FORM 10-QSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number: 0-266932
PHOTOLOFT.COM
(Exact name of small business issuer as specified in its charter)
Nevada 87-0431036
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
300 Orchard City Drive, Suite 142
Campbell, CA 95008
(Address of Principal Executive Offices)
Issuer's telephone number: (408) 364-8777
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the 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 May 5, 2000, the issuer had 12,881,875 shares of common stock, $.001
par value per share, outstanding.
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PHOTOLOFT.COM
CONTENTS
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Page No.
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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PHOTOLOFT.COM
BALANCE SHEETS
=====================================================================================
MARCH 31, December 31,
2000 1999
- --------------------------------------------------------- ------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
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Cash and cash equivalents $ 300,700 $ 175,300
Accounts receivable,
net of allowance for doubtful accounts
of $16,900 and $16,900, respectively 19,100 60,100
Notes receivable -- 250,000
Prepaid expenses and other current assets 16,600 49,500
- --------------------------------------------------------- ------------ ------------
TOTAL CURRENT ASSETS 336,400 534,900
PROPERTY AND EQUIPMENT, net 409,400 418,000
OTHER ASSETS 26,000 17,200
- --------------------------------------------------------- ------------ ------------
$ 771,800 $ 970,100
=====================================================================================
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Notes payable to shareholders $ 115,000 $ --
Accounts payable 682,500 906,800
Accrued expenses 287,300 263,500
Deferred revenue 13,300 15,200
- --------------------------------------------------------- ------------ ------------
TOTAL CURRENT LIABILITIES 1,098,100 1,185,500
Commitments, Contingencies and Subsequent Events
SHAREHOLDERS' DEFICIENCY
Convertible preferred stock,
$0.001 par value; 500,000 shares
authorized; 106 and -0- shares issued and outstanding 1,060,000 --
Common stock,
$0.001 par value; 50,000,000 shares
authorized; 12,914,375
and 12,881,875 shares issued
and outstanding, respectively 12,900 12,900
Additional paidcapital 6,083,800 4,904,500
Deferred compensation (143,000) (481,200)
Accumulated deficit (7,340,000) (4,651,600)
- --------------------------------------------------------- ------------ ------------
TOTAL SHAREHOLDERS' DEFICIENCY (326,300) (215,400)
- --------------------------------------------------------- ------------ ------------
$ 771,800 $ 970,100
=====================================================================================
See accompanying notes to financial statements.
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PHOTOLOFT.COM
STATEMENTS OF OPERATIONS
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Three months ended March 31,
----------------------------
2000 1999
==========================================================================================
(Unaudited) (Unaudited)
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Revenues $ 61,800 $ 21,800
Cost of Revenues 27,300 36,300
- ------------------------------------------------------------- ------------ ------------
GROSS PROFIT (LOSS) 34,500 (14,500)
- ------------------------------------------------------------- ------------ ------------
OPERATING EXPENSES:
Sales and marketing 113,800 18,800
General and administrative 2,608,200 605,100
- ------------------------------------------------------------- ------------ ------------
TOTAL OPERATING EXPENSES 2,722,000 623,900
- ------------------------------------------------------------- ------------ ------------
LOSS FROM OPERATIONS (2,687,500) (638,400)
OTHER INCOME (EXPENSE):
Interest income (100) 40,100
Other -- (2,500)
- ------------------------------------------------------------- ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (100) 37,600
- ------------------------------------------------------------- ------------ ------------
LOSS BEFORE INCOME TAXES (2,687,600) (600,800)
INCOME TAX (BENEFIT) EXPENSE 800 (240,300)
- ------------------------------------------------------------- ------------ ------------
NET LOSS (2,688,400) (360,500)
Deemed dividend on conversion of preferred
stock into common stock -- 934,000
- ------------------------------------------------------------- ------------ ------------
Net loss available to common shareholders $(2,688,400) $(1,294,500)
=========================================================================================
Basic and diluted loss per share $ (0.21) $ (0.04)
=========================================================================================
Basic and diluted weighted-average common shares outstanding 12,881,875 9,063,500
=========================================================================================
See accompanying notes to financial statements.
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PHOTOLOFT.COM
STATEMENTS OF CASH FLOWS
===============================================================================
Three months ended March 31,
----------------------------
2000 1999
- --------------------------------------------------- ------------ -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss $(2,688,400) $ (360,500)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 42,000 7,400
Compensation relating to stock options
and warrants issued 1,571,400 --
Issuance of stock for services -- 42,500
Changes in operating assets and liabilities:
Accounts receivable 41,000 --
Prepaid expenses and other current assets 32,900 (15,900)
Deferred income taxes -- (240,300)
Accounts payable (224,300) 62,600
Accrued expenses 39,400 (8,600)
Deferred revenue (1,900) (14,500)
- --------------------------------------------------- ------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (1,187,900) (527,300)
- --------------------------------------------------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal received under note receivable -- 215,500
Purchase of property and equipment (33,400) (48,200)
Other assets (8,800) (5,000)
- --------------------------------------------------- ------------ -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (42,200) 162,300
- --------------------------------------------------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
to shareholders 115,000 --
Proceeds from shareholder note receivable 250,000 --
Proceeds from issuances of stock 1,060,000 1,120,900
Proceeds from issuance of warrants 10,000 --
Payment of stock issuance costs (79,500) (44,000)
- --------------------------------------------------- ------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,355,500 1,076,900
- --------------------------------------------------- ------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 125,400 711,900
CASH AND CASH EQUIVALENTS, beginning of period 175,300 370,000
- --------------------------------------------------- ------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 300,700 $1,081,900
===============================================================================
See accompanying notes to financial statements.
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PHOTOLOFT.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
PhotoLoft.com, Inc. (formerly AltaVista Technology, Inc.) (the Company) a
California corporation, was incorporated on November 17, 1993. The Company
provides users with advanced, easy-to-use technology to instantly create, share
and print Internet photo albums.
On March 1, 1999, 100% of the Company's outstanding common stock was acquired by
PhotoLoft.com (formerly Data Growth, Inc., a publicly traded shell corporation)
(PhotoLoft), a Nevada Corporation, in exchange for 9,579,268 shares of
PhotoLoft's $.001 par value common stock. For accounting purposes, the
acquisition has been treated as the acquisition of PhotoLoft, with the Company
as the acquiror (reverse acquisition).
The shares held by the shareholders of PhotoLoft prior to the acquisition
(625,000 shares after reflecting a 2.46 to 1 reverse stock split effected by
PhotoLoft immediately prior to the acquisition) have been recognized as if they
were issued in connection with the acquisition of PhotoLoft by the Company.
Since PhotoLoft prior to the reverse acquisition was a public shell corporation
with no significant operations, pro forma information giving effect to the
acquisition is not presented. All shares and per share data prior to the
acquisition have been restated to reflect the stock issuance as a
recapitalization of the Company. The historical information prior to March 1,
1999 is that of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB for
the year ended December 31, 1999.
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3. SUPPLEMENTAL CASH FLOW DISCLOSURE
During each of the three months ended March 31, 2000 and 1999, the Company paid
$800 for income taxes and $0 for interest.
Noncash financing activities for the three months ended March 31, 2000 consisted
of the issuance of 32,500 shares of common stock in exchange for accrued
expenses totaling $15,600.
Noncash financing activities for the three months ended March 31, 1999 consisted
of the issuance of 85,011 shares of common stock for services aggregating
approximately $42,500, and the issuance of 25,000 shares of common stock for the
payment of stock issuance costs totaling $12,500.
4. SUBSEQUENT EVENTS AND INTERIM PERIOD INFORMATION
In March 2000, the Company sold 400,000 warrants with an exercise price of $0.10
to an investor for proceeds of $10,000. The warrants expire March 2005, and are
exercisable as soon as the investor provides a term sheet for a financing of at
least $15 million, regardless of whether the financing is successfully
completed.
In March 2000, the Company obtained loans from two shareholders aggregating
$115,000.
In March 2000, the Company entered into employment agreements with three of its
officers, one of which replaced an existing agreement entered into in February
1999. All three agreements are for one year, from March 15, 2000 through March
15, 2001. One officer's employment agreement provides for the granting of
250,000 options after a term sheet is signed for a major financing, and another
500,000 options on the effective date of a major financing.
In April 2000 the Company repriced 500,000 warrants, originally granted with an
exercise price of $1.0093, to $0.10.
In April 2000, the Company granted warrants to purchase 200,000 shares of common
stock to a consultant at an exercise price of $0.10, and granted warrants to
purchase 100,000 shares of common stock to the same consultant at an exercise
price of $1.00. The warrants expire April 2005, and the vesting of the warrants
is contingent upon the consultant assisting the Company in obtaining a term
sheet for financing of at least $15,000,000, regardless of whether the financing
is successfully completed.
In May 2000, the Company received a loan of $50,000 from an officer.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT
LIMITATION, STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS
OR FUTURE STRATEGIES THAT ARE SIGNIFIED BY THE WORDS "EXPECTS", "ANTICIPATES",
"INTENDS", "BELIEVES", OR SIMILAR LANGUAGE. THESE FORWARD-LOOKING STATEMENTS
INVOLVE RISKS, UNCERTAINTIES AND OTHER FACTORS. ALL FORWARD-LOOKING STATEMENTS
INCLUDED IN THIS REPORT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON
THE DATE HEREOF AND SPEAK ONLY AS OF THE DATE HEREOF. THE FACTORS DISCUSSED
ELSEWHERE IN THIS REPORT ARE AMONG THOSE FACTORS THAT IN SOME CASES HAVE
AFFECTED THE COMPANY'S RESULTS AND COULD CAUSE THE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto AND "Factors That Could
Affect Our Financial Condition and Results of Operations" both of which are
included elesewhere in this report.
General
- -------
As an early player in the online imaging market, Photoloft.com established
itself as a business to business ("B2B") website. At the same time, we
established a consumer photosharing web site that served as a prototype for our
private label and cobrand partner sites. As the marketplace for our services
evolved over the ensuing years, we utilized this time to educate the
marketplace and build our consumer site. Now that the B2B marketplace has
become much more sophisticated and we have honed our products, we are looking to
become a leader in the nascent Internet digital imaging and photosharing (B2B)
market.
We provide turnkey B2B web-based infrastructure for rapidly producing
websites that can be integrated seamlessly with client companies websites in
co-branded, private label and customized installations for consumer oriented
photosharing communities and digital imaging businesses. Designed for B2B
backbone purposes, and easy scaling, the PhotoLoft.com solution is mated to a
powerful e-commerce engine that automates purchases of prints and other photo
related merchandise and integrates seamlessly with the client website and with
diverse product fulfillers and distributors. We intend to leverage our
technology to power the sites of others and garner fees and revenue split from
sharing print, e-commerce and advertising revenue, and from the sale of these
products on our own site. We adopted our current business model in April 2000.
Accordingly, we are very much like a start-up company and have generated minimal
revenues since the adoption of this model.
Results of Operations
- -----------------------
Three Months Ended March 31, 2000 Compared With Three Months Ended March 31,
- --------------------------------------------------------------------------------
1999
- ----
Revenues. For the three months ended March 31, 2000, Photoloft had revenues
of $61,800 compared to revenues of $ 21,800 for the three months ended March 31,
1999. The cost of revenues decreased to $27,300 for the three months ended
March 31, 2000 compared to $36,300 for the comparable period in 1999. Gross
profit was $34,500 for the three months ended March 31, 2000 compared to a
gross loss of $14,500 for the three months ended March 31, 1999.
The negative gross margin for the three months ended March 31, 1999 was due
primarily to the transition of our business from software sales to advertising
sales, resulting in an inability to cover the fixed component of the cost of
revenues during those months.
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Selling and Marketing Expenses. Selling and marketing expenses were
$113,800 for the three months ended March 31, 2000, compared to $18,800 for the
comparable period in 1999. Substantially all of the selling and marketing
expenses in the first quarter of 2000 were derived from a shift in Photoloft's
primary target customers from consumers to organizations (both traditional and
online) that service the consumers.
General and Administrative Expenses. General and administrative expenses
increased to $2,608,200 for the three months ended March 31, 2000, compared to
$605,100 for the three months ended March 31, 1999.
The increase in general and administrative expenses was due primarily to
compensation relating to stock option and warrant grants during the three months
ended March 31, 2000.
Net Loss. As a result of the foregoing factors, Photoloft's net loss
increased to $2,688,400 for the three months ended March 31, 2000, from a net
loss of $360,500 for the three months ended March 31, 1999. The net loss per
share decreased to $0.21 for the three months ended March 31, 2000 from $0.04
for the comparable period in 1999. The increase in net loss was due
primarily to compensation relating to stock option and warrant grants during
the three months ended March 31, 2000, and a low level of operations during
the transition of our business from software sales to advertising sales during
the three months ended March 31, 1999.
Liquidity and Capital Resources
- ----------------------------------
To date, Photoloft has funded its operations primarily through private
placements of equity securities. Such placements generated net proceeds of
$1,060,000 during the three months ended March 31, 2000 compared to proceeds of
$1,120,900 for the three months ended March 31, 1999.
We anticipate that we will require approximately $10.5 million in 2000 to
grow as contemplated. To continue functioning at our current level, we will need
approximately $4 million in 2000. We anticipate that 20% of our requirements
will come from cash from operations. We will seek the remainder from equity or
debt financing sources. In March 2000 we raised $1,060,000 in a private
placement financing. We are actively seeking to raise additional capital
through debt or equity financing. We cannot assure you that we will be able to
obtain this additional financing. If financing is not available when required
or is not available on acceptable terms, we may be unable to develop or enhance
our products or services or take advantage of business opportunities or respond
to competitive pressures. In addition, our ability to meet our obligations and
continue our obligations could be adversely affected. The sale of additional
equity or convertible debt securities could result in additional dilution to our
stockholders. The incurrence of indebtedness would result in an increase in our
fixed obligations and could result in operating covenants that would restrict
our operations. There can be no assurance that financing will be available in
amounts or on terms acceptable to us, if at all. We note that our independent
certified public accountants modified their opinion to include an explanatory
paragraph relative to a going concern uncertainty.
If we are unsuccessful in generating resources from one or more of the
anticipated sources and unable to replace any shortfall with resources from
another source, we may be able to extend the period for which available
resources would be adequate by deferring the creation or satisfaction of various
commitments, deferring the introduction of various services or features or entry
into various markets and otherwise cutting back operations. Such a scaling back
of operations would involve two phases. The first phase would involve reducing
our current burn rate by approximately 15% by cutting back on business
development expenses and infrastructure. The second phase would involve
substantially reducing our e-commerce research and development efforts and
restructuring our approach to new business partnering deals. If we are unable
to generate required resources, our ability to meet our obligations and to
continue our operations will be adversely affected.
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Impact Of The Year 2000
- ---------------------------
In our previous filings with the Securities and Exchange Commission, we have
discussed the nature and progress of our plans to deal with potential Year 2000
problems. These problems arise from the fact that many currently installed
computer systems and software products were coded to accept or recognize only
two digit entries in the date code field. These systems may recognize a date
using "00" as the year 1900 rather than the year 2000. As a result, computer
systems and/or software used by many companies and governmental agencies needed
to be upgraded to comply with Year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities. Prior to
December 31, 1999, we completed our assessment of all material information
technology and non-information technology systems at our headquarters, as well
as our review of Year 2000 compliance by our key vendors, distributors and
suppliers. To date, we have experienced no significant disruptions in mission
critical information technology and non-information technology systems and we
believe those systems successfully responded to the Year 2000 date changes. We
are not aware of any material problems resulting from Year 2000 issues, either
with our own 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 that any latent
Year 2000 matters that may arise are addressed promptly.
Factors That Could Affect Our Financial Condition and Results of Operations
- ---------------------------------------------------------------------------
You should carefully consider the risk described below before making an
Investement decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
know to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occur, our business could be
harmed.
WE ARE MUCH LIKE A START UP COMPANY AND HAVE A LIMITED OPERATING HISTORY ON
WHICH TO EVALUATE OUR POTENTIAL FOR FUTURE SUCCESS.
We launched our current business model in April, 2000 and therefore are
much like a start-up company. We have only a limited operating history upon
which you can evaluate our business and prospects, and have yet to develop
sufficient experience regarding actual revenues to be received from such
products and services. You must consider the risks and uncertainties frequently
encountered by early stage companies in new and rapidly evolving markets, such
as e-commerce. If we are unsuccessful in addressing these risks and
uncertainties, our business, results of operations and financial condition will
be materially and adversely affected.
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WE EXPECT LOSSES FOR THE FORESEEABLE FUTURE, AND OUR OPERATING RESULTS MAY
FLUCTUATE FROM QUARTER TO QUARTER.
Since 1997, we have incurred losses from operations, resulting primarily
from costs related to developing our web site, attracting users to our web site,
and establishing our brand. Because of our plans to invest heavily in marketing
and promotion, to hire additional employees, and to enhance our web site and
operating infrastructure, we expect to incur net losses for the foreseeable
future. We believe these expenditures are necessary to build and maintain the
technical infrastructure necessary to host multiple images and to strengthen our
brand recognition, attract more users to our web site and ultimately, generate
greater online revenues. If our revenue growth is slower than we anticipate or
our operating expenses exceed our expectations, our losses will be significantly
greater. We may never achieve profitability. We note that our independent
certified public accountants modified their opinion to include an explanatory
paragraph relative to a going concern uncertainty.
OUR FUTURE REVENUES ARE UNPREDICTABLE AND OUR QUARTERLY OPERATING RESULTS MAY
FLUCTUATE SIGNIFICANTLY.
We have no significant revenue history with respect to our recently
launched products and services. Our revenues for the foreseeable future will
remain primarily dependent on the number of private label, co-branded and
customized companies to whom PhotoLoft.com provides solutions, and the revenue
sharing and fees generated from its B2B partners. We cannot forecast with any
degree of certainty the number of visitors to the sites of its partners, or the
revenue sharing and fees.
We expect our operating results to fluctuate from quarter to quarter. We
believe that some of the revenue streams that we share in with our customers and
partners, including e-commerce and advertising vary from quarter to quarter.
While fluctuations in the revenues streams may be offset by other revenue
streams that we earn, such as set up fees, our operating results may fluctuate
significantly from quarter to quarter.
Other factors which may cause our operating results to fluctuate
significantly from quarter to quarter include:
- our ability to attract new and repeat customers;
- our customers' ability to attract new and repeat customers
and sell product through e-commerce channels;
- our ability to keep current with the evolving tastes
of our target market;
- our ability to manage the number of items listed on our services;
- our ability to protect our proprietary technology;
- the ability of our competitors to offer new or enhanced web
site features, products or services;
- the growth of the digital photosharing market as projected;
- the level of use of the Internet and online services;
- consumer confidence in the security of transactions over the
Internet;
- unanticipated delays or cost increases with respect to product and
service
introductions; and
- the costs, timing and impact of our marketing and promotion
initiatives.
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Because of these and other factors, we believe that quarter-to-quarter
comparisons of our results of operations are not good indicators of our future
performance. If our operating results fall below the expectations of securities
analysts and investors in some future periods, then our stock price may decline.
YOUR HOLDINGS MAY BE DILUTED IN THE FUTURE.
We are authorized to issue up to 50,000,000 shares of common stock. To the
extent of such authorization, our Board of Directors will have the ability,
without seeking stockholder approval, to issue additional shares of common stock
in the future for such consideration as our Board of Directors may consider
sufficient. The issuance of additional common stock in the future will reduce
the proportionate ownership and voting power of our common stock held by
existing stockholders. We are also authorized to issue up to 500,000 shares of
preferred stock, the rights and preferences of which may be designated in series
by our Board of Directors. To the extent of such authorization, such
designations may be made without stockholder approval. We have designated 125
shares of our preferred stock as series A preferred stock and issued 106 of such
shares in a private placement financing in March 2000. Such shares are
convertible into common stock, and such conversion will dilute the interests of
our other shareholders. Holders of the series A preferred stock must approve any
merger, sale of assets, or other transaction that amounts to a sale of
Photoloft.com, and such approval rights may have the effect of delaying a
transaction that might otherwise be favorable to other holders of our capital
stock. The designation and issuance of additional series of preferred stock in
the future would create additional securities that would have dividend and
liquidation preferences over our common stock.
WE MAY FAIL TO ESTABLISH AN EFFECTIVE INTERNAL SALES ORGANIZATION
To date, we have relied to a significant extent on outside parties to
develop new customer opportunities. We believe that the growth of partner and
shared revenues will depend on our ability to establish an aggressive and
effective internal sales organization. We will need to increase this sales
force in the coming year in order to execute our business plan. Our ability to
increase our sales force involves a number of risks and uncertainties, including
competition and the length of time for new sales employees to become productive.
If we do not develop an effective internal sales force, our business will be
materially and adversely affected.
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WE ARE GROWING RAPIDLY, AND EFFECTIVELY MANAGING OUR GROWTH MAY BE DIFFICULT.
We are currently experiencing a period of significant expansion. In order
to execute our business plan, we must continue to grow significantly. This
growth will strain our personnel, management systems and resources. To manage
our growth, we must implement operational and financial systems and controls and
recruit, train and manage new employees. We cannot be certain that we will be
able to integrate new executives and other employees into our organization
effectively. If we do not manage growth effectively, our business, results of
operations and financial condition will be materially and adversely affected.
WE DEPEND ON OUR KEY PERSONNEL TO OPERATE OUR BUSINESS, AND WE MAY NOT BE ABLE
TO HIRE ENOUGH ADDITIONAL MANAGEMENT AND OTHER PERSONNEL AS OUR BUSINESS GROWS.
Our performance is substantially dependent on the continued services and on
the performance of our executive officers and other key employees, particularly
Jack Marshall, our Chief Executive Officer, President and Treasurer. The loss of
the services of any of our executive officers could materially and adversely
affect our business. Additionally, we believe we will need to attract, retain
and motivate talented management and other highly skilled employees to be
successful. Competition for employees that possess knowledge of both the
Internet industry and our target market is intense. We may be unable to retain
our key employees or attract, assimilate and retain other highly qualified
employees in the future. See "Description of Business-Employees."
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.
The markets in which we are engaged are new, rapidly evolving and intensely
competitive, and we expect competition to intensify further in the future. We
currently or potentially compete with a number of other companies, including
some large photography equipment and service providers that have existing photo
lab customers and expertise in selling services to these customers, and a number
of other small services, including those that serve specialty markets. In
addition, companies that currently provide other digital imaging services or
online photo sharing communities may migrate into our markets, thus increasing
competition. Competitive pressures created by any one of these companies, or by
our competitors collectively, could have a material adverse effect on our
business, results of operations and financial condition. A potential competitor
could develop a technology that is competitive or superior to ours.
WE WILL NEED FURTHER CAPITAL.
We currently anticipate that our available funds will be sufficient to meet
our anticipated needs for working capital, capital expenditures and business
operation through the end of April 2000. Thereafter, we will need to raise
additional funds. If additional funds are raised through the issuance of equity
or convertible debt securities, the percentage ownership of our stockholders
will be reduced, stockholders may experience additional dilution and such
securities may have rights, preferences and privileges senior to those of our
common stock. We are currently negotiating with prospective investors with
respect to financing; however, to date , no definitive agreements have been
reached. There can be no assurance that additional financing will be available
on terms favorable to us or at all. If adequate funds are not available or are
not available on acceptable terms, we may not be able to fund expansion, take
advantage of unanticipated acquisition opportunities, develop or enhance
services or products or respond to competitive pressures. Such inability could
have a material adverse effect on our business, results of operations and
financial condition.
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WE MAY FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS.
We have in the past, and intend in the future to establish strategic
alliances with photo finishing equipment providers, photo lab retailers and
popular web sites to increase the number of customers using our infrastructure.
In the future, we may not be able to enter into these relationships on
commercially reasonable terms or at all. Even if we enter into strategic
alliances, our partners may not attract significant numbers of users.
Therefore, our infrastructure may not generate the anticipated level of revenue
sharing. Our inability to enter into new distribution relationships or
strategic alliances and expand our existing ones could have a material and
adverse effect on our business.
ACQUISITIONS MAY DISRUPT OR OTHERWISE HAVE A NEGATIVE IMPACT ON OUR BUSINESS.
We may acquire or make investments in complementary businesses, products,
services or technologies on an opportunistic basis when we believe they will
assist us in carrying out our business strategy. Growth through acquisitions has
been a successful strategy used by other Internet companies. We do not have any
present understanding, nor are we having any discussions relating to any such
acquisition or investment. If we buy a company, then we could have difficulty in
assimilating that company's personnel and operations. In addition, the key
personnel of the acquired company may decide not to work for us. An acquisition
could distract our management and employees and increase our expenses.
Furthermore, we may have to incur debt or issue equity securities to pay for any
future acquisitions, the issuance of which could be dilutive to our existing
shareholders.
UNFORESEEN DEVELOPMENTS MAY OCCUR WITH RESPECT TO DIGITAL IMAGING TECHNOLOGY.
Digital imaging is a relatively new phenomenon and the slower than expected
acceptance of the new technology could affect our ability to grow as rapidly as
we need to in order to meet our financial targets. Digital camera manufacturers
have made great strides in the past two years improving the functionality of
their cameras and pricing them in a range that is attractive to many consumers.
The continued refinement of the technology and commoditization of the price will
help to move acceptance of the technology along. Full acceptance of digital
imaging technology will require a move on the part of the photographic
population away from traditional chemical-based photo processing to the new
paradigm of home printed photos. The costs remain competitive for digital
imaging, however, there is no guarantee the general population will make this
shift rapidly, if at all.
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WE ARE DEPENDENT ON THE CONTINUED DEVELOPMENT OF THE INTERNET INFRASTRUCTURE.
Our industry is new and rapidly evolving. Our business would be adversely
affected if web usage and e-commerce does not continue to grow. Web usage may be
inhibited for a number of reasons, including:
- inadequate Internet infrastructure;
- security concerns;
- inconsistent quality of service; or
- unavailability of cost-effective, high-speed service.
If web usage grows, the Internet infrastructure may not be able to support
the demands placed on it by this growth, or its performance and reliability may
decline. In addition, web sites have experienced a variety of interruptions in
their service as a result of outages and other delays occurring throughout the
Internet network infrastructure. If these outages or delays frequently occur in
the future, web usage, including usage of our web site, could grow slowly or
decline.
OUR LONG-TERM SUCCESS DEPENDS ON THE DEVELOPMENT OF THE E-COMMERCE MARKET, WHICH
IS UNCERTAIN.
Our future revenues and profits substantially depend upon the widespread
acceptance and use of the web as an effective medium of commerce by consumers.
Rapid growth in the use of the web and commercial online services is a recent
phenomenon. Demand for recently introduced services and products over the web
and online services is subject to a high level of uncertainty. The development
of the web and online services as a viable commercial marketplace is subject to
a number of factors, including the following:
- e-commerce is at an early stage and buyers may be unwilling to shift
their purchasing from traditional vendors to online vendors;
- insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times; and
- adverse publicity and consumer concerns about the security of
commerce transactions on the Internet could discourage its
acceptance and growth.
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WE FACE RISKS ASSOCIATED WITH GOVERNMENT REGULATION OF AND LEGAL UNCERTAINTIES
SURROUNDING THE INTERNET.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could increase our cost of doing business or
otherwise have a material and adverse effect on our business, results of
operations and financial condition. Laws and regulations directly applicable to
Internet communications, commerce and advertising are becoming more prevalent.
The law governing the Internet, however, remains largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws governing intellectual property,
copyright, privacy, obscenity, libel and taxation apply to the Internet. In
addition, the growth and development of e-commerce may prompt calls for more
stringent consumer protection laws, both in the United States and abroad. See
"Description of Business - Government Regulation."
SHARES ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY AFFECT
OUR STOCK PRICE.
To date, we have had a very limited trading volume in our common stock. As
long this condition continues, the sale of a significant number of shares of
common stock at any particular time could be difficult to achieve at the market
prices prevailing immediately before such shares are offered. In addition,
sales of substantial amounts of common stock, including shares issued upon the
exercise of outstanding options and warrants, under Securities and Exchange
Commission Rule 144 or otherwise could adversely affect the prevailing market
price of our common stock and could impair our ability to raise capital at that
time through the sale of our securities. In addition, we are obligated to
register additional securities for immediate resale under the Securities Act
and, upon completion of such registration, a substantial number of additional
securities will be placed into the public market with the potential adverse
consequences described above.
ANTI-TAKEOVER PROVISIONS AND OUR RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT.
We are a Nevada corporation. Anti-takeover provisions of Nevada law could
make it more difficult for a third party to acquire control of us, even if such
change in control would be beneficial to stockholders. Our articles of
incorporation provide that our Board of Directors may issue preferred stock
without stockholder approval. The issuance of preferred stock could make it
more difficult for a third party to acquire us. All of the foregoing could
adversely affect prevailing market prices for our common stock.
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OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
The market price of our common stock is likely to be, highly volatile as
the stock market in general, and the market for Internet-related and technology
companies in particular, has been highly volatile. Investors may not be able to
resell their shares of our common stock following periods of volatility because
of the market's adverse reaction to volatility. The trading prices of many
technology and Internet-related companies' stocks have reached historical highs
within the last 52 weeks and have reflected valuations substantially above
historical levels. During the same period, these companies' stocks have also
been highly volatile and have recorded lows well below historical highs. We
cannot assure you that our stock will trade at the same levels of other Internet
stocks or that Internet stocks in general will sustain their current market
prices.
Factors that could cause such volatility may include, among other things:
- actual or anticipated fluctuations in our quarterly operating results;
- announcements of technological innovations;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet industry; and
- changes in the market valuations of other Internet companies.
In addition, our stock is currently traded on the NASD O-T-C Market and it
is uncertain that we will be able to successfully apply for listing on the
NASDAQ National Market or SmallCap market in the foreseeable future due to the
trading price for our common stock, our working capital and revenue history.
Failure to list our shares on the National or SmallCap Markets will impair the
liquidity for our common stock.
OPERATIONS DEPENDANT ON ABILITY TO PROTECT OUR OPERATING SYSTEMS.
We maintain substantially all of our computer systems at AboveNet
Communications, Inc. Its operations are dependent in part on its ability to
protect its operating systems against physical damage from fire, floods,
earthquakes, power loss, telecommunications failures, break-ins or other similar
events. Furthermore, despite its implementation of network security measures,
its servers are also vulnerable to computer viruses, break-ins and similar
disruptive problems. The occurrence of any of these events could result in
interruptions, delays or cessations in service to its users, which could have a
material adverse effect on our business, results of operations and financial
condition.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 23, 1999 Hewlett-Packard, Co. filed an action against us in the
Santa Clara County Superior Court of California (Case Number CV 782769) alleging
trade secret misappropriation, unfair competition, and breach of contract
arising out of the activities of one of our employees. Hewlett-Packard seeks a
preliminary and permanent injunction enjoining us from directly or indirectly
using trade secrets of Hewlett-Packard and for damages. We are presently in
settlement negotiations with Hewlett-Packard with regard to this matter. We
believe that the outcome of this matter will be a non-monetary settlement. We
have a preexisting relationship with Hewlett-Packard with respect to the
development and use of certain aspects of our advanced viewing and printing
technologies. See "Item 1. Description of Business -- Products and Services."
On January 7, 2000 Gale Drive LLC filed an action against us in the Santa
Clara County Superior Court of California (Case Number CV 787055) alleging
breach of contract arising out of a lease agreement for office space located in
Campbell, California. We expect that our exposure in this matter will not
exceed $100,000, and we have accrued our estimated liability relating to this
matter. No further actions have been taken since the original filing of the
action.
In January 2000 we agreed to the terms of a binding settlement agreement
with a former employee who had filed an action against us stating various claims
arising out of the termination of his employment with us. Under the terms of
the settlement agreement, in which we admitted no wrongdoing, we paid $20,000
and allowed the employee to exercise options to purchase 32,500 shares of our
common stock at no cost.
In April 2000 Expert Connection dba Kinetic Tec filed an action against us
in the Santa Clara County Superior Court alleging breach of contract arising out
of an alleged fee agreement. Kinetic Tec claims it submitted the resume of a
potential employee to us and we hired the employee and thus owe Kinetic Tec
according to a fee agreement. Kinetic Tec requests damages in the amount of
$21,000.
To the best of our knowledge, there are presently no other pending legal
proceedings to which we or any of our subsidiaries is a party or to which any of
our property is subject and, to the best of its knowledge, no such actions
against us are contemplated or threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Set forth in chronological order is information regarding shares of common
stock issued and options and warrants and other convertible securities granted
by us during the three months ending March 31, 2000. Also included is the
consideration, if any, received by us for such shares and options and
information relating to the section of the Securities Act, or rule of the SEC
under which exemption from registration was claimed.
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In March 2000, we issued options to purchase up to 378,344 shares of our
common stock to one of our officers pursuant to the terms of our employment
agreement with the officer. The exercise price for the options was $3.44 per
share, which was not less than the fair market value of the shares on the date
of grant. The issuance was made in reliance on Section 4(2) of the Securities
Act of 1933 and/or Rule 701 promulgated under the Securities Act of 1933 and was
made without general solicitation or advertising. The optionee is a
sophisticated investor with access to all relevant information necessary to
evaluate the investment, and who represented to us that the shares were being
acquired for investment.
In March 2000, we issued 106 shares of preferred stock, designated series A
preferred stock, in exchange for $1,060,000 to investors in a private placement.
In connection with that offering, we also issued to The May Davis Group, Inc.,
the placement agent for the offering, warrants to purchase up to 185,500 shares
of common stock at an exercise price of $3.30. The issuances were made in
reliance on Section 4(2) of the Securities Act of 1933 and/or Regulation D
promulgated under the Securities Act of 1933 and were made without general
solicitation or advertising. The purchasers were sophisticated investors with
access to all relevant information necessary to evaluate the investments, and
who represented that the shares were being acquired for investment. In
connection with the offer and sale of the series A preferred stock, we have
agreed to file a registration statement under the Securities Act of 1933
covering the resale of shares of common stock that may be issued upon conversion
of such series A preferred stock. The holders of the series A preferred stock
have the right to convert such shares into common stock on or after the earlier
of (i) 90 days after the issuance of the series A preferred shares, (ii) five
days after receipt of a "no-review" status from the Securities and Exchange
Commission with respect to the aforementioned registration statement, or (iii)
the effective date of such registration statement. The conversion rate for the
series A preferred stock is based on the number of days from the issuance date
through the conversion date, and the conversion price, which is the lower of
$2.65 or 80% of the average market price for our common stock for the last five
trading days immediately preceding the date of conversion. Holders of the
series A preferred stock are entitled to certain cash payments in the event that
the aforementioned registration statement is not declared effective by the SEC
on or before the 120th day following the first issuance of the series A
preferred stock. The series A preferred stock will be automatically converted
into common stock on March 3, 2002 if not previously converted, and holders of
the series A preferred stock must approve any merger, sale of assets, or other
transaction that amounts to a sale of Photoloft.com.
In March 2000, we entered into a new employment agreement with Jack Marshall
in which he will receive 250,000 bonus options, granted under our Employee Stock
Option Plan, upon acceptance by the Board of a term sheet for a sale of
PhotoLoft.com or a major financing. Employee will also receive 500,000 bonus
options, granted under our Employee Stock Option Plan, on the effective date of
a sale of PhotoLoft.com or major financing.
In March 2000, we sold 400,000 warrants with an exercise price of
$0.10 to an investor for proceeds of $10,000. The warrants expire March 2005,
and are exercisable as soon as the investor provides a term sheet for a
financing of at least $15,000,000, regardless of whether the financing is
successfully completed.
In April 2000, we granted warrants to purchase 200,000 shares of
common stock to an investor at an exercise price of $0.10, and granted warrants
to purchase 100,000 shares of common stock to the investor at an exercise price
of $1.00. The warrants expire in April 2005, and the vesting of the warrants is
contingent upon the investor assisting us in obtaining a term sheet for
financing of at least $15,000,000, regardless of whether the financing is
successfully completed.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed as part of this report:
10.1 Employment Agreement, dated March 15, 2000, by and between
Chris McConn and the Registrant.
10.2 Employment Agreement, dated March 15, 2000, by and between
Jack Marshall and the Registrant.
10.3 Employment Agreement, dated March 15, 2000, by and between
Kay Wolf Jones and the Registrant.
27.1 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March 31,
2000.
SIGNATURES
Pursuant to the requirements 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.
PHOTOLOFT.COM
Date: May 15, 2000 By: /s/ Jack Marshall
-------------------
Jack Marshall,
President
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") effective as of the 15th day of March
2000, between PhotoLoft.com , a Nevada corporation having its principal place of
business at 300 Orchard City Drive, Suite 142, Campbell, California 98005
("Employer"), and Chris McConn ("Employee").
<PAGE>
WITNESSETH:
WHEREAS, Employer desires to employ Employee upon the terms and subject to the
conditions hereinafter set forth, and Employee desires to accept such
employment:
NOW, THEREFORE, for and in consideration of the premises, the mutual promises,
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows.
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement,
Employer shall employ Employee and Employee hereby accepts such
employment.
2. TERM. The term of this Agreement shall be for the period from March
15, 2000 through March 15, 2001(the "Initial Term").
3. POSITION AND DUTIES.
a. POSITION. Employee shall serve as CTO and shall perform the
duties and exercise the powers in connection with such position
and which may from time to time be reasonably assigned to or
vested in him or her by the CEO and/or the Board of Directors or
similar governing body of Employer (the "Board") or the duly
authorized committee or designee thereof.
b. FULL TIME EFFORTS. Employee shall perform and discharge
faithfully, diligently and to the best of his or her ability such
duties and responsibilities and shall devote his or her full-time
efforts to the business and affairs of Employer.
c. NO INTERFERENCE WITH DUTIES. Employee shall not devote time to
other activities such as would inhibit or otherwise interfere
with the proper performance of his or her duties.
4. WORK STANDARD. Employee hereby agrees that he or she will at all times
comply with abide by all terms and conditions set forth in this
Agreement, and all applicable work policies, procedures and rules as
may be issued by Employer.
5. COMPENSATION.
a. BASE SALARY. Subject to the terms and conditions set forth in
this Agreement, Employer shall pay Employee, and Employee shall
accept, a salary ("Base Salary") at the annual rate of $115,000
for all services rendered during the term of this Agreement. Base
Salary shall be reviewed no less frequently than annually. The
Base Salary is not to be considered in any way to limit
Employee's opportunity to receive appropriate increases in Base
Salary during the term of this Agreement. The Base Salary shall
be paid in accordance with Employer's normal payroll procedures.
b. EMPLOYMENT OPTIONS. Employee shall continue vesting options
granted under a 1998 Option Agreement.
c. WITHHOLDING. All compensation payable to Employee pursuant to
this Agreement shall be subject to, and Employer will deduct and
withhold, all applicable federal, state and local withholding,
employment, social security, and other similar taxes.
6. FRINGE BENEFITS. During the term of Employee's employment under this
Agreement, Employee shall receive the fringe benefits described below:
a. MEDICAL, DENTAL, VISION, LIFE AND DISABILITY INSURANCE. Employer
shall provide Employee and eligible dependents ("spouse and
children under 21 years of age") with medical, dental and vision
insurance coverage. Life and disability insurance coverage will
be provided by Employer to Employee.
b. VACATION. Employee is eligible for four (4) weeks of vacation per
calendar year.
c. OUT OF POCKET EXPENSES. Employer will reimburse Employee for out
of pocket expenses ("out of pocket expenses") as incurred by the
Employee in the normal course of business, including, but not
limited to corporate entertainment, non-capital purchases and
corporate travel.
7. LAWS, REGULATIONS, AND PUBLIC ORDINANCES. Employee shall comply with
all federal, state, and local statutes, regulations and public
ordinances governing the work.
8. CONFIDENTIAL INFORMATION; INVENTIONS; CONFLICTING EMPLOYMENT;
RETURNING COMPANY DOCUMENTS; SOLICITATION OF EMPLOYEES; NON-COMPETE.
a. COMPANY INFORMATION: Employee agrees at all times during the term
of employment and thereafter, to hold in strictest confidence,
and not use, except for the benefit of the Employer, or to
disclose to any person, firm or corporation without written
authorization of the board of Directors of the Company, any
Confidential Information of the Company. Employee understands
that Confidential Information means any company proprietary
information, technical data, trade secrets or know-how,
including, but not limited to, research, product plans, products,
services, customer lists and customers (including, but not
limited to, customers of the company on whom Employee called or
with whom Employee became acquainted during the term of
employment), markets, software, developments, inventions,
processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances, or other
business information disclosed to me by the company either
directly or indirectly in writing, orally or by drawings or
inspection of parts or equipment. Employee further understands
that Confidential Information does not include any of the
foregoing items which has become publicly known and made
generally available through no wrongful act of Employee.
b. FORMER EMPLOYER INFORMATION. Employee agrees that he will not,
during employment with the company, improperly use or disclose
any proprietary information or trade secrets of any former or
concurrent employer or other person or entity with which Employee
has an agreement or duty to keep in confidence, information
acquired by Employee in confidence, if any, and that he will not
bring onto the premises of the Company any unpublished document
or proprietary information belonging to any such employer, person
or entity unless consented to in writing by such employer, person
or entity.
c. THIRD PARTY INFORMATION. Employee recognizes that the company has
received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on
certain limited purposes. Employee agrees to hold all such
confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out work
for the company consistent with the company's agreement with such
third party.
d. INVENTIONS RETAINED AND LICENSED: Employee has attached hereto as
Exhibit A, a list describing all inventions, original works of
authorship, developments, improvements and trade secrets which
were made by Employee prior to employment with the company
(collectively referred to as Prior inventions), which belong to
Employee, which relate to the company's purposed business,
products or hereunder; or, if not such list is attached, Employee
represents that there are no such prior inventions. If in the
course of his employment wit the company, Employee incorporates
into a company product, process or machine a prior invention
owned by Employee or in which Employee has an interest, the
Company is hereby granted and shall have a non-exclusive,
royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such prior invention as part of
or in connection with such product, process or machine.
e. ASSIGNMENT OF INVENTIONS; Employee agrees that he will promptly
make full written disclosure to the company, will hold in trust
for the sole right and benefit of the company and hereby assign
to the company, or its designee, all right, title, and interest
in and to any and all inventions, original works of authorship,
developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under copyright or similar laws,
which Employee may solely or jointly conceive or develop or
reduce to practice, during the period of time he is in the
employee of the company (collectively referred to as
"Inventions"), except as provided in Section i below. Employee
further acknowledges that all original works of authorship which
are made by him (solely or jointly with others) within the scope
of employment and which are protectable by copyright are "works
made for hire," as that term is defined in the United States
Copyright Act.
f. MAINTENANCE OF RECORDS: Employee agrees to keep and maintain
adequate and current written records of all inventions made by
Employee (solely or jointly with others) during the term of
employment with the company. The records will be in the form of
notes, sketches, drawings and any other format that may be
specified by the company. The records will be available to and
remain the sole property of the company at all times.
<PAGE>
g. PATENT AND COPYRIGHT REGISTRATION: Employee agrees to assist the
company, or its designee, at the company's expense, in every
proper way to secure the company's rights in the inventions and
any copyrights, patents, mask work rights or other intellectual
property rights relating thereto in any and all countries,
including the disclosure to the company of all pertinent
information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other
instruments which the company shall deem necessary in order to
apply for and obtain such rights and in order to assign and
convey to the company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such
inventions, and any copyrights, patents, mask work rights, or
other intellectual property rights relating thereto. Employee
further agrees that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or
papers shall continue after the termination of this Agreement. If
the company is unable because of mental or physical incapacity or
for any other reason to secure my signature to apply for or to
pursue any application for any United States or foreign patents
or copyrights registrations covering inventions or original works
of authorship assigned to the company as above, then Employee
hereby irrevocably designates and appoints company and its duly
authorized officers and agents as his agent and attorney in fact,
to act for and in his behalf and stead to execute and file any
such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent or
copyright registrations thereon with the same legal force and
effect as if executed by Employee.
<PAGE>
h. EXCEPTIONS TO ASSIGNMENTS. Employee understands that the
provisions of this Agreement requiring assignment of inventions
to company do not apply to any invention which qualifies fully
under the provisions of California Labor Code Section 2870.
Employee will advise the company promptly in writing of any
inventions that he believes meet the criteria in California Labor
Code Section 2870 and not otherwise disclosed on Exhibit A.
i. RETURNING COMPANY DOCUMENTS. Employee agrees that, at the time of
leaving the employ of the company he will deliver to the company
(and will not keep in his possession or deliver to anyone else)
any and all devices, records, data, notes, reports, proposals,
lists, correspondence, specifications, drawings, blueprints,
sketches, materials, equipment, others documents, or property, or
reproductions of any aforementioned items developed by Employee
pursuant to his employment with the company or otherwise
belonging to the company, its successors or assigns.
j. SOLICITATION OF EMPLOYEES. Employee agrees that, for a period of
one year immediately following the termination of his
relationship with the company for any reason, whether with or
without cause, either directly or indirectly, on his own behalf
or in the service or on behalf of other, solicit, recruit or
attempt to persuade any person to terminate such person's
employment with the company, whether or not such person is a
full-time employee or whether or not such employment is pursuant
to a written agreement or is at-will.
k. NON-COMPETE. Employee agrees that he shall not, for a period of
one year immediately following the termination of my relationship
with the company for any reason, whether with or without cause,
either directly or indirectly engage in any activity that
competes with PhotoLoft.com
<PAGE>
9. TERMINATION FOR CAUSE. This Agreement may be terminated at any time by
Employer without prior notice thereof to Employee and without any
liability owning to Employee under this Agreement under the following
conditions, each of which shall constitute "Cause";
a. FAILURE TO DISCHARGE DUTIES. Employee willfully neglects or
refuses to discharge his duties hereunder or refuses to comply
with any lawful and reasonable instructions given to him by
Employer without reasonable excuse;
b. BREACH. Employee shall have committed any material breach, or
repeated or continued after written notice of any breach, whether
material or not, of his obligations hereunder;
c. GROSS MISCONDUCT. Employee is guilty of gross misconduct. For the
purposes of this Agreement the following acts shall constitute
gross misconduct:
i) Any act involving fraud or dishonesty or breach of
applicable regulations of competent authorities in relation
to trading or dealing with stocks, securities, investments
and the like;
ii) The carrying out of any activity or the making of any
statement which would prejudice or impair the good name or
standing of Employer or would bring Employer into contempt,
ridicule or would reasonable shock or offend any community
in which Employer is located;
<PAGE>
iii) Attendance at work in a state of intoxication or otherwise
being found in possession at his place of work any
prohibited drug or substance, possession of which would
amount to a criminal offense;
iv) Assault or other act of violence against any employee of
Employer or other person during the course of his or her
employment;
v) Harassment of disparagement of others based on their age,
disability, color, national origin, race, religion, sex or
veteran status, including acts of sexual harassment or,
vi) Conviction of any felony or misdemeanor involving moral
turpitude.
10. TERMINATION BY EMPLOYER FOR REASONS OTHER THAN CAUSE. Notwithstanding
anything herein to the contrary, and subject to the survival
provisions of Paragraph 13.G hereof, Employer may terminate this
Agreement at any time with thirty (30) days prior notice thereof to
Employee. In such an event, Employer shall pay to Employee in
accordance with Employer's normal practices; 1) the Base Salary; 2)
vested Stock Options, 3) Medical, Dental, Vision, Life and Disability
Insurance, 5) and any unused Vacation -for a period of one (1) year
after the date of the termination.
<PAGE>
11. TERMINATION BASED UPON CHANGE OF CONTROL. In the event Employer enters
into an agreement with another person or entity, the effect of which
is to change the control of the Employer, then and in such event,
Employee shall be exclusively entitled to terminate this Agreement,
and in such event, Employer shall pay to Employee the severance
payments in the amount of one (1) year base salary, and benefits
payable through the end of the term. Additionally, upon such
termination, the vesting of all options to purchase Common Stock of
the Company held by Employee shall be accelerated so that such options
are immediately exercisable. For purposes of this Agreement, the term
"change of control: shall mean: (i) any change of equity such that
more than fifty percent (50%) of the issued and outstanding shares of
the Company are transferred to a third party; (ii) or debt ownership,
including but not limited to conversion rights of debt to equity of
the Employer such that more than fifty percent (50%) of the issued and
outstanding shares are transferred to a third party; or (iii) a sale
of substantially all of Employer's assets. However, a change of
control shall not include a public offering of the securities of the
Company.
12. TERMINATION BY EMPLOYEE.
a. VOLUNTARY TERMINATION. Employee may terminate his employment
under this Agreement at any time with thirty (30) days prior
written notice thereof to Employer. Upon such termination,
Employee shall be entitled to his pro-rata Base Salary and all
stock options that have vested at that time.
b. RESIGNATION FOR GOOD CAUSE. The termination of his employment
under this Agreement by Employee following a substantial
reduction in Employee's position or duties or material breach of
this Agreement by Employer shall be deemed a termination by
employee for reasons other than cause as set forth in paragraph
10 hereof.
c. TERMINATION UPON DEATH. This Agreement shall terminate
immediately upon Employee's death. Employee's estate shall be
entitled to Employee's Base Salary up to twelve (12) months after
the Employee's death and earned Stock Options. Medical, Dental
and Vision Insurance payments shall continue for six (6) months
from date of Employee's death.
<PAGE>
13. GENERAL PROVISIONS.
a. AMENDMENT. This Agreement may be amended or modified only by a
writing signed by both of the parties hereto.
b. BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon Employee, his or her heirs and personal
representatives, and Employer, its successors and assigns.
c. WAIVER. The waiver by either party of a breach of any provision
contained in this Agreement shall not be construed as or operate
as a waiver of any subsequent breach.
d. NOTICES
i) All notices and all other communication provided for herein
shall be in writing and delivered personally to the other
designated party, or mailed by certified or registered mail,
return receipt requested or delivered by a recognized
national overnight courier service, or sent by facsimile as
follows:
If to Employer to: Mr. Patrick Dane
Director
If to Employer to: Mr. Jack Marshall
CEO, President, Treasurer
If Employee has provided notice to Employer that he is
represented by counsel, Employer shall copy Employee's counsel at
the address specified. Employee agrees and understands that any
legal fees or expenses incurred by him in connection with this
Agreement are his sole responsibility and Employer shall not
reimburse Employee for any portion of such fees or expenses.
<PAGE>
ii) All notices sent under this Paragraph 13 shall be deemed
given twenty four (24) hours after sent by facsimile or
courier and seventy-two (72) hours after sent by certified
or registered mail.
iii) Either party hereto may change the address to which notice
is to be sent hereunder by written notice to the other party
in accordance with the provisions of this Paragraph.
e. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without
regard to principles of conflicts of laws.
f. ENTIRE AGREEMENT. This Agreement contains the full and complete
understanding of the parties hereto with respect to the subject
matter contained herein and this Agreement supersedes and
replaces any prior agreement , either oral or written, which
Employee may have with Employer that relates generally to the
same subject matter.
g. SURVIVAL. Notwithstanding any expiration or termination of this
Agreement, the provisions of this agreement shall survive and
remain in full force and effect, as shall any other provision
hereof that, by its terms or reasonable interpretation thereof,
sets forth obligations that extend beyond the termination of this
Agreement.
h. ASSIGNMENT. This Agreement may not be assigned by Employee
without the prior written consent of Employer, and any attempted
assignment not in accordance herewith shall be null and void and
of no force or effect. Employer can assign this Agreement to any
Affiliate with Employee's written consent. Thereafter, any such
assignee shall be considered to be the Employer for all purposes
under this Agreement; provided however, that references to
previous incentive bonuses shall be deemed to include incentive
bonuses paid by any assignor.
<PAGE>
i. SEVERABILITY. If any one or more of the terms, provisions,
covenants or restrictions of this Agreement shall be determined
by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full
force and effect, and to that end the provisions hereof shall be
deemed severable.
j. PARAGRAPH HEADING. The section headings set forth herein are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement whatsoever.
k. VOLUNTARY AGREEMENT. Employee and Employer represent and agree
that each has reviewed all aspects of this Agreement, has
carefully read and fully understands all provisions of this
Agreement, and is voluntarily entering into this Agreement. Each
party represents and agrees that such party has had the
opportunity to review any and all aspects of this Agreement with
legal, tax or other advisers(s) of such party's choice before
executing this Agreement.
REMEDIES.
ARBITRATION OF DISAGREEMENTS. Any dispute, controversy or claim
arising out of or relating to the obligations under this Agreement
shall be settled by final and binding arbitration in accordance with
the American Arbitration Association Employment Dispute Resolution
Rules. The arbitrator shall be selected by mutual agreement of the
parties, if possible. If the parties fail to reach agreement upon
appointment of an arbitrator within 30 days following receipt by one
party of the other party's notice of desire to arbitrate, the
arbitrator shall be selected from a panel or panels of persons
submitted by the American Arbitration Association (the "AAA"). The
selection process shall be that which is set forth in the AAA
Employment Dispute Resolution Rules, except that, if the parties fail
to select an arbitrator from one or more panels, AAA shall not have
the power to make an appointment but shall continue to submit
additional panels until an arbitrator has been selected.
<PAGE>
All fees and expenses of the arbitration, including a transcript if
requested, will be borne by the Employer. Any action to enforce or
vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by California state law.
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement as of the date first above
written.
EMPLOYER EMPLOYEE
Patrick Dane Chris McConn
BY:
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") effective as of the 15th day of March
2000, between PhotoLoft.com , a Nevada corporation having its principal place of
business at 300 Orchard City Drive, Suite 142, Campbell, California 98005
("Employer"), and Jack Marshall ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee upon the terms and subject to the
conditions hereinafter set forth, and Employee desires to accept such
employment:
<PAGE>
NOW, THEREFORE, for and in consideration of the premises, the mutual promises,
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows.
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement,
Employer shall employ Employee and Employee hereby accepts such
employment.
2. TERM. The term of this Agreement shall be for the period from March
15, 2000 through March 15, 2001.
3. POSITION AND DUTIES.
a. POSITION. Employee shall serve as CEO, President and Treasurer
and shall perform the duties and exercise the powers in
connection with such position and which may from time to time be
reasonably assigned to or vested in him or her by the Board of
Directors or similar governing body of Employer (the "Board") or
the duly authorized committee or designee thereof.
b. FULL TIME EFFORTS. Employee shall perform and discharge
faithfully, diligently and to the best of his or her ability such
duties and responsibilities and shall devote his or her full-time
efforts to the business and affairs of Employer.
c. NO INTERFERENCE WITH DUTIES. Employee shall not devote time to
other activities such as would inhibit or otherwise interfere
with the proper performance of his or her duties.
4. WORK STANDARD. Employee hereby agrees that he or she will at all times
comply with abide by all terms and conditions set forth in this
Agreement, and all applicable work policies, procedures and rules as
may be issued by Employer.
<PAGE>
5. COMPENSATION.
a. BASE SALARY. Subject to the terms and conditions set forth in
this Agreement, Employer shall pay Employee, and Employee shall
accept, a salary ("Base Salary") at the annual rate of $140,000
for all services rendered during the term of this Agreement. Base
Salary shall be reviewed no less frequently than annually. The
Base Salary is not to be considered in any way to limit
Employee's opportunity to receive appropriate increases in Base
Salary during the term of this Agreement. The Base Salary shall
be paid in accordance with Employer's normal payroll procedures.
b. INCENTIVE BONUS. Subject to the terms and conditions set forth in
this Agreement, Employer shall pay Employee, and Employee shall
accept, an annual cash bonus ("Incentive Bonus") to be no less
than fifty (50%) percent of the Annual Salary upon achieving the
following milestones: a) an average of one (1) million
impressions to the PhotoLoft.com web site over a thirty (30) day
period; b) one (1) million members in PhotoLoft.com; c) no less
than $500,000 gross revenue generated in 2000. The Incentive
Bonus will be no less than one hundred (100%) percent of the
Annual Salary upon achieving the following milestones: a) an
average of two (2) million impressions to the PhotoLoft.com web
site over a thirty (30) day period; b) two (2) million members in
PhotoLoft.com; c) no less than one ($1) million dollars are
generated in gross revenues in 2000.
c. EMPLOYMENT OPTIONS. Employee will continue to accrue employment
options granted under a 1998 Stock Option Agreement, whereby the
Employee will vest up to 750,000 options by July 2002.
<PAGE>
d. BONUS OPTIONS. Employee will receive 250,000 bonus options,
granted under the Employee Stock Option Plan, upon acceptance by
the Board of a term sheet for a sale of the company or a major
financing. Employee will receive 500,000 bonus options, granted
under the Employee Stock Option Plan, on the Effective Date of a
sale of the company or major financing.
e. WITHHOLDING. All compensation payable to Employee pursuant to
this Agreement shall be subject to, and Employer will deduct and
withhold, all applicable federal, state and local withholding,
employment, social security, and other similar taxes.
6. FRINGE BENEFITS. During the term of Employee's employment under this
Agreement, Em0ployee shall receive the fringe benefits described
below:
a. MEDICAL, DENTAL, VISION, LIFE AND DISABILITY INSURANCE. Employer
shall provide Employee and eligible dependents ("spouse and
children under 21 years of age") with medical, dental and vision
insurance coverage. Life and disability insurance coverage will
be provided by Employer to Employee.
b. VACATION. Employee is eligible for four (4) weeks of vacation per
calendar year.
c. CAR ALLOWANCE. Employee is eligible for a monthly car allowance
of $500.
d. OUT OF POCKET EXPENSES. Employer will reimburse Employee for out
of pocket expenses ("out of pocket expenses") as incurred by the
Employee in the normal course of business, including, but not
limited to corporate entertainment, non-capital purchases and
corporate travel.
7. LAWS, REGULATIONS, AND PUBLIC ORDINANCES. Employee shall comply with
all federal, state, and local statutes, regulations and public
ordinances governing the work.
<PAGE>
8. CONFIDENTIAL INFORMATION; INVENTIONS; CONFLICTING EMPLOYMENT;
RETURNING COMPANY DOCUMENTS; SOLICITATION OF EMPLOYEES; NON-COMPETE.
a. COMPANY INFORMATION: Employee agrees at all times during the term
of employment and thereafter, to hold in strictest confidence,
and not use, except for the benefit of the Employer, or to
disclose to any person, firm or corporation without written
authorization of the board of Directors of the Company, any
Confidential Information of the Company. Employee understands
that Confidential Information means any company proprietary
information, technical data, trade secrets or know-how,
including, but not limited to, research, product plans, products,
services, customer lists and customers (including, but not
limited to, customers of the company on whom Employee calls or
with whom Employee became acquainted during the term of
employment), markets, software, developments, inventions,
processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances, or other
business information disclosed to Employee by the company either
directly or indirectly in writing, orally or by drawings or
inspection of parts or equipment. Employee further understands
that Confidential Information does not include any of the
foregoing items which has become publicly known and made
generally available through no wrongful act of Employee.
b. FORMER EMPLOYER INFORMATION. Employee agrees that he will not,
during employment with the company, improperly use or disclose
any proprietary information or trade secrets of any former or
concurrent employer or other person or entity with which Employee
has an agreement or duty to keep in confidence, information
acquired by Employee in confidence, if any, and that Employee
will not bring onto the premises of the Company any unpublished
document or proprietary information belonging to any such
employer, person or entity unless consented to in writing by such
employer, person or entity.
<PAGE>
c. THIRD PARTY INFORMATION. Employee recognizes that the company has
received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on
certain limited purposes. Employee agrees to hold all such
confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my
work for the company consistent with the company's agreement with
such third party.
d. INVENTIONS RETAINED AND LICENSED: Employee has attached hereto as
Exhibit A, a list describing all inventions, original works of
authorship, developments, improvements and trade secrets which
were made by Employee prior to employment with the company
(collectively referred to as Prior inventions), which belong to
Employee, which relate to the company's purposed business,
products or hereunder; or, if not such list is attached, Employee
represents that there are no such prior inventions. If in the
course of employment with the company, Employee incorporates into
a company product, process or machine a prior invention owned by
Employee or in which Employee has an interest, the Company is
hereby granted and shall have a non-exclusive, royalty-free,
irrevocable, perpetual, worldwide license to make, have made,
modify, use and sell such prior invention as part of or in
connection with such product, process or machine.
e. ASSIGNMENT OF INVENTIONS; Employee agrees that he will promptly
make full written disclosure to the company, will hold in trust
for the sole right and benefit of the company and hereby assign
to the company, or its designee, all right, title, and interest
in and to any and all inventions, original works of authorship,
developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under copyright or similar laws,
which Employee may solely or jointly conceive or develop or
reduce to practice, during the period of time he is in the
employee of the company (collectively referred to as
"Inventions"), except as provided in Section i below. Employee
further acknowledges that all original works of authorship which
are made by Employee (solely or jointly with others) within the
scope of employment and which are protectable by copyright are
"works made for hire," as that term is defined in the United
States Copyright Act.
<PAGE>
f. MAINTENANCE OF RECORDS: Employee agrees to keep and maintain
adequate and current written records of all inventions made by
him (solely or jointly with others) during the term of my
employment with the company. The records will be in the form of
notes, sketches, drawings and any other format that may be
specified by the company. The records will be available to and
remain the sole property of the company at all times.
g. PATENT AND COPYRIGHT REGISTRATION: Employee agrees to assist the
company, or its designee, at the company's expense, in every
proper way to secure the company's rights in the inventions and
any copyrights, patents, mask work rights or other intellectual
property rights relating thereto in any and all countries,
including the disclosure to the company of all pertinent
information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other
instruments which the company shall deem necessary in order to
apply for and obtain such rights and in order to assign and
convey to the comp0any, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such
inventions, and any copyrights, patents, mask work rights, or
other intellectual property rights relating thereto. Employee
further agrees that any obligation to execute or cause to be
executed, when it is in his power to do so, any such instrument
or papers shall continue after the termination of this Agreement.
If the company is unable because of Employee's mental or physical
incapacity or for any other reason to secure Employee's signature
to apply for or to pursue any application for any United States
or foreign patents or copyrights registrations covering
inventions or original works of authorship assigned to the
company as above, then Employee hereby irrevocably designates and
appoints company and its duly authorized officers and agents as
agent and attorney in fact, to act for and in Employee's behalf
and stead to execute and file any such applications and to do all
other lawfully permitted acts to further the prosecution and
issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by Employee.
<PAGE>
h. EXCEPTIONS TO ASSIGNMENTS. Employee understands that the
provisions of this Agreement requiring assignment of inventions
to company do not apply to any invention which qualifies fully
under the provisions of California Labor Code Section 2870.
Employee will advise the company promptly in writing of any
inventions that he believe meet the criteria in California Labor
Code Section 2870 and not otherwise disclosed on Exhibit A.
<PAGE>
i. RETURNING COMPANY DOCUMENTS. Employee agrees that, at the time of
leaving the employ of the company he will deliver to the company
(and will not keep in his possession or deliver to anyone else)
any and all devices, records, data, notes, reports, proposals,
lists, correspondence, specifications, drawings, blueprints,
sketches, materials, equipment, others documents, or property, or
reproductions of any aforementioned items developed by Employee
pursuant to employment with the company or otherwise belonging to
the company, its successors or assigns.
j. SOLICITATION OF EMPLOYEES. Employee agrees that he shall not, for
a period of one (1) year immediately following the termination
from the company for any reason, whether with or without cause,
either directly or indirectly, on his own behalf or in the
service or on behalf of other, solicit, recruit or attempt to
persuade any person to terminate such person's employment with
the company, whether or not such person is a full-time employee
or whether or not such employment is pursuant to a written
agreement or is at-will.
k. NON-COMPETE. Employee agrees that he shall not, for a period of
one (1) year immediately following the termination of his
relationship with the company for any reason, whether with or
without cause, either directly or indirectly engage in any
activity that competes with PhotoLoft.com
9. TERMINATION FOR CAUSE. This Agreement may be terminated at any time by
Employer without prior notice thereof to Employee and without any
liability owning to Employee under this Agreement under the following
conditions, each of which shall constitute "Cause";
<PAGE>
a. FAILURE TO DISCHARGE DUTIES. Employee willfully neglects or
refuses to discharge his duties hereunder or refuses to comply
with any lawful and reasonable instructions given to him by
Employer without reasonable excuse;
b. BREACH. Employee shall have committed any material breach, or
repeated or continued after written notice of any breach, whether
material or not, of his obligations hereunder;
c. GROSS MISCONDUCT. Employee is guilty of gross misconduct. For the
purposes of this Agreement the following acts shall constitute
gross misconduct:
i) Any act involving fraud or dishonesty or breach of
applicable regulations of competent authorities in relation
to trading or dealing with stocks, securities, investments
and the like;
ii) The carrying out of any activity or the making of any
statement which would prejudice or impair the good name or
standing of Employer or would bring Employer into contempt,
ridicule or would reasonable shock or offend any community
in which Employer is located;
iii) Attendance at work in a state of intoxication or otherwise
being found in possession at his place of work any
prohibited drug or substance, possession of which would
amount to a criminal offense;
<PAGE>
iv) Assault or other act of violence against any employee of
Employer or other person during the course of his or her
employment;
v) Harassment of disparagement of others based on their age,
disability, color, national origin, race, religion, sex or
veteran status, including acts of sexual harassment or,
vi) Conviction of any felony or misdemeanor involving moral
turpitude.
10. TERMINATION BY EMPLOYER FOR REASONS OTHER THAN CAUSE. Notwithstanding
anything herein to the contrary, and subject to the survival
provisions of Paragraph 13.G hereof, Employer may terminate this
Agreement at any time with thirty (30) days prior notice thereof to
Employee. In such an event, Employer shall pay to Employee in
accordance with Employer's normal practices; 1) twice the Base Salary;
2) Incentive Bonus as applicable, 3) vested Stock Options, 4) Medical,
Dental, Vision, Life and Disability Insurance, 5) Car Allowance, 6)
and any unused Vacation - for a period of one (1) year from the date
of termination.
11. TERMINATION BASED UPON CHANGE OF CONTROL. In the event Employer enters
into an agreement with another person or entity, the effect of which
is to change the control of the Employer, then and in such event,
Employee shall be exclusively entitled to terminate this Agreement,
and in such event, Employer shall pay to Employee the severance
payments in the amount of two (2) years base salary, any bonus and
benefits payable through the end of the term. Additionally, upon such
termination, the vesting of all options to purchase Common Stock of
the Company held by Employee shall be accelerated so that such options
are immediately exercisable. For purposes of this Agreement, the term
"change of control": shall mean: (i) any change of equity such that
more than fifty percent (50%) of the issued and outstanding shares of
the Company are transferred to a third party; (ii) or debt ownership,
including but not limited to conversion rights of debt to equity of
the Employer such that more than fifty percent (50%) of the issued and
outstanding shares are transferred to a third party; or (iii) a sale
of substantially all of Employer's assets. However, a change of
control shall not include a public offering of the securities of the
Company.
<PAGE>
12. TERMINATION BY EMPLOYEE.
a. VOLUNTARY TERMINATION. Employee may terminate his employment
under this Agreement at any time with thirty (30) days prior
written notice thereof to Employer. Upon such termination,
Employee shall be entitled to his pro-rata Base Salary and
Incentive Bonus through the date of such termination and all
stock options that have vested at that time.
b. RESIGNATION FOR GOOD CAUSE. The termination of his employment
under this Agreement by Employee following a substantial
reduction in Employee's position or duties or material breach of
this Agreement by Employer shall be deemed a termination by
employee for reasons other than cause as set forth in paragraph
10 hereof.
c. TERMINATION UPON DEATH. This Agreement shall terminate
immediately upon Employee's death. Employee's estate shall be
entitled to Employee's Base Salary up to twelve (12) months after
the Employee's death, Incentive Bonus if applicable and earned
Stock Options. Medical, Dental and Vision Insurance payments
shall continue for twelve (12) months from date of Employee's
death.
GENERAL PROVISIONS.
a. AMENDMENT. This Agreement may be amended or modified only by a
writing signed by both of the parties hereto.
b. BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon Employee, his or her heirs and personal
representatives, and Employer, its successors and assigns.
c. WAIVER. The waiver by either party of a breach of any provision
contained in this Agreement shall not be construed as or operate
as a waiver of any subsequent breach.
d. NOTICES
i) All notices and all other communication provided for herein
shall be in writing and delivered personally to the other
designated party, or mailed by certified or registered mail,
return receipt requested or delivered by a recognized
national overnight courier service, or sent by facsimile as
follows:
If to Employer to: Mr. Patrick Dane
Director
If to Employee to: Mr. Jack Marshall
CEO, President, Treasurer
If Employee has provided notice to Employer that he is represented by
counsel, Employer shall copy Employee's counsel at the address
specified. Employee agrees and understands that any legal fees or expenses
incurred by him in connection with this Agreement are his sole
responsibility and Employer shall not reimburse Employee for any portion
of such fees or expenses.
ii) All notices sent under this Paragraph 13 shall be deemed
given twenty-four (24) hours after sent by facsimile or
courier and seventy-two (72) hours after sent by certified
or registered mail.
<PAGE>
iii) Either party hereto may change the address to which notice
is to be sent hereunder by written notice to the other party
in accordance with the provisions of this Paragraph.
e. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without
regard to principles of conflicts of laws.
f. ENTIRE AGREEMENT. This Agreement contains the full and complete
understanding of the parties hereto with respect to the subject
matter contained herein and this Agreement supersedes and
replaces any prior agreement , either oral or written, which
Employee may have with Employer that relates generally to the
same subject matter.
g. SURVIVAL. Notwithstanding any expiration or termination of this
Agreement, the provisions of this agreement shall survive and
remain in full force and effect, as shall any other provision
hereof that, by its terms or reasonable interpretation thereof,
sets forth obligations that extend beyond the termination of this
Agreement.
h. ASSIGNMENT. This Agreement may not be assigned by Employee
without the prior written consent of Employer, and any attempted
assignment not in accordance herewith shall be null and void and
of no force or effect. Employer can assign this Agreement to any
Affiliate with Employee's written consent. Thereafter, any such
Assignee shall be considered to be the Employer for all purposes
under this Agreement; provided however, that references to
previous incentive bonuses shall be deemed to include incentive
bonuses paid by any assignor.
i. SEVERABILITY. If any one or more of the terms, provisions,
covenants or restrictions of this Agreement shall be determined
by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full
force and effect, and to that end the provisions hereof shall be
deemed severable.
j. PARAGRAPH HEADING. The section headings set forth herein are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement whatsoever.
k. VOLUNTARY AGREEMENT. Employee and Employer represent and agree
that each has reviewed all aspects of this Agreement, has
carefully read and fully understands all provisions of this
Agreement, and is voluntarily entering into this Agreement. Each
party represents and agrees that such party has had the
opportunity to review any and all aspects of this Agreement with
legal, tax or other advisers(s) of such party's choice before
executing this Agreement.
13. REMEDIES. ARBITRATION OF DISAGREEMENTS. Any dispute, controversy or claim
arising out of or relating to the obligations under this Agreement shall be
settled by final and binding arbitration in accordance with the American
Arbitration Association Employment Dispute Resolution Rules. The arbitrator
shall be selected by mutual agreement of the parties, if possible. If the
parties fail to reach agreement upon appointment of an arbitrator within 30
days following receipt by one party of the other party's notice of desire
to arbitrate, the arbitrator shall be selected from a panel or panels of
persons submitted by the American Arbitration Association (the "AAA"). The
selection process shall be that which is set forth in the AAA Employment
Dispute Resolution Rules, except that, if the parties fail to select an
arbitrator from one or more panels, AAA shall not have the power to make an
appointment but shall continue to submit additional panels until an
arbitrator has been selected.
All fees and expenses of the arbitration, including a transcript if
requested, will be borne by the Employer. Any action to enforce or vacate
the arbitrator's award shall be governed by the Federal Arbitration Act, if
applicable, and otherwise by California state law.
<PAGE>
IN WTINESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement as of the date first above
written.
EMPLOYER Jack Marshall
BY:
Patrick Dane
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") effective as of the 15th day of March
2000, between PhotoLoft.com , a Nevada corporation having its principal place of
business at 300 Orchard City Drive, Suite 142, Campbell, California 98005
("Employer"), and Kay Wolf Jones ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee upon the terms and subject to the
conditions hereinafter set forth, and Employee desires to accept such
employment:
NOW, THEREFORE, for and in consideration of the premises, the mutual promises,
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows.
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement, Employer
shall employ Employee and Employee hereby accepts such employment.
2. TERM. The term of this Agreement shall be for the period from March 15,
2000 through March 15, 2001 (the "Initial Term").
3. POSITION AND DUTIES.
a. POSITION. Employee shall serve as Vice President, Marketing and shall
perform the duties and exercise the powers in connection with such
position and which may from time to time be reasonably assigned to or
vested in him or her by the CEO and/or Board of Directors or similar
governing body of Employer (the "Board") or the duly authorized
committee or designee thereof.
<PAGE>
b. FULL TIME EFFORTS. Employee shall perform and discharge faithfully,
diligently and to the best of his or her ability such duties and
responsibilities and shall devote his or her full-time efforts to the
business and affairs of Employer.
c. NO INTERFERENCE WITH DUTIES. Employee shall not devote time to other
activities such as would inhibit or otherwise interfere with the
proper performance of his or her duties.
4. WORK STANDARD. Employee hereby agrees that he or she will at all times
comply with abide by all terms and conditions set forth in this Agreement,
and all applicable work policies, procedures and rules as may be issued by
Employer.
5. COMPENSATION.
a. BASE SALARY. Subject to the terms and conditions set forth in this
Agreement, Employer shall pay Employee, and Employee shall accept, a
salary ("Base Salary") at the annual rate of $95,000 for all services
rendered during the term of this Agreement. Base Salary shall be
reviewed no less frequently than annually. The Base Salary is not to
be considered in any way to limit Employee's opportunity to receive
appropriate increases in Base Salary during the term of this
Agreement. The Base Salary shall be paid in accordance with Employer's
normal payroll procedures.
b. EMPLOYMENT OPTIONS. Employee will earn up to 150,000 employment
options, granted under the PhotoLoft.com Employee Stock Option Plan.
The options will be priced at the closing price of the stock March 31,
2000.
c. WITHHOLDING. All compensation payable to Employee pursuant to this
Agreement shall be subject to, and Employer will deduct and withhold,
all applicable federal, state and local withholding, employment,
social security, and other similar taxes.
6. FRINGE BENEFITS. During the term of Employee's employment under this
Agreement, Em0ployee shall receive the fringe benefits described below:
a. MEDICAL, DENTAL, VISION, LIFE AND DISABILITY INSURANCE. Employer shall
provide Employee and eligible dependents ("spouse and children under
21 years of age") with medical, dental and vision insurance coverage.
Life and disability insurance coverage will be provided by Employer to
Employee.
b. VACATION. Employee is eligible for four (4) weeks of vacation per
calendar year.
c. OUT OF POCKET EXPENSES. Employer will reimburse Employee for out of
pocket expenses ("out of pocket expenses") as incurred by the Employee
in the normal course of business, including, but not limited to
corporate entertainment, non-capital purchases and corporate travel.
7. LAWS, REGULATIONS, AND PUBLIC ORDINANCES. Employee shall comply with all
federal, state, and local statutes, regulations and public ordinances
governing the work.
8. CONFIDENTIAL INFORMATION; INVENTIONS; CONFLICTING EMPLOYMENT; RETURNING
COMPANY DOCUMENTS; SOLICITATION OF EMPLOYEES; NON-COMPETE.
a. COMPANY INFORMATION: Employee agrees at all times during the term of
employment and thereafter, to hold in strictest confidence, and not
use, except for the benefit of the Employer, or to disclose to any
person, firm or corporation without written authorization of the board
of Directors of the Company, any Confidential Information of the
Company. Employee understands that Confidential Information means any
company proprietary information, technical data, trade secrets or
know-how, including, but not limited to, research, product plans,
products, services, customer lists and customers (including, but not
limited to, customers of the company on whom Employee called or with
whom Employee became acquainted during the term of employment),
markets, software, developments, inventions, processes, formulas,
technology, designs, drawings, engineering, hardware configuration
information, marketing, finances, or other business information
disclosed to me by the company either directly or indirectly in
writing, orally or by drawings or inspection of parts or equipment.
Employee further understands that Confidential Information does not
include any of the foregoing items which has become publicly known and
made generally available through no wrongful act of mine.
b. FORMER EMPLOYER INFORMATION. Employee agrees that she will not, during
employment with the company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent
employer or other person or entity with which Employee has an
agreement or duty to keep in confidence, information acquired by
Employee in confidence, if any, and that Employee will not bring onto
the premises of the Company any unpublished document or proprietary
information belonging to any such employer, person or entity unless
consented to in writing by such employer, person or entity.
c. THIRD PARTY INFORMATION. Employee recognizes that the company has
received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on certain
limited purposes. Employee agrees to hold all such confidential or
proprietary information in the strictest confidence and not to
disclose it to any person, firm or corporation or to use it except as
necessary in carrying out my work for the company consistent with the
company's agreement with such third party.
<PAGE>
d. INVENTIONS RETAINED AND LICENSED: Employee has attached hereto as
Exhibit A, a list describing all inventions, original works of
authorship, developments, improvements and trade secrets which were
made by me prior to employment with the company (collectively referred
to as Prior inventions), which belong to Employee, which relate to the
company's purposed business, products or hereunder; or, if not such
list is attached, Employee represents that there are no such prior
inventions. If in the course of employment wit the company, Employee
incorporates into a company product, process or machine a prior
invention owned by Employee or in which Employee has an interest, the
Company is hereby granted and shall have a non-exclusive,
royalty-free, irrevocable, perpetual, worldwide license to make, have
made, modify, use and sell such prior invention as part of or in
connection with such product, process or machine.
e. ASSIGNMENT OF INVENTIONS; Employee agrees that she will promptly make
full written disclosure to the company, will hold in trust for the
sole right and benefit of the company and hereby assign to the
company, or its designee, all right, title, and interest in and to any
and all inventions, original works of authorship, developments,
concepts, improvements or trade secrets, whither or not patentable or
registrable under copyright or similar laws, which she may solely or
jointly conceive or develop or reduce to practice, during the period
of time she is in the employee of the company (collectively referred
to as "Inventions"), except as provided in Section i below. Employee
further acknowledges that all original works of authorship which are
made by Employee (solely or jointly with others) within the scope of
employment and which are protectable by copyright are "works made for
hire," as that term is defined in the United States Copyright Act.
<PAGE>
f. MAINTENANCE OF RECORDS: Employee agrees to keep and maintain adequate
and current written records of all inventions made by her (solely or
jointly with others) during the term of employment with the company.
The records will be in the form of notes, sketches, drawings and any
other format that may be specified by the company. The records will be
available to and remain the sole property of the company at all times.
g. PATENT AND COPYRIGHT REGISTRATION: Employee agrees to assist the
company, or its designee, at the company's expense, in every proper
way to secure the company's rights in the inventions and any
copyrights, patents, mask work rights or other intellectual property
rights relating thereto in any and all countries, including the
disclosure to the company of all pertinent information and data with
respect thereto, the execution of all applications, specifications,
oaths, assignments and all other instruments which the company shall
deem necessary in order to apply for and obtain such rights and in
order to assign and convey to the comp0any, its successors, assigns
and nominees the sole and exclusive rights, title and interest in and
to such inventions, and any copyrights, patents, mask work rights, or
other intellectual property rights relating thereto. Employee further
agrees that her obligation to execute or cause to be executed, when it
is in her power to do so, any such instrument or papers shall continue
after the termination of this Agreement. If the company is unable
because of Employee's mental or physical incapacity or for any other
reason to secure Employee's signature to apply for or to pursue any
application for any United States or foreign patents or copyrights
registrations covering inventions or original works of authorship
assigned to the company as above, then Employee hereby irrevocably
designates and appoints company and its duly authorized officers and
agents as agent and attorney in fact, to act for and in behalf and
stead of Employee to execute and file any such applications and to do
all other lawfully permitted acts to further the prosecution and
issuance of letters patent or copyright registrations thereon with the
same legal force and effect as if executed by Employee.
<PAGE>
h. EXCEPTIONS TO ASSIGNMENTS. Employee understands that the provisions of
this Agreement requiring assignment of inventions to company do not
apply to any invention which qualifies fully under the provisions of
California Labor Code Section 2870. Employee will advise the company
promptly in writing of any inventions that she believes meet the
criteria in California Labor Code Section 2870 and not otherwise
disclosed on Exhibit A.
i. RETURNING COMPANY DOCUMENTS. Employee agrees that, at the time of
leaving the employ of the company she will deliver to the company (and
will not keep in her possession or deliver to anyone else) any and all
devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches,
materials, equipment, others documents, or property, or reproductions
of any aforementioned items developed by Employee pursuant to
employment with the company or otherwise belonging to the company, its
successors or assigns.
j. SOLICITATION OF EMPLOYEES. Employee agrees that, for a period of one
(1) year immediately following the termination of Employee's
relationship with the company for any reason, whether with or without
cause, either directly or indirectly, on behalf or in the service or
on behalf of other, solicit, recruit or attempt to persuade any person
to terminate such person's employment with the company, whether or not
such person is a full-time employee or whether or not such employment
is pursuant to a written agreement or is at-will.
k. NON-COMPETE. I agree that I shall not, for a period of one year
immediately following the termination of my relationship with the
company for any reason, whether with or without cause, either directly
or indirectly engage in any activity that competes with PhotoLoft.com
9. TERMINATION FOR CAUSE. This Agreement may be terminated at any time by
Employer without prior notice thereof to Employee and without any
liability owning to Employee under this Agreement under the following
conditions, each of which shall constitute "Cause";
<PAGE>
a. FAILURE TO DISCHARGE DUTIES. Employee willfully neglects or refuses to
discharge her duties hereunder or refuses to comply with any lawful
and reasonable instructions given to her by Employer without
reasonable excuse;
b. BREACH. Employee shall have committed any material breach, or repeated
or continued after written notice of any breach, whether material or
not, of her obligations hereunder;
c. GROSS MISCONDUCT. Employee is guilty of gross misconduct. For the
purposes of this Agreement the following acts shall constitute gross
misconduct:
<PAGE>
i) Any act involving fraud or dishonesty or breach of applicable
regulations of competent authorities in relation to trading or
dealing with stocks, securities, investments and the like;
ii) The carrying out of any activity or the making of any statement
which would prejudice or impair the good name or standing of
Employer or would bring Employer into contempt, ridicule or would
reasonable shock or offend any community in which Employer is
located;
iii) Attendance at work in a state of intoxication or otherwise being
found in possession at her place of work any prohibited drug or
substance, possession of which would amount to a criminal
offense;
iv) Assault or other act of violence against any employee of Employer
or other person during the course of his or her employment;
v) Harassment or disparagement of others based on their age,
disability, color, national origin, race, religion, sex or
veteran status, including acts of sexual harassment or,
vi) Conviction of any felony or misdemeanor involving moral
turpitude.
10. TERMINATION BY EMPLOYER FOR REASONS OTHER THAN CAUSE. Notwithstanding
anything herein to the contrary, and subject to the survival
provisions of Paragraph 13.G hereof, Employer may terminate this
Agreement at any time with thirty (30) days prior notice thereof to
Employee. In such an event, Employer shall pay to Employee in
accordance with Employer's normal practices; 1) the Base Salary; 2)
vested Stock Options, 3) Medical, Dental, Vision, Life and Disability
Insurance, 5) and any unused Vacation - for a period of one (1) year
after the termination date.
11. TERMINATION BASED UPON CHANGE OF CONTROL. In the event Employer enters
into an agreement with another person or entity, the effect of which
is to change the control of the Employer, then and in such event,
Employee shall be exclusively entitled to terminate this Agreement,
and in such event, Employer shall pay to Employee the severance
payments in the amount of one (1) year base salary, and benefits
payable through the end of the term. Additionally, upon such
termination, the vesting of all options to purchase Common Stock of
the Company held by Employee shall be accelerated so that such options
are immediately exercisable. For purposes of this Agreement, the term
"change of control: shall mean: (i) any change of equity such that
more than fifty (50%) percent (50%) of the issued and outstanding
shares of the Company are transferred to a third party; (ii) or debt
ownership, including but not limited to conversion rights of debt to
equity of the Employer such that more than fifty percent (50%) of the
issued and outstanding shares are transferred to a third party; or
(iii) a sale of substantially all of Employer's assets. However, a
change of control shall not include a public offering of the
securities of the Company.
<PAGE>
12. TERMINATION BY EMPLOYEE.
a. VOLUNTARY TERMINATION. Employee may terminate this employment under
this Agreement at any time with thirty (30) days prior written notice
thereof to Employer. Upon such termination, Employee shall be entitled
to her pro-rata Base Salary through the date of such termination and
all stock options that have vested at that time.
b. RESIGNATION FOR GOOD CAUSE. The termination of her employment under
this Agreement by Employee following a substantial reduction in
Employee's position or duties or material breach of this Agreement by
Employer shall be deemed a termination by employee for reasons other
than cause as set forth in paragraph 10 hereof.
c. TERMINATION UPON DEATH. This Agreement shall terminate immediately
upon Employee's death. Employee's estate shall be entitled to
Employee's Base Salary up to twelve (12) months after the Employee's
death and earned Stock Options. Medical, Dental and Vision Insurance
payments shall continue for six (6) months from date of Employee's
death.
GENERAL PROVISIONS.
a. AMENDMENT. This Agreement may be amended or modified only by a writing
signed by both of the parties hereto.
b. BINDING AGREEMENT. This Agreement shall inure to the benefit of and be
binding upon Employee, his or her heirs and personal representatives,
and Employer, its successors and assigns.
c. WAIVER. The waiver by either party of a breach of any provision
contained in this Agreement shall not be construed as or operate as a
waiver of any subsequent breach.
d. NOTICES
i) All notices and all other communication provided for herein shall
be in writing and delivered personally to the other designated
party, or mailed by certified or registered mail, return receipt
requested or delivered by a recognized national overnight courier
service, or sent by facsimile as follows:
If to Employer to: Mr. Patrick Dane
Director
If to Employee to: Mr. Jack Marshall
CEO, President, Treasurer
<PAGE>
If Employee has provided notice to Employer that he is represented by
counsel, Employer shall copy Employee's counsel at the address
specified. Employee agrees and understands that any legal fees or
expenses incurred by him in connection with this Agreement are his
sole responsibility and Employer shall not reimburse Employee for any
portion of such fees or expenses.
ii) All notices sent under this Paragraph 13 shall be deemed given
twenty-four (24) hours after sent by facsimile or courier and
seventy-two (72) hours after sent by certified or registered
mail.
iii) Either party hereto may change the address to which notice is to
be sent hereunder by written notice to the other party in
accordance with the provisions of this Paragraph.
e. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to
principles of conflicts of laws.
f. ENTIRE AGREEMENT. This Agreement contains the full and complete
understanding of the parties hereto with respect to the subject matter
contained herein and this Agreement supersedes and replaces any prior
agreement , either oral or written, which Employee may have with
Employer that relates generally to the same subject matter.
g. SURVIVAL. Notwithstanding any expiration or termination of this
Agreement, the provisions of this agreement shall survive and remain
in full force and effect, as shall any other provision hereof that, by
its terms or reasonable interpretation thereof, sets forth obligations
that extend beyond the termination of this Agreement.
h. ASSIGNMENT. This Agreement may not be assigned by Employee without the
prior written consent of Employer, and any attempted assignment not in
accordance herewith shall be null and void and of no force or effect.
Employer can assign this Agreement to any Affiliate with Employee's
written consent. Thereafter, any such assignee shall be considered to
be the Employer for all purposes under this Agreement; provided
however, that references to previous incentive bonuses shall be deemed
to include incentive bonuses paid by any assignor.
i. SEVERABILITY. If any one or more of the terms, provisions, covenants
or restrictions of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, then the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect, and to that end the
provisions hereof shall be deemed severable.
j. PARAGRAPH HEADING. The section headings set forth herein are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement whatsoever.
k. VOLUNTARY AGREEMENT. Employee and Employer represent and agree that
each has reviewed all aspects of this Agreement, has carefully read
and fully understands all provisions of this Agreement, and is
voluntarily entering into this Agreement. Each party represents and
agrees that such party has had the opportunity to review any and all
aspects of this Agreement with legal, tax or other advisers(s) of such
party's choice before executing this Agreement.
<PAGE>
13. REMEDIES.
ARBITRATION OF DISAGREEMENTS. Any dispute, controversy or claim
arising out of or relating to the obligations under this Agreement
shall be settled by final and binding arbitration in accordance with
the American Arbitration Association Employment Dispute Resolution
Rules. The arbitrator shall be selected by mutual agreement of the
parties, if possible. If the parties fail to reach agreement upon
appointment of an arbitrator within 30 days following receipt by one
party of the other party's notice of desire to arbitrate, the
arbitrator shall be selected from a panel or panels of persons
submitted by the American Arbitration Association (the "AAA"). The
selection process shall be that which is set forth in the AAA
Employment Dispute Resolution Rules, except that, if the parties fail
to select an arbitrator from one or more panels, AAA shall not have
the power to make an appointment but shall continue to submit
additional panels until an arbitrator has been selected.
All fees and expenses of the arbitration, including a transcript if
requested, will be borne by the Employer. Any action to enforce or
vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by California state law.
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement as of the date first
above written.
EMPLOYER EMPLOYEE
Patrick Dane Kay Wolf Jones
BY:
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Photoloft.com's statements of operations and balance sheets and is qualified
in it entirety by reference to such financial statements.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 300700
<SECURITIES> 0
<RECEIVABLES> 36000
<ALLOWANCES> 16900
<INVENTORY> 0
<CURRENT-ASSETS> 336400
<PP&E> 567600
<DEPRECIATION> 158200
<TOTAL-ASSETS> 771800
<CURRENT-LIABILITIES> 1098100
<BONDS> 0
0
1060000
<COMMON> 12900
<OTHER-SE> (1399200)
<TOTAL-LIABILITY-AND-EQUITY> 771800
<SALES> 61800
<TOTAL-REVENUES> 61800
<CGS> 27300
<TOTAL-COSTS> 2722000
<OTHER-EXPENSES> (100)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2687600)
<INCOME-TAX> 800
<INCOME-CONTINUING> (2687400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2688400)
<EPS-BASIC> (.21)
<EPS-DILUTED> (.21)
</TABLE>
