(a) The Committee. The Plan is administered by the Board directly,
acting as a Committee of the whole, or if the Board elects, by a separate
Committee appointed by the Board for that purpose and consisting of at
least three Board members, at least two of whom must be Nonemployee
Directors. All references in the Plan to the "Committee" are to such
separate Committee, if any is established, or if none is then in existence,
then to the Board as a whole. Once appointed, any such Committee must
continue to serve until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional
members thereto, remove members (with or without cause), appoint new
members in substitution therefor, and fill vacancies (however caused). At
all times, the Board has the power to remove all members of the Committee
and thereafter to directly administer the Plan as a Committee of the whole.
(b) Meetings; Reports. The Committee shall select one of its members
as chairman, and hold meetings at such times and places as the chairman or
a majority of the Committee may determine. All actions of the Committee
must be either by (i) a majority vote of the members of the full Committee
at a meeting of the Committee, or (ii) by unanimous written consent of all
members of the full Committee without a meeting. At least annually, the
Committee must present a written report to the Board indicating the
Employees to whom Options have been granted since the date of the last such
report, and in each case the date or dates of Options granted, the number
of shares optioned, and the Option price per share.
(c) Powers of the Committee. Subject to all provisions and
limitations of the Plan, the Committee has the authority and discretion to:
2
<PAGE>
(1) Determine the Employees to whom Options are to be granted, the
times of grant, and the number of shares to be represented by each
Option;
(2) Determine the Option price for the shares of Common Stock to be
issued pursuant to each Option, subject to the provisions of Section
6(b) in the case of Incentive Stock Options;
(3) Determine all other terms and conditions of each Option granted
under the Plan (including specifying the dates upon which Options
become exercisable), which need not be identical;
(4) Modify or amend the terms of any Option previously granted, or to
grant substitute Options, subject to the provisions of Sections 6(l)
and 6(m);
(5) Interpret the Plan;
(6) Authorize any person or persons to execute and deliver Option
agreements or to take any other actions deemed by the Committee to be
necessary or appropriate to effectuate the grant of Options by the
Committee; and
(7) Make all other determinations and take all other actions which the
Committee deems necessary or appropriate to administer the Plan in
accordance with its terms and conditions.
(d) Final Authority; Limitation of Liability. The Committee's
decisions, determinations and interpretations are final and binding on all
persons, including all Optionees and any other holders or persons
interested in any Options, unless otherwise expressly determined by a vote
of the majority of the entire Board. No member of the Committee or of the
Board may be held liable for any action or determination made in good faith
with respect to the Plan or any Option.
5. Eligibility; Limitation of Rights. Options may be granted only to
Employees whom the Committee, in its discretion, determines to be key Employees.
The grant of Options under the Plan is entirely discretionary with the
Committee, and the adoption of the Plan does not confer upon any Employee any
right to receive any Option or Options unless and until granted by the
Committee, in its sole discretion. Neither the adoption of the Plan nor the
grant of any Options to any Employee or Optionee will confer any right to
continued employment, nor shall the same interfere in any way with the
Employee's right or that of the Employer (or any Subsidiary) to terminate the
Employee's employment at any time.
6. Option Terms; Conditions. All Option grants under the Plan must be (i)
approved in advance by the Committee; and (ii) documented in written Option
agreements in such form as the Committee approves from time to time. All Option
agreements must comply with, and are subject to the following terms and
conditions:
(a) Number of Shares; Annual Limitation. Each Option agreement must state
whether the Option is an Incentive Stock Option or a Nonqualified Stock
Option, and the number of shares subject to Option. Any number of Options
may be granted to a single eligible Employee at any time and from time to
time, except that, in the case of Incentive Stock Options, the aggregate
fair market value (determined as of the time each Option is granted) of all
shares of Common Stock with respect to which Incentive Stock Options
3
<PAGE>
become exercisable for the first time by such Employee in any one calendar
year (under all incentive stock option plans of the Employer and all of its
Subsidiaries taken together) may not exceed one hundred thousand dollars
($100,000).
(b) Option Price. The Option price for the shares of Common Stock to be
issued under the Option will be the price determined by the Committee,
except that, in the case of Incentive Stock Options, the price may not be
less than the fair market value of the Common Stock on the date of grant of
the Incentive Stock Option. In the case of an Incentive Stock Option
granted to an Employee who, immediately before the grant of such Incentive
Stock Option, is a Shareholder-Employee, the Incentive Stock Option price
must be at least one hundred and ten percent (110%) of the fair market
value of the Common Stock on the date of grant of the Incentive Stock
Option. Fair market value is determined by the Committee in its discretion;
provided, however, that in the event that there is a public market for the
Common Stock, the fair market value is the closing price of the Common
Stock as of the date of grant as reported on the Nasdaq Stock Market or, in
the event the Common Stock is listed on a stock exchange, the fair market
value is the closing price on the exchange as of the date of grant of the
Option.
(c) Consideration; Manner of Exercise. The Option price is payable either
(i) in U.S. dollars upon exercise of the Option, or (ii) if approved by the
Board, other consideration including without limitation Common Stock of the
Employer, services, or other property. An Option is deemed to be exercised
when written notice of exercise has been given to the Employer in
accordance with the terms of the Option by the person entitled to exercise
the Option, together with full payment for the shares of Common Stock
subject to said notice.
(d) Term of Option. Under no circumstances may an Option granted under
the Plan be exercisable after the expiration of ten (10) years from the
date such Option is granted. Further, the term of an Incentive Stock Option
granted to an Employee who, immediately before such Incentive Stock Option
is granted, is a Shareholder-Employee may not exceed five (5) years from
the date of grant of such Option. Subject to the foregoing and other
applicable provisions of the Plan including but not limited to Section
6(e), the term of each Option must be determined by the Committee in its
discretion.
(e) Date of Grant; Holding Period. The grant date of an Option, for all
purposes, is the date the Committee makes the determination granting the
Option, as set forth in the Option agreement. Shares of Common Stock
obtained upon the exercise of any Option may not be sold by any Optionee
that is subject to Section 16 of the 1934 Act until six (6) months have
elapsed since the date of the Option grant. In addition shares of Common
Stock obtained upon exercised of any Option may be sold by any Optionee
only pursuant to the following schedule:
(i) Up to twenty -five percent (25%) of the shares acquired upon
exercise of an Option within the first 90 days following exercise of
the Option.
(ii) Up to fifty percent (50%) of the shares acquired upon exercise
of an Option within the first 180 days following exercise of the
Option.
(iii) Up to seventy-five percent (75%) of the shares acquired upon
exercise of an Option within the first 270 days following exercise of
the Option.
(iv) All of the shares acquired upon exercise of an Option may be
sold after 360 days following exercise of the Option.
4
<PAGE>
(f) Death of Optionee. In the event of the death of an Optionee who at
the time of his death was an Employee and who had been in Continuous Status
as an Employee since the date of grant of the Option, the Option terminates
on the earlier of (i) six (6) months after the date of death of the
Optionee, or (ii) the expiration date otherwise provided in the Option
agreement (except that if the expiration date of a Nonqualified Stock
Option should occur during the 90-day period immediately following the
Optionee's death, such Option terminates at the end of such 90-day period).
Under these circumstances, the Option will be exercisable at any time prior
to such termination by the Optionee's estate, or by such person or persons
who have acquired the right to exercise the Option by bequest or by
inheritance or by reason of the death of the Optionee.
(g) Disability of Optionee. If an Optionee's status as an Employee is
terminated at any time during the Option period by reason of a disability
(within the meaning of Section 22(e)(3) of the Code) and if the Optionee
had been in Continuous Status as an Employee at all times between the date
of grant of the Option and the termination of his status as an Employee,
the Option terminates on the earlier of (i) one (1) year after the date of
termination of his status as an Employee, or (ii) the expiration date
otherwise provided in the Option agreement.
(h) Termination of Status as an Employee. If an Optionee's status as an
Employee is terminated at any time after the grant of an Option by the
Optionee for any reason other than death or disability, as provided in
Sections 6(f) and 6(g), and not by the Company, as provided below, the
Option terminates on the earlier of (i) thirty (30) days following
termination of status as an Employee, or (ii) the expiration date otherwise
provided in the Option agreement. If an Optionee's status as an Employee
is terminated at any time after the grant of an Option by the Company for
any reason, then the Option terminates on the date of termination of status
as an Employee.
(i) Nontransferability of Options. No Option granted under the Plan may
be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or distribution and
may be exercised, during the lifetime of the Optionee, only by the
Optionee.
(j) Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Employer, the number of shares of Common
Stock covered by each outstanding Option, the number of shares of Common
Stock available for grant of additional Options, and the price per share of
Common Stock specified in each outstanding Option, must be proportionately
adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from any stock split or other subdivision or
consolidation of shares, the payment of any stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of such
shares of Common Stock effected without receipt of consideration by the
Employer; provided, however, that conversion of any convertible securities
of the Employer will not be deemed to have been "effected without receipt
of consideration."
Any adjustments as a result of a change in the Employer's capitalization
will be made by the Committee, whose determination in that respect is final,
binding and conclusive, subject to the condition that no Incentive Stock Option
may be adjusted by the Committee under this Section 6(j) in a manner that causes
the Option to fail to continue to qualify
5
<PAGE>
as such within the meaning of Section 422 of the Code. Except as otherwise
expressly provided in this Section 6(j), no Optionee shall have any rights by
reason of any stock split or the payment of any stock dividend or any other
increase or decrease in the number of shares of Common Stock. Except as
otherwise expressly provided in this Section 6(j), any issue by the Employer of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect the number of shares or price of Common Stock
subject to any Options, and no adjustments in Options shall be made by reason
thereof. The grant of an Option under the Plan does not in any way affect the
right or power of the Employer to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure.
(k) Conditions Upon Issuance of Shares. Shares of Common Stock may not be
issued with respect to an Option granted under the Plan unless the exercise
of the Option and the issuance and delivery of such shares pursuant thereto
complies with all applicable provisions of law, including, applicable
federal and state securities laws.
As a condition to the exercise of an Option, the Employer may require the
person exercising such Option to represent and warrant at the time of exercise
that the shares of Common Stock are being purchased only for investment and
without any present intention to sell or distribute such Common Stock if, in the
opinion of counsel for the Employer, such a representation is required by any
relevant provisions of law.
(l) Merger, Sale of Assets, Etc. In the event of the merger or
reorganization of the Employer with or into any other corporation, or in
the event of a proposed sale of substantially all of the assets of the
Employer, or in the event of a proposed dissolution or liquidation of the
Employer (collectively, "sale transaction"): (i) all outstanding Options
that are not then fully exercisable becomes exercisable immediately before
the date of closing of any sale transaction or such earlier date as the
Committee may fix; and (ii) the Committee may, in the exercise of its sole
discretion, terminate all outstanding Options as of a date fixed by the
Committee. In the event of such termination, however, the Committee must
notify each Optionee of such action in writing not less than sixty (60)
days prior to the termination date fixed by the Committee, and each
Optionee has the right to exercise his Option prior to said termination
date.
(m) Substitute Stock Options. In connection with the acquisition or
proposed acquisition by the Employer or any Subsidiary, whether by merger,
acquisition of stock or assets, or other reorganization transaction, of a
business any employees of which have been granted incentive stock options,
the Committee is authorized to issue, in substitution of any such
unexercised stock option, a new Option under this Plan which confers upon
the Optionee substantially the same benefits as the old option; provided,
however, that the issuance of any new Option for an old incentive stock
option must satisfy the requirements of Section 424(a) of the Code.
(n) Tax Compliance. The Employer, in its sole discretion, may take any
actions that it reasonably believes to be required in order to comply with
any local, state, or federal tax laws relating to the reporting or
withholding of taxes attributable to the grant or exercise of any Option or
the disposition of any shares of Common Stock issued upon exercise of an
Option, including, but not limited to: (i) withholding from any Optionee
exercising an Option a number of shares of Common Stock having a fair
market value equal to the amount required to be withheld by Employer under
applicable tax laws, and (ii) withholding from
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<PAGE>
any form of compensation or other amount due an Optionee or holder of
shares of Common Stock issued upon exercise of an Option any amount
required to be withheld by Employer under applicable tax laws. Withholding
or reporting is considered required for purposes of this Section 6(n) if
any tax deduction or other favorable tax treatment available to Employer is
conditioned upon such reporting or withholding.
(o) Other Provisions. Option agreements executed under the Plan may
contain such other provisions as the Committee deems advisable, provided
that: (i) they are not inconsistent with any of the other terms and
conditions of the Plan or applicable laws, and (ii) in the case of
Incentive Stock Options, the provisions are not inconsistent with the
provisions of Section 422 of the Code.
7. Term of the Plan. The Plan is effective on the earlier of (i) the date
of adoption of the Plan by the Board; or (ii) the date of shareholder approval,
as required under Section 9. Unless sooner terminated as provided in Section 8,
the Plan will terminate on the tenth (10th) anniversary of its effective date.
Options may be granted at any time after the effective date and prior to the
date of termination of the Plan.
8. Amendment; Early Termination. The Board may terminate or amend the
Plan at any time and in such respects as it deems advisable, although no
amendment or termination would affect any previously-granted Options, which
would remain in full force and effect notwithstanding any amendment or
termination of the Plan Shareholder approval of any amendments to the Plan must
be obtained whenever required by applicable law(s).
9. Shareholder Approval. Continuance of the Plan is subject to approval
of the Plan by affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Employer at a duly convened meeting of the
shareholders of the Employer, which approval must occur within twelve (12)
months before or after the date of adoption of the Plan by the Board.
* * * *
CERTIFICATE OF ADOPTION
I certify that the foregoing plan was adopted by the Board on
_____________________ 1997, and approved by the Employer's shareholders on
____________________, 1997.
----------------------------
Jennifer Lorette
Secretary
Information Highway, Inc.
7
<PAGE>
SCHEDULE A
Option Grant Schedule
<TABLE>
<CAPTION>
Name of No. of Shares Date(s) First
Optionee Under Option Date of Grant Exercisable
- -------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
===================================================================================================
</TABLE>
The Option awards listed above were approved by the Committee (or the
entire Board, acting as the Plan Administrator) on this ___ day of
_____________________, ________.
_________________________ ____________________________
(Signature of Member) (Signature of Member)
_________________________ ____________________________
(Signature of Member) (Signature of Member)
_________________________ ____________________________
(Signature of Member) (Signature of Member)
8
<PAGE>
EXHIBIT 3.4
INFORMATION HIGHWAY, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement ("Agreement") is entered into by
and between INFORMATION HIGHWAY, INC. (the "Employer") and ____________________
("Optionee").
Pursuant to Employer's Stock Option Plan (the "Plan"), Employer hereby
grants to Optionee an irrevocable non-qualified stock option to purchase
________________ shares of common stock of Employer at an option price of
$________ per share, payable in cash on the date of exercise.
The date of grant of this option is______________________. This option
shall terminate on the fifth anniversary of the date of grant, unless sooner
terminated by reason of death, disability or other termination of status as an
Employee, as defined in the Plan.
This option shall become vested and eligible for exercise upon date of
grant after which date this option shall be exercisable in whole or in part at
any time and from time to time until the date of termination of this option.
Exercise must be by actual delivery to Employer of a written notice of exercise
signed by Optionee specifying the number of shares and accompanied by payment of
the full amount of the option exercise price.
All of the terms and conditions of the Plan are hereby incorporated by this
reference as a part of this Agreement as if said terms and conditions had been
included herein.
EXECUTED as of this ______ day of _____________, 199__.
OPTIONEE: EMPLOYER:
INFORMATION HIGHWAY, INC.,
a Washington corporation
By:
- -------------------------- ----------------------------
John G. Robertson, President
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<PAGE>
EXHIBIT 8.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), entered into
this 17th day of February 1999, is by, between, and among Florida Venture Fund,
Inc., a Florida corporation (hereinafter"FVFI"), Information Highway, Inc., a
Washington corporation (hereinafter "IHI"), and the shareholders of IHI who have
executed Subscription Agreements in the form attached in Exhibit "A" hereto (the
"Shareholders").
RECITALS:
WHEREAS, FVFI wishes to acquire, and the Shareholders, by executing Exhibit
"A" hereto, are willing to sell, a majority the outstanding stock of IHI in
exchange solely for a part of the voting stock of FVFI whereby the Shareholders
would acquire a controlling interest of FVFI; and
WHEREAS, the parties hereto intend to qualify such transaction as a tax-
free exchange pursuant to the provisions of the Internal Revenue Code of 1986,
as amended;
NOW, THEREFORE, based upon the stated premises, which are incorporated
herein by reference, and for and in consideration of the mutual covenants and
agreements set forth herein, the mutual benefits to the parties to be derived
herefrom, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto approve and adopt this
Agreement and Plan of Reorganization and mutually covenant and agree with each
other as follows:
1. Shares to be Transferred and Shares to be Issued.
1.1 Provided that Shareholders owning at least a majority of the
outstanding shares of IHI execute and deliver copies of Exhibit "A" on or before
the Closing Date, the Shareholders shall transfer to FVFI certificates for the
number of shares of the common stock of IHI represented by such shares of the
common stock of IHI.
1.2 In exchange for the transfer of the common stock of IHI pursuant
to subsection 1.1. hereof, FVFI shall on the Closing Date and contemporaneously
with such transfer of the common stock of IHI to it by the Shareholders issue
and deliver to the Shareholders one share of the common stock of FVFI for each
share of IHI transferred pursuant to this Agreement. In addition, FVFI hereby
assumes the obligation of IHI to issue shares pursuant to warrants and stock
options issued by IHI and outstanding as of Closing at the rate of one share of
FVFI for
1
<PAGE>
each share of IHI to have been issued pursuant to such outstanding warrants and
stock options.
1.3 On the Closing Date FVFI shall cause to be canceled 1,659,833
shares of outstanding Common Stock, such that at Closing FVFI shall have not
more than 319,667 shares of Common Stock outstanding.
2. Representations and Warranties of IHI. IHI represents and warrants to
FVFI as set forth below. These representations and warranties are made as an
inducement for FVFI to enter into this Agreement and, but for the making of such
representations and warranties and their accuracy, FVFI would not be a party
hereto.
2.1 Organization and Authority. IHI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington
with full power and authority to enter into and perform the transactions
contemplated by this Agreement. IHI has three wholly owned subsidiaries, namely
Blue Crow Internet Company, Ltd., YesIC, Communications, Inc., and World Tel,
Internet (Toronto) Ltd., each of which was acquired by IHI in December 1996.
2.2 Capitalization. As of the date of the Closing, IHI will have a
total of no more than 5,650,000 shares of common stock issued and outstanding.
All of the shares will have been duly authorized and validly issued and will be
fully paid and nonassessable. There are no options, warrants, debentures,
conversion privileges, or other rights, agreements, or commitments obligating
IHI to issue or to transfer from treasury any additional shares of capital stock
of any class, other than common stock options to purchase 865,000 shares at from
$0.50 to $0.75 per share exercisable immediately and warrants to purchase
873,650 shares of common stock of IHI at $1.00 per share exercisable
immediately.
2.3 Directors. The names of all directors of IHI as of the date of
this Agreement are as follows: John G. Robertson, Jennifer Lorette, and James
L. Vandeberg.
2.4 Performance of This Agreement. The execution and performance of
this Agreement and the transfer of stock contemplated hereby have been
authorized by the board of directors of IHI.
2.5 Financials. True copies of the financial statements of IHI
consisting of the balance sheets as of the fiscal year ended May 31, 1998
(audited) and the period ended November 30, 1998 (unaudited), and statements of
income, cash flow and changes in stockholder's equity for each of the periods
then ended, have been delivered by IHI to FVFI. These statements have been
examined and certified by Elliott, Tulk, Pryce, Anderson, Chartered Accountants.
Said financial statements are true and correct in all material respects and
present an
2
<PAGE>
accurate and complete disclosure of the financial condition of FVFI as of
November 30, 1998, and the earnings for the periods covered, in accordance with
generally accepted accounting principles applied on a consistent basis.
2.6 Liabilities. There are no material liabilities of IHI, whether
accrued, absolute, contingent or otherwise, which arose or relate to any
transaction of IHI, its agents or servants occurring prior to November 30, 1998,
which are not disclosed by or reflected in said financial statements. As of the
date hereof, there are no known circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may hereafter give rise to
liabilities, except in the normal course of business of IHI.
2.7 Absence of Certain Changes or Events. Except as set forth in
this Agreement, since November 30, 1998, there has not been (i) any material
adverse change in the business, operations, properties, level of inventory,
assets, or condition of IHI, or (ii) any damage, destruction, or loss to IHI
(whether or not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or conditions of IHI.
2.8 Litigation. There are no legal, administrative or other
proceedings, investigations or inquiries, product liability or other claims,
judgments, injunctions or restrictions, either threatened, pending, or
outstanding against or involving IHI or its subsidiaries, if any, or their
assets, properties, or business, nor does IHI or its subsidiaries know, or have
reasonable grounds to know, of any basis for any such proceedings,
investigations or inquiries, product liability or other claims, judgments,
injunctions or restrictions. In addition, there are no material proceedings
existing, pending or reasonably contemplated to which any officer, director, or
affiliate of IHI or as to which any of the Shareholders is a party adverse to
IHI or any of its subsidiaries or has a material interest adverse to IHI or any
of its subsidiaries.
2.9 Taxes. All federal, state, foreign, county and local income,
profits, franchise, occupation, property, sales, use, gross receipts and other
taxes (including any interest or penalties relating thereto) and assessments
which are due and payable have been duly reported, fully paid and discharged as
reported by IHI, and there are no unpaid taxes which are, or could become a lien
on the properties and assets of IHI, except as provided for in the financial
statements of IHI, or have been incurred in the normal course of business of IHI
since that date. All tax returns of any kind required to be filed have been
filed and the taxes paid or accrued. There are no disputes as to taxes of any
nature payable by IHI.
2.10 Hazardous Materials. No hazardous material has been released,
placed, stored, generated, used, manufactured, treated, deposited, spilled,
discharged, released, or disposed of on or under any real property currently or
previously owned or leased by IHI or any of its subsidiaries.
3
<PAGE>
2.11 Accuracy of All Statements Made by IHI. No representation or
warranty by IHI in this Agreement, nor any statement, certificate, schedule, or
exhibit hereto furnished or to be furnished by or on behalf of IHI pursuant to
this Agreement, nor any document or certificate delivered to FVFI by IHI
pursuant to this Agreement or in connection with actions contemplated hereby,
contains or shall contain any untrue statement of material fact or omits or
shall omit a material fact necessary to make the statements contained therein
not misleading.
3. Representations and Warranties of FVFI. FVFI represents and warrants
to IHI as set forth below. These representations and warranties are made as an
inducement for IHI to enter into this Agreement and, but for the making of such
representations and warranties and their accuracy, IHI would not be parties
hereto.
3.1 Organization and Good Standing. FVFI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida with full power and authority to enter into and perform the transactions
contemplated by this Agreement. FVFI does not have any subsidiaries or own any
interest in any other entity.
3.2 Capitalization. FVFI presently has outstanding 1,979,500 shares
of common stock. As of the date of the Closing, FVFI will have a total of no
more than 319,667 shares of common stock issued and outstanding (excluding the
shares to be issued pursuant to this Agreement). All of the outstanding shares
have been duly authorized and validly issued and are fully paid and
nonassessable. Except for FVFI's obligations hereunder with respect to the
shares to be issued pursuant to subsection 1.2 hereof, there are no options,
warrants, debentures, conversion privileges, or other rights, agreements, or
commitments obligating FVFI to issue or to transfer from treasury any additional
shares of capital stock of any class. As of the Closing, the Articles of
Incorporation, as amended, of FVFI and as currently in effect shall remain
unchanged, except as provided herein.
3.3 Performance of This Agreement. The execution and performance of
this Agreement and the issuance of stock contemplated hereby have been
authorized by the board of directors of FVFI.
3.4 Financials. True copies of the financial statements of FVFI
consisting of the balance sheets as of the fiscal years ended December 31, 1998,
1997, and 1996 (audited) and the period ended February 15, 1999 (unaudited), and
statements of income, cash flow and changes in stockholder's equity for each of
the periods then ended, have been delivered by FVFI to IHI. These statements
have been examined and certified by Larry Legel, Certified Public Accountant.
Said financial statements are true and correct in all material respects and
present an accurate and complete disclosure of the financial condition of FVFI
as of February 15, 1999, and
4
<PAGE>
the earnings for the periods covered, in accordance with generally accepted
accounting principles applied on a consistent basis.
3.5 Liabilities. There are no material liabilities of FVFI, whether
accrued, absolute, contingent or otherwise, which arose or relate to any
transaction of FVFI, its agents or servants which are not disclosed by or
reflected in said financial statements. As of the date hereof, there are no
known circumstances, conditions, happenings, events or arrangements, contractual
or otherwise, which may hereafter give rise to liabilities, except in the normal
course of business of FVFI.
3.6 Litigation. There are no legal, administrative or other
proceedings, investigations or inquiries, product liability or other claims,
judgments, injunctions or restrictions, either threatened, pending, or
outstanding against or involving FVFI or its subsidiaries, if any, or their
assets, properties, or business, nor does FVFI or its subsidiaries know, or have
reasonable grounds to know, of any basis for any such proceedings,
investigations or inquiries, product liability or other claims, judgments,
injunctions or restrictions. In addition, there are no material proceedings
existing, pending or reasonably contemplated to which any officer, director, or
affiliate of FVFI is a party adverse to FVFI or any of its subsidiaries or has a
material interest adverse to FVFI or any of its subsidiaries.
3.7 Taxes. All federal, state, foreign, county and local income,
profits, franchise, occupation, property, sales, use, gross receipts and other
taxes (including any interest or penalties relating thereto) and assessments
which are due and payable have been duly reported, fully paid and discharged as
reported by FVFI, and there are no unpaid taxes which are, or could become a
lien on the properties and assets of FVFI, except as provided for in the
financial statements of FVFI, or have been incurred in the normal course of
business of FVFI since that date. All tax returns of any kind required to be
filed have been filed and the taxes paid or accrued. There are no disputes as
to taxes of any nature payable by FVFI.
3.8 Hazardous Materials. No hazardous material has been released,
placed, stored, generated, used, manufactured, treated, deposited, spilled,
discharged, released, or disposed of on or under any real property currently or
previously owned or leased by FVFI or any of its subsidiaries.
3.9 Legality of Shares to be Issued. The shares of common stock of
FVFI to be issued by FVFI pursuant to this Agreement, when so issued and
delivered, will have been duly and validly authorized and issued by FVFI and
will be fully paid and nonassessable.
3.10 Accuracy of All Statements Made by FVFI. No representation or
warranty by FVFI in this Agreement, nor any statement, certificate, schedule, or
exhibit hereto furnished
5
<PAGE>
or to be furnished by FVFI pursuant to this Agreement, nor any document or
certificate delivered to IHI pursuant to this Agreement or in connection with
actions contemplated hereby, contains or shall contain any untrue statement of
material fact or omits to state or shall omit to state a material fact necessary
to make the statements contained therein not misleading.
4. Covenants of the Parties.
4.1 Corporate Records.
a. Simultaneous with the execution of this Agreement by IHI, if not
previously furnished, such entity shall deliver to FVFI copies of the articles
of incorporation, as amended, and the current bylaws of IHI, and copies of the
resolutions duly adopted by the board of directors of IHI approving this
Agreement and the transactions herein contemplated.
b. Simultaneous with the execution of this Agreement by FVFI, if not
previously furnished, such entity shall deliver to IHI copies of the FVFI
articles of incorporation, as amended, and the current bylaws of FVFI, and
copies of the resolutions duly adopted by the board of directors of FVFI
approving this Agreement and the transactions herein contemplated.
4.2 Access to Information.
a. FVFI and its authorized representatives shall have full access
during normal business hours to all properties, books, records, contracts, and
documents of IHI, and IHI shall furnish or cause to be furnished to FVFI and its
authorized representatives all information with respect to its affairs and
business as FVFI may reasonably request. FVFI shall hold, and shall cause its
representatives to hold confidential, all such information and documents, other
than information that (i) is in the public domain at the time of its disclosure
to FVFI; (ii) becomes part of the public domain after disclosure through no
fault of FVFI; (iii) is known to FVFI or any of its officers or directors prior
to disclosure; or (iv) is disclosed in accordance with the written consent of
IHI. In the event this Agreement is terminated prior to Closing, FVFI shall,
upon the written request of IHI, promptly return all copies of all documentation
and information provided by IHI hereunder.
b. IHI and its authorized representatives shall have full access
during normal business hours to all properties, books, records, contracts, and
documents of FVFI, and FVFI shall furnish or cause to be furnished to IHI and
its authorized representatives all information with respect to its affairs and
business IHI may reasonably request. IHI shall hold, and shall cause its
representatives to hold confidential, all such information and documents, other
than information that (i) is in the public domain at the time of its disclosure
to IHI; (ii) becomes part of the public domain after disclosure through no fault
of IHI; (iii) is known to IHI or any of
6
<PAGE>
its officers or directors prior to disclosure; or (iv) is disclosed in
accordance with the written consent of FVFI. In the event this Agreement is
terminated prior to Closing, IHI shall, upon the written request of FVFI,
promptly return all copies of all documentation and information provided by FVFI
hereunder.
4.3 Actions Prior to Closing. From and after the date of this
Agreement and until the Closing Date:
a. Neither FVFI nor IHI shall negotiate with any other person or
contemplate any inquiries or proposals relating to the possible disposition of
their capital stock, or their assets.
b. FVFI and IHI shall each carry on its business diligently and
substantially in the same manner as heretofore, and neither party shall make or
institute any unusual or novel methods of purchase, sale, management, accounting
or operation.
c. Neither FVFI nor IHI shall enter into any contract or commitment,
or engage in any transaction not in the usual and ordinary course of business
and consistent with its business practices.
d. Neither FVFI nor IHI shall amend its articles of incorporation or
bylaws or make any changes in authorized or issued capital stock, except as
provided in this Agreement.
e. FVFI and IHI shall each use its best efforts (without making any
commitments on behalf of the company) to preserve its business organization
intact.
f. Neither FVFI nor IHI shall do any act or omit to do any act, or
permit any act or omission to act, which will cause a material breach of any
material contract, commitment, or obligation of such party.
g. FVFI and IHI shall each duly comply with all applicable laws as
may be required for the valid and effective issuance or transfer of stock
contemplated by this Agreement.
h. Neither FVFI nor IHI shall sell or dispose of any property or
assets, except products sold in the ordinary course of business.
i. FVFI and IHI shall each promptly notify the other of any lawsuits,
claims, proceedings, or investigations that may be threatened, brought,
asserted, or commenced
7
<PAGE>
against it, its officers or directors involving in any way the business,
properties, or assets of such party.
4.4 Shareholders' Approval. FVFI shall promptly submit this
Agreement and the transactions contemplated hereby for the approval of its
stockholders by majority written consent or at a meeting of stockholders and,
subject to the fiduciary duties of the board of directors of FVFI under
applicable law, shall obtain stockholder approval and adoption of this Agreement
and the transactions contemplated hereby.
4.5 No Covenant as to Tax or Accounting Consequences. It is
expressly understood and agreed that neither FVFI nor its officers or agents has
made any warranty or agreement, expressed or implied, as to the tax or
accounting consequences of the transactions contemplated by this Agreement or
the tax or accounting consequences of any action pursuant to or growing out of
this Agreement.
4.6 Indemnification. IHI shall indemnify FVFI for any loss, cost,
expense, or other damage (including, without limitation, attorneys' fees and
expenses) suffered by FVFI resulting from, arising out of, or incurred with
respect to the falsity or the breach of any representation, warranty, or
covenant made by IHI herein, and any claims arising from the operations of IHI
prior to the Closing Date. FVFI shall indemnify and hold IHI harmless from and
against any loss, cost, expense, or other damage (including, without limitation,
attorneys' fees and expenses) resulting from, arising out of, or incurred with
respect to, or alleged to result from, arise out of or have been incurred with
respect to, the falsity or the breach of any representation, covenant, warranty,
or agreement made by FVFI herein, and any claims arising from the operations of
FVFI prior to the Closing Date. The indemnity agreement contained herein shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of any party and shall survive the consummation of the
transactions contemplated by this Agreement.
4.7 Publicity. The parties agree that no publicity, release, or
other public announcement concerning this Agreement or the transactions
contemplated by this Agreement shall be issued by any party hereto without the
advance approval of both the form and substance of the same by the other parties
and their counsel, which approval, in the case of any publicity, release, or
other public announcement required by applicable law, shall not be unreasonably
withheld or delayed.
4.8 Expenses. Except as otherwise expressly provided herein, each
party to this Agreement shall bear its own respective expenses incurred in
connection with the negotiation and preparation of this Agreement, in the
consummation of the transactions contemplated hereby, and in connection with all
duties and obligations required to be performed
8
<PAGE>
by each of them under this Agreement.
4.9 Further Actions. Each of the parties hereto shall take all such
further action, and execute and deliver such further documents, as may be
necessary to carry out the transactions contemplated by this Agreement.
4.10 Finder's Fee. At the Closing IHI shall pay to Business
Development Corporation, a finder's fee of $100,000 in the form of a cashier's
check payable to such entity.
4.11 Leakage Agreement. At the Closing Business Development
Corporation shall execute and deliver a leakage agreement in the form attached
hereto as Exhibit "B" and incorporated herein.
4.12 Name Change. On or before the Closing Date FVFI shall obtain
shareholder approval to amend its articles of incorporation to change the name
of the corporation to "Information Highway.com, Inc." or some other name
reasonably designated by IHI.
4.13 Stock Exchange. Following Closing new management of FVFI shall
use its best efforts to exchange shares of FVFI for all of the remaining
outstanding shares of IHI such that IHI shall become a wholly owned subsidiary
of FVFI and then to merge IHI into FVFI such that FVFI shall be the surviving
entity.
4.14 Legal Opinions. At Closing IHI shall deliver to FVFI an opinion
of counsel in form reasonably satisfactory to FVFI that the issuance of shares
to the Shareholders pursuant to this Agreement, and the shares of common stock
of FVFI proposed to be issued to the remaining shareholders of IHI following the
Closing, shall not violate federal or state securities laws, as applicable. At
Closing FVFI shall deliver to IHI an opinion of counsel in form reasonably
satisfactory to IHI that FVFI is duly organized, validly existing under the laws
of the State of Florida and that the outstanding shares of FVFI have been
legally issued, and are fully paid and non-assessable.
4.15 Compliance with New Bulletin Board Requirements. Following
Closing new management of FVFI shall use its best efforts to maintain the
quotation of the common stock of FVFI on the Bulleting Board.
5. Conditions Precedent to FVFI's Obligations. Each and every obligation
of FVFI to be performed on the Closing Date shall be subject to the satisfaction
prior thereto of the following conditions:
5.1 Truth of Representations and Warranties. The representations and
9
<PAGE>
warranties made by IHI in this Agreement or given on its behalf hereunder shall
be substantially accurate in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date.
5.2 Performance of Obligations and Covenants. IHI shall have
performed and complied with all obligations and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing.
5.3 Officer's Certificate. FVFI shall have been furnished with a
certificate (dated as of the Closing Date and in form and substance reasonably
satisfactory to FVFI), executed by an executive officer of IHI, certifying to
the fulfillment of the conditions specified in subsections 5.1 and 5.2 hereof.
5.4 No Litigation or Proceedings. There shall be no litigation or
any proceeding by or before any governmental agency or instrumentality pending
or threatened against any party hereto that seeks to restrain or enjoin or
otherwise questions the legality or validity of the transactions contemplated by
this Agreement or which seeks substantial damages in respect thereof.
5.5 No Material Adverse Change. As of the Closing Date there shall
not have occurred any material adverse change, financially or otherwise, which
materially impairs the ability of IHI to conduct its business or the earning
power thereof on the same basis as in the past.
5.6 Shareholders' Execution of Subscription Agreement. As of the
Closing Date Shareholders owning not less than 51% of the outstanding common
stock of IHI shall have duly executed and delivered Subscription Agreements in
the form as set forth in Exhibit "A."
6. Conditions Precedent to Obligations of IHI. Each and every obligation
of IHI to be performed on the Closing Date shall be subject to the satisfaction
prior thereto of the following conditions:
6.1 Truth of Representations and Warranties. The representations and
warranties made by FVFI in this Agreement or given on its behalf hereunder shall
be substantially accurate in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date.
6.2 Performance of Obligations and Covenants. FVFI shall have
performed and complied with all obligations and covenants required by this
Agreement to be performed or
10
<PAGE>
complied with by it prior to or at the Closing.
6.3 Officer's Certificate. IHI shall have been furnished with a
certificate (dated as of the Closing Date and in form and substance reasonably
satisfactory to IHI), executed by an executive officer of FVFI, certifying to
the fulfillment of the conditions specified in subsections 6.1 and 6.2 hereof.
6.4 No Litigation or Proceedings. There shall be no litigation or
any proceeding by or before any governmental agency or instrumentality pending
or threatened against any party hereto that seeks to restrain or enjoin or
otherwise questions the legality or validity of the transactions contemplated by
this Agreement or which seeks substantial damages in respect thereof.
6.5 No Material Adverse Change. As of the Closing Date there shall
not have occurred any material adverse change, financially or otherwise, which
materially impairs the ability of FVFI to conduct its business.
7. Change of Management. Upon and as a condition of Closing this
Agreement:
7.1 Prior to Closing FVFI will present to its shareholders for
approval the election of John G. Robertson, Jennifer Lorette, and James L.
Vandeberg as directors of FVFI effective immediately following the Closing of
this Agreement. Prior to Closing IHI will furnish material information of John
G. Robertson, Jennifer Lorette, and James L. Vandeberg as nominees to be elected
by the shareholders of FVFI. FVFI reserves the right to refuse to cause the
nomination of any or all such persons as directors of FVFI if, after review of
the foregoing information concerning said persons, it is the opinion of FVFI
that the election of such persons would not be in the best interests of FVFI.
7.2 IHI reserves the right to terminate this Agreement if nominees
selected by it are not elected or appointed as set forth above.
8. Closing.
8.1 Time and Place. The Closing of this transaction ("Closing")
shall take place at 57 West 200 South, Suite 310, Salt Lake City, Utah, at 11:00
am, on February 19, 1999, or at such other time and place as the parties hereto
shall agree upon. Such date is referred to in this Agreement as the "Closing
Date."
8.2 Documents To Be Delivered by IHI. At the Closing IHI shall
deliver to FVFI the following documents:
11
<PAGE>
a. Executed copies of Exhibit "A" executed by shareholders of IHI
owning not less than 51% of the outstanding common stock of IHI.
b. Stock certificates endorsed to FVFI representing the shares of
stock of IHI transferable to FVFI pursuant to subsection 1.1 hereof.
c. The certificate required pursuant to subsection 5.3 hereof.
d. The legal opinion set forth in subsection 4.14 hereof.
e. A cashier's check in the amount of $100,000 as required pursuant to
subsection 4.10 hereof.
f. A signed consent and/or minutes of IHI's directors approving this
Agreement and each matter to be approved under this Agreement.
g. Such other documents of transfer, certificates of authority, and
other documents as FVFI may reasonably request.
8.3 Documents To Be Delivered by FVFI. At the Closing FVFI shall
deliver to IHI the following documents:
a. Certificates for the number of shares of common stock of FVFI
as determined in subsection 1.2 hereof.
b. The certificate required pursuant to subsection 6.3 hereof.
c. The executed leakage agreement as set forth in subsection 4.11
hereof.
d. The legal opinion as set forth in subsection 4.14 hereof.
e. A signed consent and/or minutes of FVFI's directors and
shareholders approving this Agreement and each matter to be approved under this
Agreement.
f. Such other documents of transfer, certificates of authority, and
other documents as IHI may reasonably request.
9. Termination. This Agreement may be terminated by FVFI or IHI by notice
to the
12
<PAGE>
other if, (i) at any time prior to the Closing Date any event shall have
occurred or any state of facts shall exist that renders any of the conditions to
its or their obligations to consummate the transactions contemplated by this
Agreement incapable of fulfillment, or (ii) on February 26, 1999, if the Closing
shall not have occurred. Following termination of this Agreement no party shall
have liability to another party relating to such termination, other than any
liability resulting from the breach of this Agreement by a party prior to the
date of termination.
10. Miscellaneous.
10.1 Notices. All communications provided for herein shall be in
writing and shall be deemed to be given or made when served personally or when
deposited in the United States mail, certified return receipt requested,
addressed as follows, or at such other address as shall be designated by any
party hereto in written notice to the other party hereto delivered pursuant to
this subsection:
FVFI: 340 Sunset Drive
Suite 1203
Ft. Lauderdale, FL 33301
Attn: Van R. Perkins, President
With Copy to: Ronald N. Vance
Attorney at Law
57 West 200 South
Suite 310
Salt Lake City, UT 84101
IHI: #185-10751 Shellbridge Way
Richmond, British Columbia, Canada V6X 2S8
Attn: John Robertson, Chairman
With Copy to: James Vandeberg
VANDEBERG JOHNSON & GANDARA
One Union Square, Suite 2424
600 University Street
Seattle, WA 96101-1192
10.2 Default. Should any party to this Agreement default in any of
the covenants, conditions, or promises contained herein, the defaulting party
shall pay all costs and expenses, including a reasonable attorney's fee, which
may arise or accrue from enforcing this Agreement, or in pursuing any remedy
provided hereunder or by any statute.
13
<PAGE>
10.3 Assignment. This Agreement may not be assigned in whole or in
part by the parties hereto without the prior written consent of the other party
or parties, which consent shall not be unreasonably withheld.
10.4 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and assigns.
10.5 Partial Invalidity. If any term, covenant, condition, or
provision of this Agreement or the application thereof to any person or
circumstance shall to any extent be invalid or unenforceable, the remainder of
this Agreement or application of such term or provision to persons or
circumstances other than those as to which it is held to be invalid or
unenforceable shall not be affected thereby and each term, covenant, condition,
or provision of this Agreement shall be valid and shall be enforceable to the
fullest extent permitted by law.
10.6 Entire Agreement. This Agreement constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all negotiations, representations, prior discussions,
letters of intent, and preliminary agreements between the parties hereto
relating to the subject matter of this Agreement.
10.7 Interpretation of Agreement. This Agreement shall be interpreted
and construed as if equally drafted by all parties hereto.
10.8 Survival of Covenants, Etc. All covenants, representations, and
warranties made herein to any party, or in any statement or document delivered
to any party hereto, shall survive the making of this Agreement and shall remain
in full force and effect until the obligations of such party hereunder have been
fully satisfied.
10.9 Further Action. The parties hereto agree to execute and deliver
such additional documents and to take such other and further action as may be
required to carry out fully the transactions contemplated herein.
10.10 Amendment. This Agreement or any provision hereof may not be
changed, waived, terminated, or discharged except by means of a written
supplemental instrument signed by the party or parties against whom enforcement
of the change, waiver, termination, or discharge is sought.
10.11 Full Knowledge. By their signatures, the parties acknowledge
that they have carefully read and fully understand the terms and conditions of
this Agreement, that each
14
<PAGE>
party has had the benefit of counsel, or has been advised to obtain counsel, and
that each party has freely agreed to be bound by the terms and conditions of
this Agreement.
10.12 Headings. The descriptive headings of the various sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
10.13 Counterparts. This Agreement may be executed in two or more
partially or fully executed counterparts, each of which shall be deemed an
original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto executed the foregoing Agreement and
Plan of Reorganization as of the day and year first above written.
FVFI: Florida Venture Fund, Inc.
By
---------------------------
Van R. Perkins, President
IHI: Information Highway, Inc.
By
---------------------------
John G. Robertson, President
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED FINANCIAL STATEMENTS, FOR THE YEARS END MAY 31, 1998 AND 1997.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> MAY-31-1998 MAY-31-1997
<PERIOD-START> JUN-01-1997 OCT-15-1996
<PERIOD-END> MAY-31-1998 MAY-31-1997
<CASH> 35,699 4,947
<SECURITIES> 0 0
<RECEIVABLES> 4,442 1,628
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 43,142 11,851
<PP&E> 297,626 192,097
<DEPRECIATION> 88,273 34,110
<TOTAL-ASSETS> 527,093 604,175
<CURRENT-LIABILITIES> 206,608 63,970
<BONDS> 261,784 151,439
0 0
0 0
<COMMON> 762,048 539,460
<OTHER-SE> 3,654 0
<TOTAL-LIABILITY-AND-EQUITY> 527,093 604,175
<SALES> 859,184 145,449
<TOTAL-REVENUES> 895,184 145,449
<CGS> 0 0
<TOTAL-COSTS> 1,416,391 296,143
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (557,207) (150,694)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (557,207) (150,694)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (557,207) (150,694)
<EPS-PRIMARY> (.14) (.10)
<EPS-DILUTED> (.14) (.10)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 11/30/98 AND 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> MAY-31-1999 MAY-31-1998
<PERIOD-START> JUN-01-1998 JUN-01-1997
<PERIOD-END> NOV-30-1998 NOV-30-1997
<CASH> 367,655 0
<SECURITIES> 0 0
<RECEIVABLES> 6,563 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 379,518 0
<PP&E> 290,631 0
<DEPRECIATION> 116,382 0
<TOTAL-ASSETS> 748,491 0
<CURRENT-LIABILITIES> 229,660 0
<BONDS> 158,927 0
0 0
0 0
<COMMON> 1,356,197 0
<OTHER-SE> 7,938 0
<TOTAL-LIABILITY-AND-EQUITY> 748,491 0
<SALES> 498,895 400,741
<TOTAL-REVENUES> 498,895 400,741
<CGS> 0 0
<TOTAL-COSTS> 795,225 575,448
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (296,330) (174,707)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (296,330) (174,707)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (296,330) (174,707)
<EPS-PRIMARY> (.06) (.04)
<EPS-DILUTED> (.06) (.04)
</TABLE>
