SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: March 31, 2000; or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _________ to __________
Commission File Number: 0-27349
ZIASUN TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 84-1376402
- ---------------------------------- --------------------
(State or other Jurisdiction of (IRS Employer
of Incorporation or Organization) Identification No.)
462 Stevens Avenue, Suite 106, Solana Beach, California 92075
- ------------------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
(858) 350-4060
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that a
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
As of March 31, 2000, there were 27,230,018 shares of the registrant's
Common Stock, $0.001 par value, issued and outstanding.
Transitional Small Business Disclosure Format. Yes [ ] No [ X ]
This Form 10-QSB has 29 pages, the Exhibit Index is located at page 25.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements included herein have been prepared by the Company,
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of March 31, 2000 and the results of its operations and changes in
its financial position from inception through March 31, 2000 have been made. The
results of operations for such interim period is not necessarily indicative of
the results to be expected for the entire year.
Index to Financial Statements
-----------------------------
Page
----
Balance Sheets........................................................... 3
Statements of Operations................................................. 5
Statements of Stockholders' Equity....................................... 6
Statements of Cash Flows................................................. 7
Notes to the Financial Statements......................................... 9
All other schedules are not submitted because they are not applicable or
not required or because the information is included in the financial statements
or notes thereto.
2
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- ----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 15,734,397 $ 11,652,505
Trade receivables, net 1,067,270 1,145,960
Interest receivable 16,458 8,333
Inventory 16,923 18,239
Marketable securities 1,228,276 540,234
Prepaid expenses 433,789 131,772
---------------- ----------------
Total Current Assets 18,497,113 13,497,043
---------------- ----------------
EQUIPMENT
Printing equipment 289,443 289,443
Machinery and equipment 435,150 393,091
Office equipment 153,734 153,734
Vehicles 17,163 17,163
Leasehold improvements 138,841 138,841
Less: accumulated depreciation (253,942) (197,053)
---------------- ----------------
Total Equipment 780,389 795,219
---------------- ----------------
OTHER ASSETS
Equity investment 241,856 254,195
Goodwill - net 116,242,750 4,667,623
Receivables - related parties 360,638 88,679
Other assets 774,649 664,088
---------------- ----------------
Total Other Assets 117,619,893 5,674,585
---------------- ----------------
TOTAL ASSETS $ 136,897,395 $ 19,966,847
================ ================
</TABLE>
3
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- ----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 2,321,505 $ 1,382,757
Related party payable 6,000,000 690,000
Taxes payable 3,632,316 2,083,763
Deferred income 62,995 74,100
---------------- ----------------
Total Current Liabilities 12,016,816 4,230,620
---------------- ----------------
Total Liabilities 12,016,816 4,230,620
---------------- ----------------
MINORITY INTEREST 800,136 -
---------------- ----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of $0.001
par value, 32,153,670 and 22,205,018 shares issued
and outstanding, respectively 32,154 22,205
Additional paid-in capital 118,820,370 12,504,547
Treasury stock, 63,200 shares (34,030) (34,030)
Other comprehensive income 55,276 54,230
Deferred compensation (20,000) (30,000)
Stock subscription receivable (25,000) -
Retained earnings 5,251,673 3,219,275
---------------- ----------------
Total Stockholders' Equity 124,080,443 15,736,227
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 136,897,395 $ 19,966,847
================ ================
</TABLE>
4
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
SALES, NET $ 14,498,361 $ 885,871
COST OF GOODS SOLD 7,474,414 393,423
---------------- ----------------
Gross Margin 7,023,947 492,448
---------------- ----------------
OPERATING EXPENSES
Depreciation and amortization expense 195,992 88,784
Bad debt expense 15,000 -
Consulting fees - related party - 30,000
General and administrative 2,701,487 500,490
---------------- ----------------
Total Operating Expenses 2,912,479 619,274
---------------- ----------------
Gain (Loss) from Operations 4,111,468 (126,826)
---------------- ----------------
OTHER INCOME (EXPENSE)
Loss on equity investment (12,339) (12,339)
Unrealized gain on marketable securities 45,480 (17,324)
Rental income - 60,920
Interest and dividend income 99,841 5,270
---------------- ----------------
Total Other Income (Expense) 132,982 36,527
---------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES 4,244,450 (90,299)
INCOME TAXES 2,212,052 437
---------------- ----------------
NET INCOME (LOSS) 2,032,398 (90,736)
---------------- ----------------
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment 1,046 -
---------------- ----------------
NET COMPREHENSIVE INCOME $ 2,033,444 $ (90,736)
================ ================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 22,219,148 20,930,000
================ ================
BASIC INCOME PER SHARE $ 0.09 $ (0.00)
================ ================
FULLY DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 22,269,148 21,030,000
================ ================
FULLY DILUTED INCOME PER SHARE $ 0.09 $ (0.00)
================ ================
</TABLE>
5
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Other
Common Stock Additional Compre- Deferred Stock
---------------- Paid-in Treasury hensive Compen- Subscription Retained
Shares Amount Capital Stock Income sation Receivable Earnings Total
---------- -------- ---------- --------- ---------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1998 20,930,000 $20,930 $8,923,394 $(70,000) $38,794 $(40,000) $ - $(2,744,964) $6,128,154
Purchase of
ASIA4Sale.com, Ltd. 100,000 100 249,900 - - - - - 250,000
Purchase of
Online Investors
Advantage, Inc. 1,150,000 1,150 2,873,850 - - - - - 2,875,000
Exercise of stock
option at $2.00
per share 25,000 25 49,975 - - - - - 50,000
Amortization of
deferred compensation - - - - - 10,000 - - 10,000
Proceeds from the
sale of the Company's
common stock by a
Subsidiary - - 407,428 35,970 - - - - 443,398
Adjustment for
forward stock split 18 - - - - - - - -
Currency translation
adjustment - - - - 15,436 - - - 15,436
Net income for
the year ended
December 31, 1999 - - - - - - - 5,964,239 5,964,239
---------- -------- ----------- --------- ---------- --------- ------------ ---------- ---------
Balance,
December 31, 1999 22,205,018 22,205 12,504,547 (34,030) 54,230 (30,000) - 3,219,275 15,736,227
Purchase of
Online Investors
Advantage Inc. 9,820,152 9,820 105,575,952 - - - - - 105,585,772
Stock option exercised 25,000 25 49,975 - - - (25,000) - 25,000
Amortization and
deferred compensation - - - - - 10,000 - - 10,000
Common stock issued
for related party
payable 103,500 104 689,896 - - - - - 690,000
Currency translation
adjustment - - - - 1,046 - - - 1,046
Net income for the
three months ended
March 31, 2000 - - - - - - - 2,032,398 2,032,398
---------- -------- ----------- --------- ---------- --------- ------------ ---------- ---------
Balance, March
31, 2000 32,153,670 $32,154 $118,820,370 $(34,030) $ 55,276 $(20,000) $(25,000) $5,251,673 $124,080,443
========== ======== =========== ========= =========== ========= ============ =========== ===========
</TABLE>
6
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,032,398 $ (90,736)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 195,992 88,784
Bad debt expense 15,000 -
Loss on equity investment 12,339 12,339
Unrealized gain on marketable securities (45,480) 17,324
Currency translation adjustment 1,046 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 55,565 19,557
(Increase) decrease in inventory 1,316 50,000
(Increase) decrease in prepaids (302,017) 2,454
Purchase of marketable securities (642,562) -
(Increase) decrease other assets (110,561) (65,999)
Increase (decrease) in accounts payable and
accrued expenses 938,748 (90,508)
Increase (decrease) in taxes payable 1,548,553 -
Increase (decrease) in deferred income (11,105) -
(Increase) decrease in receivable - related party receivable (271,959) (68,017)
---------------- ----------------
Net Cash Provided by (Used In) Operating Activities 3,417,273 (124,802)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (42,059) (161,322)
---------------- ----------------
Net Cash Provided by Investing Activities (42,059) (161,322)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Minority interest 800,136 -
Sale of the Company's common stock by a subsidiary - 443,398
Proceeds from borrowings - related parties 5,310,000 -
Cash acquired in purchase of subsidiaries (5,428,458) 211,757
Proceeds from exercise of stock options 25,000 -
---------------- ----------------
Net Cash Provided by Financing Activities 706,678 655,155
---------------- ----------------
NET INCREASE (DECREASE) IN CASH 4,081,892 369,031
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,652,505 517,781
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,734,397 $ 886,812
================ ================
</TABLE>
7
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid For:
Interest $ - $ -
Income taxes $ - $ -
Schedule of Non-Cash Financing Activities:
Purchase of subsidiaries for common stock $ 105,585,772 $ 3,125,000
Issuance of common stock for related party payable $ 690,000 $ -
</TABLE>
8
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly BestWay U.S.A., Inc.)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at March 31, 2000 and 1999
and for all periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December
31, 1999 audited consolidated financial statements. The results of
operations for periods ended March 31, 2000 and 1999 are not
necessarily indicative of the operating results for the full
years.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
March 31, 2000 and December 31, 1999
Changes in Financial Condition
------------------------------
On December 31, 1999 the Company sold Asia4sale to Internet Ventures, Ltd.
for $5,000,000 cash and 300,000 shares of Internet Ventures, Ltd. common stock.
On March 31, 1999 the Company also acquired Online Investors Advantage (OIA) for
restricted common stock of the Company and $400,000 cash. This acquisition was
accounted for as a purchase. The acquisition of OIA continues to make a
substantial, positive contribution to the financial condition of the Company.
The balance of current assets at March 31, 2000 was $18,497,113 compared to a
balance of $13,497,043 at December 31,1999. The balances of current liabilities
were $12,016,816 and $4,230,620 for the same periods respectively. The resulting
current ratio at March 31, 2000 is 1.5:1. The current ratio at December 31, 1999
was 3.2:1.
The increase of current assets at March 31, 2000 over December 31, 1999 is
due primarily to the increase of cash from $11,652,505 to $15,734,397 an
increase of $4,081,892, or 35%. This increase is due primarily from positive
cash flow generated from the operations of OIA. (See further discussion of
income below.)
Current assets at March 31, 2000 also increased due to an increase in
marketable securities from $540,000 at December 31, 1999 to $1,228,276 at March
31, 2000, an increase of $688,042, or 127%. The Company invested a portion of
its cash in liquid equity investments. Additionally, prepaid expenses increased
from $131,772 to $433,789, an increase of $302,017, or 229%. The increase in
prepaid expenses is primarily due to seminar related expenses of OIA. The
balance of accounts receivable at March 31, 2000 was $1,067,270. The balance
includes OIA's pre-approved seminar payments not yet charged to credit cards of
approximately $774,950 and the trade receivables of MAI. A substantial portion
of these balances has been collected subsequent to March 31, 2000.
The balance of current liabilities at March 31, 2000 is $12,016,816 and at
December 31, 1999 is $4,230,620. The increase of $7,786,196, or 184%, is due
primarily to the increase in related party payable from $690,000 at December 31,
1999 to $6,000,000 at March 31, 2000. The March 31, 2000 balance of $6,000,000
represents the amount owed to certain shareholders of OIA, as of March 31, 2000,
based on the Company's amended purchase agreement with OIA whereby these
shareholders would receive an earn out, or increase in purchase price, based on
OIA's profitability from the period from March 31, 1999 to March 31, 2000.
Additionally, these shareholder's will receive 9,820,152 shares of the Company's
stock pursuant to the earn out provision. The earn out has increased the
Company's goodwill by $111,585,772 and will be amortized over 10 years.
Current liabilities also increased for the accrual of income taxes payable
from $2,083,763 at December 31, 1999 to $3,632,316 at March 31, 2000, an
increase of $1,548,553 or 74%, relating to the increased first quarter U.S.
earnings of OIA. Momentum Internet is a British Virgin Islands company, Momentum
Asia is a Philippine company. These companies are subject to income taxation of
the respective countries of their registration. OIA is a Utah corporation, and
therefore subject to United States income tax. Accounts payable increased
$938,748, or 68%, from $1,382,757 at December 31, 1999 to $2,321,505 at March
31, 2000. The increase is primarily due to OIA, which had a balance of accounts
payable of $1,544,044 at March 31, 2000.
Other assets increased $111,945,308, or 1,973% from $5,674,585 at December
31, 1999 to $117,619,893 at March 31, 2000. The increase is due primarily to the
addition of $111,585,772 of goodwill, resulting from the earn out provision of
the acquisition agreement of OIA. (See explanation above.) Goodwill is the book
value given to the difference between the purchase price and the estimated fair
market value of the net assets of OIA, and is amortized over the estimated life
of 10 years. The receivable from related party also increased for a $300,000
loan made to an officer of a subsidiary.
10
<PAGE>
At March 31, 2000 the Company has no long-term debt. The Company has
sufficient cash flow from operations to meet its current cash obligations. The
Company anticipates continued positive cash flow from existing operations during
the next twelve months, and will continue to look for ways to invest its cash
flow in acquisitions of companies and other investments that will contribute in
a positive way to the Company's operating strategy.
Results of Operations
---------------------
For the three months ended March 31, 2000 and March 31, 1999
The Company's operations for the three months ended March 31, 1999 include
Momentum Asia and Momentum Internet. The March 31, 2000 operations include
Momentum Asia, Momentum Internet and OIA. The Company acquired OIA on March 31,
1999. This acquisition has had considerable impact on the operating income of
the Company since that date.
Sales for the three months ended March 31, 2000 were $14,498,361 compared
to $885,871 for the same period in 1999, resulting in an increase of
$13,612,490, or 1,437%. Cost of goods sold for the quarter ended March 31, 2000
was $7,474,414, or 52% of sales, compared to $393,423, or 44% of sales, for
1999. Gross profit was $7,023,947, or 48% of sales and $492,448, or 56% of sales
for the same periods respectively.
Operating expenses include primarily depreciation and amortization expense
and general and administrative expenses. Depreciation and amortization expense
for the three months ended March 31, 2000 includes depreciation of $56,889 and
amortization of goodwill of $139,103. The Company recorded goodwill for the
October, 1998 acquisitions of Momentum Asia and Momentum Internet and the March,
1999 acquisition of OIA. General and administrative expenses were $2,701,487,
19% of sales, for the three months ended March 31, 2000 and $500,490 or 56% of
sales for the same period in 1999, resulting in an increase of $2,200,997 or
440%. The increase is due to primarily to the operating expenses of OIA which
were not present in the first quarter 1999 numbers.
Other income increased from $36,527 in 1999 to $132,982 in 2000, an
increase of $96,455 or 264%. The increase is due primarily to the increase in
interest and dividend income from $5,270 in 1999 to $99,841 in 2000, an increase
of $94,571, or 1,795%, resulting from the interest earned from the short-term
investment of surplus cash balances.
11
<PAGE>
CAUTIONARY FORWARD - LOOKING STATEMENT
- --------------------------------------
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made with the approval of an authorized
executive officer which are not historical or current facts are "forward-looking
statements" made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future
could affect the Company's actual results and could cause the Company's actual
financial performance to differ materially from that expressed in any
forward-looking statement: (i) the extremely competitive conditions that
currently exist in the three dimensional software development marketplace are
expected to continue, placing further pressure on pricing which could adversely
impact sales and erode profit margins; (ii) many of the Company's major
competitors in its channels of distribution have significantly greater financial
resources than the Company; and (iii) the inability to carry out marketing and
sales plans would have a materially adverse impact on the Company's projections.
The foregoing list should not be construed as exhaustive and the Company
disclaims any obligation subsequently to revise any forward-looking statements
to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.
YEAR 2000 INFORMATION
- ---------------------
Impact of Year 2000
-------------------
During 1999 we completed our remediation and testing of our platform
systems, management support, systems, and our internal information technology
and non-information technology systems. Because of those planning and
implementation efforts, we experienced no disruptions in our information
technology and non-information technology systems and those systems have
successfully responded to the Year 2000 date change. We did not incur any
significant expenses during 1999 in conjunction with remediating our systems. We
are not aware of any material problems resulting from Year 2000 issues, either
with our products, internal systems, or the products and services of third
parties. We will continue to monitor our mission critical computer applications
and those of our suppliers and vendors throughout the year 2000 to ensure any
latent Year 2000 matters arising are addressed promptly.
12
<PAGE>
RISK FACTORS
- ------------
Risks of Penny Stock.
---------------------
The Company's common stock may, at some future time, be deemed to be "penny
stock" as that term is defined in Rule 3a51-1 of the Exchange Act of 1934. Penny
stocks are stocks (i) with a price of less than five dollars per share; (ii)
that are not traded on a "recognized" national exchange; (iii) whose prices are
not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must
still meet requirement (i) above); or (iv) of an issuer with net tangible assets
less than US$2,000,000 (if the issuer has been in continuous operation for at
least three years) or US$5,000,000 (if in continuous operation for less than
three years), or with average annual revenues of less than US$6,000,000 for the
last three years.
A principal exclusion from the definition of a penny stock is an equity
security that has a price of five dollars ($5.00) of more, excluding any broker
or dealer commissions, markups or markdowns. As of the date of this Registration
Statement the Company's common stock has a price in excess of $5.00 and would
not be deemed a penny stock.
If the Company's Common Stock were deemed a penny stock, section 15(g) and
Rule 3a51-1 of the Exchange Act of 1934 would require broker-dealers dealing in
the Company's Common Stock to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in the Company's common
stock are urged to obtain and read such disclosure carefully before purchasing
any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 of the Exchange Act of 1934 Commission requires
broker-dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.
Competition.
------------
There are numerous corporations, firms and individuals which are engaged in
the type of business activities in which the Company is presently engaged. Many
of those entities are more experienced and possess substantially greater
financial, technical and personnel resources than the Company or its
subsidiaries. Many of the Company's competitors have longer operating histories
and significantly greater financial, technical, marketing and other resources
than the Company. In addition, many of the Company's competitors offer a wider
range of services and financial products than the Company, and thus may be able
to respond more quickly to new or changing opportunities, technologies and
customer requirements. Many of the Company's competitors also have greater name
recognition and larger customer bases that could be leveraged, thereby gaining
market share from the Company. Such competitors may conduct more extensive
promotional activities and offer better terms and lower prices to customers than
the Company can. Moreover, certain competitors have established cooperative
relationships among themselves or with third parties to enhance their services
and products. Accordingly, it is possible that new competitors or alliances
among existing competitors may significantly reduce the Company's market share.
General financial success within the securities industry over the past several
years has strengthened existing competitors. The Company believes that such
success will continue to attract new competitors to the industry, such as banks,
13
<PAGE>
software development companies, insurance companies, providers of online
financial and information services and others, as such companies expand their
product lines. The current trend toward consolidation in the commercial banking
industry could further increase competition in all aspects of our business.
While the Company cannot predict the type and extent of competitive services
that commercial banks and other financial institutions ultimately may offer, or
whether legislative barriers will be modified, the Company may be adversely
affected by such competition or legislation. To the extent the Company's
competitors are able to attract and retain customers based on the convenience of
one-stop shopping, the Company's business or ability to grow could be adversely
affected. In many instances, the Company is competing with such organizations
for the same customers. In addition, competition among financial services firms
exists for experienced technical and other personnel. There can be no assurance
that the Company will be able to compete effectively with current or future
competitors or that such competition will not have a material adverse effect on
the Company's business, financial condition and operating results. While the
Company hopes to be competitive with other similar companies, there can be no
assurance that such will be the case.
Volatile Market for Common Stock.
---------------------------------
The Company's common stock is quoted on the OTC Bulletin Board of the
National Association of Securities Dealers, Inc. (the "NASD") under the symbol
"ZSUN." The market price of the Company's Common Stock has been and is likely to
continue to be highly volatile and subject to wide fluctuations due to various
factors, many of which may be beyond the Company's control, including: quarterly
variations in operating results; announcements of technological innovations or
new software, services or products by the Company or its competitors; and
changes in financial estimates and recommendations by securities analysts. In
addition, there have been large price and volume fluctuations in the stock
market which have affected the market prices of securities of many technology
and services companies, often unrelated to the operating performance of such
companies. These broad market fluctuations, as well as general economic and
political conditions, may adversely affect the market price of the Company's
common stock. In the past, volatility in the market price of a company's
securities has often led to securities class action litigation. Such litigation
could result in substantial costs and aversion of the Company's attention and
resources, which could have a material adverse effect on the Company's business,
financial condition and operating results.
Dependence on Key Employees.
----------------------------
Historically, the Company and its subsidiaries have been heavily dependent
on the ability of D. Scott Elder, Ross W. Jardine, Anthony Tobin, Eric
Montandon, Allen D. Hardman, Scott Harris, David McCoy and Peter Graham Daley,
who contribute essential technical and management experience. In the event of
future growth in administration, marketing, manufacturing and customer support
functions, the Company may have to increase the depth and experience of its
management team by adding new members. The Company's success will depend to a
large degree upon the active participation of its key officers and employees.
Loss of services of any of the current officers and directors could have a
significant adverse effect on the operations and prospects of the Company. There
can be no assurance that it will be able to employ qualified persons on
acceptable terms to replace officers that become unavailable.
Discretionary Use of Proceeds.
------------------------------
Because of management's broad discretion with respect to the acquisition of
assets, property or business, the Company may be deemed to be a growth oriented
company. Although management intends to apply substantially all of the proceeds
that it may receive through the issuance of stock or debt to suitable
acquisitions. such proceeds will not otherwise be designated for any more
specific purpose. The Company can provide no assurance that any allocation of
such proceeds will allow it to achieve its business objectives.
14
<PAGE>
Unascertainable Risks Associated with Potential Future Acquired Businesses.
---------------------------------------------------------------------------
To the extent that the Company may acquire a business in a highly risky
industry, the Company will become subject to those risks. Similarly, if the
Company acquires a financially unstable business or a business that is in the
early stages of development, the Company will become subject to the numerous
risks to which such businesses are subject. Although management intends to
consider the risks inherent in any industry and business in which it may become
involved, there can be no assurance that it will correctly assess such risks.
Risks Associated with Acquisitions, Strategic Relationships.
------------------------------------------------------------
The Company may acquire other companies or technologies in the future, and
the Company regularly evaluates such opportunities. Acquisitions entail numerous
risks, including: difficulties in the assimilation of acquired operations and
products; diversion of management's attention from other business concerns;
amortization of acquired intangible assets; and potential loss of key employees
of acquired companies. The Company has limited experience in assimilating
acquired organizations into our operations. No assurance can be given as to the
Company's ability to integrate successfully any operations, personnel, services
or products that might be acquired in the future. Failure to successfully
assimilate acquired organizations could have a material adverse effect on the
Company's business, financial condition and operating results. The Company has
established a number of strategic relationships with online and Internet service
providers and software and information service providers. There can be no
assurance that any such relationships will be maintained, or that if they are
maintained, they will be successful or profitable. Additionally, the Company may
not develop any new such relationships in the future. Due to the foregoing
factors, quarterly revenues and operating results are difficult to forecast. The
Company believes that period-to-period comparisons of the Company's operating
results will not necessarily be meaningful and you should not rely on them as
any indication of future performance. The Company's future quarterly operating
results may not consistently meet the expectations of securities analysts or
investors, which in turn may have an adverse effect on the market price of the
Company's Common Stock. Additionally, to the extent that the Company may acquire
a business in a highly risky industry, the Company will become subject to those
risks. Similarly, if the Company acquires a financially unstable business or a
business that is in the early stages of development, the Company will become
subject to the numerous risks to which such businesses are subject. Although
management intends to consider the risks inherent in any industry and business
in which it may become involved, there can be no assurance that it will
correctly assess such risks.
Uncertain Structure of Future Acquisitions.
-------------------------------------------
Management has had no preliminary contact or discussions regarding, and
there are no current plans, proposals or arrangements to acquire any other
specific assets, property or business. Accordingly, it is unclear whether such
any such acquisition would take the form of an exchange of capital stock, a
merger or an asset acquisition.
Conflicts of Interest; Related Party Transactions.
--------------------------------------------------
Although the Company has not identified any new potential acquisition
targets and management does not believe there is any "present potential" for
such transactions, the possibility exists that the Company may acquire or merge
with a business or company in which the Company's executive officers, directors,
beneficial owners or their affiliates may have an ownership interest. Although
there is no formal bylaw, stockholder resolution or agreement authorizing any
such transaction, corporate policy does not forbid it and such a transaction may
occur if management deems it to be in the best interests of the Company and its
stockholders, after consideration of the above referenced factors. A transaction
of this nature would present a conflict of interest to those parties with a
managerial position and/or an ownership interest in both the Company and the
acquired entity, and may compromise management's fiduciary duties to the
Company's stockholders. An independent appraisal of the acquired company may or
may not be obtained in the event a related party transaction is contemplated.
Furthermore, because management and/or beneficial owners of the Company's common
stock may be eligible for finder's fees or other compensation related to
potential acquisitions by the Company, such compensation may become a factor in
negotiations regarding such potential acquisitions. It is the Company's
intention that all future transactions be entered into on such terms as if
negotiated at arms length, unless the Company is able to received more favorable
terms from a related party.
15
<PAGE>
Risks Associated with Systems Failures.
---------------------------------------
Many of the services and products offered by the Company and its
subsidiaries are through and over Internet, online service providers and
touch-tone telephone. Thus, the Company depends heavily on the integrity of the
electronic systems supporting this activity, including the Company's internal
software programs and computer systems. The Company's systems or any other
systems of third parties whom the we utilize could slow down significantly or
fail for a variety of reasons including: undetected errors in the Company 's
internal software programs or computer systems; the Company's inability to
effectively resolve any errors in the Company's internal software programs or
computer systems once they are detected; or heavy stress placed on the Company's
system during certain peak hours of usage of either the Company's own or its
third party provider systems. If the Company's systems or any other systems
which the Company relies on slow down significantly or fail even for a short
time, the Company's customers would suffer delays and dissatisfaction. The
Company could experience future system failures and degradations. The Company
could experience a number of adverse consequences as a result of these systems
failures including the loss of existing customers and the inability to attract
or retain new customers. There can be no assurance that the Company 's network
structure or those of third party service providers will operate appropriately
in any of the following events: subsystem, component or software failure; a
power or telecommunications failure; human error; an earthquake, fire or other
natural disaster; or an act of God or war. There can be no assurance that in any
such event, we will be able to prevent an extended systems failure. Any such
systems failure that interrupts the Company's operations could have a material
adverse effect on the Company's business, financial condition and operating
results.
Risks Associated with Encryption Technology.
--------------------------------------------
A significant barrier to online commerce is the secure transmission of
confidential information over public networks. The Company rely on encryption
and authentication technology to provide secure transmission of confidential
information. There can be no assurance that advances in computer and
cryptography capabilities or other developments will not result in a compromise
of the encryption and authentication technology we use to protect customer
transaction data. If any such compromise of the Company 's security were to
occur, it could have a material adverse effect on the Company's business,
financial condition and operating results.
Risks Associated with Significant Fluctuations In Quarterly Operating
Results.
---------------------------------------------------------------------------
The Company expects to experience large fluctuations in future quarterly
operating results that may be caused by many factors, including the following:
the timing of introductions or enhancements to online investing services and
other products by the Company or its competitors; market acceptance of online
investing services and products; the pace of development of the market for
online commerce; changes in trading volume in securities markets; trends in
securities markets; domestic and international regulation of the brokerage
industry; changes in pricing policies by the Company or its competitors; changes
in strategy; the success of or costs associated with acquisitions, joint
ventures or other strategic relationships; changes in key personnel; seasonal
trends; the extent of international expansion; the mix of international and
domestic revenues; changes in the level of operating expenses to support
projected growth; and general economic conditions. The Company have also
experienced fluctuations in the average number of customer transactions per day.
Thus, the rate of growth in customer transactions at any given time is not
necessarily indicative of future transaction activity.
Risks Associated with Management of a Changing Business.
--------------------------------------------------------
The Company has grown rapidly and the Company's business and operations
have changed substantially since the Company began offering online investing
services and products, and the Company expects this trend to continue. Such
rapid change and expansion places significant demands on the Company's
administrative, operational, financial and other resources. The Company expects
16
<PAGE>
operating expenses and staffing levels to increase substantially in the future.
In particular, the Company intends to hire a significant number of additional
skilled personnel, including persons with experience in both the computer and
brokerage industries. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to find or keep additional
suitable senior managers or technical persons in the future. the Company also
expects to expend resources for future expansion of the Company's accounting and
internal information management systems and for a number of other new systems
and procedures. In addition, the Company expects that future expansion will
continue to challenge the Company's ability to successfully hire and retain
associates. If the Company's revenues do not keep up with operating expenses,
the Company's information management systems do not expand to meet increasing
demands, the Company fails to attract, assimilate and retain qualified
personnel, or the Company fails to manage the Company's expansion effectively,
there would be a material adverse effect on the Company's business, financial
condition and operating results. The rapid growth in the use of the Company's
services may strained the Company's ability to adequately expand
technologically. As the Company acquires new equipment and applications quickly,
the Company has less time and ability to test and validate hardware and
software, which could lead to performance problems. The Company also relies on a
number of third parties to process the Company's transactions, including online
and Internet service providers, back office processing organizations, service
providers and market-makers, all of which will need to expand the scope of the
operations they perform for us. Any backlog caused by a third party's inability
to expand sufficiently to meet the Company needs could have a material adverse
effect on our business, financial condition and operating results. As trading
volume increases, the Company may have difficulty hiring and training qualified
personnel at the necessary pace, and the shortage of licensed personnel could
cause a backlog in the processing of orders that need review, which could lead
to not only unsatisfied customers, but also to liability for orders that were
not executed on a timely basis.
Risks Associated with Early Stage of Market Development; Dependence on
Online Commerce and the Internet.
---------------------------------------------------------------------------
The market for online investing services, particularly over the Internet,
is at an early stage of development and is rapidly evolving. Consequently,
demand and market acceptance for recently introduced services and products are
subject to a high level of uncertainty. For the Company, this uncertainty is
compounded by the risks that consumers will not adopt online commerce and that
commerce on the Internet will not adequately develop or flourish to permit the
Company to succeed. Sales of many of the Company's services and products will
depend on consumers adopting the Internet as a method of doing business. This
may not occur because of inadequate development of the necessary infrastructure,
such as a reliable network infrastructure, or complementary services and
products such as high-speed modems and communication lines. The Internet has
grown and is expected to grow both in number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by this continued growth. In addition,
the Internet could lose its viability due to slow development or adoption of
standards and protocols to handle increased Internet activity, or due to
increased governmental regulation. Moreover, critical issues including security,
reliability, cost, ease of use, accessibility and quality of service remain
unresolved and may negatively affect the growth of Internet use or commerce on
the Internet. Because use of the Internet for commerce is new and evolving,
there can be no assurance that the Internet will prove to be a viable commercial
marketplace. If these critical issues are not resolved, if the necessary
infrastructure is not developed, or if the Internet does not become a viable
commercial marketplace, the Company business, financial condition and operating
results will be materially adversely affected. Adoption of online commerce by
individuals that have relied upon traditional means of commerce in the past will
require such individuals to accept new and very different methods of conducting
business. Moreover, the Company 's online trading and investing services over
the Internet involve a new approach to investing research and trading which will
require intensive marketing and sales efforts to educate prospective customers
regarding the Internet's uses and benefits. For example, consumers who trade
with more traditional brokerage firms, or even discount brokers, may be
reluctant or slow to change to obtaining brokerage services over the Internet.
Also, concerns about security and privacy on the Internet may hinder the growth
of online investing research and trading, which could have a material adverse
effect on the Company 's business, financial condition and operating results.
17
<PAGE>
Risks Associated with the Securities Industry; Concentration of Services.
-------------------------------------------------------------------------
Most of the Company's revenue in the past have been from the Company's
online investor services and products, and the Company expects this business to
continue to account for most of the Company's revenue in the foreseeable future.
The Company, like other companies in the Internet securities industry, are
directly affected by economic and political conditions, broad trends in business
and finance and changes in volume and price levels of securities and futures
transactions. In recent months, the U.S. securities markets have fluctuated
considerably and a downturn in these markets could effect customers interest in
our products and services and adversely affect the Company's operating results.
In October 1987 and October 1989, the stock market suffered major declines, as a
result of which many company's and firms suffered financial losses, and the
level of individual investor trading activity decreased after these events.
Reduced trading volume and prices have historically resulted in reduced revenues
to company's such as the Company's. When trading volume is low and investor and
customer interest or use of the Company's products and services diminishes, the
Company's operating results may be adversely affected because the Company's
overhead remains relatively fixed. Severe market fluctuations in the future
could have a material adverse effect on the Company's business, financial
condition and operating results. Some of the Company's competitors with more
diverse product and service offerings might withstand such a downturn in the
securities industry better than the Company would.
Risks Associated with Delays In Introduction of New Services and Products.
--------------------------------------------------------------------------
The Company's future success depends in part on the Company's ability to
develop and enhance the Company's services and products. There are significant
technical risks in the development of new services and products or enhanced
versions of existing services and products. There can be no assurance that the
Company will be successful in achieving any of the following: effectively using
new technologies; adapting the Company's services and products to emerging
industry standards; developing, introducing and marketing service and product
enhancements; or developing, introducing and marketing new services and
products. The Company may also experience difficulties that could delay or
prevent the development, introduction or marketing of these services and
products. Additionally, these new services and products may not adequately meet
the requirements of the marketplace or achieve market acceptance. If the Company
is unable to develop and introduce enhanced or new services and products quickly
enough to respond to market or customer requirements, or if they do not achieve
market acceptance, the Company's business, financial condition and operating
results will be materially adversely affected.
Risks Associated with Dependence on Intellectual Property Rights.
-----------------------------------------------------------------
Neither the Company or any of its subsidiaries presently holds any patents,
copyrights or trademarks for their products or services offered or the names
under which they operate. However, the Company and its subsidiaries are
currently in the process of seeking copyright and trademark protection of its
trade names and website addresses. The Company's success and ability to compete
are dependent to a degree of the Company's and its subsidiary's name and product
recognition. Accordingly, the Company will primarily rely on copyright, trade
secret and trademark law to protect our product, services and brand names offer
or under which the Company and its subsidiaries conduct their business.
Effective trademark protection may not be available for the Company's
trademarks. There can be no assurance that the Company will be able to secure
significant protection for the Company's trademarks. The Company's competitors
or others may adopt product or service names similar to the Company's, thereby
impeding the Company's ability to build brand identity and possibly leading to
customer confusion. The Company's inability to adequately protect our product,
brand, trade names and trademarks would have a material adverse effect on the
Company's business, financial condition and operating results. Despite any
precautions the Company takes, a third party may be able to copy or otherwise
obtain and use the Company's software or other proprietary information without
authorization or to develop similar software independently. Policing
unauthorized use of the Company's technology is made especially difficult by the
global nature of the Internet and difficulty in controlling the ultimate
18
<PAGE>
destination or security of software or other data transmitted on it. The laws of
other countries may afford us little or no effective protection for the
Company's intellectual property. There can be no assurance that the steps the
Company takes will prevent misappropriation of the Company's technology or that
agreements entered into for that purpose will be enforceable. In addition,
litigation may be necessary in the future to enforce the Company's intellectual
property rights; protect the Company's trade secrets; determine the validity and
scope of the proprietary rights of others; or defend against claims of
infringement or invalidity. Such litigation, whether successful or unsuccessful,
could result insubstantial costs and diversions of resources, either of which
could have a material adverse effect on the Company's business, financial
condition and operating results.
Risks Associated with Infringement.
-----------------------------------
The Company may in the future receive notices of claims of infringement of
other parties' proprietary rights. There can be no assurance that claims for
infringement or invalidity (or any indemnification claims based on such claims)
will not be asserted or prosecuted against the Company. Any such claims, with or
without merit, could be time consuming and costly to defend or litigate, divert
the Company's attention and resources or require the Company to enter into
royalty or licensing agreements. There can be no assurance that such licenses
would be available on reasonable terms, if at all, and the assertion or
prosecution of any such claims could have a material adverse effect on the
Company's business, financial condition and operating results.
Risks Associated with Entering New Markets.
-------------------------------------------
One element of our strategy is to leverage the Company's brand names and
services that the Company and its subsidiaries provide. No assurance can be
given that the Company will be able to successfully adapt the Company's products
and services for use in other markets. Even if the Company does adapt the
Company's to other markets, no assurance can be given that the Company will be
able to compete successfully in any such new markets. There can be no assurance
that the Company's marketing efforts or the Company's pursuit of any new
opportunities will be successful. If the Company's efforts are not successful,
the Company could realize less than expected earnings, which in turn could
result in a decrease in the market value of the Company's Common Stock.
Furthermore, such efforts may divert management attention or inefficiently
utilize the Company's resources.
Risks Associated with International Strategy.
---------------------------------------------
One component of the Company's strategy is a planned increase in efforts to
attract additional international customers and to expand the Company's Online
Investors seminars, services and products into international markets. To date,
the Company has limited experience in providing investment services
internationally. There can be no assurance that the Company's and the Company's
subsidiaries will be able to market the Company's branded services and products
successfully in international markets. In addition, there are certain risks
inherent in doing business in international markets, such as: unexpected changes
in regulatory requirements, tariffs and other trade barriers; difficulties in
staffing and managing foreign operations; political instability; fluctuations in
currency exchange rates; reduced protection for intellectual property rights in
some countries; seasonal reductions in business activity during the summer
months in Europe and certain other parts of the world; and potentially adverse
tax consequences. Any of the foregoing could adversely impact the success of the
Company's international operations. Under these agreements, the Company relies
upon third parties for a variety of business and regulatory compliance matters.
The Company has limited control over the management and direction of these third
parties. The Company runs the risk that their action or inaction could harm the
Company's operations and/or the goodwill associated with the Company's brand
names. As a result, the risk to our operations and goodwill is higher. There can
be no assurance that one or more of the factors described above will not have a
material adverse effect on the Company's future international operations, if
any, and, consequently, on our business, financial condition and operating
results.
19
<PAGE>
Equity Price Risk.
------------------
The Company through its subsidiary Momentum Asia holds a small portfolio of
marketable-equity traded securities that are subject to market price volatility.
Equity price fluctuations of plus or minus 15 percent would not have a material
impact on the Company. For its working capital and reserves that are required to
be segregated under Federal or other regulations, the Company invests in money
market funds, resale agreements, certificates of deposit, and commercial paper.
Money market funds do not have maturity dates and do not present a material
market risk. The other financial instruments are fixed rate investments with
short maturities and do not present a material interest rate risk.
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
ZiaSun Technologies, Inc. v. Floyd D. Schneider, et al.
------------------------------------------------------
The company was a party Plaintiff in the matter of ZiaSun Technologies,
Inc. v. Floyd D. Schneider, et al., United States District Court, Western
District of Washington, C99-1025. This action arises from the defendants alleged
defamatory campaign against the Company and its officers and directors. This
alleged cybersmear campaign involved the defendants postings of statements about
the Company and its offices and directors which are alleged to be false and
defamatory. The Company alleges that the defendants were and are knowingly
posting false statements with the intent of negatively impacting the Company's
stock prices in order for defendants to benefit financially in short selling. To
protect the Company, its shareholders and its officers and directors, on June
24, 1999, the Company filed a civil action in the United States District Court,
Western District of Washington seeking damages and injunction relief, alleging
among other things, Securities Fraud through the defendants posting of false and
misleading defamatory statements, violation of the Washington Consumer
Protection Act, Intentional Interference with Business Expectancy, Violation of
Federal RICO Statute 28 USA Sec. 1962, and violation of Washington's Criminal
Profiteering Act.
On November 29,1999, defendant, Stephen Worthington who posts under the
name "Auric Goldfinger" filed a motion to dismiss on various grounds including
that Washington was improper venue. The Honerable Marcia Pechman granted the
Company's motion for preliminary injunction against Floyd Schneider on January
21, 2000, restraining him from posting defamatory or untrue remarks on the
internet or elsewhere. On February 28, 2000, the Court granted the defendant
[Christopher H. Howard] Worthington's motion on the grounds of improper venue
without ruling on the defendant's other claims motions, and further ruled on the
Court's own initiative that venue was inappropriate for all defendants,
dismissing the case. The Company thereafter filed a motion for reconsideration
of the dismissal asking in the alternative that this case be transferred to
another venue. The Court granted The Company's motion for reconsideration on
March 24, 2000, reinstating the action and pending preliminary injunction, and
subsequently, on April 7, 2000, ordered that the entire action be transferred to
the United States District Court for the Northern District of California. The
case was physically retained in Washington for 30 days and then transferred to
the United States District Court for the Northern District of California on
approximately May 5, 2000. The matter is pending at present before the Honerable
Charles R. Breyer.
20
<PAGE>
ZiaSun Technologies, Inc. v. Financialweb.Com, Inc., et al.
-----------------------------------------------------------
The company was a party Plaintiff in the matter of ZiaSun Technologies,
Inc. v. Financialweb.Com, Inc., et al., Circuit Court of Seminole County,
Florida, 99-1136-CA-16-G. This action arises from the defendants posting of
alleged false and defamatory article about the Company on its website known as
"The Stock Detective." The defendants allegedly knowingly posted the false and
defamatory article with the intent on negatively impacting the Company's stock
prices in order for defendants to benefit financially. The Company requested
that defendant publish a retraction but defendant has refused to do so. To
protect the Company, its shareholders and its officers and directors, the
Company filed a civil action in the Circuit Court of Seminole County Florida,
seeking damages and injunction relief. The matter is pending at present time.
With the exception of the legal proceedings set forth above, the Company is
not a party to any pending legal proceeding. No federal, state or local
governmental agency is presently contemplating any proceeding against the
Company. No director, executive officer or affiliate of the Company or owner of
record or beneficially of more than five percent of the Company's common stock
is a party adverse to the Company or has a material interest adverse to the
Company in any proceeding.
Item 2. Changes in Securities.
Not required.
Item 3. Defaults Upon Senior Securities.
Not required.
Item 4. Submission of Matters to a Vote of Security Holders.
Not required
Item 5. Other Information.
Credico Inc. Consulting Agreement.
---------------------------------
On January 1, 2000, the Company entered into a Consulting Agreement with
Credico Inc., a Nevada corporation ("Credico"), whereby the Company engaged
Credico to (i) provide advice and counsel concerning business development,
mergers and acquisitions which further and are consistent with the Company's
long-term strategic goals, and (ii) identify and evaluate potential mergers and
acquisitions, and proactively participate in negotiating and developing the
timing and structure of those mergers and acquisitions. A copy of the Consulting
Agreement between the Company and Credico is attached hereto and incorporated
herein by reference. See Item 13 Exhibits.
Appointment of Bryant Cragun As member of the Advisory Board.
------------------------------------------------------------
On January 1, 2000, in conjunction with the Company entering into the above
referenced Consulting Agreement with Credico Inc., Bryant D. Cragun was
appointed as a member of the Company's advisory board. This appointed was
formerly adopted and ratified by the board of directors on February 25, 2000.
Appointment of Hans Von Meiss As Director.
-----------------------------------------
On January 17, 2000, the Company appointed Hans Von Meiss as a director of
the Company. Mr. Von Meiss, 52, received a Bachelors Degree in Economics in 1973
from the University of St. Gallen, Switzerland. After receiving an MBA in 1977
from INSEAD, Fountainebleau, France, he spent seven years in investment banking
with Bankers Trust International Ltd. and Chase Manhattan Ltd. in London. Then,
from 1984 to 1988, Mr. von Meiss served as the CEO of Dr. Ing. Koenig AG, a
leading Swiss service center for flat steel and industrial fasteners. He spent
the following 3 years from 1988 to 1991 in financial consulting. Then, in 1991,
Mr. von Meiss became the CEO of a publicly-quoted Dutch company after its
privatization from the Dutch Government, and served in that position until 1994.
In 1994, he became the CEO of Swiss Textile Group via an acquisition and
completed a turnaround and eventual sale of the business in 1997. Since 1997,
Mr. Von Meiss has been involved in financial management and consulting, and
pursued investments in Internet-related businesses. He also serves on the Board
of a private bank, an industrial concern, an M&A consulting Company, and his own
company, G. von Meiss AG.
21
<PAGE>
Acquisition of AsiaEnet Interest by Momentum Internet, Inc.
-----------------------------------------------------------
In January 2000, Momentum Internet, Inc. ("MII"), a wholly owned subsidiary
of the Company acquired ninety percent (90%), represented by 900 post split
adjusted ordinary shares of AsiaEnet Limited, a Hong Kong registered company
("AsiaEnet") for nominal consideration. Bensley Ltd., a British Virgin Island
company ("Bensley") owned the other ten percent (10%) or 100 post split adjusted
shares. On March 13, 2000 MII sold ten (10) of the ordinary shares it owned, to
Paradym Enterprises Limited, a British Virgin Island registered company
("Paradym") for $200,000 in cash. Additionally, on March 13, 2000 AsiaEnet split
it shares on a 10 for 1 basis. AsiaEnet also issued 90 shares to Paradym for
consideration of $800,000 to AsiaEnet, resulting in MII, Bensley and Paradym
owning 800 shares, 100 shares and 100 shares, respectively of AsiaEnet as of
March 31, 2000. A copy of the Sale and Purchase Agreement, and Shareholders'
Agreement is attached hereto and incorporated herein by this reference. See Item
13 Exhibits.
Change of the Executive Officers of the Company.
------------------------------------------------
On February 25, 2000, at the request of Anthony Tobin, the former President
and D. Scott Elder, the former CEO of the Company, the Board of directors
restructured the composition of its executive officers and their roles.
Mr. Tobin, who was the acting President of ZiaSun, is also the Managing
Officer for MII. Due to the significant increase in his responsibilities with
the ongoing growth and development of MII and the amount of concentrated effort
required on his part to effectively manage its day-to-day operations, Mr.
desired to utilize his unique skills and knowledge of the Asian Rim in searching
for and developing new products and strategic business relationships for both
MII and Momentum Asia.
Mr. Elder, who was the acting CEO of ZiaSun, and a co-founder of OIA
Investors advantage ("OIA"), one of ZiaSun's most profitable subsidiaries is a
significant and important factor in the operations, future development and
growth of OIA and had indicated that his concentration on the expansion of the
business of OIA would better serve ZiaSun and its shareholders.
Accordingly, the board of directors elected the following persons to serve
until the next annual meeting of the directors or until their successors have
been duly elected and qualified:
D. Scott Elder .......... Chairman of the Board
Allen D. Hardman ........ President and Chief Executive Officer
Anthony Tobin ........... Vice President
and Chief Operating Officer-Asia Operations
Dennis E. McGrory ...... Secretary
Allen D. Hardman, 58, was appointed as a Director and the Vice President of
the Company on October 5, 1999. On February 25, 2000 Mr. Hardman was appointed
as President and Chief Executive Office of the Company, Mr. Hardman earned an
Industrial Engineering Technical Diploma from the University of Utah in 1966,
and a Bachelors Degree in Business Administration from California State
University in 1975. Mr. Hardman served as the Managing Director of Business
Relations for Roeslein & Associates from June 1993 through June 1997. Mr.
Hardman was the Vice President of Operations of Bestway USA from July 1997 until
the Company's spin-off of Bestway USA in October 1998. Mr. Hardman has 35 years
of varied business experience, some with small companies and some with
mid-to-large corporations. His work experience includes president for a company
furnishing pre-assembled manufacturing systems on a global basis, director of
business development for industrial manufacturing systems, national sales
manager for systems products, manufacturing engineering, product and systems
engineering, consulting engineering, operations management, project management
for multi-million dollar projects installed worldwide, manufacturing quality
control and customer service management.
22
<PAGE>
During the last several years, and particularly the last two years, Mr.
Hardman has restructured several small businesses to either establish their
viability as an enterprise and/or increase their operating proficiency and
potential for profitability. He has also been intimately involved in identifying
and establishing some strategic partner alliances and/or joint ventures. This
allowed the companies involved to improve their respective competitive
position(s) in the marketplace through improved product or intellectual property
designs, which resulted from the synergy realized by combining their individual
product offerings.
D. Scott Elder, 41, was elected as a director of the Company in May 1999,
and as the Chairman of the Board in June 1999. From 1994 to 1997, Mr. Elder
owned and operated two consulting businesses, D. Scott Elder & Associates and
The Business Alliance Company, which developed marketing and training programs.
In 1998 Mr. Elder continued to operate the consulting business of D. Scott Elder
& Associates and founded OIA with Ross W. Jardine. Mr. Elder served as the
President of OIA until his appointment as the CEO and Chairman of the Board of
the Company in June 1999. Mr. Elder has a degree in Communications from Brigham
Young University and an M.B.A. from the University of Phoenix in 1997. Mr. Elder
is also currently the Vice President of Online Investors Advantage, Inc., a Utah
Corporation ("OIA"), a company he co-founded with Ross Jardine in 1997. OIA
provides educational workshops and video-based home study training programs that
teach people how to use its Investor Toolbox web site in order to make sound
stock investing decisions and manage their own stock investments. OIA was
recently acquired by the Company.
Before devoting full time to OIA, Mr. Elder was the owner of The Business
Alliance Company, which developed joint-venture marketing and training programs.
Some of the companies Mr. Elder has developed joint-venture projects with
include General Mills, Procter & Gamble, Rubbermaid, and Zane Publishing, a
company that markets educational programs through Amway.
Mr. Anthony Tobin, 53, was appointed as a Director of the Company on
October 5, 1998 and as the Vice President of the Company and Chief Operating
Officer of Asia Operations on February 25, 2000. Mr. Tobin is also President of
Momentum Internet. From 1994 through November 1997, Mr. Tobin was the Managing
Director of Momentum Campaigns Ltd., Hong Kong, an advertising and public
relations consultancy company. In November 1997 Momentum Internet Incorporated
was formed to specialize in Internet projects. Mr. Tobin has served as the
President of Momentum Internet from 1997 to present. In May 1998 Momentum
Associates Ltd., a subsidiary of Momentum Internet, was formed to handle the
operations of Momentum Internet in Hong Kong. Mr. Tobin has more than 25 years
experience in Asia (Hong Kong, Singapore, and the Philippines) -- in journalism-
publishing, public relations, marketing, advertising, government information.
and the Internet. He was the former senior information communications officer in
the Hong Kong and Singapore governments. Mr. Tobin reported to the Prime
Minister's office in Singapore, advising on domestic and international publicity
policies and implementing new strategies in the Ministry of Information. He has
spent the last three years developing and marketing the Momentum Internet
Incorporated product roster. Mr. Tobin is also a Director and Manager of
Crossbow Consultants Ltd., an Internet publishing company, which has a
consulting, contract with Momentum Internet Incorporated, a subsidiary of the
Company.
Dennis E. McGrory, was appointed as the Secretary of the Company on
February 25, 2000. Mr. McGrory is an Air Force veteran where he served as a
court reporter and administrative specialist. Overall, Mr. McGrory has 30 years
of combined administrative experience, including Assistant to the City Editor
for a major newspaper, Legal Transcriber, Legal Assistant, Paralegal, and more
recently Office Manager for a large law firm wherein he was responsible for all
administrative functions. He is also currently the commander of the American
Legion San Dieguito Post 416.
23
<PAGE>
Subsequent Events
-----------------
Resignation of Anthony Tobin as Officer and Director
and Appointment and Managing Director of Momentum Internet, Inc.
----------------------------------------------------------------
On April 21, 2000, Anthony Tobin's resignation as a director of the Company
was accepted by the board of directors Mr. Tobin was named Managing Director of
Asia Operations.
Business Agreement with The McKenna Group.
-----------------------------------------
On April 20, 2000, Subsequent to the period covered by this report, the
Company entered into a Business Agreement with The McKenna Group of Palo Alto,
California under which the Company and the McKenna Group through a newly formed
entity would establish a business relationship and pool their resources,
expertise and capital for the providing internet consulting services and for
investment in and incubation of emerging technology companies. A copy of the
Business Agreement dated April 20, 2000 is attached hereto and incorporated
herein by this reference. See Item 13 Exhibits.
Appointment of Christopher D. Outram As Director.
------------------------------------------------
On April 21, 2000 the Company appointed Christopher D. Outram as a director
of the Company. Mr. Outram, 51, received double first class honors in mechanical
engineering and industrial economics in 1972 from the University of Birmingham
in the UK. He also received the Engineering and the Economics prizes for his
course. Following university, Mr. Outram pursued a career in Marketing and
Accountancy with Mobile Oil Company, Air Products Limited and CCL Systems. He
then attended INSEAD Business School in France, where he graduated with an MBA
with distinction. Following 2 years at the world-renowned strategy consultancy,
The Boston Consulting Group, Mr. Outram became Strategic Planning Director of
one of its clients, The Van Gelder Paper Company in the Netherlands.
Two years later Mr. Outram joined Booz Allen & Hamilton in London, where he
was elected Partner in 1986. 1987 saw the creation of OC&C Strategy Consultants
(OC&C) of which Mr. Outram was the founding Director. OC&C now operates directly
and through alliances on a global basis and can deploy in excess of 200
consultants. OC&C and its sister firms advise clients on strategy, strategic
business development and M&A activity. Some 70% of the company business is now
related to the Internet. The consultancy advises large corporations, as well as
smaller start-ups, regarding their Internet strategies. The combined
understanding of the operating dynamics of both large and small players in the
Internet arena has allowed OC&C to develop very creative and ambitious
strategies for its clients. Mr. Outram has also been instrumental in the
creation of e-commerce venturing businesses, both in Silicon Valley in the U.S.,
as well as in Europe.
Appointment of Geoff Mott As member of the Advisory Board.
---------------------------------------------------------
On April 21, 2000, Geoff Mott of The McKenna Group was appointed as a
member of the Company's advisory board.
Resolution of SEC Comments to Form 10-SB Registration Statement.
---------------------------------------------------------------
On September 16, 1999, the Company filed a Registration Statement on Form
10-SB in order to register the Company's common stock, $0.001 par value pursuant
to Section 12(g) of the Securities Exchange Act of 1934. Pursuant to statute the
registration statement on Form 10-SB was deemed effective on November 15, 1999.
Following the effectiveness of the Form 10-SB, the Company received various
comments from the SEC requesting clarification of various items in the
Registration Statement and certain changes to the financial statements. The
Company work closely with the SEC to resolve these comments and filed various
amendments to its Registration Statement in response to the SEC's comments. On
May 12, 2000, the Company received notification that the SEC had reached a
position of no further comment to the For 10-SB Registration Statement. The
Registration Statement on Form 10-SB and all amendments thereto as filed with
the Securities and Exchange Commission are incorporated herein by reference.
24
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits attached or incorporated by referenced pursuant to
Item 601 of Regulation S-B.
Exhibit
Number Description
- --------------------------------------------------------------------------------
2.1(+) Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Momentum Internet Incorporated dated October 5,
1998. (Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
2.2(+) Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Momentum Asia, Inc. dated October 5, 1998.
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
2.3(+) Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Asia4sale.com, Ltd., dated March 25, 1999.
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
2.4(+) Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Online Investors Advantage, Inc., dated March
31, 1999. (Incorporated by reference from the Registrant's
Registration Statement on Form 10-SB filed on September 16, 1999;
Commission File No. 000-27349).
3.1(a)(+) Original Articles of Incorporation.(Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
3.1(b)(+) Certificate of Amendment to Articles of Incorporation filed April 29,
1997. (Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
3.1(c)(+) Certificate of Amendment to Articles of Incorporation filed September
10, 1998 changing the name of the Company to ZiaSun Technologies, Inc.
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
3.1(d)(+) Certificate filed pursuant to NRS Section 78.207.(Incorporated by
reference from the Registrant's Registration Statement on Form 10-SB
filed on September 16, 1999; Commission File No. 000-27349).
3.1(e)(+) Restated Article of Incorporation filed August 16, 1999.(Incorporated
by reference from the Registrant's Registration Statement on Form
10-SB filed on September 16, 1999; Commission File No. 000-27349).
3.2(+) Amended and Restated By-laws. (Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
10.1(+) License Agreement between Fountain Fresh International and Katori
Consultants, Ltd. dated April 17, 1997.(Incorporated by reference from
the Registrant's Registration Statement on Form 10-SB filed on
September 16, 1999; Commission File No. 000-27349).
10.2(+) Assignment of License Agreement by Katori Consultants Ltd., to the
Company dated April 18, 1999. (Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
10.3(+) Unsecured Promissory Note for $50,000 from Asai4sale.com in favor of
the Company dated March 31, 1999. (Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
25
<PAGE>
10.4(+) Stock Option Agreement between Brian Hodgson and the Company dated
March 25, 1999. (Incorporated by reference from the Registrant's
Registration Statement on Form 10-SB filed on September 16, 1999;
Commission File No. 000-27349).
10.5(+) Agreement between the Company and Global Direct Marketing Limited
dated February 12, 1999. (Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
10.6(+) Agreement between Asia4sale.com, Ltd., and Hong Kong Telecom IMS dated
March 29, 1999. (Incorporated by reference from the Registrant's
Registration Statement on Form 10-SB filed on September 16, 1999;
Commission File No. 000-27349).
10.7(+) Agreement between Momentum Internet, Inc., and Hays Business Systems
dated April 1, 1999. (Incorporated by reference from the Registrant's
Registration Statement on Form 10-SB filed on September 16, 1999;
Commission File No. 000-27349).
10.8(+) Loan Agreement between Momentum Asia, Inc. (formerly New Age
Publications, Inc.) and Touchstone Transport Services, Inc.
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.9(+) Real Estate Mortgage Momentum Asia, Inc. (formerly New Age
Publications, Inc.) and Touchstone Transport Services, Inc.
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.10(+) Subscribers Agreement between Momentum Asia, Inc., (formerly New Age
Publications, Inc.), and Torquay Associates Ltd. (Incorporated by
reference from the Registrant's Registration Statement on Form 10-SB
filed on September 16, 1999; Commission File No. 000-27349).
10.11(+) Reuters Investor Distribution Agreement with Momentum Internet Inc.,
dated April 22, 1999. (Incorporated by reference from the Registrant's
Registration Statement on Form 10-SB filed on September 16, 1999;
Commission File No. 000-27349).
10.12(+) Market Datafeed Service Agreement with Stock Exchange Information
Services Limited dated May 3, 1999. (Incorporated by reference from
the Registrant's Registration Statement on Form 10-SB filed on
September 16, 1999; Commission File No. 000-27349).
10.13(+) Agreement between Momentum Internet, Inc., and Options Direct dated
May 18, 1999. (Incorporated by reference from the Registrant's
Registration Statement on Form 10-SB filed on September 16, 1999;
Commission File No. 000-27349).
10.14((+) Agreement between Asia4sale.com, Ltd., and Karrex dated June 25, 1999.
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.15(+) Agreement between Momentum Internet, Inc., and United Mok Ying Kie
Limited dated June 29, 1999. (Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
10.16(+) Reuters Service Contract with Momentum Internet Inc. (Incorporated by
reference from the Registrant's Registration Statement on Form 10-SB
filed on September 16, 1999; Commission File No. 000-27349).
26
<PAGE>
10.17(+) Online Stock Trading Agreement between Swiftrade, Inc. and WdoT.rade
Inc. dated July 1, 1999. (Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
10.18(+) Lease Agreement between the Company and Propco L.P. (Incorporated by
reference from the Registrant's Registration Statement on Form 10-SB
filed on September 16, 1999; Commission File No. 000-27349).
10.19(+) Addendum to Lease between the Company and Propco L.P. (Incorporated by
reference from the Registrant's Registration Statement on Form 10-SB
filed on September 16, 1999; Commission File No. 000-27349).
10.20(+) Tenancy Agreement between Momentum Associates Limited and Hong Kong
Finance Property Company Limited dated December 1, 1998. (Incorporated
by reference from the Registrant's Registration Statement on Form
10-SB filed on September 16, 1999; Commission File No. 000-27349).
10.21(+) Contract of Lease between Rebecca A. Ynares and Momentum Internet
(Philippines) Inc. dated December 1998. (Incorporated by reference
from the Registrant's Registration Statement on Form 10-SB filed on
September 16, 1999; Commission File No. 000-27349).
10.22(+) First Amendment to Contract of Lease between Rebecca A. Ynares and
Momentum Internet (Philippines) Inc. (Incorporated by reference from
the Registrant's Registration Statement on Form 10-SB filed on
September 16, 1999; Commission File No. 000-27349).
10.23(+) Contract of Lease between Philippine International Trading Corporation
and Momentum Internet (Philippines) Inc. (Incorporated by reference
from the Registrant's Registration Statement on Form 10-SB filed on
September 16, 1999; Commission File No. 000-27349).
10.24(+) Sublease Agreement between Philexcel Textiles Incorporated and
Momentum Asia, Inc. (formerly New Age Publications, Inc.)
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.25(+) Amended Sublease Agreement between Philexcel Textiles Incorporated and
Momentum Asia, Inc. (formerly New Age Publications, Inc.)
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.26(+) Lease Agreement between EsNET Properties L.C. and Online Investors
Advantage, Inc., dated May 25, 1999. (Incorporated by reference from
the Registrant's Registration Statement on Form 10-SB filed on
September 16, 1999; Commission File No. 000-27349).
10.27(+) Lease Agreement between Dc Mason Ltd., and Online Investors Advantage,
Inc., dated October 7, 1998. (Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
10.28(+) Lease Agreement between Gordon Jacobson and Online Investors
Advantage, Inc., dated June 22, 1999. (Incorporated by reference from
the Registrant's Registration Statement on Form 10-SB filed on
September 16, 1999; Commission File No. 000-27349).
10.29(+) Employment Agreement and Stock Option between the Company and Allen D.
Hardman dated July 1, 1997. (Incorporated by reference from the
Registrant's Registration Statement on Form 10-SB filed on September
16, 1999; Commission File No. 000-27349).
10.30(+) Amendment to Employment Agreement between the Company and Allen D.
Hardman. (Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.31(+) Non-Qualified Stock Option Agreement between the Company and Allen D.
Hardman. (Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
27
<PAGE>
10.32(+) Agreement between Momentum Associates Limited and Peter Graham Daley.
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.33(+) Agreement between Momentum Associates Limited and Anthony L. Tobin.
(Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.34(+) Agreement between Momentum Internet Inc., and Crossbow Consultants
Limited. (Incorporated by reference from the Registrant's Registration
Statement on Form 10-SB filed on September 16, 1999; Commission File
No. 000-27349).
10.35(+) Agreement between Asia4sale.com Ltd., and Momentum Internet Inc.,
dated March 25, 1999. (Incorporated by reference from the Registrant's
Registration Statement on Form 10-SB filed on September 16, 1999;
Commission File No. 000-27349).
10.36(+) ZiaSun Technologies, Inc. - 1999 Stock Option Plan.
10.37(+) Consulting Agreement dated January 1, 2000 between the Company and
Netgenesis Strategic Internet Marketing, Ltd.
10.38(+) Client Service Agreement dated January 14, 2000 between the Company
and Continental Capital & Equity Corporation.
10.39(+) Common Stock Purchase Warrant issued to Continental Capital & Equity
Corporation.
10.40(+) Registration Rights Agreement between the Company and Continental
Capital & Equity Corporation.
10.41(++) Consulting Agreement dated January 1, 2000 between the Company and
Credico Inc.
10.42(++) Business Agreement dated April 20, 2000 between the Company and The
McKenna Group.
10.43(++) Sale and Purchase Agreement dated March 13, 2000 between the Company
and Paradym Enterprises Limited.
10.44(++) Shareholders' Agreement between Momentum Internet, Inc., Bensley Ltd.,
and Paradym Enterprises Limited dated March 13, 2000.
27.(++) Financial Data Schedule (submitted electronically for SEC information
only).
(+) Previously filed.
(++) Filed herewith.
(b) Reports on Form 8-K.
The Company filed a Form 8-k on January 18, 2000, and an amended Form 8-K/A
on January 21, 2000. There were no other reports on Form 8-K filed during the
period covered by this report.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
ZiaSun Technologies, Inc.
Dated: May 19, 2000 /S/ Allen D. Hardman
-----------------------------------
By: Allen D. Hardman
Its: President & CEO
29
<PAGE>
Exhibit 10.41
-------------
CONSULTING AGREEMENT
--------------------
This Consulting Agreement ("Agreement") made on this 1st day of January,
2000, by and between ZiaSun Technologies, Inc., a Nevada corporation, located at
462 Stevens Avenue, Suite 106, Solana Beach, California ("Client"), and CREDICO
INC., a Nevada corporation, located at 205 P. South Helix, #68, Solana Beach,
California 92075 ("Consultant"), is made in consideration of the mutual promises
made herein and set forth as follows:
ARTICLE 1. TERM OF CONTRACT
---------------------------
1.1 This Agreement will become effective on the date first stated above and
will continue in effect until the services provided for in this Agreement have
been performed, or until terminated as provided in Article 6, below.
ARTICLE 2. SERVICES TO BE PERFORMED BY CONSULTANT
-------------------------------------------------
2.1 Services: Consultant agrees to perform the following consulting
services for the Client:
2.1.1 Serve as an Advisor to Client as a member of Client's Advisory
Board, with emphasis on assisting Client in the formulation of a long-term
strategic plan which maximizes Client's growth and profit potential.
2.1.2 Provide advice and counsel concerning business development,
mergers and acquisitions which further and are consistent with Client's
long-term strategic goals. Identify and evaluate potential mergers and
acquisitions, and proactively participate in negotiating and developing the
timing and structure of those mergers and acquisitions.
2.2 Delivery Schedule: Performance of all services shall commence
immediately upon execution of this Agreement, and shall continue throughout the
term of this Agreement.
2.3 Method of Performing Services: Consultant will determine the method,
details, and means of performing the above-described services. Consultant may
perform the Services under this Agreement at any suitable time and location of
Consultant's choice.
2.4 Status of Consultant: Consultant is and shall remain an independent
contractor. Consultant and any agents or employees of Consultant shall not act
as an officer or employee of Client. Client assumes no liability for
Consultant's actions in performance, or responsibility for taxes, funds,
payments or other commitments, implied or expressed, by or for Consultant.
Consultant has no authority to assume or create any commitment or obligation on
behalf of, or to bind, Client in any respect.
1
<PAGE>
ARTICLE 3. COMPENSATION
-----------------------
3.1 M&A Fee: For each merger or acquisition consummated by Client where
Consultant is the procuring cause (i.e., the first communication between Client
and the third party occurs solely as the result of Consultant's introduction),
Consultant shall be granted a specified number of shares of the surviving
company, which number shall be agreed upon between Consultant and Client in
advance, and said agreement shall be set forth in a writing executed by both
parties and attached to this Agreement. Upon execution and attachment, such
writing shall be incorporated herein and made a part hereof by this reference
("M&A Fee"). The M&A Fee shall be due and payable to Consultant within fifteen
(15) days following the close of the applicable transaction. Consultant
acknowledges and understands that if the stock which is issued is stock of
ZiaSun Technologies, Inc., it is unregistered, restricted stock, as more fully
described in the Memorandum from George G. Chachas, Esq., to ZiaSun
Technologies, Inc., dated February 17, 2000, and the SEC Release No. 33-7390,
dated February 20, 1997, copies of which are attached hereto as Exhibit "A" and
made a part hereof by this reference. Consultant agrees to fully comply with the
requirements set forth in Exhibit "A," as amended from time to time, and
acknowledges that any certificate(s) for shares of the Client issued pursuant to
this paragraph will contain the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION FOR THESE SHARES UNDER SUCH ACT OR
AN OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
ARTICLE 4. OBLIGATIONS OF CONSULTANT
------------------------------------
4.1 Non-Exclusive Relationship: Client acknowledges and agrees that the
relationship with Consultant is non-exclusive and Consultant may represent,
perform services for, and contract with, as many additional clients, persons or
companies as Consultant in Consultant's sole discretion sees fit.
4.2 Consultant's Qualifications: Consultant represents and warrants that
Consultant has the qualifications and skills necessary to perform the services
under this Agreement in a competent and professional manner, and is able to
fulfill the requirements of this Agreement. Consultant shall comply with all
applicable federal, state and local laws in the performance of its obligations
hereunder, and all materials used by Consultant in fulfilling its obligations
under this Agreement shall not infringe upon any third party copyright, patent,
trade secret or other proprietary right. Consultant acknowledges and agrees that
failure to perform all the services required under this agreement shall
constitute a material breach of the Agreement.
2
<PAGE>
4.3 Availability of Bryant Cragun: Consultant acknowledges and agrees that
a material consideration of this Agreement is that Bryant Cragun shall be
available to provide all services rendered to Client by Consultant under this
Agreement, therefore, the unavailability of Bryant Cragun to perform such
services shall constitute a material breach of this Agreement.
4.4 Indemnity: Consultant agrees to indemnify, defend, and hold Client free
and harmless from all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties, attorneys' fees, and costs, including without limitation expert
witnesses' fees, that Client may incur as a result of a breach by Consultant of
any representation or agreement contained in this Agreement.
4.5 Assignment: Neither this Agreement nor any duties or obligations under
this Agreement may be assigned by Consultant without the prior written consent
of Client.
ARTICLE 5. OBLIGATIONS OF CLIENT
--------------------------------
5.1 Compliance with Requests: Client agrees to comply with all reasonable
requests of Consultant necessary to the performance of Consultant's duties under
this Agreement.
5.2 Place of Work: Client agrees to furnish an office for Bryant Cragun on
Client's premises for use by said representative of Consultant from time-to-time
when visiting the San Diego area to facilitate his performance of the
above-described services.
5.3 Company Provided Information: Client assumes full responsibility for
the accuracy and completeness of all information provided to Consultant.
5.4 Indemnity: Client agrees to indemnify, defend, and hold Consultant free
and harmless from all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties, attorneys' fees, and costs, including without limitation expert
witnesses' fees, that Consultant may incur as a result of any information
provided to Consultant by Client under this Agreement.
ARTICLE 6. TERMINATION OF AGREEMENT
-----------------------------------
6.1 Termination on Notice: Notwithstanding any other provision of this
Agreement, either party may terminate this Agreement at any time by giving
thirty (30) days written notice to the other party. Unless otherwise terminated
as provided in this Agreement, this Agreement will continue in force until the
Services provided for in this Agreement have been fully and completely
performed.
6.2 Termination on Occurrence of Stated Events: This Agreement will
terminate automatically on the occurrence of any of the following events:
3
<PAGE>
6.2.1 Unavailability of Bryant Cragun to provide the services to be
rendered to Client by Consultant under this Agreement.
6.2.2 Bankruptcy or insolvency of either party.
6.2.3 Dissolution of either party.
6.2.4 Assignment of this Agreement by Consultant without the prior
written consent of Client.
6.3 Termination for Default: If either party defaults in the performance of
this Agreement, or materially breaches any of its provisions, the non-breaching
party may terminate this Agreement by giving written notification to the
breaching party. Termination will take effect immediately on receipt of notice
by the breaching party or five (5) days after mailing of notice, whichever
occurs first. For the purposes of this paragraph, material breach of this
Agreement includes, but is not limited to, the following:
6.3.1 Consultant's failure to complete the services specified in this
Agreement.
6.3.2 Consultant's material breach of any representation or agreement
contained in Article 4, above.
6.3.3 Client's material breach of any representation or agreement
contained in Article 5, above.
6.3.4 Client's failure to pay Consultant any compensation due.
ARTICLE 7. CLIENT INFORMATION
-----------------------------
7.1 Nondisclosure/Nonuse of Client Information: Consultant agrees that all
information provided by Client to Consultant under this Agreement shall not be
disclosed or used by Consultant for any purpose other than Consultant's
performance under this Agreement.
7.2 Confidential Information: Any written, printed, graphic, or
electronically or magnetically recorded information furnished by Client for
Consultant's use is and shall remain the sole property of Client. This
proprietary information includes, but is not limited to, investor lists,
marketing information, planning, drawings, specifications, and information
concerning Client's employees, products, services, prices, and operations.
Consultant will keep this confidential information in the strictest confidence,
and will not disclose it by any means to any person except with Consultant's
prior written approval, and only to the extent necessary to perform the services
under this Agreement. This prohibition also applies to Consultant's employees,
agents, and subcontractors. On termination of this Agreement or request by
Client, Consultant will return within two (2) days any confidential information
in Consultant's possession to Client.
4
<PAGE>
ARTICLE 8. GENERAL PROVISIONS
-----------------------------
8.1 Notices: Any notices to be given by either party to the other shall
be in writing and may be transmitted either by personal delivery or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing in the
introductory paragraph of this Agreement, but each party may change that address
by written notice in accordance with this section. Notices delivered personally
shall be deemed communicated as of the date of actual receipt. Mailed notices
shall be deemed communicated as of five (5) days after the date of mailing.
8.2 Attorneys' Fees and Costs: If this Agreement gives rise to a lawsuit or
other legal proceeding between any of the parties hereto, the prevailing party
shall be entitled to recover court costs, necessary disbursements (including
expert witnesses' fees) and reasonable attorneys' fees, in addition to any other
relief such party may be entitled.
8.3 Entire Agreement: This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the services provided by Consultant to Client under this Agreement, and
contains all of the covenants and agreements between the parties with respect to
this Agreement in any manner whatsoever. Each party to this Agreement
acknowledges that no representations, inducements, promises, or agreements,
orally or otherwise, have been made by any party, or anyone acting on behalf of
any party, which are not embodied herein, and that no other agreement,
statement, or promise not contained in this Agreement shall be valid or binding.
8.4 Modifications: Any modification of this Agreement will be effective
only if it is in writing signed by the party to be charged.
8.5 Effect of Waiver: The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of this Agreement by
the other party shall not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times.
8.6 Partial Invalidity: If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
8.7 Law Governing Agreement: This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
8.8 Jurisdiction/Venue: Jurisdiction and venue for any dispute arising out
of this Agreement shall be exclusively in the County of San Diego, State of
California.
8.9 Construction: If any construction is to be made of any provision of
this Agreement, it shall not be construed against either party on the ground
such party was the drafter of the Agreement or any particular provision.
5
<PAGE>
8.10 Time: Time is of the essence in this Agreement.
8.11 Corporate Authorization: If any signatory of this Agreement is a
corporation, said signatory represents and warrants that this Agreement and the
undersigned's execution of this Agreement have been duly authorized and approved
by the corporation's Board of Directors. The undersigned officers and
representatives of the corporation(s) executing this Agreement on behalf of the
corporation(s) represent and warrant they are officers of the corporation(s)
with full authority to execute this Agreement on behalf of the corporation(s).
IN WITNESS WHEREOF, the undersigned have executed this Agreement, effective
as of the date first above written.
CLIENT: CONSULTANT:
ZiaSun Technologies, Inc. CREDICO INC.
/S/ D. Scott Elder /S/ Bryant D. Cragun
- -------------------------------- ----------------------------------
By: Scott Elder By: Bryant D. Cragun
Its: Chairman & CEO Its: President/Treasurer/Secretary
-and-
/S/ Allen D. Hardman
- --------------------------------
By: Allen D. Hardman
Its: Executive Vice President
6
<PAGE>
Exhibit 10.42
-------------
BUSINESS AGREEMENT
------------------
This Agreement is made effective the 20th day of April, 2000, and entered
into at San Diego, California, by and between ZiaSun Technologies, Inc.,
("ZiaSun") a Nevada corporation, located at 462 Stevens Avenue, Suite 106,
Solana Beach, California 92075, and the appropriate McKenna Group entity (Yet to
be named, but hereinafter referred to as "TAMEG"). The McKenna Group, ("TMG") is
a LLC, located at 1755 Embarcadero Road, Palo Alto, California 94303
WHEREAS, ZiaSun is a holding company for worldwide acquisitions, mergers
and/or consolidations, which are compatible with its long-term strategic plans;
and,
WHEREAS, TAMEG is an Internet consulting firm, which provides consulting
services to leading and emerging technology companies worldwide; and,
WHEREAS, ZiaSun and TAMEG are desirous of establishing a business
relationship for the provision of internet consulting services and for
investment in and incubation of emerging technology companies;
Formation of Business Relationship
----------------------------------
NOW, THEREFORE, the parties to this Agreement do hereby voluntarily
associate themselves together as parties in this business relationship, subject
to the following terms and conditions:
Purposes of Business Relationship
---------------------------------
1. The purposes of this business relationship shall be:
1.1 To establish a non-exclusive business relationship under which TAMEG
will provide ZiaSun with Internet consulting services at a preferred
price.
1.2 To anticipate the establishment of an exclusive business relationship
under which ZiaSun and TAMEG will pool their resources, expertise and
capital into a joint fund, MKZ, to facilitate investments in
emerging-technology companies.
Terms of Business Relationship
------------------------------
2. The terms of the business relationship are set forth below:
1
<PAGE>
2.1 Internet consulting services will be provided by TAMEG to ZiaSun under
the following terms:
2.1.1 TAMEG will develop a preferred pricing structure for all ZiaSun
business strategy consulting requirements over the next year with
a discounted fee schedule of 15% below standard rates
2.1.2 TAMEG will build a comprehensive strategy development proposal
for key ZiaSun entities, such as Online Investors Advantage.
ZiaSun will call off specific projects against this master
proposal
2.1.3 TAMEG will begin major strategy projects no later than thirty
days after ZiaSun makes a written request for services
2.1.4 ZiaSun will prepay the sum of five hundred thousand dollars
($500,000) to TAMEG which will be drawn down as services are
provided and expenses are incurred
2.1.5 All sums beyond the initial $500,000 indicated above that fall
due as a result of ZiaSun commissioning work based upon the
proposal outlined in 2.1.3 above will be invoiced net 30 days in
the middle of the month in which the charges occur
2.1.6 ZiaSun agrees to use TAMEG as lead consultant and program manager
for all its internet consulting needs in the 2000-2001 period
2.1.7 TAMEG undertakes to work with ZiaSun to select and manage all
service providers that will be selected to perform complementary
internet consulting activities (e.g., web design) to implement
the strategy that is developed
2.1.8 TAMEG also undertakes to introduce new technology partners to
ZiaSun in a timely manner to keep ZiaSun at the forefront of
applying e-business solutions in the Online Finance Services
industry
2.2 The establishment of an exclusive business relationship under which
ZiaSun and TAMEG will pool their resources, expertise and capital into
a joint fund to facilitate investments in emerging-technology is
described in detail in the document entitled: MKZ-MVA Agreement
2
<PAGE>
Milestones and Time Line
------------------------
3. The milestones and time line for this business venture are:
<TABLE>
<CAPTION>
Milestone Description Completion Date
--------- ----------- -----------------
<S> <C> <C>
3.1 Sign Business Agreement April 20 2000
3.2 Prepayment of Consulting Fees April 28 2000
3.3 Completion of agreed consulting contract May 31 2000
3.4 Complete formation of MVA 30 June 2000
3.5 Review and evaluate a minimum of 31 December 2000
sixty (60) potential investments.
3.6 Close a minimum of six (6) investments. 31 December 2000
3.7 Review and evaluate a minimum of one 31 December 2001
hundred (100) potential investments.
3.8 Close a minimum of ten (10) investments. 31 December 2001
</TABLE>
Termination of Business Relationship
------------------------------------
4. This business relationship shall commence on execution of this Agreement
and shall continue until the first of any of the following events occur:
4.1 Termination on Occurrence of Stated Events: This Agreement will
terminate automatically on the occurrence of any of the following
events:
4.1.1 Non-performance under the consulting contract by either
party
4.1.2 Those described in the MKZ-MVA Agreement.
4.1.3 Dissolution, termination of existence, insolvency, business
failure, appointment of a receiver, assignment for the
benefit of creditors, or the commencement of any proceeding
under any bankruptcy or insolvency law by or against either
party to this Agreement.
4.1.4 Termination for Default: If any party defaults in the
performance of this Agreement or materially breaches any of
its provisions, the non-breaching party may terminate this
Agreement by giving written notification to the breaching
party. Said notice of termination shall be effective
immediately on receipt of notice by the breaching party, one
(1) day after sending the notice by facsimile, or five (5)
days after sending the notice by U.S. mail in accordance
with this Agreement, whichever occurs first. The party in
default shall have twenty-one (21) days after the notice of
termination is effective to cure the default. If the default
is not cured within said twenty-one (21) days, this
Agreement shall automatically terminate. For the purposes of
this paragraph, material breach of this Agreement includes,
but is not limited to, the following:
3
<PAGE>
4.1.5 Any party's material breach of any representation or
agreement contained in this Agreement.
4.1.6 Any voluntary or involuntary assignment or transfer by
either party hereto, without the consent of the other party
hereto, of its interest in this business venture.
4.2 Mutual Termination: The parties may, at any time, mutually agree
to terminate this Agreement.
General Provisions
------------------
5. Business Partners Not Agents: This Agreement does not constitute any
business partner as the agent or legal representative of the other
business partner for any purpose whatsoever. No business partner is
granted any express or implied right or authority by any other business
partner to assume or to create any obligation or responsibility on behalf
of, or in the name of, the other business partner, or to bind the other
business partner in any manner or thing whatsoever.
6. Indemnity: Each business partner agrees to defend, indemnify and hold
harmless the other business partner from and against any and all
liabilities, claims, expenses (including without limitation expert
witnesses' fees), attorneys' fees, damages, causes of action, suits or
judgments relating to and/or arising out of the business partner's
performance under this Agreement.
7. Notice of Claims:
----------------
7.1 If during the term of this Agreement, any business partner shall
have reason to believe there may be a claim against itself or the
other business venture partner in respect of any transaction
growing out of this Agreement, it shall notify the other business
partner in writing within ten (10) days after it knows, or has
reason to know, the basis of any such claim.
4
<PAGE>
7.2 Failure to give the notice prescribed by Item 16.1 shall relieve
the other business partner from any and all liability on any
claim in respect to any transaction growing out of this
Agreement.
7.3 The provisions of this section shall survive the termination of
any other provisions of this Agreement.
8. Law: This Agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to conflict of laws
provisions.
9. Attorneys' Fees: If this Agreement gives rise to a lawsuit or other legal
proceeding between any of the parties hereto, the prevailing party shall be
entitled to recover court costs, necessary disbursements (including without
limitation expert witnesses' fees) and reasonable attorneys' fees, in
addition to any other relief such party may be entitled. This provision
shall be construed as applicable to the entire contract.
10. Injunctive Relief: Business partners hereby agree the subject matter of
this Agreement is unique, unusual and extraordinary in nature such that it
has a peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages in an action at Law. Each business partner,
therefore, expressly agrees that the other business partner, in addition to
any other rights or remedies which the other business partner may possess,
shall be entitled to injunctive and other equitable relief to prevent or
remedy a breach of this Agreement by a business partner.
11. Binding on Heirs: This Agreement shall be binding on and shall inure to the
benefit of the heirs, executors, administrators, successors, and assigns of
the business venture partners.
12. Jurisdiction/Venue: If any dispute arises out of this Agreement, it is
agreed that jurisdiction and venue shall lie exclusively in a competent
court in the County of San Diego, California, U.S.A.
13. Entire Agreement/Modification: This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the subject matter hereof, and no other agreement, statement, or
promise relating to the subject matter of this Agreement which is not
contained herein shall be valid or binding. Any modification of this
Agreement will be effective only if it is in writing.
5
<PAGE>
14. Assignment: No business partner shall have the right to assign any right or
interest arising under this Agreement without the prior written consent of
the other business partner.
15. Severability: If any provision in this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force without being impaired
or invalidated in any way.
16. Waiver: The waiver by any party of any breach of a provision of this
Agreement by the other party shall not constitute a continuing waiver or a
waiver of any subsequent breach of the same or of a different provision of
this Agreement. Except as otherwise specifically provided in this
Agreement, nothing contained herein shall be deemed to restrict or prevent
any party from exercising legal or equitable rights or from pursuing legal
or equitable remedies in connection herewith.
17. Notices and Requests: Except as otherwise provided herein, any notice,
demand, or request required or permitted to be given hereunder shall be in
writing and shall be deemed effective seventy-two (72) hours after having
been sent via facsimile to the addressee at the office set forth in the
first paragraph of this Agreement.
18. Ratification: This Agreement will be activated, and in force, upon
ratification within seven (7) days by the partners of the McKenna Group,
who are listed on Page No. 7, and who are acting for and in behalf of
TAMEG.
19. Construction: Each party cooperated in the drafting of this Agreement. If
any construction is to be made of any provision of this Agreement, it shall
not be construed against either party on the ground such party was the
drafter of the Agreement or any particular provision.
20. Time is Of The Essence: Time is of the essence in this Agreement.
21. Entity Authorization: Each signatory of this Agreement represents and
warrants that this Agreement and the undersigned's execution of this
Agreement has been duly authorized and approved by the corporation's Board
of Directors, if necessary, or the governing board of the entity, if
necessary. The undersigned officers and representatives of the entities
executing this Agreement on behalf of the entities represent and warrant
they possess full authority to execute this Agreement on behalf of the
entities.
22. Execution By Facsimile: This Agreement may be executed by the parties and
transmitted by facsimile. A facsimile signature of a party shall be binding
as an original. If a party sends a copy of the Agreement or part thereof
with that party's signature by facsimile, that party shall promptly send
the original by first class mail.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
THE McKENNA GROUP ZIASUN TECHNOLOGIES, INC.
- ----------------- -------------------------
/S/ Geoff Mott /S/ Allen D. Hardmand
- -------------------------------- ---------------------------------------
By: Geoff Mott By: Allen D. Hardman
Its: Managing Partner Its: President & Chief Executive Officer
/S/ D. Scott Elder
----------------------------------------
By: D. Scott Elder
Its: Chairman of Board
Ratified by:
/S/ Regis McKenna /S/ John Calhoun /S/ Pam Kline
- ------------------ -------------------- -------------------------
Regis McKenna John Calhoun Pam Kline
/S/ Gayle Holste /S/ Phillip Gerbert /S/ Christopher D. Outram
- ------------------ -------------------- -------------------------
Gayle Holste Phillip Gerbert Christopher D. Outram
/S/ Glen MacDonald /S/ Amiel Kornel /S/ Hiroshi Menjo
- ------------------ -------------------- -------------------------
Glen MacDonald Amiel Kornel Hiroshi Menjo
7
<PAGE>
Exhibit 10.43
-------------
SALE AND PURCHASE AGREEMENT
---------------------------
THIS AGREEMENT is made the 13th day of March 2000
BETWEEN
- -------
1. Momentum Internet Inc. ("MII") a company incorporated under the laws of the
British Virgin Islands and having a correspondence address at 12A, First
Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong and
2. Paradym Enterprises Limited ("PEL") a company incorporated under the laws
of the British Virgin Islands and having a correspondence address at Suite
908B, Lippo Centre, Tower 2, 89 Queensway, Hong Kong.
WHEREAS
- -------
1. AsiaEnet Limited having its registered office situate at 12A First Pacific
Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong ("AsiaEnet") is a Hong
Kong incorporated company with an authorized capital of HK$10,000 and a
paid up capital of HK$ 100 divided into 100 shares of HK$1 each.
2. MII is registered as the legal owner of 90 shares in AsiaEnet and wishes to
sell 10 shares to PEL on the terms and conditions hereinafter appearing
NOW IT IS HEREBY AGREED as follows:
- -----------------------
1. Definitions:
- -----------------
Completion : shall be on the date hereof
Sale Shares : ten shares registered in the name of MII in AsiaEnet
2. Consideration
- ------------------
In consideration of the payment by PEL of US$200,000 on Completion MII as
beneficial owner shall sell the Sale Shares to PEL
3. On Completion
- ------------------
3.1. MII shall deliver to PEL
3.1.1. a share transfer form duly executed of the Sale Shares in
favour of PEL
1
<PAGE>
3.1.2. a sell note covering the Sale Shares in favour of PEL
3.1.3. a share certificate for the Sale Shares
3.1.4. a board resolution of AsiaEnet approving the transfer of the
Sale Shares from MII to PEL
3.2. PEL shall pay to MII by telegraphic transfer the sum of US$200,000.
4. MII hereby warrants and covenants with PEL as follows:
- ---------------------------------------------------------
4.1. That at the date hereof AsiaEnet is incorporated in Hong Kong and that
all returns particulars resolutions and other documents required to be
filed with or delivered to the Companies Registry pursuant to the
Companies Ordinance have been correctly and properly made up and filed
and delivered
4.2. That at the date hereof AsiaEnet has obtained all necessary business
governmental regulatory and other licences and authorizations required
to carry on its business
4.3. That AsiaEnet has disclosed to PEL full details of all its financial
obligations and that at the date hereof there has not been any
material change in relation thereto
4.4. That AsiaEnet has disclosed to PEL all material agreements to which it
is a patty and that at the date hereof it has not entered into any
further such agreements
4.5. That MII has the authority to enter into a Shareholders Agreement of
even date and made between MII, Bensley and PEL in respect of AsiaEnet
4.6. That MII has registered the domain name "tigertooth.com", has the
exclusive right to use the same and will transfer the same as soon as
practical to AsiaEnet
4.7. That AsiaEnet will obtain revenue share agreements with as many
suitable websites as possible on behalf of the tigertooth.com web
portal.
5. Notices
- ----------
5.1. Any notice, demand or other communication to be given hereunder shall
be deemed to have been delivered (a) if given or made by letter, if by
airmail within seven (7) days or if by local Hong Kong post within two
(2) days from the date of posting; (b) if by hand when actually
delivered to the relevant address: (c) if given or made by fax or
electronic mail, when dispatched.
5.2. Such notice shall be sent if by post or by hand to the last known
address of either party or in the case of electronic transmission to
the last known fax number or electronic mail address of either party.
2
<PAGE>
6. Governing law
- ----------------
6.1. This Agreement and all rights and obligations of the parties hereto
shall be governed and construed in accordance with the Laws of Hong
Kong and the parties hereto hereby submit to the jurisdiction of the
Hong Kong Courts.
IN WITNESS whereof this Agreement has been executed on the day and year first
above written.
SIGNED by /s/ Anthony Tobin ) For and on behalf of
) MOMENTUM INTERNET INCORPORATED
for and on behalf of Momentum )
) /s/ Anthony Tobin
Internet Inc. in the presence of:- ) Authorized Signature(s)
/s/
SIGNED by Terrence Annamonthodo ) For and on behalf of
) PARADYM ENTERPRISES LIMITED
for and on behalf of Paradym )
) /s/
Enterprises Limited in the presence) Authorized Signature(s)
)
of: /s/ )
<PAGE>
Exhibit 10.44
-------------
THIS SHAREHOLDERS' AGREEMENT is made the 13th day of March 2000
BETWEEN
(1) Momentum Internet Inc. ( "MII ") a company incorporated under the laws
of the British Virgin Islands and having a correspondence address at
12A, First Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong
(2) Bensley Ltd. ( "Bensley ") a company incorporated under the laws of
the British Virgin Islands and having a correspondence address at
Suite 16C, On Hing Building, 1-9 On Hing Terrace, Central, Hong Kong
and
(3) Paradym Enterprises Limited ("PEL"), a company incorporated under the
laws of the British Virgin Islands and having a correspondence address
at Suite 908B, Lippo Centre, Tower 2, 89 Queensway, Hong Kong.
WHEREAS
1. AsiaEnet Limited having its registered office situate at 12A First
Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong
("AsiaEnet") is a Hong Kong incorporated company with an authorized
capital of HK$10,000 and a paid up capital of HK$100 divided into 100
shares of HK$1 each.
2. AsiaEnet carries on the business of providing various internet
services.
3. As at the date hereof MII is the registered owner of 90 shares and
Bensley is the registered owner of 10 shares in AsiaEnet.
4. Pursuant to a Sales and Purchase Agreement of even date and made
between MII and PEL, PEL has agreed to purchase 10 shares in AsiaEnet
from MII on the terms and conditions contained in the Sales and
Purchase Agreement
5. AsiaEnet wishes to raise additional capital by the issue of another
900 shares and the parties hereto have agreed to subscribe for those
shares on the terms and conditions contained in this Agreement.
6. The parties are also desirous of entering into this Agreement to
regulate the future relationship between each other and AsiaEnet's
affairs.
IT IS HEREBY AGREED
1. INTERPRETATION
--------------
1.1 In this Agreement unless the context otherwise requires:
1
<PAGE>
"Associate"
means:
(i) in relation to any company, any other company or company which is its
Subsidiary or Holding Company or is a fellow Subsidiary of any such
Holding Company or one in the equity capital of which it and/or such
other company or companies taken together are directly or indirectly
interested so as to exercise or control the exercise of 20 per cent or
more of the voting power at a general meeting or to control the
composition of a majority of the board of directors or the majority of
votes of the board of directors; or
(ii) in relation to any individual, means any company in the equity capital
of which that individual is directly or indirectly interested so as to
exercise or control the exercise of 20 per cent or more of the voting
power at general meeting, or to control the composition of a majority
of the board of directors and any other company which is its
Subsidiary or Holding company or a fellow Subsidiary of any such
Holding Company.
"Board"
at any time means the board of Directors at that time;
"Completion"
shall be on the date hereof;
"Control"
in relation to a body corporate, means the power of a person
directly or indirectly to secure:
(a) by means of the holding of shares or the possession of voting
power (either at shareholder level or director level) in or in
relation to that or any other body corporate; or
(b) by virtue of any powers conferred by the Articles of Association
or other document regulating that or any other body corporate,
that the affairs of the first mentioned body corporate are conducted
in accordance with the wishes of that person:
"Directors"
means at any time the directors of AsiaEnet at that time including
where applicable any alternate directors;
"Group"
at any time means AsiaEnet and its Subsidiaries at that time;
2
<PAGE>
"Shares"
means shares of HK$ 1.00 each in the capital of AsiaEnet;
"Shareholders"
means the parties hereto and includes any person who undertakes to be
bound hereby pursuant to Clauses 8 and 9;
"Subsidiaries" and "Holding Companies"
in respect of a person means that person's subsidiaries or holding
companies and for this purpose "subsidiaries" and holding companies
have the meanings ascribed thereto in Section 2 of the Companies
Ordinance of Hong Kong;
1.2 In this Agreement, words importing the singular include the plural and
vice versa, words importing one gender include both genders and the
neuter and references to persons include bodies corporate or
unincorporate.
1.3 References in this Agreement to statutory provisions are references to
those provisions as respectively amended or re-enacted from time to
time (if and to the extent that the provisions as amended or
re-enacted are for the purposes hereof equivalent to those provisions
before such amendment or re-enactment) and shall include any provision
of which they are re-enactments (if and to the extent aforesaid) and
any subordinate legislation made under such provisions.
1.4 References herein to "Clauses" and "Schedules" are to clauses of and
schedules to this Agreement respectively and a reference to this
Agreement includes a reference to each Schedule hereto.
1.5 The headings and table of contents in this Agreement are for
convenience only and shall not affect its interpretation.
2. ASIAENET
--------
2.1 The Shareholders hold, or will be allotted pursuant to the provisions
of Clause 3 hereof, the number of Shares set out in respect of each
Shareholder in Schedule 1.
3. ALLOTMENT OF SHARES
-------------------
3.1. MII, Bensley and PEL hereby agree on Completion to subscribe and pay
for an additional 900 shares in AsiaEnet in the following proportions:
a) MII: 720 shares
b) Bensley: 90 shares
c) PEL: 90 shares
3
<PAGE>
3.2. MII and Bensley hereby agree to subscribe at par value of HK$1 each
per share
3.3. PEL hereby agrees to subscribe at the price of US$8,888.89 per share.
3.4. The parties hereto will execute letters of application for the
aforesaid shares.
3.5. MII together with its letter of application shall deposit the sum of
HK$720 with AsiaEnet.
3.6. Bensley together with its letter of application shall deposit the sum
of HK$90 with AsiaEnet.
3.7. PEL together with its letter of application shall transfer by
telegraphic transfer the sum of US$800,000 to the bank account of
AsiaEnet.
3.8 On Completion MII and Bensley will procure that the Directors shall
arrange the allotment and issue by AsiaEnet to the parties hereto the
said 900 shares and shall deliver to the parties hereto share
certificates in respect of the 900 shares.
4. THE BOARD
---------
4.1 The Board will comprise a minimum of three directors.
4.2 PEL will be entitled to appoint one director.
4.3 The Chairman and Managing Director of AsiaE Net will be appointed by
MII Voting at meetings of the Board shall be by way of directors vote
and each of the directors shall have one vote at meetings of the
Board. Each of the directors shall be entitled to nominate an
alternate director and the parties shall procure that such nomination
of an alternate director shall be unanimously approved by the board of
directors. 4.4 Each Shareholder shall have the right to remove any
Director appointed by it by notice in writing and by notice in writing
to appoint another person to act in place of such Director in
accordance with clause 4.5. Any Shareholder removing a Director shall
be responsible for and shall indemnify the other Shareholders and
AsiaEnet against any claim by such Director for wrongful dismissal (if
any) arising out of such removal.
4.5 Notice of any appointment or removal under this Clause shall be given
to the other Shareholders and to AsiaEnet at its address given in this
Agreement and within twenty-one(21) days after receipt of such notice
the parties hereto shall join in procuring (so far as lies within
their respective powers) that such action is taken as is necessary
under the Articles to effect the appointment or removal concerned.
4
<PAGE>
4.6 The quorum for Board meetings and committee meetings shall be two
Directors (or their alternates) of whom one Director is nominated by
PEL and the second by MII.
4.7 Any resolution of the Board in writing signed by all of the Directors
shall be valid and effective as a resolution passed by the Board at a
duly convened Board meeting. Any such resolution may be contained in
one document or separate copies prepared and circulated for signature
by the Directors.
4.8 The control and ultimate management of AsiaEnet shall lie with the
Board. The Directors shall be entitled to receive and to have access
to all information regarding the affairs of AsiaEnet and its
Subsidiaries.
4.9 Subject to any statutory disqualification, no Director shall be
removed during his term of office except by the Shareholder who
appointed him provided that the requirements of clauses 4.2 and 4.3
continue to be satisfied.
4.10 A Director may appoint an alternate Director in accordance with the
Articles and such alternate shall, in the absence of the Director who
appointed him, be treated for the purposes of this Agreement as if he
were that Director. If an alternate is also a Director in his own
right, he shall be entitled at any meeting of the Board to cast both
his own vote(s) as a Director and the vote(s) of his appointers(s).
4.11 Any person appointed as a Director under Clauses 4.2 and/or an
alternate Director under Clause 4.10 shall give to AsiaEnet an address
in Hong Kong for service of notices of Board meetings and shall be
entitled to make full disclosure to the person appointing him of any
information relating to AsiaEnet of which such appointee shall become
aware in the course of his appointment.
4.12 Unless all the Directors otherwise agree in writing (in accordance
with the Articles), at least two (2) days' notice shall be given to
each Director of each meeting of the Board which notice shall contain
reasonable particulars of matters to be discussed at such meeting
together with all relevant papers for discussion. Minutes of all
meetings of the Board shall be circulated promptly to each Director
following each meeting.
4.13 Subject to compliance with all requirements of Hong Kong, meetings of
the Board shall take place in Hong Kong unless otherwise agreed by the
Board. Such Board meeting shall be at such time or times as may be
required. Board meetings may take place by telephone or other means of
telecommunication by virtue of which all participants are able to hear
each other. Any such Board meeting may at the request of such number
of Directors as together comprise a quorum of the relevant Board, be
held in such manner.
5
<PAGE>
4.14 Other than reimbursements of reasonable expenses incurred, no salary
or fees shall be paid to any of the Non-executive Directors relating
to attendance at Board or general meetings of AsiaEnet or otherwise in
relation to the performance of their duties as Directors.
5. BUSINESS OF ASIAENET
--------------------
The main business of AsiaEnet shall be as the holding company of the
internet portal service named "Tigertooth.com", together with
ancillary or related activities carried on, in each case, in
accordance with the provisions of this Agreement.
6. INFORMATION TO SHAREHOLDERS
6.1 Each Shareholder shall be entitled access to the books, records and
documents of the Group at any reasonable time (unless the Board
reasonably believes that such access by a Shareholder is contrary to
the interests of the Group).
6.2 The Board shall arrange for the preparation of management accounts of
the Group every quarter and send such management accounts to every
Shareholder by the twentieth day of the following quarter and send
audited accounts annually to each Shareholder.
6.3 The Board shall notify Shareholders of any offer which it considers
reasonable, in its absolute discretion, received by it to acquire all
or a substantial part of the issued share capital or the business of
AsiaEnet.
7. SHAREHOLDERS' APPROVAL
----------------------
7.1 The management of the business of AsiaEnet shall be vested in the
Board, who may exercise all such powers and do all such acts and
things pursuant to the powers and authorities expressly conferred by
this Agreement or by the Articles or as may be exercised or done or
approved by AsiaEnet.
7.2 The quorum necessary to constitute a meeting of the Shareholders of
AsiaEnet shall be two Shareholders of which one is a corporate
representative of PEL.
7.3 Unless all Shareholders agree in writing to shorter notice not less
than five (5) working days' notice of a Shareholders meeting must be
given to all Shareholders unless in the reasonable opinion of the
Directors any of the business on the agenda of the meeting is likely
to have a material direct effect on the value of the Shares in which
case not less than fourteen (14) days' notice of the meeting shall be
given to the Shareholders.
6
<PAGE>
7.4 AsiaEnet shall not, and shall procure that no member of the Group
shall, carry out any of the following save with the prior approval by
resolution of Shareholders holding in aggregate not less than sixty
(60) percent of the issued Shares at the time the resolution is
passed:
(a) the incurring of capital expenditure by any Group company of over
US$100,000 on any item or US$250,000 in any financial year of
AsiaEnet;
(b) any public offer for sale of the issued or new shares of AsiaEnet
or its Subsidiaries or application for listing of the shares of
AsiaEnet or its Subsidiaries on any recognized stock exchange;
(c) approving and/or adopting any financial statements which are in
any wayqualified;
(d) the declaration of a dividend or making of any other distribution
toshareholders;
(e) the giving of any guarantee or indemnity or any mortgage, charge,
pledgeor other security or granting or permitting to arise any
encumbrance over any of the assets of any Group company except
for the exclusive benefit of the Group;
(f) the sale or other disposal of any of the issued share capital of
AsiaEnet;
(g) the sale or other disposal of material parts of any of the
databases to be assembled by AsiaEnet, beyond the normal course
of business;
(h) the entry into or variation of any contract or arrangement
(whether legally binding or not) with any of its Directors,
senior management or any Shareholder or with any Associate of a
Director or Shareholder, including, without limitation, the
granting of any option or other right to acquire or call for the
issue of Shares; and
(i) the borrowing of any money in excess of a sum equivalent to
thirty (30) percent or more of the issued and paid up share
capital of AsiaEnet.
7.5 AsiaEnet shall not, and shall procure that no member of the Group
shall, borrow any money in excess of the sum equivalent to fifty (50)
per cent of the paid up issued share capital of AsiaEnet, save with
the prior approval by resolution of Shareholders holding in aggregate
not less than sixty (60) per cent of the issued Shares at the time of
the resolution.
7
<PAGE>
7.6 The parties to this Agreement shall procure that the Articles are
amended to reflect the provision of this Clause 7.
8. FUNDING THE BUSINESS OF ASIAENET
--------------------------------
8.1 AsiaEnet shall be funded by:
- paid up share capital;
- loans from Shareholders provided that no Shareholder shall be
obliged to advance any loan to AsiaEnet;
- advances and credit from third parties; and
- further issues of Shares.
8.2 Subject to AsiaEnet's Memorandum of Association, the Articles and
Clause 2, the Board may increase the authorized share capital of
AsiaEnet and may allot and issue new Shares provided that if the Board
or AsiaEnet wishes to issue any Shares, such Shares shall, before
issue, be offered to the Shareholders in proportion as nearly as
circumstances will admit to the number of Shares held by each of them
at that time respectively. The offer, which shall be in writing, shall
specify the number of shares offered and the price per Share and limit
the time (not being less than 21 days after service) within which the
officer, if not accepted, will be deemed to have been declined. After
the expiration of that time, or on the receipt of an intimation from a
Shareholder that it declines to accept the Shares offered, the Board
shall offer the Shares so declined or deemed to have been declined in
like manner (except that the period which may be specified as the time
within which such further offer, if not accepted, will be deemed to
have been declined may be less than 21 days but shall be not less than
seven days after service) to Shareholders other than those who have so
declined or who are deemed so to have declined.
8.3 The Shareholders (if more than one) entitled to such Shares so
declined or deemed to have been declined shall be entitled to them in
the proportion as nearly as circumstances will admit to the number of
Shares then held by them respectively. If any of the Shares comprised
in such further offer are declined or deemed to be declined, the Board
shall again offer the Shares so declined or deemed to have been
declined in this manner and this procedure shall be repeated as often
as may be necessary so long as at least one Shareholder for the time
being shall not have declined or be deemed to have declined any such
offer.
8.4 If, after this procedure has been exhausted as aforesaid, any of the
Shares remain undisposed of to any of the Shareholders, the Board may
dispose of those Shares in such manner as it considers most beneficial
to AsiaEnet but not in any event at a price lower than that at which
the Shares were originally offered to the Shareholders.
8
<PAGE>
8.5 The Board shall be entitled, in its discretion, instead of making
successive offers to Shareholders as aforesaid to permit each
Shareholder who accepts in full the first such offer simultaneously to
apply for any of the Shares so offered to the other Shareholders which
are declined or deemed to be declined by such other Shareholders (each
such application being referred to in this Clause as an "excess
application"); provided that, in the event of the aggregate number of
Shares the subject of the excess applications exceeding the aggregate
number of Shares which are so declined or deemed to be declined,
acceptances by the Board of the excess applications shall be in the
proportions as between the Shareholders making the excess applications
which would have resulted had successive offers been made as aforesaid
and had each such offer been accepted by each of such Shareholders in
full or to such lesser extent as would avoid the aggregate cumulative
amount of such Shareholders' acceptances exceeding the amount of such
Shareholder's excess application. If the Board exercises its
discretion under this Clause 8.6 it must do so (and notify the
Shareholders of such exercise) prior to the first offer of Shares to
Shareholders pursuant to Clause 8.3.
8.6 If any Shares are to be issued to a third party pursuant to the
provisions of this Clause,the directors shall require as a condition
precedent to the allotment that the third party shall undertake by
deed expressed to be supplemental to this Agreement to be bound by the
terms of this Agreement (including this Clause.).
9. TRANSFER OF SHARES
------------------
9.1 No Share or any interest in any Shares' may be sold, assigned,
transferred or otherwise disposed of, save as set out herein, except
if the Shares are listed on any recognized stock exchange, upon which
listing, this Clause 9 shall cease to have effect, unless the
Shareholders otherwise agree in writing.
9.2 No Shareholder shall create or permit any mortgage, charge, pledge,
lien, encumbrance or other security interest on or over or in respect
of all or any of the Share held by it.
9.3 Subject to Sub-clause 9.4, each Shareholder may, or may jointly with
other Shareholders, at any time transfer all (but not part only) of
its or their Shares to any one of its or their wholly-owned
subsidiaries, or if the Shareholder is a natural person to a company
wholly-owned by that person or wholly-owned jointly with other
Shareholders, (such subsidiary or company wholly owned by a natural
person being referred to in this Clause only as a "Subsidiary"),
provided always that
(a) before such transfer takes place the Subsidiary shall have agreed
in writing with AsiaEnet that if the Subsidiary ceases to be
Subsidiary of the original transferor(s) it shall give notice of
such proposed cessation and forthwith transfer or procure the
transfer of the relevant Shares back to the original
transferor(s); and
9
<PAGE>
(b) the transferring Shareholder(s) shall remain liable for any and
all of its or their obligations under this Agreement.
9.4 Subject to Clause 2 and Sub-clause 9.5, if any Shares (or any interest
in any Shares) are proposed to be transferred to a third party
(including a Subsidiary) pursuant to the provisions of this Clause:
(a) the Board shall be entitled, as a condition precedent to the
registration of the relevant transfer to call upon the transferor
to furnish the Directors with such evidence as the Directors may
reasonably require as to the identity of the relevant third
party, the amount proposed to be paid by the relevant third party
for such Shares and any rebates, deductions, allowances or
commissions payable in respect of the relevant transfer;
(b) the Board shall be entitled to refuse to register the Shares
which the transferor proposes to transfer to such third party if
the Board in its absolute discretion so determines; and
(c) the transferor shall as a condition precedent thereto procure
that the third party acquiring Shares shall undertake by deed
expressed to be supplemental to this Agreement with the other
parties for the time being hereto to be bound by the terms of
this Agreement.
9.5 Subject to Sub-Clause 9.3 and Clause 11, the Shareholders shall
transfer their shares according to the following procedure:
(a) before transferring any Shares the Shareholder proposing to
transfer them (the "Proposing Transferor") shall give a notice in
writing (a "Transfer Notice") to AsiaEnet that it desires to
transfer them and specify the sum which it considers to be the
fair value of the Shares offered for sale, and the Transfer
Notice shall constitute AsiaEnet the agent of the proposing
Transferor, together with all rights than attached thereto, for
the sale of all the Shares then held by the Proposing Transferor
(the "Sale Shares") to any other Shareholders, at the price
proposed, or if applicable at the value to be fixed in accordance
with Sub-clause 9.10 (the "Sale Price"). A Transfer Notice must
relate to all and not part only, of the Shares held by the
Proposing Transferor and once given or deemed to be given shall
be irrevocable except with the consent of the Board for the
purposes of which consent directors nominated by the Proposing
Transferor shall be unable to vote;
(b) the Sale Shares shall be offered by AsiaEnet in the first
instance for purchase at the Sale Price to all the Shareholders
(other than the Proposing Transferor) in proportion to the
aggregate number of Shares held by each of them respectively. At
the expiration of the time limit of such offer for the acceptance
of such Shares (being 21 days after service), the balance (if
any) of the Sale Shares offered but not accepted shall be offered
for purchase in line manner (except that the period which may be
specified as the time within which such further offer, if not
accepted, will be deemed to have been declined may be less than
21 days but shall be not less than seven days after service) to
the Shareholders who have accepted all the Shares offered to
them; and
10
<PAGE>
(c) those Shareholders (if more than one) shall be entitled to
purchase the balance of the Sale Shares in the proportion as
nearly as circumstances will admit to the aggregate number of
Shares held by each of them respectively. If any of the Shares
comprised in such further offer are declined or deemed to be
declined, the Board shall again offer the Shares so declined or
deemed to be declined as provided above and this procedure shall
be repeated as often as may be necessary so long as at least one
Shareholder shall not have declined or be deemed to have declined
any such offer.
9.6 (a) If one or more Shareholders shall have accepted the offer or
offers made by AsiaEnet on behalf of the Proposing Transferor to
purchase all of the Sale Shares at the Sale Price (any such
Shareholder being called a "Purchaser") AsiaEnet shall give
notice in writing thereof to the Proposing Transferor who shall
be bound, upon payment of the prescribed price, to transfer such
Shares to the respective Purchasers thereof.
(b) Every such notice shall state the name and address of the
Purchaser or Purchasers and the number of Shares agreed to be
purchased by him or them and the purchase shall be completed at a
place and time to be appointed by the Board, not being less than
seven days nor more than 21 days after the date of such notice,
and the proposing Transferor shall thereupon hand over to the
Purchaser a transfer or transfers in his or their favour in
respect of the Shares duly executed by it together with the
certificate for such shares; and
(c) if a Proposing Transferor, after having become bound to transfer
any Share to a purchaser, shall default in transferring it the
Board may authorize some person to execute on behalf of and as
agent for the Proposing Transferor any necessary transfer and may
receive the purchase money and shall thereupon cause the-name of
the purchaser to be entered in the register as the holder of such
Share and hold the purchase money in trust for the Proposing
Transferor.
9.7 If AsiaEnet has not received acceptances by Shareholders to purchase
all of the Sale Shares at the Sale Price the Proposing Transferor
shall be entitled to retain all of the Sale Shares or at any time
within 60 days after the expiry of the period in which the Sale Shares
were offered to other Shareholders to:
11
<PAGE>
(a) accept the offer from the Shareholders to purchase that part of
the Sale Shares at the Sale Price that they have offered to
purchase and either retain the balance or sell the balance to a
third party approved in writing by the Board in advance of the
proposed transfer at a price not less that the Sale Price
(without any deduction, rebate or allowance) and otherwise on
terms no more favourable than those described in the Transfer
Notice; or
(b) sell all of the Sale Shares to any one person at a price not less
than the Sale Price (without any deduction, rebate or allowance)
and otherwise on terms no more favourable than those described in
the transfer notice, provided that, if the proposed transferee is
not a Shareholder, the approval in writing of the board of the
proposed transfer is obtained before the Sale Shares are
transferred.
9.8 Forthwith upon the sale of Shares by a Shareholder the transferee
shall use its best endeavors to procure that any guarantee given by
the transferor of those Shares in respect of the obligations of
AsiaEnet is released in proportion to the Shares sold and replaced by
such other several guarantee or security as shall be acceptable to the
relevant recipient of the original guarantee. Pending replacement of
such guarantee (or portion thereof) the transferee shall indemnify the
transferor of the Shares from liability thereunder (or under the
relevant part thereof) relating to periods from the date of transfer.
9.9 If any difference shall arise between the Proposing Transferor and the
Directors appointed by Shareholders other than the Proposing
Transferor as to the fair value of the Sale Shares then:
(a) the fair value shall be fixed by an independent person jointly
appointed by the Proposing Transferor and AsiaEnet or, if they
cannot agree on a mutually acceptable person within seven (7)
days of the difference arising, then by a firm of certified
public accountants to be nominated by the President for the time
being of the Hong Kong Society of Accountants, who when appointed
or nominated and in certifying the sum which in his opinion is
the fair value of the Sale Shares shall be considered to be
acting as an expert and not as an arbitrator and whose costs
shall be borne by AsiaEnet; and
(b) the value so fixed shall be the fair value calculated as at the
date of the Transfer Notice upon the basis of an open market sale
of the Shares between an unconnected willing but not anxious
buyer and an unconnected willing but not anxious seller, both
having the same full knowledge and all relevant data, and on the
assumption that the purchaser had no other interest in AsiaEnet
and that AsiaEnet would continue in business as a going concern.
Such value will then be pro rated, to determine the value of the
particular Sale Shares which are proposed to be sold.
12
<PAGE>
9.10 Upon appointment or nomination (and acceptance of such appointment or
nomination) of an independent person in accordance with Sub-clause
9.10:
(a) that person must complete the required valuation and deliver the
same to the Proposed Transferor and AsiaEnet within 30 days of
the acceptance of his appointment or nomination or such other
period as the Proposed Transferor and AsiaEnet may agree;
(b) that person must take into account in addition to these matters
specified in Sub-clause 9.10 all relevant facts, matters and
circumstances in arriving at his valuation;
(c) AsiaEnet and the Proposed Transferor must promptly provide all
information which the nominated valuer may request and must not
unreasonably withhold such information or otherwise delay the
preparation of the valuation.
9.11 In any case where a Transfer Notice is deemed to be served on behalf
of the Proposing Transferor the Directors shall obtain a report from
an independent person as to the fair value of the Shares offered in
accordance with Sub-clauses 9.10 and 9.11 and this shall constitute
the Sale Price therefor.
9.12 The parties to this Agreement shall procure that the Articles are
amended to reflect the provisions of this Clause 9.
10. CONFIDENTIALITY AND ANNOUNCEMENTS
---------------------------------
10.1 Subject to the provisions of Clause 10.4, each party shall, and shall
procure its Associates and advisers will, treat in confidence all
non-public information regarding the Group contained in written
documents and materials ("Confidential Material") which they may
obtain from the Group or any other party and in the event that this
Agreement is not completed or this Agreement is rescinded or otherwise
terminated, will return such Confidential Material to the party
providing them.
10.2 Subject to the provisions of Clause 10.4, each of the Shareholders and
AsiaEnet hereby undertakes to each other party to this Agreement that
it will not, and will procure that none of its Subsidiaries will, at
any time after the date of this Agreement, divulge or communicate to
any person other than to its professional advisers, to regulatory
bodies or when required by law, or to officers or employees of
AsiaEnet whose province it is to know the same or on the instructions
of the board of directors of AsiaEnet, any confidential information
concerning the business, accounts, finance or contractual arrangements
or other dealings, transactions or affairs of the Group which may be
within or may come to its knowledge and it shall use its best
endeavors to prevent the publication or disclosure of any such
confidential information concerning such matters.
13
<PAGE>
10.3 Any announcement by any party required to be made pursuant to any
relevant law or the requirements of any relevant stock exchange shall
be issued only after such prior consultation with the other parties as
is reasonably practicable in the circumstances.
10.4 Nothing in this Clause shall prohibit any Shareholder from making any
publicity announcements relating to its interest in AsiaEnet and the
general nature of AsiaEnet's business from time to time (without
disclosing confidential information of AsiaEnet) provided that the
prior consent of the other Shareholders to such publicity or
announcement is obtained (which consent shall not be unreasonably
withheld or delayed).
11. ARBITRATION
-----------
Where the parties agree that arbitration is a more suitable method of
resolving any dispute, claim, controversy or difference arising out of
or in connection with this Agreement which cannot be settled by mutual
agreement or friendly consultation, a party hereto shall give the
other parties written notice of its intent to resolve such matter by
arbitration and such matter shall be finally settled by arbitration.
Such arbitration shall be held in Hong Kong, in English, and shall be
referred to the President for the time being of the Hong Kong Society
of Accountants. This Agreement shall be governed by and construed in
accordance with the laws of Hong Kong.
12. COMPETITION
-----------
The Shareholders acknowledge that the Group shall be the primary
vehicle for the exploitation of their business relating to the
provision of information and services on the Internet and each party
agrees that for so long as it remains a Shareholder and for one year
thereafter it will not carry on the business of providing information
and services on the Internet such as are to be provided by AsiaEnet or
anything which may reasonably be regarded as similar or may represent
competition to the proposed business of AsiaEnet as set out in the
said business plan, save and except through the Group.
14
<PAGE>
13. CHANGE OF CONTROL
-----------------
If a change of Control occurs in respect of any Shareholder, such
Shareholder shall forthwith notify AsiaEnet and the other Shareholders
of the fact.
14. TERM
----
14.1 This Agreement shall continue in force from the date hereof unless
otherwise terminated in accordance with its terms.
14.2 If any party shall be in breach of the terms and conditions of this
Agreement and shall fail to cure such breach with a period of thirty
(30) days from the date on which any other party shall have given it
and each other party written notice thereof referring to this
sub-Clause, then any other party or parties holding in aggregate at
least one half of the issued Shares (excluding those held by the party
in default) may terminate this Agreement forthwith by written notice
to that effect (referring to this sub-Clause) to all other parties,
given at any time after the end of the thirty day period.
14.3 With the consent of the majority vote of the Shareholders (other than
the party who wishes to withdraw) any party may withdraw from this
Agreement forthwith by written notice to that effect (referring to
this sub-clause) to all other parties, given at any time after the
happening of any of the following events:
(a) if the right of any party to make or continue to maintain its
investment shall be denied or withdrawn by any
statutory/governmental authority; or
(b) the seizure, liquidation, bankruptcy or insolvency of AsiaEnet or
of any of the parties, or the appointment of a trustee, receiver
or liquidator for substantially all of the assets or the business
of AsiaEnet or of any Shareholder (or anything analogous
thereto).
14.4 Any Shareholder who withdraws from this Agreement pursuant to Clause
14.3 shall be deemed to have given a Transfer Notice in respect of all
the Shares beneficially held by it.
14.5 The provision of Clause 9 shall have effect, mutatis mutandis, to a
Transfer Notice deemed to have been given pursuant to this Clause 14
with references to the proposing Transferor being construed as
references to the Shareholder deemed to have given the Transfer Notice
pursuant to this Clause 14.
15. RELATIONSHIP BETWEEN THIS AGREEMENT AND THE MEMORANDUM OF ARTICLES
------------------------------------------------------------------
In the event of any conflict or inconsistency between the Memorandum
and Articles of Association of AsiaEnet and this Agreement, the
provisions of this Agreement shall prevail.
15
<PAGE>
16. SEVERABILITY
------------
The various provisions of this Agreement are severable and if any
provision is held to be invalid or unenforceable by any court of
competent jurisdiction then such invalidity or unenforceability shall
not affect the remaining provisions of this Agreement.
17. NOTICES
-------
17.1 Each notice, demand or other communication given or made under this
Agreement shall be in writing and delivered by hand or sent by post
(airmail if overseas) or by facsimile transmission to AsiaEnet at its
registered address and to any other party at its address or fax number
set out in Schedule 2 (or such other address or fax number as the
addressee has by five (5) days' prior written notice specified to the
other parties).
17.2 Any notice, demand or other communication so addressed to the relevant
party shall be deemed to have been delivered (a) if given or made by
letter, when in the ordinary course of the postal service it would
first be received by the addressee in normal business hours; and (b)
if given or made by fax, when dispatched.
18. TIME OF ESSENCE
---------------
Time shall be of the essence of this Agreement, both as regards the
dates and periods specifically mentioned and as to any dates and
periods which may, by agreement in writing between the parties hereto,
be substituted therefor.
19. COSTS
-----
Each party shall bear its own legal and professional fees, costs and
expenses incurred in connection with this Agreement.
20. ASSIGNMENT
----------
This Agreement shall be binding on and shall enure for the benefit of
the successors and assigns of the parties hereto but shall not be
capable of being assigned by any party without the written consent of
all other parties.
21. ENTIRE AGREEMENT
-----------------
This Agreement sets forth the entire agreement and understanding
between the parties in relation to the subject matter of this
Agreement and supersedes and cancels in all respects all previous
agreements, letters of intent, correspondence, understandings,
agreements and undertakings (if any) between the parties hereto with
respect to the subject matter hereof, whether such be written or oral.
16
<PAGE>
22. COUNTERPARTS
------------
This Agreement may be signed in two or more counterparts, all of which
taken together shall constitute one and the same instrument.
IN WITNESS whereof this Agreement has been executed on the day and year
first above written.
SIGNED by /s/ Anthony Tobin ) For and on behalf of
) MOMENTUM INTERNET INCORPORATED
for and on behalf of Momentum )
) /s/ Anthony Tobin
Internet Inc. in the presence of: ) Authorized Signature(s)
SIGNED by Julie Siu Shan Edwards, ) For and en behalf of
) BENSLEY LIMITED
director of Larville Ltd., for and on ) For and on behalf of
) LARVILLE LIMITED
behalf of Bensley Ltd. in the ) /s/
presence of: -) ) Authorized Signature(s)
SIGNED by Terrence Annamunthode ) For and on behalf of
) PARADYM ENTERPRISES LIMITED
for and on behalf of Paradym )
) /s/
Enterprise Limited in the presence of: ) Authorized Signature(s)
17
<PAGE>
Schedule 1
----------
Percentage of
Shareholders No. of shares shareholding
------------ ------------- -------------
1. Momentum Internet Incorporated 800 80%
2. Bensley Ltd. 100 10%
3. Paradym Enterprises Ltd. 100 10%
---- ---
TOTAL issued shares: 1,000 100%
<PAGE>
Schedule 2
----------
1. Momentum Internet Incorporated
--------------------------------------
Correspondence address: 12A First Pacific Bank Centre,
56 Gloucester Road, Wanchai, Hong Kong.
Telephone No. : 2866 9323
Facsimile No. : 2866 8137
E-mail : [email protected]
2. Bensley Ltd.
--------------------
Correspondence address: Suite C, 16(degree)' Floor On Hing Building,
1-9 On Hing Terrace, Central, Hong Kong
Telephone No. : 2522 9118
Facsimile No. : 2810 1703
E-mail : compsec.netvigator.com
----------------------
3. Paradym Enterprises Limited
------------------------------------
Correspondence address: Suite 908B, Lippo Centre, Tower 2,
89 Queensway, Hong Kong
Telephone No. : 2521 7218
Facsimile No. : 2521 2626
E-mail : [email protected]
-----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 15,734,397
<SECURITIES> 1,228,276
<RECEIVABLES> 1,067,270
<ALLOWANCES> 0
<INVENTORY> 16,923
<CURRENT-ASSETS> 18,497,113
<PP&E> 1,034,331
<DEPRECIATION> (253,942)
<TOTAL-ASSETS> 136,897,395
<CURRENT-LIABILITIES> 12,016,816
<BONDS> 0
0
0
<COMMON> 32,154
<OTHER-SE> 124,048,289
<TOTAL-LIABILITY-AND-EQUITY> 136,897,395
<SALES> 14,498,361
<TOTAL-REVENUES> 14,498,361
<CGS> 7,474,414
<TOTAL-COSTS> 7,474,414
<OTHER-EXPENSES> 2,912,479
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 4,244,450
<INCOME-TAX> 2,212,052
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