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As Filed with the Securities and Exchange Commission on November 13, 2000
Registration Statement No. 333-____________
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
Registration Statement under the Securities Act of 1933
PLUS SOLUTIONS, INC.
(Name of small business issuer as specified in its charter)
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TEXAS 7372 88-0412455
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S.Employer I.D. No.)
Incorporation or Organization Classification Code Number)
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14677 MIDWAY ROAD, SUITE 206
ADDISON, TEXAS, U.S.A. 75001
(972) 687-0090
(Address and telephone number of principal executive
offices and principal place of business)
MAX GOLDEN, PRESIDENT
14677 MIDWAY ROAD, SUITE 206
ADDISON, TEXAS, U.S.A. 75001
(972) 687-0090
(Name, address and telephone
number of agents for service)
Copies to:
FRED S. STOVALL, ESQ.
PATTON BOGGS LLP
2001 ROSS AVENUE, SUITE 3000
DALLAS, TEXAS, U.S.A.
(214) 758-1515
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a) may determine.
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of each maximum aggregate
class of securities Amount being offering price maximum Amount of
being registered registered (2) per security (3) offering price (3) registration fee
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Common Stock (1) 40,000,000 $0.07 $2,800,000 $785
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(1) Issuable upon the conversion of certain convertible notes and exercise
of certain warrants as described more fully herein.
(2) Pursuant to Rule 416, there are also being registered additional shares
of common stock as may be issuable as a result of anti-dilution and
other similar provisions upon the conversion of convertible notes and
exercise of warrants described herein.
(3) Pursuant to Rule 457(c), based upon the average of the high and low
prices of the registrant's common stock as quoted on the Nasdaq OTC
Bulletin Board system on November 9, 2000, $0.07.
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PROSPECTUS
40,000,000 SHARES
PLUS SOLUTIONS, INC.
COMMON STOCK
The selling security holders identified in this prospectus are offering
up to 40,000,000 shares of our common stock which are issuable by us upon
exercise of convertible notes or warrants held by the selling security holders.
The selling security holders may sell shares of our common stock from time to
time in transactions, including block transactions, on the exchanges or
quotation systems on which our common stock may be then listed for trading or
quoted or in transactions outside any exchange or other public market. Shares
may be sold in privately negotiated transactions, in underwritten offerings, or
by a combination of methods of sale. Sales of shares of common stock may be made
at fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
We are not offering any shares of our common stock for sale under this
prospectus and we will not receive any of the proceeds from the sale of shares
by selling security holders under this prospectus.
INVESTING IN OUR COMMON STOCK INVOLVES CONSIDERABLE RISKS. PLEASE
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5 BEFORE BUYING SHARES OF
OUR COMMON STOCK.
Our common stock is traded on the OTC Bulletin Board system operated by
the Nasdaq Stock Market, Inc. under the symbol "PLSO". On November 9, 2000, the
last reported sale price of our common stock was $.06 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus is dated November ____, 2000.
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TABLE OF CONTENTS
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Additional Information........................................................3
Forward Looking Statements....................................................3
Summary.......................................................................4
Risk Factors..................................................................5
Selected Financial Data......................................................12
Plan of Development..........................................................13
Description of Our Business..................................................15
Financing Arrangements.......................................................20
Management...................................................................23
Principal Stockholders.......................................................26
Information about Our Capital Stock..........................................27
Description of Our Capital Stock.............................................27
Selling Security Holders.....................................................29
Plan of Distribution.........................................................30
Legal Matters................................................................31
Experts......................................................................31
Index to Financial Statements...............................................F-1
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ADDITIONAL INFORMATION
This prospectus constitutes a part of a registration statement on Form
SB-2 that we filed with the United States Securities and Exchange Commission
under the United States Securities Act. This prospectus, which forms a part of
the registration statement, does not contain all the information contained in
the registration statement. You should refer to the complete registration
statement and its related exhibits and schedules for further information with
respect to our company and the shares offered in this prospectus. Statements
contained in this prospectus concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
that document filed as an exhibit to the registration statement or otherwise
filed with the SEC and each such statement is qualified by this reference. The
registration statement and its exhibits and schedules are on file at the offices
of the SEC and may be inspected without charge.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file,
including the registration statement, at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the Public Reference
Room. Our public filings arc also available from commercial document retrieval
services and at the Internet World Wide Web site maintained by the SEC at
"http://www.sec.gov."
You should rely only on the information incorporated by reference or
contained in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. The selling shareholders
are not making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing
in this prospectus is accurate as of the date on the front cover of this
prospectus only. Our business, financial condition, results of operations and
prospects may have changed since that date.
FORWARD LOOKING STATEMENTS
The statements in this prospectus and the documents incorporated by
reference that relate to matters that are not historical facts are "forward
looking statements" within the meaning of Section 27A of the United States
Securities Act and Section 21E of the United States Securities Exchange Act.
Forward looking statements are subject to risks, uncertainties and assumptions
that could cause future events and actual results to differ materially from the
results anticipated or implied by the forward looking statements. When used in
this prospectus, words such as "anticipate", "believe", "expect", "plan",
"intend", "estimate", "project", "will", "could," "may," "predict" and similar
expressions are intended to identify forward looking statements. The information
contained in this prospectus, including the information presented under the
heading "Risk Factors", identifies factors that could affect our operating
results and performance and the ultimate accuracy of our forward looking
statements. We urge you to carefully consider those factors.
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SUMMARY
The following summary highlights some of the information in this
prospectus. To understand this offering fully, you should read the entire
prospectus carefully, including the risk factors and our consolidated financial
statements and the notes accompanying the consolidated financial statements
appearing elsewhere in this prospectus.
PLUS SOLUTIONS
We are a development-stage company that provides Internet-based
business-to-business e-commerce solutions. We have developed Expressorder(TM), a
global business-to-business e-commerce service that enables buyers and suppliers
to automate business transactions on the Internet. Our ExpressBuyer(TM) service
enables businesses to automate their purchasing methods. Our ExpressSeller(TM)
service enables businesses to offer a catalog of their products over the
Internet.
THE OFFERING
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Common stock offered by the selling security holders ......... 40,000,000 shares
Common stock outstanding after the offering (1) .............. 79,000,000 shares
Nasdaq OTC Bulletin Board symbol .......................................... PLSO
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(1) Assuming the offering of all 40,000,000 shares described in this
prospectus. Does not include the conversion or exercise of any
securities convertible into or exercisable for our common stock, except
convertible and exercisable securities held by the selling security
holders.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. In
addition to other information contained in this prospectus, you should carefully
consider the following risk factors and other information in this prospectus
before investing in our common stock.
RISKS RELATED TO OUR BUSINESS
WE ARE AN EARLY STAGE COMPANY, WE HAVE A HISTORY OF LOSSES AND WE EXPECT FUTURE
LOSSES.
We have never been profitable, we expect to incur net losses for the
foreseeable future and we may never be profitable. We were founded in October
1998 and have never had any revenues in connection with our current business. We
have a limited operating history that makes it difficult to forecast our future
operating results. We expect to substantially increase our sales and marketing,
product development and general and administrative expenses. As a result we will
need to generate significant revenues to achieve and maintain profitability in
the future. If we do achieve profitability in any period, we cannot be certain
that we will sustain or increase such profitability on a quarterly or annual
basis.
WE EXPECT OUR OPERATIONS TO CONTINUE TO PRODUCE A NEGATIVE CASH FLOW;
CONSEQUENTLY, IF WE CANNOT RAISE ADDITIONAL CAPITAL, WE MAY NOT BE ABLE TO FUND
OUR CONTINUED OPERATIONS.
Since our inception, cash used in our operations has substantially
exceeded cash received from our operations, and we expect this trend to continue
for the foreseeable future. We currently anticipate that our available cash
resources, combined with the net proceeds from this offering will be sufficient
to meet our anticipated working capital and capital expenditure requirements for
at least the next twelve to eighteen months. The estimate of the time period in
which our cash resources and proceeds from the offering will be sufficient to
meet our working capital and capital expenditure needs is a forward-looking
statement that involves risks and uncertainties. The actual time period may
differ materially from that indicated in our estimate as a result of a number of
factors. As a result, we cannot assure you that such resources will be
sufficient for anticipated or unanticipated working capital and capital
expenditure requirements for this period. Factors that may vary significantly
affect whether our cash resources are sufficient to meet our needs for the
period indicated include our expectation that we will continue to incur net
losses and our continuing incurrence of substantial negative cash flow. If
adequate funds are not available or are not available on acceptable terms, we
may not be able to take advantage of unanticipated opportunities, develop new
products or services, fund our continued operations, or otherwise respond to
unanticipated competitive pressures. We cannot assure you that any additional
financing we may need will be available on terms favorable to us, if at all.
BECAUSE OUR INDUSTRY IS HIGHLY COMPETITIVE AND HAS LOW BARRIERS TO ENTRY, WE
CANNOT ASSURE YOU THAT WE WILL BE ABLE TO EFFECTIVELY COMPETE. THE MARKET FOR
BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE SOLUTIONS IS EXTREMELY COMPETITIVE. WE
EXPECT COMPETITION TO INTENSIFY AS CURRENT COMPETITORS EXPAND THEIR PRODUCT
OFFERINGS AND NEW COMPETITORS ENTER THE MARKET. WE CANNOT ASSURE YOU THAT WE
WILL BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT OR FUTURE COMPETITORS, OR
THAT COMPETITIVE PRESSURES WE FACE WILL NOT HARM OUR BUSINESS, OPERATING RESULTS
OR FINANCIAL CONDITION.
Because there are relatively low barriers to entry in the electronic
commerce market, competition from other established and emerging companies may
develop in the future. In addition, our customers and partners may become
competitors in the future. Certain of our competitors may be able to negotiate
alliances with strategic partners on more favorable terms than we are able to
negotiate. Many of our competitors may also have well-established relationships
with our prospective customers. Increased competition is likely to result in
price reductions, lower average sales prices, reduced margins, longer
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sales cycles and decrease or loss of our market share, any of which could harm
our business, operating results or financial condition.
Many of our competitors have, and new potential competitors may have,
more experience developing Internet-based software and end-to-end purchasing
solutions, larger technical staffs, larger customer bases, more established
distribution channels, greater brand recognition and greater financial,
marketing and other resources than we have. In addition, competitors may be able
to develop products and services that are superior to our products and services,
that achieve greater customer acceptance or that have significantly improved
functionality as compared to our existing and future products and services. We
cannot assure you that the business-to-business electronic commerce solutions
offered by our competitors now or in the future will not be perceived by buyers
and suppliers as superior to ours.
OUR LENGTHY SALES AND IMPLEMENTATION CYCLE COULD CAUSE DELAYS IN REVENUE GROWTH.
The period between our initial contact with a potential customer and
the purchase of our products and services may be long and may have delays
associated with the lengthy budgeting and approval process of our customers.
These lengthy cycles will have a negative impact on the timing of our revenues,
especially our realization of any transaction fee based revenues.
We believe that a customer's decision to purchase our products and
services is discretionary, involves a significant commitment of resources, and
is influenced by customer budgetary cycles. To successfully sell our products
and services, we generally must educate our potential customers regarding the
use and benefit of our products and services, which can require significant time
and resources. Many of our potential customers are large enterprises that
generally take longer to make significant business decisions. In addition, our
solutions include enterprise applications that take significant time to deploy
successfully across an organization.
IF OUR POTENTIAL CUSTOMERS ARE NOT WILLING TO SWITCH TO OR ADOPT OUR ELECTRONIC
COMMERCE SOLUTION, OUR GROWTH AND REVENUES WILL BE LIMITED.
The failure to generate a large customer base would harm our growth and
revenues. This failure could occur for several reasons. Some of our
business-to-business electronic commerce competitors charge their customers
large fees upon the execution of customer agreements. Businesses that have made
substantial up-front payments to our competitors for electronic commerce
solutions may be reluctant to replace their current solution and adopt our
solution. As a result, our efforts to create a larger customer base may be more
difficult than expected even if we are deemed to offer products and services
superior to those of our competitors. Further, because the business-to-business
electronic commerce market is new and underdeveloped, potential customers in
this market may be confused or uncertain about the relative merits of each
electronic commerce solution or which electronic commerce solution to adopt, if
any. Confusion and uncertainty in the marketplace may inhibit customers from
adopting our solution, which could harm our business, operating results and
financial condition.
OUR BUSINESS PLAN ANTICIPATES RAPID GROWTH IN OUR BUSINESS AND FAILURE TO MANAGE
OUR GROWTH COULD STRAIN OUR MANAGEMENT AND OTHER RESOURCES.
Our ability to successfully offer products and services and implement
our business plan in a rapidly evolving market requires an effective planning
and management process. Future expansion efforts could be expensive and put a
strain on our management and resources. We have increased, and plan to continue
to increase, the scope of our operations at a rapid rate. To manage future
growth effectively, we must maintain and enhance our financial and accounting
systems and controls, integrate new personnel and manage expanded operations.
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IF OUR ELECTRONIC COMMERCE PRODUCTS DO NOT CONTAIN THE FEATURES AND
FUNCTIONALITY OUR CUSTOMERS WANT, OUR CUSTOMERS WILL NOT BUY THEM.
Our success depends upon our ability to accurately determine the
features and functionality required by customers and to design and implement
business-to-business electronic commerce products that meet these requirements
in a timely and efficient manner. If we fail to accurately determine customer
feature and functionality requirements, enhance our existing products and
develop new products, our current and potential future customers will not buy
them. To date, our products have been based on our internal efforts and on
feedback from a limited number of customers and potential customers. We cannot
assure you that we have determined or will successfully determine customer
requirements or that the features and functionality of our future products and
services will adequately satisfy current or future customer demands.
OUR FUTURE REVENUES DEPEND UPON CURRENT AND POTENTIAL CUSTOMERS INTEGRATING OUR
SOLUTIONS INTO THEIR BUSINESSES.
Our success depends upon the acceptance and successful integration by
customers and their suppliers of our Expressorder(TM) products. Our potential
customers and their related suppliers often rely on third party systems
integrators to develop, deploy and manage their business-to-business electronic
commerce platforms and solutions. If a large number of systems integrators fail
to adopt and support our solution or, if any of our customers or suppliers are
not able to successfully integrate our solution, our business, operating results
and financial condition will suffer.
IF WE RELEASE PRODUCTS CONTAINING DEFECTS, WE MAY NEED TO HALT FURTHER SHIPMENTS
UNTIL WE FIX THE DEFECTS, AND OUR BUSINESS AND REPUTATION WOULD BE HARMED.
Products as complex as ours often contain known and undetected errors
or performance problems. Many serious defects are frequently found during the
period immediately following introduction and initial shipment of new products
or enhancements to existing products. Although we attempt to resolve all errors
that we believe would be considered serious by our customers before shipment to
them, our products are not error-free. These errors or performance problems
could result in lost revenues or delays in customer acceptance and would be
detrimental to our business and reputation. In the past, defects in our products
have delayed their shipments after those products have been commercially
introduced. While these delays have not been material to date, we cannot assure
you that undetected errors or performance problems in our existing or future
products will not be discovered in the future or that known errors considered
minor by us will not be considered serious by our customers.
WE MAY NOT BE ABLE TO HIRE AND RETAIN SUFFICIENT SALES, MARKETING AND TECHNICAL
PERSONNEL THAT WE NEED TO SUCCEED BECAUSE THESE PERSONNEL ARE LIMITED IN NUMBER
AND IN HIGH DEMAND.
If we fail to hire and retain sufficient numbers of sales, marketing
and technical personnel, our business, operating results and financial condition
would be harmed. Competition for qualified sales, marketing and technical
personnel is intense as these personnel are in limited supply, and we might not
be able to hire and retain sufficient numbers of such personnel to grow our
business. We need to substantially expand our sales operations and marketing
efforts, in order to increase market awareness and sales of our Expressorder(TM)
system and the related services we offer. We will also need to increase our
technical staff to support the growth of our business. In addition, our
competitors may attempt to hire our employees away from us. We expect that they
will continue to attempt to do so in the future.
OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.
Our future success depends upon the continued service of our executive
officers and other key personnel, and none of our executive officers or key
employees is bound by an employment agreement for any specific term. If we lose
the services of one or more of our executive officers or key employees, or
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if one or more of them decide to join a competitor or otherwise compete directly
or indirectly with us, our business, operating results and financial condition
would be seriously harmed. In particular, the services of Max Golden, our Chief
Executive Officer, would be difficult to replace.
BECAUSE THE PROTECTION OF OUR PROPRIETARY TECHNOLOGY IS LIMITED, OUR PROPRIETARY
TECHNOLOGY COULD BE USED BY OTHERS WITHOUT OUR CONSENT.
Our success depends, in part, upon our proprietary technology and other
intellectual property rights. To date, we have relied primarily on a combination
of copyright, trade secret, and trademark laws, and nondisclosure and other
contractual restrictions on copying and distribution to protect our proprietary
technology. We cannot assure you that our means of protecting our intellectual
property rights in the United States or abroad will be adequate or that others,
including our competitors, will not use our proprietary technology without our
consent.
Furthermore, litigation may be necessary to enforce our intellectual
property rights, to protect our trade secrets, to determine the validity and
scope of the proprietary rights of others, or to defend against claims of
infringement or invalidity. Such litigation could result in substantial costs
and diversion of resources and could harm our business, operating results and
financial condition.
IF THIRD PARTIES CLAIM THAT WE INFRINGE UPON THEIR INTELLECTUAL PROPERTY, OUR
ABILITY TO USE CERTAIN TECHNOLOGIES AND PRODUCTS COULD BE LIMITED AND WE MAY
INCUR SIGNIFICANT COSTS TO RESOLVE THESE CLAIMS.
Litigation regarding intellectual property rights is common in the
Internet and software industries. We expect that third party infringement claims
involving Internet technologies and software products and services to increase.
Although we believe that our intellectual property rights are sufficient to
allow us to market our existing products without incurring liability to third
parties, we cannot assure you that our products and services do not infringe on
the intellectual property rights of third parties. If an infringement claim is
filed against us, we may be prevented from using certain technologies and may
incur significant costs to resolve the claim.
WE HAVE IMPLEMENTED CERTAIN ANTI-TAKEOVER PROVISIONS THAT COULD MAKE IT MORE
DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so would be beneficial to our
stockholders.
OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS CONTROL
PLUS SOLUTIONS AND COULD LIMIT THE ABILITY OF OUR OTHER STOCKHOLDERS TO
INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER TRANSACTIONS SUBMITTED FOR
A VOTE OF OUR STOCKHOLDERS.
Upon completion of this offering, our executive officers, directors and
principal stockholders will beneficially own, in the aggregate, approximately
36% of our outstanding common stock. As a result, these stockholders will be
able to exercise control over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions which could have the effect of delaying or preventing a third party
from acquiring control over us.
RISKS RELATED TO THE INTERNET INDUSTRY
CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR OUR FUTURE GROWTH.
The market for Internet-based, business-to-business electronic commerce
products is relatively new and is evolving rapidly. Our future revenues and any
future profits depend upon the widespread
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acceptance and use of the Internet as an effective medium of
business-to-business commerce, particularly as a medium to perform indirect
goods procurement and fulfillment functions. The failure of the Internet to
continue to develop as a commercial or business medium or of significant numbers
of buyers and suppliers of indirect goods to conduct business-to-business
commerce on the Internet would harm our business, operating results and
financial condition. The acceptance and use of the Internet for
business-to-business commerce could be limited by a number of factors, such as
the growth and use of the Internet in general, the relative ease of conducting
business on the Internet, the efficiencies and improvements that conducting
commerce on the Internet provides, concerns about transaction security and
taxation of transactions on the Internet.
OUR MARKET MAY UNDERGO RAPID TECHNOLOGICAL CHANGE AND THIS CHANGE MAY MAKE OUR
PRODUCTS AND SERVICES OBSOLETE OR CAUSE US TO INCUR SUBSTANTIAL COSTS TO ADAPT
TO THESE CHANGES.
Failure of the market for our products and services to develop and grow
or our failure to gain acceptance in this market would harm our business,
operating results and financial condition. Our market is characterized by
rapidly changing technology, evolving industry standards and frequent new
product announcements. To be successful, we must adapt to our rapidly changing
market by continually improving the performance, features and reliability of our
products and services or else our products and services may become obsolete. We
also could incur substantial costs to modify our products, services or
infrastructure in order to adapt to these changes. Our business, operating
results and financial condition could be harmed if we incur significant costs
without adequate results, or find ourselves unable to adapt rapidly to these
changes.
FAILURE TO EXPAND INTERNET INFRASTRUCTURE COULD LIMIT OUR FUTURE GROWTH.
The recent growth in Internet traffic has caused frequent periods of
decreased performance, and if Internet usage continues to grow rapidly, its
infrastructure may not be able to support these demands and its performance and
reliability may decline. If outages or delays on the Internet occur frequently
or increase in frequency, overall Internet usage including usage of our products
and services could grow more slowly or decline. Our ability to increase the
speed and scope of our services to customers is ultimately limited by and
depends upon the speed and reliability of both the Internet and our customers'
internal networks. Consequently, the emergence and growth of the market for our
services depends upon improvements being made to the entire Internet as well as
to our individual customers' networking infrastructures to alleviate overloading
and congestion. If these improvements are not made, the ability of our customers
to utilize our solution will be hindered, and our business, operating results
and financial condition may suffer.
OUR REVENUES MAY DECREASE IF GROWTH IN THE USE OF THE INTERNET IN THE MARKETS WE
TARGET DOES NOT OCCUR AS PROJECTED.
The use of the Internet as a means to interconnect buyers and sellers
and to create online trading communities is integral to our business model. Our
business strategy is, in part, to create a global, business-to-business
electronic marketplace for buyers and sellers of indirect goods. However, the
use of the Internet as a means of transacting business is relatively new and has
not been accepted by all customers in the markets we have targeted. If the rate
of growth of the Internet use in or targeted markets is less than expected, or
if the Internet fails to produce a feasible electronic commerce marketplace, our
revenues will suffer. We cannot assure you that the use of the Internet as a
means of conducting business will continue to grow at a rate similar to the
historical rates, if at all.
SECURITY RISKS OF ELECTRONIC COMMERCE MAY DETER FUTURE USE OF OUR PRODUCTS AND
SERVICES.
A fundamental requirement to conduct Internet-based,
business-to-business electronic commerce is the secure transmission of
confidential information over public networks. Failure to prevent security
breaches of the our internal Internet systems, or well publicized security
breaches affecting the Web in general, could significantly harm our business,
operating results and financial condition. We cannot be certain that advances in
computer capabilities, new discoveries in the field of cryptography, or other
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developments will not result in a compromise or breach of the algorithms we use
to protect content and transactions on our internal Internet systems or
proprietary information in our databases. Anyone who is able to circumvent our
security measures could misappropriate proprietary, confidential customer
information or cause interruptions in our operations. We may be required to
incur significant costs to protect against security breaches or to alleviate
problems caused by breaches. Further, a well-publicized compromise of security
could deter people from using the Internet to conduct transactions that involve
transmitting confidential information.
ADDITIONAL GOVERNMENT REGULATIONS MAY INCREASE OUR COSTS OF DOING BUSINESS.
The laws governing Internet transactions remain largely unsettled. The
adoption or modification of laws or regulations relating to the Internet could
harm our business, operating results and financial condition by increasing our
costs and administrative burdens. It may take years to determine whether and how
existing laws such as those governing intellectual property, privacy, libel,
consumer protection and taxation apply to the Internet.
Laws and regulations directly applicable to communications or commerce
over the Internet are becoming more prevalent. We must comply with new
regulations in both Europe and the United States, as well as any other
regulations adopted by other countries where we may do business. The growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws, both in the United States and abroad, as
well as new laws governing the taxation of Internet commerce. Compliance with
any newly adopted laws may prove difficult for us and may harm our business,
operating results and financial condition.
RISKS RELATED TO OUR COMMON STOCK
IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS OR INVESTORS, THE
MARKET PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY.
We anticipate that our quarterly operating results will vary
significantly in the future. We believe that period-to-period comparisons of our
results of operations may not be meaningful in the future and should not be
relied upon as indicators of future performance. Our operating results may fall
below the expectations of securities analysts or investors in some future
quarter or quarters. Our failure to meet these expectations would likely
adversely affect the market price of our common stock.
INTERNET RELATED STOCK PRICES ARE ESPECIALLY VOLATILE AND THIS VOLATILITY MAY
DEPRESS OUR STOCK PRICE.
The stock market and specifically the stock prices of Internet-related
companies have been very volatile. This volatility is often not related to the
operating performance of the companies. This broad market volatility and
industry volatility may reduce the price of our common stock, without regard to
our operating performance. Due to this volatility, the market price of our
common stock could significantly decrease.
WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED STOCK
PRICE VOLATILITY.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources.
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OUR STOCK PRICE COULD BE AFFECTED BY SHARES OF OUR COMMON STOCK BECOMING
AVAILABLE FOR SALE IN THE FUTURE.
A large number of shares of our common stock could become eligible for
sale in the public market in the near future, including the shares offered
pursuant to this prospectus. Sales of a substantial number of shares of common
stock in the public market could depress the market price of the common stock
and could impair our ability to raise capital through the sale of additional
equity securities.
WE HAVE IMPLEMENTED CERTAIN ANTI-TAKEOVER PROVISIONS THAT COULD MAKE IT MORE
DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so would be beneficial to our
stockholders.
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<PAGE> 13
SELECTED FINANCIAL DATA
The following selected financial data are derived from our audited and
unaudited financial statements. This data should be read in conjunction with
those financial statements and the notes thereto.
<TABLE>
<CAPTION>
PERIOD FROM FISCAL YEAR
SIX MONTHS ENDED JUNE 30 OCTOBER 5, 1998 ENDED CUMULATIVE
------------------------------ TO DECEMBER 31, DECEMBER 31, FROM
1999 2000 1998 1999 INCEPTION
------------ ------------ --------------- ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ -- $ -- $ -- $ -- $ --
Operating expenses 195,674 460,605 5,995,300 2,064,728 8,250,633
------------ ------------ ------------ ------------ -----------
Operating loss (195,674) (460,605) (5,995,300) (2,064,7280) (8,250,633)
Other expense - net -- -- (5,501) (2,373) (7,874)
------------ ------------ ------------ ------------ -----------
Net loss $ (195,674) $ (460,605) $ (6,000,801) $ (2,067,101) $(8,528,507)
============ ============ ============ ============
Loss per share (Basic and
Diluted) $ (0.01) $ (0.01) $ (0.33) $ (0.10)
============ ============ ============ ============
Weighted average common and
common equivalent shares
outstanding (Basic and
Diluted) 18,299,347 38,940,000 18,191,020 20,574,041
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
<S> <C> <C>
BALANCE SHEET DATA:
Working capital $ (234,729) $ (111,922)
Total assets 269,882 271,574
Long term debt, less current portion
$ -- $ --
Stockholders' equity $ (1,373) $ 36,815
</TABLE>
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<PAGE> 14
PLAN OF DEVELOPMENT
Plus Solutions, Inc, a Texas corporation, was organized in October
1998. To avoid confusion, we will refer to the Plus Solutions organized as a
Texas corporation as "Texas Plus Solutions". Before March 10, 2000, Texas Plus
Solutions pursued the business we now pursue. On March 10, 2000, Texas Plus
Solutions was acquired by Sound Designs, Inc., a Nevada corporation that had
been organized in September 1998. Although Sound Designs acquired Texas Plus
Solutions, Texas Plus Solutions was considered the acquiring entity for
accounting purposes. Following the acquisition, Sound Designs adopted the
management and business plan of Texas Plus Solutions and subsequently changed
its corporate name to Plus Solutions, Inc. in May 2000.
We have not generated any revenues from our current business, which we
commenced after and as a result of the acquisition of Texas Plus Solutions. In
addition, Texas Plus Solutions never generated any revenues prior to its
acquisition by Sound Designs. Although Sound Designs generated nominal revenues
prior to the acquisition of Texas Plus Solutions, we have abandoned the business
pursued by Sound Designs prior to the acquisition of Texas Plus Solutions. As a
result, we consider the nominal revenues generated by Sound Designs while
pursuing a line of business that we have abandoned to be immaterial and we have
chosen not to discuss financial information
We are considered a development-stage company. We have experienced
cumulative operating losses, and our operations are subject to certain risks and
uncertainties, including, among others, risks associated with technology and
regulatory trends, growth competition by entities with greater financial and
other resources, and the need for additional capital. We cannot assure you that
we will be successful in becoming profitable or generating positive cash flow in
the future. Our fiscal year ends on December 31 of each calendar year.
LIQUIDITY AND CAPITAL RESOURCES.
As a result of the financing arrangements described under the section
titled "Financing" in this prospectus, we believe we will have sufficient
resources to continue our operations for approximately 12 to 18 months. However,
while management believes that these arrangements will continue to provide
additional funds to the Company, we cannot assure you that these additional
funds will be made available. If such additional funds are not made available,
we may have to cease operations if replacement funding is not available.
The availability of funds in excess of $1,000,000 under the current
financing arrangements is dependent on the ownership level of each of the four
investors supporting the financing. These investors do not have any obligation
to provide financing in excess of $1,000,000 ($500,000 of which has already been
provided to us) if such additional financing would result in the investor owning
convertible notes that may be converted into more than 9.9% of our outstanding
common stock. Since the amount of common stock into which the convertible notes
may be converted is dependent on the market price of our common stock upon the
date of issuance of the convertible note, we may be unable to require the funds
that are parties to our current financing arrangements to provide funding in
excess of $1,000,000 if our stock price remains low or loses value. In that
case, we may need to secure additional financing in 12 to 18 months to continue
implementation of our business plan,. If we fail to acquire such additional
financing, we may be forced to delay the full implementation of our business
plan or we may be unable to continue our business at all.
RESEARCH AND DEVELOPMENT
We anticipate research and development costs of approximately $100,000
during the next 12 months to provide enhancements and added functionality to our
Expressorder(TM) product. Our anticipated expenditures may vary as a result of
the number and type of customers which we serve, products and services offered
by our competitors, and developments in the marketplace for our products and
services.
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<PAGE> 15
EQUIPMENT AND CAPITAL EXPENDITURES
We currently plan capital expenditures for equipment and software
during the next 12 months totaling approximately $125,000. We believe such
expenditures will include additional Internet data servers, additional
communication equipment, a customer support call management system and upgrades
of support software to support our Expressorder(TM) product. These expenditures
will be tied to the number and type of customers which use our products, the
specific product support requirements of those customers, and the volume of
transactions processed.
EMPLOYEES
We anticipate adding 30 additional employees during the next 12 months.
We anticipate that the majority of these employees will be in the areas of sales
and marketing, product development and support, and customer service and
support. In addition, we anticipate adding a small number of administrative
employees. The number and timing of such hirings will be a function of our
success in acquiring customers, business volume, market opportunities, and the
general business climate.
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<PAGE> 16
DESCRIPTION OF OUR BUSINESS
We are a development-stage company that provides Internet-based
business-to-business e-commerce solutions. We have developed Expressorder(TM), a
global business-to-business e-commerce service that enables buyers and suppliers
to automate business transactions on the Internet. Our ExpressBuyer(TM) service
enables businesses to automate their purchasing methods. Our ExpressSeller(TM)
service enables businesses to offer a catalog of their products over the
Internet.
We have focused on the recruiting of quality information technology and
engineering professionals. We utilize established testing methods to ensure that
our professionals are properly qualified. We also review candidates' technical
backgrounds and conduct preliminary interviews prior to referring candidates to
our customers. By attracting the most qualified professionals, we believe that
we will be able to attract high quality customers who require the services of
such professionals.
The Company has not had significant operations or revenues to date,
however, we intend to seek financing to expand our operations and commence
full-scale marketing and customer implementation of our services. If such
financing is not made available to us, however, we may not be able to implement
our plan of development and business strategy or implement any Expressorder(TM)
solutions. Even if such financing is made available, we must successfully
implement our plans to develop our business and implement our business strategy.
We intend to develop a strong internal marketing team to market our
services to targeted businesses and organizations in the North America and
Europe. In addition, we will employ marketing support personnel to assist the
marketing team in the preparation of presentations, proposals, research and
other related administrative tasks. As industry relationships are built,
individuals with specific industry knowledge will be employed to leverage such
relationships.
We will use carefully targeted advertising, such as print advertising
in industry publications, to market our services to targeted businesses and
organizations. It is anticipated that such advertising will highlight the
competitive advantages of Expressorder(TM) relative to the products and services
of our competitors. We have also established an Internet site to assist our
marketing efforts. As part of our continuing public relations efforts, we will
attempt to arrange media coverage of our services by television, radio and print
media, and participation in industry conferences.
We will continue to develop and improve our Expressorder(TM) solution
system. We anticipate that such continued development and improvement will be
critical to maintaining a competitive advantage over other e-commerce solution
providers and providing maximum value to our customers.
We will look for value-added strategic alliances with partners that
enable us to enter targeted industries, gain access to technology or potential
customers, or establish revenue sharing opportunities. Potential alliance
partners include advertising agencies, accounting firms, software or
technology-based businesses, and other e-commerce vendors. During the
development of Expressorder(TM), we initiated efforts to contact potential
alliance partners and explore mutually beneficial arrangements. As a result of
these efforts, we became a member of International Business Machines Corp.'s
PartnerWorld program in March 2000.
During the development of Expressorder(TM), we contacted potential
customers to establish relationships and industry knowledge and to solicit input
regarding our services. As a result, Expressorder(TM) has been reviewed and
evaluated by senior managers of several large businesses. We believe that these
relationships may be leveraged to identify potential customers and improve the
quality of our services.
We intend to target corporations and other organizations in a broad
range of industries that we believe will most benefit from our outsourced,
turnkey solutions offered by Expressorder(TM). We believe
15
<PAGE> 17
these organizations will be the most likely beneficiaries of an automated,
reliable, robust and scalable e-commerce solution and can provide strong
customer references. In addition, the large number and variety of implementation
circumstances involved in serving these organizations will rigorously test our
products and assist us in designing a robust, reliable and scalable solution.
We believe a loyal base of reference customers affords us a significant
competitive advantage. Therefore, we intend to devote significant resources
towards customer satisfaction. We will employ a variety of customer satisfaction
programs to promote superior customer satisfaction.
EXPRESSORDER(TM)
Expressorder(TM) consists of two components. Our ExpressBuyer(TM)
service enables businesses to automate their purchasing methods.
ExpressBuyer(TM) is a robust, scalable and reliable service that enables an
organization to reduce processing costs and improve productivity by automating
the procurement cycle and linking end-users throughout an organization with
internal administration and financial systems. ExpressBuyer(TM) also enables
organizations to reduce the cost of operating resources by channeling purchases
to preferred suppliers. Our ExpressSeller(TM) service enables businesses to
offer a catalog of products over the Internet through a fully automated
transaction. As a complete solution package, Expressorder(TM) provides a
business-to-business e-commerce platform.
We believe Expressorder(TM) provides the following benefits to our
customers:
Stand-alone, easily implemented solution. Expressorder(TM) is a
stand-alone service that can easily be initiated with any size company. It does
not require integration into a company's operational systems package or changes
in the existing business processes. It can also serve as an extension and
enhancement of, rather than a replacement for, a supply chain management system,
increasing the efficiencies of these systems.
Speed of implementation. Expressorder(TM) is an outsourced, turnkey
solution that can be quickly installed and implemented. We estimate that
Expressorder(TM) can be fully implemented for a customer in as little as three
to five months. Because it does not rely on the scarce internal technology
resources of our customers, the total cost of Expressorder(TM) will be
significantly less than that of competing solution systems.
Fully customizable and scalable. Expressorder(TM) can be fully
customized as either a buying or selling solution, or both, depending on the
individual needs of our customers. In addition, Expressorder(TM) is fully
scalable and may be reconfigured to suit a customers ongoing needs.
EXPRESSBUYER(TM)
ExpressBuyer(TM) is our purchasing component that enables an
organization to reduce processing costs and improve productivity by automating
purchasing methods. We believe ExpressBuyer(TM) offers the following benefits to
our customers:
Automation of procurement procedures and resulting costs reduction and
productivity increases. ExpressBuyer(TM) automates the procurement of goods and
services and significantly reduces processing costs and increases productivity.
ExpressBuyer(TM) enables an organization to streamline and automate complex
business processes. By operating without a complete re-engineering of the
customers existing systems ExpressBuyer(TM) takes advantage of investments in
financial, human resource and enterprise resource planning systems. As a result,
our services allow organizations to focus on value-added activities such as
negotiating better discounts with preferred suppliers. In addition, our
customers can order and receive requested items more quickly and with less
effort, improving overall productivity.
Compilation and analysis of buying data. ExpressBuyer(TM) enables
organizations to maximize procurement economies of scale, lowering the overall
costs of goods and services. ExpressBuyer(TM)
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<PAGE> 18
provides reporting tools on buying patterns, enabling organizations to negotiate
more favorable contracts with suppliers. ExpressBuyer(TM) also routes
transactions to preferred suppliers automatically. Moreover, ExpressBuyer(TM) is
accessible on every desktop, is easy-to-use and streamlines the procurement
process. These benefits minimize the frustration to end-users that often results
in maverick buying, further enabling organizations to take advantage of
negotiated discounts with preferred suppliers.
EXPRESSSELLER(TM)
ExpressSeller(TM) is our supplier service component that enables
suppliers to offer their complete line of proprietary or vended products over
the Internet and process fully automated sales transactions. We believe
ExpressSeller(TM) offers the following benefits:
Ability to offer complete line of products and services on the
Internet. ExpressSeller(TM) enables suppliers to offer their complete catalog of
goods and services over the Internet, which provides suppliers with greater
access to new and existing customers through a global presence and 24-hour
availability. In addition, by making available Internet-based catalog
capabilities, ExpressSeller(TM) enables suppliers to differentiate and market
their goods and services in their preferred format.
Integration of sales data with suppliers. ExpressSeller(TM) allows a
business to integrate their sales with multiple customers to more effectively
control inventory and take advantage of "just in time" supply systems.
Sales costs reduction. ExpressSeller(TM) enables businesses to reduce
sales costs. By automating catalog sales transactions, a business can reduce the
costs associated with, and reduce the potential for error inherent in,
paper-based ordering and payment processes. Product information can be
distributed electronically, reducing the distribution costs of printed catalogs.
In addition, suppliers can utilize their existing investments in inventory
control and delivery systems, including catalogs and product web pages.
CHARACTERISTICS OF OUR EXPRESSORDER(TM) SERVICES.
Our Expressorder(TM) service consists of two main components.
ExpressBuyer(TM) is our completely scalable service that enables businesses to
automate their purchasing methods and thereby reduce costs and improve
productivity. ExpressBuyer(TM) links product end-users administration and
financial personnel. ExpressBuyer(TM) also reduces the costs by directing
purchases to preferred suppliers. ExpressSeller(TM) is our service that allows
the offering of an entire catalog of products through fully automated
transactions.
The main characteristics of our Expressorder(TM) services are:
User friendly, Internet-based interfaces. The Internet browser-based
user interface of our EXPRESSORDER(TM) services enables users throughout an
organization to take full advantage of Expressorder(TM) from their desktop and
with minimal training. Online help information provides automated assistance for
less experienced users through the acquisition process, while an advanced user
interface makes the system more productive for experienced users.
Automation of e-commerce transactions. Expressorder(TM) provides
flexible workflow capable of streamlining and automating even the most complex
e-commerce transactions. This flexible workflow can be customized for the unique
processes of an organization and can be tailored to respond to user input,
specific events or any extrinsic or intrinsic data relevant to the transaction.
Information access and compilation. Expressorder(TM) provides powerful
analytical and reporting tools that enable businesses to evaluate data collected
throughout the process of acquiring, receiving and paying for goods and
services. By employing these analytical tools, an organization can analyze
purchasing patterns to streamline the procurement process, negotiate more
favorable terms with preferred suppliers and gain insight into additional
savings opportunities.
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<PAGE> 19
Multi-platform compatibility. Expressorder(TM) functions on common
Internet browser software. As a result, is completely compatible with virtually
all computer operating systems, including Microsoft Windows and Windows NT,
Apple Macintosh and standard Linux/Unix systems.
CUSTOMER SERVICE, TRAINING AND SUPPORT
We believe that customer satisfaction will be essential to our
long-term success and we intend to offer comprehensive customer assistance
programs. Our technical support will provide dependable and timely resolution of
customer technical inquiries and will be available to customers by telephone,
over the Internet or by electronic mail. We will offer complete education and
training to our customers and partners to develop the knowledge and skills to
successfully use our services.
RESEARCH AND DEVELOPMENT
Substantially all of the research and development regarding
Expressorder(TM) has been outsourced to various consultants. We estimate that
Plus Solutions incurred development expenses related to Expressorder(TM) of
approximately $97,000 during 1998 and 1999, in addition to the devotion of
substantial management resources. We believe the development of Expressorder(TM)
is substantially complete and any further resources devoted to research and
development will be used to make ongoing improvements to Expressorder(TM) in
response to market demands We intend to continue to outsource such development
to consultants.
We cannot be sure that continuing development of Expressorder(TM) will
be completed or that, if completed, they will have the features or quality
necessary to make them successful in the marketplace. Further, despite input by
potential customers and our internal quality control, errors could be found in
Expressorder(TM) that we have not anticipated. We may not be able to
successfully correct these errors in a timely and cost effective manner. If we
are not able to further develop or enhance our services in a timely and
cost-effective basis, or if these new developments or enhancements do not have
the features or quality necessary to make them successful in the marketplace,
our business will be seriously harmed.
COMPETITION
The market for e-commerce solutions is intensely competitive, evolving
and subject to rapid technological change. The intensity of competition has
increased and is expected to further increase in the future. This increased
competition is likely to result in price reductions and reduced gross margins,
any one of which could seriously harm our business. Competitors vary in size and
in the scope and breadth of the products and services offered. We believe the
primary competitors in the e-commerce solutions market are Ariba, Captura
Software, Clarus, Commerce One, Concur Technologies, Extensity, GE Information
Services, Intelysis, and Netscape Communications. We also expect to encounter
competition from major enterprise software developers, such as Oracle,
PeopleSoft and SAP. In addition, because there are relatively low barriers to
entry in the e-commerce solutions market, we expect additional competition from
other established and emerging companies.
We believe that the principal competitive factors affecting our market
include:
o existing customer base
o capabilities, quality and performance of products and services
o ability to configure and improve products and services based
on market demands and customer requirements
o individual requirements of buyers and suppliers in particular
industries
o customer service and satisfaction
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<PAGE> 20
o capabilities of core technology
Although we believe that our services will compete favorably with
respect to these factors, the market for e-commerce solutions is relatively new
and is evolving rapidly. Even if we are currently competitive, we may not be
able to maintain our competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
service, support, technical and other resources.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources than us,
significantly greater name recognition and a larger existing base of customers.
In addition, many of our competitors have well-established relationships with
potential customers and have extensive knowledge of certain industries. Current
and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address customer needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. We also expect that competition will increase as a
result of consolidation of the e-commerce solutions industry.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
We will depend on our ability to develop and maintain the proprietary
aspects of our technology. To protect our proprietary technology, we will rely
primarily on a combination of contractual provisions, confidentiality
procedures, trade secrets, and patent, copyright and trademark laws.
We intend to license rather than sell the software technology in
Expressorder(TM) and we will require our customers to enter into license
agreements, which impose restrictions on their ability to utilize the software.
In addition, we will avoid disclosure of our trade secrets through a number of
means, including but not limited to, requiring those persons with access to our
proprietary information to execute confidentiality agreements with us and
restricting access to our software source code. We will attempt to protect our
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. We cannot be sure that any
of our proprietary rights will be successfully protected since the validity,
enforceability and protection of proprietary rights in Internet-related
industries are still evolving.
We rely on technology that we license from third parties to perform key
functions with respect to Expressorder(TM). If we are unable to continue to
license any of this software on commercially reasonable terms, our business may
be harmed unless equivalent technology can be readily licensed or developed, and
integrated into our services.
We intend to file applications to trademark the terms "Expressorder",
"ExpressBuyer" and "ExpressSeller" in the United States and certain other
countries. These trademark applications are subject to review by applicable
government authorities, may be opposed by private parties, and may not be
approved by such authorities.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult, and while we are unable to determine the extent to which
piracy of our software products exists, software piracy can be expected to be a
persistent problem. In addition, the laws of some foreign countries do not
protect our proprietary rights to as great an extent as do the laws of the
United States. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our products or design around patents issued to us or our other
intellectual property.
There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
products infringe their intellectual property. We expect that software product
developers
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<PAGE> 21
and providers of e-commerce solutions will increasingly be subject to
infringement claims as the number of products and competitors in our industry
segment grows and the functionality of products in different industry segments
overlaps. Any such claims, whether or not they have merit, could result in
costly litigation, cause development delays or require us to enter into royalty
or licensing agreements. Such royalty or licensing agreements, if required, may
not be available on commercially reasonable terms, which could seriously harm
our business.
EMPLOYEES
As of October 31, 2000, we had a total of 4 employees, all of whom were
management personnel. All of these employees are located in the our principal
executive offices in Addison, Texas. None of our employees is represented by a
collective bargaining agreement and we have never experienced any work stoppage.
We consider our relations with our employees to be good.
Our future operating results depend in significant part on the
continued service of our senior management personnel. Our future success will
also depend on our ability to attract and retain highly qualified technical,
marketing and management personnel. Competition for these personnel is intense,
and we may not be able to retain our key personnel or attract these personnel in
the future.
BUSINESS LOCATIONS
The Company's only business location is its principal executive offices
located at 14677 Midway Road, Suite 206, Addison, Texas 75001. The phone number
at this location is (972) 687-0090. We lease approximately 1,300 square feet of
office space at this location.
FINANCING ARRANGEMENTS
On September 27, 2000, we entered into a Subscription Agreement with
four investors, The Keshet Fund L.P., Keshet L.P., Nesher Ltd., and Talbiya B.
Investments Ltd., which provided for an $8.5 million long-term financing
commitment. The financing was arranged by KCM Ltd., a New York, New York
investment firm. Upon the execution of the Subscription Agreement, we initially
sold to the investors a total of $500,000 of our 8% Convertible Notes for a
purchase price equal to the principal amount of each note. Each investor
purchased an 8% Convertible Note in the amount set forth below:
<TABLE>
<S> <C>
The Keshet Fund L.P. .............. $110,000
Keshet L.P. ....................... 215,000
Nesher Ltd. ....................... 85,000
Talbiya B. Investments Ltd. ....... 90,000
--------
TOTAL ............................. $500,000
</TABLE>
The full principal amounts of the Convertible Notes must be paid on
September 27, 2003. The Convertible Notes incur interest at the rate of 8% per
year, which interest is paid quarterly. The Convertible Notes are a general
obligation of Plus Solutions and payment of principal and interest under the
notes is not secured by any specific assets.
The offering of the convertible notes to the investors was a private
offering made in reliance on Rule 506 of Regulation D under the United States
Securities Act. Each of the investors represented to us in the Subscription
Agreement that it qualifies as an accredited investor under Regulation D.
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<PAGE> 22
PURCHASE OF ADDITIONAL NOTES
We have the right to require the investors to purchase additional
Convertible Notes. In order to exercise this right, we must meet several
conditions, among which are:
o we have an effective registration statement under the United
States Securities Act that covers at least 200% of the shares
of our common stock issuable upon conversion of the total
amount of outstanding Convertible Notes and 100% of the shares
of our common stock issuable upon exercise of outstanding
warrants issued as finders fees
o we are a reporting company under the United States Securities
Exchange Act
o there has been no material adverse change in our business and
no event of default under the Convertible Notes
o our common stock is listed on a securities trading market and
there is no outstanding trading halt or stop order regarding
the listing, quotation or trading of our common stock
In addition, we may not require any investor to purchase an amount of
Convertible Notes that, together with the other Convertible Notes and shares of
our common stock held by the investor, would result in the investor beneficially
owning more than 9.9% of our outstanding common stock. During any calendar
month, we may not require the investors to purchase an amount of Convertible
Notes greater than the lesser of (1) $1,500,000; or (2) 10% of the weighted
average aggregate market price of the volume of our common stock traded each day
for the 30 trading days immediately preceding the issuance.
If these conditions and limitations are met, each investor may be
required to purchase additional Convertible Notes up to the maximum amounts set
forth below:
<TABLE>
<S> <C>
The Keshet Fund L.P. .............. $1,650,000
Keshet L.P. ....................... 3,225,000
Nesher Ltd. ....................... 1,275,000
Talbiya B. Investments Ltd. ....... 1,350,000
----------
TOTAL ............................. $7,500,000
</TABLE>
In addition to the amounts set forth above, we may require the investors to
purchase (1) $250,000 of Convertible Notes upon the filing of a registration
statement under the United States Securities Act that covers the resale of the
common stock issuable upon conversion of the outstanding Convertible Notes; and
(2) $250,000 of Convertible Notes upon the effectiveness of the registration
statement. The Convertible Notes with respect to the registration statement must
meet all the requirements for issuance of other Convertible Notes except the
limitation during any calendar month to 10% of the daily weighted average
aggregate market price of the traded volume of our common stock.
CONVERSION RIGHTS
The Convertible Notes may be converted into shares of our common stock
at the option of the holder or each note. Each Convertible Note may be partially
or fully converted into common stock. The number of shares into which each note
may be converted is calculated by dividing the principal amount of the note,
plus any accrued but unpaid interest on the note, by a conversion price
calculated on the date the Convertible Note is issued. The conversion price of
the Convertible Notes issued on September 27, 2000 is the lesser of (1) $.10 or
(2) the average of the three lowest bid prices for our common stock during the
90 trading days preceding the conversion date. The conversion price of all
Convertible Notes issued after September 27, 2000 is 84% of the lowest closing
price for our common stock on the principal stock market on which our common
stock is traded during the 10 trading days immediately preceding the date of
conversion. Once the conversion price is established upon issuance of
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<PAGE> 23
the Convertible Note, the conversion price may be adjusted upon the occurrence
of certain events, including any division or combination of shares of our common
stock, any recapitalization or restructuring, or any issuance of our common
stock for a purchase price less that the current conversion price.
If we are unable to deliver stock certificates as a result of the
conversion of a Convertible Note in a timely manner, we may be required to pay a
late fee and other penalties to the holder of the note. If we are prohibited
from issuing such stock certificates, we may be required to redeem the notes at
130% of their principal amount. Unless an investor provides us with 75 days
notice, an investor may not convert any amount of a Convertible Note if, after
the conversion, the investor would beneficially own more than 9.9% of our
outstanding common stock.
REGISTRATION RIGHTS
We are required to file a registration statement under the United
States Securities Act that covers the resale by the investors of at least 200%
of the shares of our common stock issuable upon conversion of the total amount
of outstanding Convertible Notes and 100% of the shares of our common stock
issuable upon exercise of outstanding warrants issued as finders fees. We must
maintain the effectiveness of this registration statement until the latest of
(1) six months after the expiration of the warrants issued as finders fees; (2)
twelve months after the last maturity date of all outstanding Convertible Notes;
or (3) two years after the last date of issuance of a Convertible Note. At any
time after 91 days after the first issuance date of Convertible Notes until the
fourth anniversary of the first issuance date of Convertible Notes, the
investors holding more than 50% of the outstanding Convertible Notes and the
shares of our common stock issued upon conversion of the Convertible Notes have
the right to require us to file an additional registration statement under the
United States Securities Act which covers the resale of the shares designated by
such holders. The investors also have the right to include shares of our common
stock they hold in a registration statement we intend to file for our own
account of for the account of another stockholder.
FINDERS FEES AND WARRANTS
Upon any sale of Convertible Notes under the Subscription Agreement, we
must pay to Alon Enterprises Ltd. finders fees in the form of cash and warrants
to purchase shares of our common stock. The cash finders fees are equal to 10%
of the total cash consideration paid by the investors for the Convertible Notes
issued pursuant to such sale. The warrant finders fees enable Alon Enterprises
to purchase a number of shares of our common stock equal to 12% of the number of
shares of our common stock into which the Convertible Notes issued pursuant to
such sale may be converted at an exercise price equal to 105% of the lowest
closing bid price for our common stock on the principal stock market on which
our common stock is traded during the 10 trading days immediately preceding the
date of the sale of Convertible Notes. The finders warrants expire on the fifth
anniversary of their date of issuance. Although the exercise price is
established upon the issuance of the finders warrant, the exercise price may be
adjusted upon the occurrence of certain events, including any division or
combination of shares of our common stock, any recapitalization or
restructuring, or any issuance of our common stock for a purchase price less
that the current exercise price.
Pursuant to the provisions of the Subscription Agreement, we issued a
finders warrant to Alon Enterprises on September 27, 2000 that is exercisable
for 2,000,000 shares of our common stock at the exercise price of $.1365 per
share.
If we do not require the investors to purchase at least $2,000,000 of
Convertible Notes during each 12 month period preceding the first, second and
third anniversaries of the Subscription Agreement, not including the $500,000 of
Convertible Notes issued on September 27, 2000, but including any Convertible
Notes that we request the investors to purchase but the investors refuse to
purchase because of the 9.9% beneficial ownership limitation, we must issue
additional warrants to Alon Enterprises. The number of shares of our common
stock that may be acquired pursuant to such additional finders warrants are
equal to the difference between the number of shares of our common stock that
might have be acquired pursuant to warrants that would have been issued had we
sold $2,000,000 of Convertible Notes during the preceding 12 month period and
the number of shares of our common stock that can be
22
<PAGE> 24
acquired pursuant to finders warrants that were actually issued during such
period (including the number of shares of our common stock that might have be
acquired pursuant to warrants that would have been issued had we sold any
Convertible Notes that we requested the investors to purchase but the investors
refused to purchase because of the 9.9% beneficial ownership limitation during
such period).
OTHER PROVISIONS
We made certain representations and warranties regarding Plus Solutions
and the offering of the Convertible Notes that are customary in transactions
similar to the sale of the Convertible Notes. The investors also made customary
representations and warranties regarding their qualification as accredited
investors and their investment intentions regarding the Convertible Notes.
We and the investors each agreed to indemnify the other for damages
arising from a breach of the agreement. We also agreed to customary mutual
indemnification with respect to the registration rights conferred to the
investors.
Other than securities issued to our directors and employees or
securities issued pursuant to mergers, acquisitions or strategic partnerships,
we may not offer for sale any securities of Plus Solutions until 180 days after
the effectiveness of the registration statement under the United States
Securities Act that covers the resale by the investors of the shares of our
common stock held by them. Until September 27, 2001, we must offer the investors
a right of first refusal with respect to any financing transaction proposed by a
third party, on the same terms and conditions as those proposed by such party.
MANAGEMENT
The following table sets forth certain information with respect to our
current directors and officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Max Golden 51 Chairman of the Board of Directors, President and
Chief Executive Officer
Mack Lawrence 53 Director
David Ballard 69 Director
Rita Hunter 41 Vice President
Martha Scroggins 52 Secretary and Treasurer
Ernest Kluft 56 Chief Technology Officer
</TABLE>
Max Golden has been our Chairman of the Board of Directors, President
and Chief Executive Officer since March 10, 2000. Prior to joining the Company,
Mr. Golden was Chairman of the Board of Directors and President of the previous
Plus Solutions since October 1998. From 1995 to 1998, he served as President and
Manager of Alliance Associates, LLC.
Mack Lawrence has been a Director since March 10, 2000. He is a
principal and president of Regency Gas Company, a position he has occupied since
1992. From 1985 to 1992, Mr. Lawrence served as a principal and officer in a
number of private companies, including American Central Gas Company. From 1969
to 1985, Mr. Lawrence served in several capacities at Texas Utilities Fuel
Company and Enserch Exploration, Inc.
David Ballard has been a Director since October 5, 2000. Mr. Ballard
has served President of Gateway Holding Company since 1999. He has also served
as a director of Gateway National Bank
23
<PAGE> 25
since 1992. Mr. Ballard served as the Chairman of the Board of Directors of
Gateway National Bank from 1998-1999. Prior to joining Gateway National Bank,
Mr. Ballard was Chairman and Chief Executive Officer of AmGas Inc., a retail
natural gas company that was subsequently acquired by Midwest Resources, a large
utility holding company.
Rita Hunter currently serves as our Vice President, a position she has
held since March 10, 2000. Prior to joining the Company, she served Plus
Solutions in a similar capacity. Before joining Plus Solutions, Ms. Hunter
served as Manager of Client and Field Services for AmGas Inc., Marketing
Coordinator and a Trainer for Artesia Data Systems and as a Senior Tax
Consultant with KPMG Peat Marwick LLP.
Martha Scroggins is our Secretary and Treasurer, a position she was
elected to on March 10, 2000. Prior to joining the Company, she served Plus
Solutions in a similar capacity. Before serving Plus Solutions, Ms. Scroggins
served as a Manager of Contract Administration with AmGas Inc.
Ernest Kluft is our Chief Technology Officer, a position he was elected
to on March 10, 2000. Prior to joining the Company, he served Plus Solutions in
a similar capacity. Before joining Plus Solutions, Mr. Kluft directed the
planning and systems efforts of Enserch Exploration for some twenty years and
subsequently directed the information technology department of its parent,
Enserch Corporation. Recently, he also coordinated all financial, planning, and
information technology efforts for Lone Star Gas in its successful bid for the
Mexico City natural gas distribution franchise.
EXECUTIVE COMPENSATION
None of our current executive officers provided any services to or
received any compensation from us during 1999. We intend to enter into
employment agreements with each of our executive officers in the future. Such
employment agreements have not yet been negotiated, but we anticipate that each
will have terms of 1-3 years and will contain customary severance provisions
that provide a minimum of 30-180 days notice to terminate the contract, except
for any termination for an appropriate cause. We also anticipate that each
employment agreement will contain special severance provisions if the employee
is terminated within one year after a change of control of the Company. The
salaries of our executive officers, which will be reflected in the employment
agreements, are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER SALARY
----------------- --------
<S> <C>
Max Golden ....................... $240,000
Rita Hunter ...................... $ 85,000
Martha Scroggins ................. $ 85,000
Ernest Kluft ..................... $135,000
</TABLE>
Each of our executive officers currently hold options to purchase
shares of common stock of Plus Solutions. These options were issued pursuant to
the Plus Solutions stock plan following the approval of the plan in April 2000.
The number of options issued to each executive officer and the exercise price
and expiration date of the options are set forth below:
<TABLE>
<CAPTION>
EXERCISE EXPIRATION
EXECUTIVE OFFICER OPTIONS PRICE DATE
----------------- --------- -------- ----------
<S> <C> <C> <C>
Max Golden ...................................... 1,200,000 $0.10 10/30/04
Rita Hunter ..................................... 300,000 $0.10 9/30/09
Martha Scroggins ................................ 300,000 $0.10 9/30/09
Ernest Kluft .................................... 33,333 $0.10 9/30/09
</TABLE>
24
<PAGE> 26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From our organization in September 1998 to March 10, 2000, Barry Wosk
and Marvin Wosk comprised our entire board of directors. During such period,
Barry Wosk served as our President and Marvin Wosk served as Secretary. Barry
Wosk is the son of Marvin Wosk. In September 1998, Barry Wosk and Marvin Wosk
each purchased 500,000 shares of our common stock for consideration of $.0025
per share. In January 2000, all of the shares issued to Barry Wosk and Marvin
Wosk were canceled. In September 1999, we entered into a Sales Commission
Agreement with Barry Wosk which was subsequently canceled in February 2000.
Barry Wosk was paid $3,678 in sales commissions under the Sales Commission
Agreement prior to its cancellation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Based on our review of reports filed pursuant to Section 16 of the
Securities Exchange Act, we are aware of the following persons who failed to
properly file a required report:
(1) Barry Wosk, a previous director and officer, failed to file a Form 3
when we became a reporting company under the Securities Exchange Act.
He also failed to file a Form 4 regarding the cancellation of all his
shares of our common stock in January 2000.
(2) Marvin Wosk, a previous director and officer, failed to file a Form 3
when we became a reporting company under the Securities Exchange Act.
He also failed to file a Form 4 regarding the cancellation of all his
shares of our common stock in January 2000
25
<PAGE> 27
PRINCIPAL STOCKHOLDERS
As of the close of business on October 31, 2000, we have issued and
outstanding 39,000,000 shares of our common stock. The following table shows
information concerning the ownership of our common stock on October 31, 2000 by:
(a) each current director, (b) each current officer, (c) each person we know to
own more than 5% of the shares of our common stock; and (d) all of the current
directors and officers and as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF SHARES
COMMON STOCK OF COMMON STOCK
NAME (1) BENEFICIALLY OWNED OUTSTANDING (2)
<S> <C> <C>
Max Golden, Chairman of the Board of Directors,
President and Chief Executive Officer (3) .... 7,776,732 19.4%
Mack Lawrence, Director (4) ........................... 184,317 *
David Ballard, Director (5) ........................... 3,178,459 8.1%
Rita Hunter, Vice President (6) ....................... 1,666,873 4.2%
Martha Scroggins, Secretary (7) ....................... 2,218,313 5.6%
Ernest Kluft, Chief Technology Officer (8) ............ 33,333 *
Keshet, L.P. (9) ...................................... 3,839,286 8.6%
Ragnall House, 18 Peel Road
Douglas, Isle of Man
1M1 4L2
United Kingdom
Mario Pinto ........................................... 2,655,988 6.8%
531 Landsdale, Suite 205
North Vancouver, British Columbia V7L 2G6
Canada
All current directors and officers as a group (10) .... 11,904,568 36.7%
</TABLE>
* Less than one percent.
(1) Unless otherwise set forth, the address of each named person is 14677
Midway Road, Suite 206, Addison, Texas, U.S.A. 75001.
(2) Based upon 39,000,000 shares of our common stock outstanding.
(3) Includes 1,200,000 shares that may be acquired upon the exercise of
options.
(4) Includes 100,000 shares that may be acquired upon the exercise of
options.
(5) Shares recorded in the name of Ballard Property Company #1, Ltd. which
is controlled by Mr. Ballard. Includes 25,000 shares that may be
acquired upon the exercise of warrants.
(6) Includes 300,000 shares that may be acquired upon the exercise of
options.
(7) Includes 300,000 shares that may be acquired upon the exercise of
options.
(8) Includes 33,333 shares that may be acquired upon the exercise of
options.
(9) Represents shares that may be acquired upon the exercise of convertible
notes.
(10) 6 persons.
SERIES A PREFERRED STOCK
In addition to our common stock, there are currently outstanding
100,000 shares of our Series A Preferred Stock, all of which are owned by David
Ballard. Shares of our Series A Preferred Stock are not
26
<PAGE> 28
convertible into our common stock and do not vote, except with respect to
matters regarding which the holders of Series A Preferred Stock are required to
vote by Nevada law.
INFORMATION ABOUT OUR CAPITAL STOCK
COMMON STOCK TRADING HISTORY
Our common stock is traded on the Nasdaq OTC Bulletin Board system
under the symbol "PLSO". The closing high and low price for our common stock at
the end of each quarter since our common stock commenced trading is set forth
below:
<TABLE>
<CAPTION>
DATE HIGH LOW
---- ----- -----
<S> <C> <C>
March 31, 2000 .......................... $6.13 $5.75
June 30, 2000 ........................... $0.64 $0.53
September 30, 2000 ...................... $0.14 $0.09
</TABLE>
On October 31, 2000, the low price for our common stock was $0.08 and
the high price was $0.08. On October 31, 2000, there were approximately 50
record holders of our common stock.
DIVIDENDS
Our present policy is to retain earnings, if any, to finance future
growth. We have never paid cash dividends with respect to our common stock and
have no present intention to pay cash dividends with respect to our common
stock. Our Series A Preferred Stock receives semi-annual dividends of $.07125
per share that cumulate if unpaid.
DESCRIPTION OF OUR CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue
90,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of
preferred stock, $0.001 par value. The following description of our capital
stock does not purport to be complete and is subject to and qualified in its
entirety by our certificate of incorporation and bylaws, which are included as
exhibits to the registration statement of which this prospectus forms a part,
and by the provisions of applicable Nevada law.
COMMON STOCK
As of October 31, 2000, there were 39,000,000 shares of our common
stock outstanding which were held of record by approximately 70 stockholders.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. After any dividends owed to any
preferred stockholders are paid, the holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
our board of directors. In the event of our liquidation, dissolution or winding
up, after any amounts owed to any preferred stockholders are paid, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities. The holders of common stock have no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock.
27
<PAGE> 29
PREFERRED STOCK
Our board of directors has the authority, without the approval of the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may be
greater than the rights of the common stock. We cannot predict the effect of the
issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the
holders of such preferred stock. However, the effects could include one or more
of the following:
o restricting dividends on the common stock;
o diluting the voting power of the common stock;
o impairing the liquidation rights of the common stock; or
o delaying or preventing a change in control of us without
further action by the stockholders.
SERIES A PREFERRED STOCK
There are currently outstanding 100,000 shares of our Series A
Preferred Stock, all of which are owned by David Ballard. Shares of our Series A
Preferred Stock are not convertible into our common stock and do not vote,
except with respect to matters regarding which the holders of Series A Preferred
Stock are required to vote by Nevada law. Our Series A Preferred Stock receives
semi-annual dividends of $.07125 per share that cumulate if unpaid. We may
redeem shares of Series A Preferred at any time for the redemption price of $.75
per share.
NEVADA ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of Nevada law and our certificate of incorporation
and bylaws could make the following more difficult:
o the acquisition of us by means of a tender offer;
o acquisition of us by means of a proxy contest or otherwise; or
o the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
us to first negotiate with our board. We believe that the benefits of increased
protection of our potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging such proposals because negotiation of such
proposals could result in an improvement of their terms.
NEVADA ANTITAKEOVER LAW. Section 78 of the Nevada General Corporation
Law, an anti-takeover law, applies to us. In general, Section 78 prohibits a
Nevada corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became an
interested stockholder, unless the "business combination" or the transaction in
which the person became an interested stockholder is approved in a prescribed
manner. Generally, a "business combination" includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with its affiliates and associates, owns or within three years prior to the
determination of interested stockholder status, did own, 10% or more of a
corporation's voting stock. The existence of this provision may have an
anti-takeover effect on transactions not approved in advance by the board of
directors, including
28
<PAGE> 30
discouraging attempts that might result in a premium over the market price for
the shares of common stock held by stockholders.
ELIMINATION OF CUMULATIVE VOTING. Our certificate of incorporation and
bylaws do not provide for cumulative voting in the election of directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Signature
Stock Transfer, Inc. of Addison, Texas.
SELLING SECURITY HOLDERS
The following table sets forth the name of each selling shareholder,
the total number of shares of our common stock beneficially owned by each
selling shareholder as of October 31, 2000, and the total number of shares that
each selling shareholder may offer and sell pursuant to this prospectus. The
selling shareholders and their transferors and other successors in interest may
offer all, none or a portion of the shares of common stock described in this
prospectus. The exact number of shares of common stock that each selling
shareholder may retain upon completion of this offering cannot be determined at
this time. None of the selling shareholders has had any position, office or
other material relationship with the company within the past three years.
<TABLE>
<CAPTION>
TOTAL SHARES SHARES OFFERED
BENEFICIALLY BY THIS
NAME OWNED PROSPECTUS
---- ------------ --------------
<S> <C> <C>
The Keshet Fund L.P. ....................... 1,964,286 8,500,000
Keshet L.P. ................................ 3,839,286 8,500,000
Nesher Ltd. ................................ 1,517,857 8,500,000
Talbiya B. Investments Ltd. ................ 1,607,143 8,500,000
Alon Enterprises, Ltd. ..................... 2,000,000 6,000,000
Total ...................................... 10,928,572 40,000,000
</TABLE>
29
<PAGE> 31
PLAN OF DISTRIBUTION
The selling shareholders may sell shares of our common stock from
time-to-time in transactions, including block transactions, on the exchanges or
quotation systems on which our common stock may be then listed or quoted, or in
transactions not crossing any exchange or public market. Shares may be sold in
privately-negotiated transactions, in underwritten offerings, or by a
combination of such methods of sale. Sales of shares of common stock may be made
at fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. As used in this prospectus, "selling shareholders" includes pledgees,
donees, transferees and other successors in interest to the selling shareholders
selling shares received from a selling stockholder after the date of this
prospectus. The selling shareholders may sell shares of our common stock to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the selling shareholders or
the purchasers of the shares for whom such broker-dealers may act as agent or to
whom they sell as principal, or both. The compensation received by any
broker-dealer may be in excess of customary commissions.
Other methods by which the shares of our common stock may be sold
include, without limitation:
o at the market to or through market makers or into an existing
market for our common stock
o in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales
effected through agents
o through transactions in options or swaps or other derivatives,
whether exchange-listed or otherwise
o through short sales
o any combination of any such methods of sale
The selling shareholders may also enter into option or other
transactions with broker-dealers which require the delivery to those broker
dealers of the common stock offered by this prospectus, which common stock such
broker-dealers may resell under this prospectus. The selling shareholders may
also sell common stock offered by this prospectus in compliance with the
requirements of Rule 144 of the Securities Act.
The selling shareholders and any broker-dealers who act in connection
with the sale of shares of our common stock under this prospectus may be deemed
to be "underwriters" as that term is defined in the Securities Act, and any
commissions received by them and profit on any resale of the shares of our
common stock as principal might be deemed to be underwriting discounts and
commissions under the Securities Act.
Under certain registration rights agreements with certain of the
selling shareholders, we have agreed to indemnify certain of the selling
shareholders and each underwriter, if any, against certain liabilities,
including certain liabilities under the Securities Act as amended, or will
contribute to payments such selling shareholders or underwriters may be required
to make in respect of certain losses, claims, damages or liabilities.
30
<PAGE> 32
After we are notified by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of common
stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
o the name of each such selling stockholder and of the
participating broker-dealer(s);
o the number of shares of our common stock involved;
o the price at which such the common stock was sold;
o the commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigations
to verify the information set out or incorporated by reference
in this prospectus; and
o other facts material to the transaction.
LEGAL MATTERS
The legality of the securities will be passed upon for us by Patton
Boggs LLP, Dallas, Texas. If the securities are being distributed in an
underwritten offering, certain legal matters will be passed for the underwriters
by counsel identified in the related prospectus supplement.
EXPERTS
The financial statements of Plus Solutions, Inc. as of December 31,
1999 and for the year then ended and for the periods from October 5, 1998 (date
of inception) to December 31, 1998 and 1999, included in this prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein (which report expresses an unqualified opinion and
includes explanatory paragraphs referring to the Company's development stage and
its ability to continue as a going concern) and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The audited financial statements of Sound Designs, Inc included in this
prospectus have been audited by Parker & Co., chartered accountants, as
indicated in their report. The report of Parker & Co. is included in this
prospectus based upon their authority as experts in financial accounting.
31
<PAGE> 33
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Financial Statements of Plus Solutions, Inc. for the Six Months ended
June 30, 2000 ................................................................................. F-2
Audited Financial Statements of Plus Solutions, Inc. for the period from inception to
December 31, 1999 ............................................................................. F-7
Audited Financial Statements of Sound Designs, Inc. for the period from inception to
December 31, 1998 ............................................................................. F-18
Unaudited Pro Forma Financial Statements of Plus Solutions, Inc. ................................ F-23
</TABLE>
F-1
<PAGE> 34
UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
PLUS SOLUTONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 36,426 $ 121,629
Prepaid expenses 100 1,208
Total current assets 36,526 122,837
PROPERTY AND EQUIPMENT - Net 84,465 51,297
PRODUCT DEVELOPMENT COSTS 148,891 97,440
TOTAL $ 269,882 $ 271,574
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 177,938 $ 166,442
Notes payable 93,317 68,317
Total current liabilities 271,255 234,759
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible voting preferred stock, 8,000,000
shares authorized; no shares issued and outstanding 0 0
Common stock, $.001 par value; 100,000,000 shares authorized;
38,940,000 and 23,340,000 shares issued and outstanding 38,940 23,340
Additional paid-in capital 8,488,194 8,081,377
Deficit accumulated during the development stage (8,528,507) (8,067,902)
Total stockholders' equity (deficit) (1,373) 36,815
TOTAL $ 269,882 $ 271,574
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.
F-2
<PAGE> 35
PLUS SOLUTONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended Cumulative
June 30, June 30, June 30, June 30, From
2000 1999 2000 1999 Inception
<S> <C> <C> <C> <C> <C>
REVENUES $ -- $ -- $ -- $ -- $ --
OPERATING EXPENSES:
Salaries and benefits 185,007 73,061 332,876 168,246 1,557,288
General and administrative 75,236 11,998 113,138 17,740 6,923,332
Depreciation expense 8,279 4,844 14,591 9,688 40,013
Total operating expenses 268,522 89,903 460,605 195,674 8,520,633
OPERATING LOSS (268,522) (89,903) (460,605) (195,674) (8,520,633)
OTHER EXPENSE - Net 0 0 0 0 (7,874)
NET LOSS $ (268,522) $ (89,903) $ (460,605) $ (195,674) $ (8,528,507)
Earnings per share:
Basic $ (0.01) $ (0.00) $ (0.01) $ (0.01)
Diluted $ (0.01) $ (0.00) $ (0.01) $ (0.01)
Weighted average common and common
equivalent shares outstanding:
Basic 38,940,000 18,321,013 38,940,000 18,299,347
Diluted 38,940,000 18,321,013 38,940,000 18,299,347
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.
F-3
<PAGE> 36
PLUS SOLUTONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended Cumulative
June 30, June 30, From
2000 1999 Inception
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (460,605) $ (195,674) $(8,528,507)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on disposal of property and equipment 5,501
Depreciation of property and equipment 14,591 9,688 40,013
Issuance of common and preferred stock for services 6,659,486
Stock compensation expense 40,000 800,000
Net changes in operating assets and liabilities:
Prepaid expenses 1,108 (100)
Accounts payable and accrued expenses (11,496) 58,464 177,938
Net cash used in operating activities (393,410) (127,522) (845,669)
INVESTING ACTIVITIES:
Additions to property and equipment (47,759) (53,562)
Capitalized product development costs (51,451) (1,000) (148,891)
Cash acquired in reverse merger 107,431 107,431
Net cash provided by (used in) investing activities 8,221 (1,000) (95,022)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 84,000 290,250
Proceeds from issuance of debt 25,000 25,000
Payments on notes payable (8,100)
Collection of due from stockholder 20,000 20,000
Capital contributions 274,986 649,967
Net cash provided by financing activities 299,986 104,000 977,117
NET INCREASE (DECREASE) IN CASH (85,203) (24,522) 36,426
CASH, BEGINNING OF PERIOD 121,629 46,198
CASH, END OF PERIOD $ 36,426 $ 21,676 $ 36,426
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.
F-4
<PAGE> 37
PLUS SOLUTONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. GOING CONCERN
The condensed financial statements have been prepared assuming that
Plus Solutions, Inc. (the "Company") will continue as a going concern. The
Company has experienced cumulative operating losses, has an accumulated deficit,
and its operations are subject to certain risks and uncertainties, including,
among others, risks associated with technology and regulatory trends, growth
competition by entities with greater financial and other resources, and the need
for additional capital. There can be no assurances that the Company will be
successful in becoming profitable or generating positive cash flow in the
future. The Company is considered to be a development stage company. The Company
is currently exploring various short-term and long-term financing alternatives,
but does not know if these alternatives will be successful. The success of these
financing alternatives will have a significant impact on the Company's ability
to continue as a going concern. The condensed financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
2. FINANCIAL STATEMENT POLICIES
BASIS OF PRESENTATION. The condensed financial statements include the
accounts of the Company. The condensed financial statements reflect all
adjustments that are, in the opinion of management, necessary to present a fair
statement of the Company's financial position as of June 30, 2000, and the
results of operations for the three and six month periods ended June 30, 2000
and June 30, 1999. All adjustments are of a normal, recurring nature.
These unaudited interim financial statements should be read in
conjunction with the audited financial statements and the notes thereto prepared
by the Company. Operating results for the six month period ended June 30, 2000,
are not necessarily indicative of the results to be achieved for the full year.
As discussed in Note 3, on March 10, 2000, the Company merged with
Sound Designs, Inc. ("Sound Designs"), and the stockholders of the Company
received approximately 1.69 shares of Sound Designs common stock for each share
of the Company's common stock they owned. At the time of the merger, the Company
had 13,876,193 common shares issued and outstanding, and in the merger,
23,340,000 shares of Sound Designs common stock were received. Retroactive
effect has been given to the merger in stockholders' equity accounts beginning
as of the year ended December 31, 1999, and in all share and per share data in
the accompanying condensed financial statements.
BUSINESS. The Company, organized in October 1998, is to be a provider
of Internet-based, business-to-business, e-commerce solutions and services that
enable buyers and suppliers to automate business transactions on the Internet.
The Company is headquartered in Addison, Texas.
3. ACQUISITION
On March 10, 2000, the Company closed the Agreement and Plan of Merger
entered into with Sound Designs, a Nevada corporation. As consideration for the
merger, the stockholders of the Company, the accounting acquirer, received
approximately 1.69 shares of Sound Designs, the legal acquirer, common stock for
each share of the Company's common stock they owned. In addition, the Company
received cash of $107,431 from Sound Designs. As a result, the former
stockholders of the Company currently own 60% of the outstanding shares of
common stock of Sound Designs. In addition, the merger agreement required all
existing directors and officers of Sound Designs to resign and name the
directors of the Company as the directors of the surviving company which has
taken the name of Plus Solutions, Inc.
F-5
<PAGE> 38
4. STOCKHOLDERS' EQUITY
During the First Quarter of 2000, the Company received additional
capital contributions of $274,986.
5. SUBSEQUENT EVENTS
On September 27, 2000, the Company entered into a Subscription
Agreement with four investors, The Keshet Fund, L.P., Keshet, L.P., Nesher Ltd.
and Talbiya B. Investments Ltd., which provided for an $8.5 million long-term
financing commitment. Upon the execution of the Subscription Agreement, the
Company initially sold to the investors a total of $500,000 of 8% convertible
notes for a purchase price equal to the principal amount of each note. The full
principal amount of the notes must be paid on September 27, 2003. The notes
incur interest at the rate of 8% per year, which interest is paid quarterly. The
notes are a general obligation of the Company and payment of principal and
interest under the notes is not secured by any specific assets.
F-6
<PAGE> 39
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Plus Solutions, Inc.:
We have audited the accompanying balance sheet of Plus Solutions, Inc. (a
development stage company) (the "Company") as of December 31, 1999, and the
related statements of operations, stockholders' equity and cash flows for the
year then ended, and for the periods from October 5, 1998 (date of inception) to
December 31, 1998 and 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1999, and the
results of its operations and its cash flows for the year then ended, and for
the periods from October 5, 1998 (date of inception) to December 31, 1998 and
1999, in conformity with accounting principles generally accepted in the United
States of America.
The Company is in the development stage at December 31, 1999. As discussed in
Note 1 to the financial statements, successful completion of the Company's
development program and, ultimately, the attainment of profitable operations are
dependent upon future events, including obtaining adequate financing to fulfill
its development activities and achieving a level of sales adequate to support
the Company's cost structure.
We have not audited any financial statements of the Company for any period
subsequent to December 31, 1999. The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company is currently
exploring various short-term and long-term financing alternatives, but does not
know if these alternatives will be successful. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 17, 2000
(November 10, 2000 as to the
third paragraph of Note 1)
F-7
<PAGE> 40
PLUS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 121,629
Prepaid expenses 1,208
-----------
Total current assets 122,837
PROPERTY AND EQUIPMENT - Net (Note 2) 51,297
PRODUCT DEVELOPMENT COSTS (Note 1) 97,440
-----------
TOTAL $ 271,574
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 166,442
Notes payable (Note 3) 68,317
-----------
Total current liabilities 234,759
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (Note 4):
Convertible voting preferred stock, 8,000,000 shares authorized;
no shares issued and outstanding
Common stock, no par value; 25,000,000 shares authorized;
13,876,193 shares issued and outstanding 6,969,736
Additional paid-in capital 1,134,981
Deficit accumulated during the development stage since October 5, 1998 (8,067,902)
-----------
Total stockholders' equity 36,815
-----------
TOTAL $ 271,574
===========
</TABLE>
See notes to financial statements.
F-8
<PAGE> 41
PLUS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999, AND
PERIODS FROM OCTOBER 5, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
From
1999 1998 Inception
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
OPERATING EXPENSES:
Salaries and benefits 1,145,559 78,853 1,224,412
General and administrative 897,992 5,912,202 6,810,194
Depreciation expense 21,177 4,245 25,422
----------- ----------- -----------
Total operating expenses 2,064,728 5,995,300 8,060,028
----------- ----------- -----------
OPERATING LOSS (2,064,728) (5,995,300) (8,060,028)
OTHER EXPENSE - Net (2,373) (5,501) (7,874)
----------- ----------- -----------
NET LOSS $(2,067,101) $(6,000,801) $(8,067,902)
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-9
<PAGE> 42
PLUS SOLUTIONS, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1999, AND
PERIODS FROM OCTOBER 5, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Convertible Common Stock Additional
Preferred ------------------------- Paid-In Due From
Stock Shares Amount Capital Stockholder
<S> <C> <C> <C> <C> <C>
BALANCE AS OF OCTOBER 5, 1998 $ -- -- $ -- $ -- $ --
Issuance of preferred stock for services,
307,000 shares 767,500
Issuance of common stock for services 10,260,055 5,130,028
Issuance of common stock for cash 200,000 100,000
Conversion of preferred stock, 62,989
shares (157,472) 314,945 157,472
Issuance of common stock for due from
stockholder 40,000 20,000 (20,000)
Net loss
-------- ---------- ---------- -------- --------
BALANCE AS OF DECEMBER 31, 1998 610,028 10,815,000 5,407,500 -- (20,000)
Issuance of common stock for services 1,523,917 761,958
Issuance of common stock for cash 317,221 190,250
Capital contributions 374,981
Conversion of preferred stock, 244,011
shares (610,028) 1,220,055 610,028
Stock options granted to employees 760,000
</TABLE>
See notes to financial statements.
F-10
<PAGE> 43
PLUS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999, AND
PERIODS FROM OCTOBER 5, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
From
1999 1998 Inception
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(2,067,101) $(6,000,801) $(8,067,902)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on disposal of property and equipment 5,501 5,501
Depreciation of property and equipment 21,177 4,245 25,422
Issuance of common and preferred stock for services 761,958 5,897,528 6,659,486
Compensation from stock options granted to employees 760,000 760,000
Net changes in operating assets and liabilities:
Prepaid expenses (1,208) (1,208)
Accounts payable and accrued expenses 123,322 43,120 166,442
----------- ----------- -----------
Net cash used in operating activities (401,852) (50,407) (452,259)
----------- ----------- -----------
INVESTING ACTIVITIES:
Additions to property and equipment (5,408) (395) (5,803)
Capitalized product development costs (97,440) (97,440)
----------- ----------- -----------
Net cash used in investing activities (102,848) (395) (103,243)
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 190,250 100,000 290,250
Collection of due from stockholder 20,000 20,000
Capital contributions 374,981 374,981
Payments on notes payable (5,100) (3,000) (8,100)
----------- ----------- -----------
Net cash provided by financing activities 580,131 97,000 677,131
----------- ----------- -----------
NET INCREASE IN CASH 75,431 46,198 121,629
CASH, BEGINNING OF PERIOD 46,198
----------- ----------- -----------
CASH, END OF PERIOD $ 121,629 $ 46,198 $ 121,629
=========== =========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid $ -- $ -- $ --
=========== =========== ===========
Income taxes paid $ -- $ -- $ --
=========== =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Notes payable issued for purchase of property and
equipment (Note 3) $ -- $ 76,417 $ 76,417
=========== =========== ===========
Common stock issued for due from stockholder $ -- $ 20,000 $ 20,000
=========== =========== ===========
</TABLE>
F-11
<PAGE> 44
PLUS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999, AND
PERIODS FROM OCTOBER 5, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998 AND 1999
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS - Plus Solutions, Inc. (a development stage
company) (the "Company") was organized in October 1998 and is to be a
provider of Internet-based, business-to-business, e-commerce solutions and
services that enable buyers and suppliers to automate business transactions
on the Internet. The Company is headquartered in Addison, Texas.
The Company has experienced cumulative operating losses, and its operations
are subject to certain risks and uncertainties, including, among others,
risks associated with technology and regulatory trends, growth competition
by entities with greater financial and other resources, and the need for
additional capital. There can be no assurances that the Company will be
successful in becoming profitable or generating positive cash flow in the
future. The Company is considered to be a development stage company.
The Company is currently exploring various short-term and long-term
financing alternatives, but does not know if these alternatives will be
successful. The success of these financing alternatives will have a
significant impact on the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
PREPARATION OF FINANCIAL STATEMENTS in conformity with auditing standards
generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities, and disclosure of contingencies at the date of the
financial statements and the reported amounts of revenues and expenses for
the period. Differences from those estimates are recognized in the period
they become known.
PROPERTY AND EQUIPMENT are stated at cost less accumulated depreciation.
Depreciation is provided on a straight-line basis over the estimated useful
lives of the related assets. The following is a summary of useful lives for
major categories of property and equipment:
<TABLE>
<CAPTION>
ASSET USEFUL LIFE
<S> <C>
Furniture and fixtures 7 years
Computers and office equipment 3 years
</TABLE>
RESEARCH AND PRODUCT DEVELOPMENT COSTS are expensed as incurred until
technological feasibility is established. Thereafter, product development
and significant enhancement costs are capitalized and, upon product
release, amortized to expense using the straight-line method over three
years. Total costs related to research and product development were $97,440
and were capitalized in 1999. No amortization has been recorded to date.
STOCK-BASED COMPENSATION arising from stock option grants is accounted for
by the intrinsic value method under Accounting Principles Board ("APB")
Opinion No. 25. Statement of Financial Accounting Standards ("SFAS") No.
123 encourages (but does not require) compensation arrangements with
employees to be measured based on the fair value of the equity instrument
awarded. As permitted by SFAS No. 123, the Company applies APB No. 25 to
its stock-based compensation awards to employees and discloses the required
pro forma effects on operations in Note 4.
DEFERRED INCOME TAXES are provided under the asset and liability method for
temporary differences in the recognition of income and expense for tax and
financial reporting purposes.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTs - In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments. SFAS No. 133 is effective
F-12
<PAGE> 45
beginning in 2001. The Company currently does not use derivative financial
products for hedging or speculative purposes and, as a result, does not
anticipate any impact on the Company's financial statements.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1999, consist of the following:
<TABLE>
<S> <C>
Furniture and fixtures $ 23,077
Computers and office equipment 53,642
--------
Total 76,719
Less accumulated depreciation (25,422)
--------
Property and equipment - net $ 51,297
========
</TABLE>
3. NOTES PAYABLE
The Company purchased property and equipment in 1998 from a related company
for a note payable of $76,417. The note bears interest, on unpaid scheduled
payment amounts, monthly at 7% and is due on August 15, 2000.
4. STOCKHOLDERS' EQUITY
COMMON STOCK - The Company has authorized the issuance of up to 25,000,000
shares of its no par value common stock. The holders of common stock are
entitled to one vote per share and are entitled to dividends when and if
declared by the Board of Directors of the Company.
SERIES A CONVERTIBLE VOTING PREFERRED STOCK - The Company has authorized
the issuance of up to 8,000,000 shares of its convertible voting preferred
stock. Each share of preferred stock shall have such rights, preferences,
privileges and restrictions, including voting rights, dividend rights,
conversion rights and liquidation preferences, as shall be determined by
the Board of Directors. In October 1998, the Company issued 307,000 shares
of preferred stock to directors and officers of the Company for services
performed. Each share of preferred stock is convertible into five shares of
common stock, and each share of preferred stock was valued at $2.50 per
share based on the $0.50 per-share price of common shares issued for cash.
In 1999 and 1998, all shares of preferred stock were converted into
1,535,000 shares of common stock. As of December 31, 1999, no shares of
preferred stock are outstanding.
F-13
<PAGE> 46
STOCK OPTION PLAN - On October 25, 1999, the Company adopted the 1999 Stock
Incentive Plan (the "Plan"). The Plan provides for the granting of
incentive stock options and nonqualified options for up to 4,000,000 shares
of common stock. Options expire no later than 10 years after the date of
grant. Options granted in 1999 are fully vested and exercisable as of the
date of grant and remain exercisable for a period of five or ten years
after the date of grant. A summary of the activity for this plan follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
NUMBER EXERCISE REMAINING
OF SHARES PRICE PER SHARE CONTRACTUAL LIFE
<S> <C> <C> <C>
BALANCE JANUARY 1, 1999 -- $ --
Options granted in 1999 1,900,000 .10 6.64 years
--------- -----
Options outstanding at
December 31, 1999 1,900,000 $ .10 6.64 years
========= =====
Options exercisable at
December 31, 1999 1,900,000 $ .10 6.64 years
========= =====
Reserved for future options at
December 31, 1999 2,100,000
=========
</TABLE>
The Company applies the provisions of APB No. 25 and related
Interpretations in accounting for the Plan. Compensation of $760,000 was
recorded for the 1,900,000 options granted in 1999, based on the $0.40
per-share excess of the estimated fair value of the stock of $0.50 per
share over the exercise price, and is recorded in 1999 in salaries and
benefits expense as the options are fully vested. SFAS No. 123 prescribes a
method to record compensation cost at the fair value of the options
granted. Had compensation cost been determined with the method prescribed
by SFAS No. 123, the Company's pro forma net loss would have been
approximately $2,099,000 in 1999.
In the pro forma calculations, the weighted average fair value of options
granted during 1999 was estimated at $0.43 per share. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used
for grants in 1999: risk-free interest rate of 5.98%; no expected dividend
yield; expected lives of five years; and no expected volatility (because
the Company's stock is not publicly traded).
5. EMPLOYMENT AGREEMENTS
The Company has employment agreements with four executives of the Company.
Each employment agreement is for a term of three years and expires in 2001.
6. COMMITMENTS
The Company leases certain office space. Total rental expense was $21,318,
4,515 and $25,833 for the year ended December 31, 1999, and for the periods
from October 5, 1998 (date of inception) to December 31, 1998 and 1999,
respectively.
7. INCOME TAXES
At December 31, 1999, the Company had a net operating loss carryforward
totaling approximately $8 million, the tax benefit of which is offset by a
valuation allowance until realization is more likely than not.
8. SUBSEQUENT EVENTS
On March 10, 2000, the Company closed the Agreement and Plan of Merger
entered into with Sound Designs, Inc. ("Sound Designs"), a Nevada
corporation. As consideration for the reverse merger, the
F-14
<PAGE> 47
stockholders of the Company, the accounting acquirer, received
approximately 1.69 shares of Sound Designs, the legal acquirer, common
stock for each share of the Company's common stock that they owned. As a
result, the former stockholders of the Company currently own 60% of the
outstanding shares of common stock of Sound Designs. In addition, the
merger agreement required all existing directors and officers of Sound
Designs to resign and name the directors of the Company as the directors of
the surviving company that will take the name of Plus Solutions, Inc.
******
F-15
<PAGE> 48
[PARKER & CO. CHARTERED ACCOUNTANTS LETTERHEAD]
AUDITORS' REPORT
To the stockholders of Sound Designs, Inc.
We have audited the statements of financial position of Sound Designs, Inc. as
at 31 December 1999 and 1998 and the statements of losses and deficit, of cash
flows and of changes in stockholder's equity for the period from the date of
incorporation, 22 September 1998, to 31 December 1998 and for the year ended 31
December 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada, which are in substantial agreement with those in the United States of
America. Those standards require that we plan and perform an audit to obtain
reasonable assurances whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at 31 December 1999 and 1998
and the result of its operations, cash flows and changes in stockholder's equity
for the period 22 September 1998 to 31 December 1998 and for the year ended 31
December 1999 in accordance with generally accepted accounting principles in the
United States of America.
These financial statements have been prepared assuming that the Company will
continue as a going concern. As stated in Note 2 to the financial statements,
the Company will require an infusion of capital to sustain itself. This
requirement for additional capital raises substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
RICHMOND, BRITISH COLUMBIA, CANADA
16 FEBRUARY 2000
PARKER & CO.
CHARTERED ACCOUNTANTS
--------------------------------------------------------------------------------
Parker Co., Chartered Accountants
F-16
<PAGE> 49
SOUND DESIGNS, INC.
STATEMENT OF FINANCIAL POSITION
AUDITED - SEE AUDITORS' REPORT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS AT 31 DECEMBER 1999 1998
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash $ 25,065 $ 2,500
Accounts receivable 40,428 --
Goods and services taxes recoverable 518 --
Inventory, Note 3 27,462 --
-------- --------
Total current assets 93,473 2,500
-------- --------
TOTAL ASSETS $ 93,473 $ 2,500
======== ========
AS AT 31 DECEMBER 1999 1998
-------- --------
CURRENT LIABILITIES
Accounts payable $ 36,735 $ 500
-------- --------
Total current liabilities 36,735 500
-------- --------
STOCKHOLDERS' EQUITY
Share capital, Note 5 2,200 1,000
Additional paid-in capital 60,300 1,500
-------- --------
Total share capital 62,500 2,500
Deficit (5,762) (500)
-------- --------
Total stockholders' equity 56,738 2,000
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 93,473 $ 2,500
======== ========
</TABLE>
F-17
<PAGE> 50
SOUND DESIGNS, INC.
STATEMENT OF LOSSES AND DEFICIT
AUDITED - SEE AUDITORS' REPORT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM THE
DATE OF
INCORPORATION,
FOR THE YEAR ENDED 22 SEPTEMBER 1998 TO
31 DECEMBER 1999 31 DECEMBER 1998
------------------ --------------------
<S> <C> <C>
REVENUE
Sales $ 67,419 $ 0
Interest earned 605 --
-------- --------
TOTAL REVENUE 68,024 --
-------- --------
EXPENSES
Cost of goods sold 45,828 --
Advertising and promotion 933 --
Commissions 4,223 --
Consulting 706 --
Travel 2,218 --
Accounting 2,352 400
Legal 15,216 --
Bank charges and interest 235 --
Finders fees 70 --
Registration and filing fees 840 100
Transfer agents fees 665 --
-------- --------
TOTAL EXPENSES 73,286 500
-------- --------
LOSSES BEFORE INCOME TAXES (5,262) (500)
INCOME TAXES, NOTE 6 -- --
-------- --------
NET LOSS (5,262) (500)
DEFICIT, BEGINNING (500) --
-------- --------
DEFICIT, ENDING $ (5,762) $ (500)
======== ========
LOSS PER SHARE, NOTE 7 $ (0.00) $ (0.00)
======== ========
</TABLE>
F-18
<PAGE> 51
SOUND DESIGNS, INC.
STATEMENT OF CASH FLOWS
AUDITED - SEE AUDITORS' REPORT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM THE
DATE OF
INCORPORATION,
22 SEPTEMBER
FOR THE YEAR ENDED 1998 TO
31 DECEMBER 1999 31 DECEMBER 1998
------------------ ----------------
<S> <C> <C>
CASH PROVIDED (USED) FROM OPERATIONS
From operation
Net loss $ (5,262) $ (500)
-------- --------
Changes in working capital other than cash
Accounts receivable (40,428) --
Goods and services sales taxes recoverable (518) --
Inventory (27,462) --
Accounts payable 36,235 500
-------- --------
(32,173) 500
-------- --------
Total cash provided (used) from operations (37,435) --
-------- --------
CASH PROVIDED (USED) BY INVESTMENT ACTIVITY -- --
-------- --------
CASH PROVIDED (USED) BY FINANCING ACTIVITY
Shares issued 60,000 2,500
-------- --------
Total cash provided by financing 60,000 2,500
-------- --------
-------- --------
CASH CHANGE 22,565 2,500
CASH BEGINNING 2,500 --
-------- --------
CASH ENDING $ 25,065 $ 2,500
======== ========
COMPRISED OF:
Cash $ 25,065 $ 2,500
======== ========
</TABLE>
F-19
<PAGE> 52
SOUND DESIGNS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCORPORATION, 22 SEPTEMBER 1998, TO 31 DECEMBER 1999
AUDITED - SEE AUDITORS' REPORT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON COMMON ADDITIONAL RETAINED
STOCK STOCK PAID IN EARNINGS
CONSIDERATION ISSUED AMOUNT CAPITAL (DEFICIT)
--------- ------- ---------- ---------
<S> <C> <C> <C> <C>
Private placement for cash on
date of incorporation, 22
September 1998 1,000,000 $ 1,000 $ 1,500
Net loss from date of
Incorporation to 31 December
1998 $ (500)
--------- ------- -------- -------
Balance as at 31 December 1998 1,000,000 1,000 1,500 (500)
Private placement for cash on 24
February 1999 1,200,000 1,200 58,800
Net loss for the year ended 31 December
1999 (5,262)
--------- ------- -------- -------
Balance as at 31 December 1999 2,200,000 $ 2,200 $ 60,300 $(5,762)
========= ======= ======== =======
</TABLE>
F-20
<PAGE> 53
SOUND DESIGNS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999
AUDITED - SEE AUDITORS' REPORT
--------------------------------------------------------------------------------
NOTE 1 THE CORPORATION AND ITS BUSINESS
Sound Designs, Inc. was incorporated in the State of Nevada, United States of
America on 22 September 1998 under the Nevada Revised Statutes, Chapter 78,
Private Corporations.
The Company has offices in Vancouver, British Columbia, Canada. The Company has
been organized to engage in the sale of electronic sound distribution equipment.
The Company is presently establishing itself as a going concern. Operations
started in the month of September 1999. The fiscal year end of the Company is 31
December.
The Company has entered into a buyer seller agreement with a supplier which
gives the Company an exclusive marketing right to all of Canada provided certain
sales target are achieved. This sales agreement can be cancelled by either party
on 30 days written notice. 100% of the Company's sales have been a result of
this agreement.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
These financial statements have been prepared in United States of America
dollars, which have been rounded to the nearest whole dollar except for the net
loss per share which has been rounded to the nearest cent, using United States
of America Generally Accepted Accounting Principals. These accounting principles
are applicable to a going concern, which contemplates the realization and
liquidation of liabilities in the normal course of business. Current business
activity has just begun and insufficient revenue has been generated to sustain
the Company as a going concern without the Infusion of additional capital.
Revenue is recorded as a sale at the time the goods are shipped from the
Company's warehouse. Costs are recorded at the time an obligation to pay occurs
and are expensed at the time the benefit to the Company is matched to revenue
or, if there is no matching revenue, to the period in which the benefit is
realized.
The inventory is valued at the lower of cost and net realizable value.
NOTE 3 INVENTORIES
The finished product purchased for resale inventory consist of electronic
communication devises that improve the distribution of sound and video
information in a residential facility.
NOTE 4 RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real property. Office services are
provided by the President of the Company. Such costs are Immaterial to the
financial statements and accordingly have not been reflected therein. The
officers and directors of the Company are involved in other business activities,
and may, in the future become active in other business activities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their own business interests. The Company has
not formulated a policy for the resolution of such conflicts.
F-21
<PAGE> 54
SOUND DESIGNS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999
AUDITED - SEE AUDITORS' REPORT
--------------------------------------------------------------------------------
NOTE 5 SHARE CAPITAL
The authorized capital stock is 25,000,000 shares of common stock with a per
value of $0.001.
2,200,000 shares of common stock have been issued as follows:
<TABLE>
<CAPTION>
ADDITIONAL
SHARE PAID IN
CONSIDERATION DATE ISSUED CAPITAL CAPITAL TOTAL
------------------ ----------------- --------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Private placement
For cash 22 September 1998 1,000,000 $1,000 $ 1,500 $ 2,500
--------- ------ ------- -------
Balance as at 31 December 1998 1,000,000 1,000 1,500 2,500
Private placement
Cash 24 February 1999 1,200,000 1,200 58,800 60,000
--------- ------ ------- -------
Balance as at 31 December 1999 2,200,000 $2,200 $60,300 $62,500
--------- ------ ------- -------
</TABLE>
On 22 September 1998 the Company issued 1,000,000 common shares with a par value
of $0.001 for $0.0025 per share. These shares are "control securities" which
cannot be sold except pursuant to certain limitations and restrictions.
On 24 February 1999 the Company issued 1,200,000 common shares with a par value
of $0.001 for $0.05 per share.
NOTE 6 INCOME TAXES
Income taxes on losses have not been reflected in these financial statement as
it is not virtually certain that these losses will be recovered before the
expiry period of the loss carry forwards.
NOTE 7 LOSS PER SHARE
Basic loss per share is computed by dividing losses available to common
stockholders by the weighted average number of common shares during the period.
Diluted loss per share is calculated on the weighted average number of common
shares that would have resulted if dilutive common stock equivalents had been
converted to common stock. No stock options or similar rights were available or
granted during the period presented. Accordingly, basic and diluted loss per
share are the same for all periods presented.
F-22
<PAGE> 55
PLUS SOLUTIONS, INC.
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet and statement of
operations of Plus Solutions, Inc. (the "Company") as of and for the year ended
December 31, 1999, (the "Unaudited Pro Forma Consolidated Financial Statements")
give effect to the acquisition of Sound Designs, Inc. (the "Acquisition") under
the purchase method of accounting. On March 10, 2000, the Company closed the
Agreement and Plan of Merger entered into with Sound Designs, Inc. ("Sound
Designs"), a Nevada corporation. As consideration for the merger, the
stockholders of the Company, the accounting acquirer, received approximately
1.69 shares of Sound Designs, the legal acquirer, common stock for each share of
the Company's common stock that they owned. As a result, the former stockholders
of the Company currently own 60% of the outstanding shares of common stock of
Sound Designs. In addition, the merger agreement required all existing directors
and officers of Sound Designs to resign and name the directors of the Company as
the directors of the surviving company that has taken the name of Plus
Solutions, Inc.
The unaudited pro forma balance sheet was prepared assuming that the Acquisition
was consummated as of December 31, 1999.
The unaudited pro forma consolidated statement of operations was prepared
assuming that the Acquisition was consummated at the beginning of 1999.
The Unaudited Pro Forma Consolidated Financial Statements are based upon the
historical financial statements of the Company, which are included elsewhere
herein, for the year ended December 31, 1999 and for the period from October 5,
1998 (date of inception) to December 31, 1998 and 1999, and should be read in
conjunction with those statements and notes thereto. The Unaudited Pro Forma
Financial Statements may not be indicative of the results that actually would
have occurred if the acquisition of Sound Designs had been in effect on the
dates indicated or of future results of operations of the combined entities.
The pro forma adjustments and the resulting Unaudited Pro Forma Consolidated
Financial Statements have been prepared based upon information and certain
assumptions and estimates deemed appropriate by the Company. The Company's
management believes, however, that the pro forma adjustments and the underlying
assumptions and estimates reasonably present the significant effects of the
transaction reflected thereby and that any subsequent changes in the underlying
assumptions and estimates will not materially affect the Unaudited Pro Forma
Consolidated Financial Statements presented herein. The Unaudited Pro Forma
Consolidated Financial Statements do not purport to represent what the Company's
results of operations actually would have been had the transaction occurred on
the date indicated or to project the Company's financial position or results of
operations for any future date or period. Furthermore, the Unaudited Pro Forma
Consolidated Financial Statements do not reflect changes that may occur as the
result of post-transaction activities and other matters.
F-23
<PAGE> 56
PLUS SOLUTIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS ADJUST
PLUS SOUND TO
SOLUTIONS DESIGNS PRO FORMA PRO FORMA
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 121,629 $ 25,065 $ -- $ 146,694
Accounts and other receivables 40,946 (40,946)(a)
Prepaid expenses 1,208 1,208
Inventory 27,462 (27,462)(a)
Total current assets 122,837 93,473 (68,408)(a) 147,902
PROPERTY AND EQUIPMENT - Net 51,297 51,297
PRODUCT DEVELOPMENT COSTS 97,440 97,440
TOTAL $ 271,574 $ 93,473 $ (68,408)(a) $ 296,639
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 166,442 $ 36,735 $ (36,735)(a) $ 203,177
Notes payable 68,317 68,317
Total current liabilities 234,759 36,735 (36,735)(a) 271,494
STOCKHOLDERS' EQUITY:
Convertible voting preferred stock, 8,000,000 shares
authorized; no shares issued and outstanding
Common stock, $.001 par value; 100,000,000 shares
authorized; 38,940,000 shares issued and outstanding, on a pro
forma basis 6,969,736 2,200 (6,932,996)(b) 38,940
Additional paid in capital 1,134,981 60,300 6,895,561 (b) 8,090,842
Deficit accumulated during the development stage (8,067,902) (5,762) 5,762 (b) (8,067,902)
Total stockholders' equity 36,815 56,738 (31,673) 61,880
TOTAL $ 271,574 $ 93,473 $ (68,408) $ 296,639
</TABLE>
F-24
<PAGE> 57
PLUS SOLUTIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
SOUND
PLUS SOLUTIONS DESIGNS ADJUSTMENTS OPERATIONS
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES $ -- $ 68,024 $ (68,024) (c) $ --
OPERATING EXPENSES 2,064,728 73,286 2,138,014
OPERATING LOSS (2,064,728) (5,262) (68,024) (2,138,014)
OTHER EXPENSE (2,373) (2,373)
LOSS FROM CONTINUING OPERATIONS $ (2,067,101) $ (5,262) $ (68,024) $ (2,140,387)
EARNINGS PER SHARE -- BASIC,
CONTINUING OPERATIONS $ (0.06)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING -- BASIC 36,174,041
</TABLE>
F-25
<PAGE> 58
PLUS SOLUTIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
1. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro
forma condensed consolidated financial statements, based on the
acquisition of all of the outstanding capital stock of Sound Designs.
The unaudited pro forma condensed consolidated balance sheet as of
December 31, 1999 gives effect to the acquisition as if it occurred on
December 31, 1999. The unaudited pro forma condensed consolidated
statement of operations for the year ended December 31, 1999, gives
effect to the acquisition as if it had occurred at January 1, 1999.
The following adjustments have been reflected in the unaudited pro
forma condensed consolidated financial statements:
a. Reflects the adjustments to record cash as the only asset
received in the acquisition. There were no other net assets
acquired.
b. Reflects the adjustments to record the pro forma effect of
the issued and outstanding common shares, 38,940,000, at
the time of the acquisition and the reclassification
between common stock, at par of $.001, and additional
paid-in capital.
c. Reflects the adjustments to eliminate the revenues of Sound
Designs, as no revenues are expected to be generated as a
result of the acquisition.
F-26
<PAGE> 59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78 of the Nevada General Corporation Law permits a corporation
to include in its articles of incorporation and bylaws, and in agreements
between the corporation and its directors and officers, provisions expanding the
scope of indemnification beyond that specifically provided by the Nevada General
Corporation Law.
Article XII of the Registrant's Articles of Incorporation, as amended,
provides for the indemnification of directors to the fullest extent permissible
under Nevada law.
Article V of the Registrant's Bylaws, as amended, provides for the
indemnification of officers, directors and third parties acting on behalf of the
Registrant to the fullest extent permissible under Nevada law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Plus Solutions in connection
with the sale of common stock being registered. All amounts are estimates.
<TABLE>
<S> <C>
SEC registration fee $
----------
NASD filing fee $
----------
Nasdaq OTC Bulletin Board listing fee $
----------
Printing and engraving costs $
----------
Legal fees and expenses $
----------
Accounting fees and expenses $
----------
Blue Sky fees and expenses $
----------
Transfer Agent and Registrar fee $
----------
Miscellaneous expenses $
----------
Total $
----------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant has issued unregistered
securities to a limited number of persons as described below:
In September 1998, Sound Designs sold 1,000,000 shares of its common
stock to its founders in a private transaction pursuant to Section 4(2) of the
Securities Act for aggregate consideration of $2,500. All of these shares were
canceled in January 2000.
In March 1999, Sound Designs sold 1,200,000 shares of its common stock
to approximately 34 persons with whom its founders had pre-existing
relationships in a private offering pursuant to Rule 504 under the Securities
Act for aggregate consideration of $60,000.
On March 10, 2000, Sound Designs closed the Agreement and Plan of
Merger with Plus Solutions. Pursuant to the merger agreement, Plus Solutions
became our wholly-owned subsidiary. As consideration for the merger, the
stockholders of Plus Solutions received an aggregate of 23,400,000 shares of our
common stock. The offering of our common stock to the stockholders of Plus
Solutions, each of whom qualifies as an "accredited investor", in accordance
with the merger agreement was made pursuant to Rule 506 under the Securities
Act.
II-1
<PAGE> 60
On August 1, 2000, we sold 100,000 shares of our Series A Preferred
Stock and a warrant exercisable for 25,000 shares of our common stock to David
Ballard for total cash consideration of $75,000. Shares of our Series A
Preferred Stock are not convertible into our common stock and do not vote,
except with respect to matters regarding which the holders of Series A Preferred
Stock are required to vote by Nevada law. The warrant allows the holder to
purchase up to 25,000 shares of our common stock for an exercise price of $.35
per share. The warrant expires on August 1, 2001.
On September 27, 2000, we closed the initial $500,000 of the $8.5
million long-term financing commitment with The Keshet Fund L.P., Keshet L.P.,
Nesher Ltd., and Talbiya B. Investments Ltd.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
3.1* Articles of Incorporation
3.2* Bylaws
4.1* Specimen Common Stock Certificate
5.1* Opinion of Patton Boggs LLP
23.1* Consent of Deloitte & Touche LLP, Independent Auditors.
23.2* Consent of Parker & Co., Certified Accountants.
23.3* Consent of Patton Boggs LLP (see Exhibit 5.1).
24.1* Power of Attorney (see page II-2).
27.1* Financial Data Schedule.
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Registrant will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement
to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act.
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the registration statement.
II-2
<PAGE> 61
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
II-3
<PAGE> 62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Addison,
State of Texas, on the November 9, 2000.
PLUS SOLUTIONS, INC.
/s/ MAX GOLDEN
--------------------
Max Golden
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 7 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ MAX GOLDEN President, Chief Executive Officer and Chairman November 9, 2000
--------------------------- of the Board of Directors (Principal Executive
Max Golden Officer)
/s/ RITA HUNTER Vice President (Principal Financial Officer) November 9, 2000
---------------------------
Rita Hunter
/s/ MACK LAWRENCE Director November 9, 2000
---------------------------
Mack Lawrence
/s/ DAVID BALLARD Director November 9, 2000
---------------------------
David Ballard
</TABLE>
S-1
