UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
EZ TALK, INC.
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(Name of Small Business Issuer in its Charter)
Florida 65-0867538
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(State or other jurisdiction of (I.R.S. Employer Identification no.)
incorporation or organization)
222 Lakeview Avenue, Suite 160-217
West Palm Beach, FL 33401
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 832-5699
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered Each class to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
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(Title of class)
Copies of Communications Sent to:
Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
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Part I
Item 1. Description of Business.
(a) Business Development.
EZ Talk, Inc. (hereinafter referred to as the "Company" or "EZT") was
organized under the laws of the State of Florida on June 10, 1998. The Company
was organized by A. Rene Dervaes, Jr., (hereinafter "Dervaes"), the President
and director of the Company, for the purpose of engaging in the business of
selling/marketing a universal, hands-free mobile speaker for mobile phones. In
this regard, the Company retained the services of Ms. Johanna Bonnier,
(hereinafter "Bonnier"). It is anticipated that the Company will benefit from
the synergy expected to result from the combination of the specialized working
experience and expertise of Dervaes and Bonnier's marketing and sales
experience. The Company's executive offices are presently located at 222
Lakeview Avenue, Suite 160, West Palm Beach, 33401-6145.
The Company is filing this Form 10-SB on a voluntary basis so that the
public will have access to the required periodic reports on the Company's
current status and financial condition. The Company will file periodic reports
in the event its obligation to file such reports is suspended under the
Securities and Exchange Act of 1934 (the "Exchange Act").
The Company generally has been inactive, having conducted no business
operations except organizational and fund raising activities since its
inception. EZT received gross proceeds in the amount of $60,000 from the sale of
1,050,000 shares of common stock, $.0001 par value per share (the "Common
Stock"), in two(2) offerings conducted pursuant to Section 3(b) of the
Securities Act of 1933, as amended (the "Act"), and Rule 504 of Regulation D
promulgated thereunder ("Rule 504"). These offerings were made in the State of
New York and Florida. The Company undertook its first offering of shares of
Common Stock pursuant to Rule 504 on June 15, 1998 and its second offering of
shares of Common Stock pursuant to Rule 504 on September 15, 1998. A
Confidential Offering Circular was used in connection with these offerings, a
summary of the business plan of the Company was included with each Offering
Circular. Neither Florida nor New York required a disclosure document under the
terms of the exemption under which these offerings were made.
There are no preliminary agreements or understandings between the Company
and its officers and directors or affiliates or lending institutions with
respect to any loan agreements or arrangements.
The Company intends to offer additional securities under Rule 506 of
Regulation D under the Act ("Rule 506) to fund its short and medium term
expansion plans. (See Part I, Item 1. "Description of Business - (b) Business of
Issuer.")
See (b) "Business of Issuer" immediately below for a description of the
Company's proposed business. As of the date hereof, the Company has no temporary
staff or clients for placement of the Company's product and services.
(b) Business of Issuer.
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General
Since its inception, the Company has conducted no business operations
except for organizational activities and an offering of Common Stock pursuant to
which it has received gross offering proceeds in the amount of $60,000. Further,
the Company has had no employees since its organization. It is anticipated that
the Company's sole executive officer and director, will receive a reasonable
salary for services as the sole executive officer at such time as the Company
commences business operations. (See Part I, Item 6. "Executive Compensation.")
This individual will devote such time and effort as may be necessary to
participate in the day-to-day management of the Company. (See Part I, Item 5.
"Directors, Executive Officers, Promoters and Control Persons - Executive
Officers and Directors.") The Company proposes to engage in the business of
selling and marketing a hands-free mobile speaker for portable phones.
The following discussion of the portable phone accessory market, as it
relates to the Company's medium and long term business objectives, is of course
pertinent only if the Company is successful in obtaining sufficient debt and/or
equity financing to commence operations as a product marketer and, in addition
thereto, is able to generate sufficient profits from operations (which are not
expected in the foreseeable future) and/or additional financing to continue in
business and/or fund the anticipated growth, assuming EZT's proposed business is
successful. There can be no assurance such financing can be obtained or that the
Company's proposed business will be successful.
Dervaes decided to pursue the distribution and sale of a hands-free speaker
for portable phone business via the Company because of the belief that his many
years of business experience, when combined with Bonnier's experience in the
marketing and sales of consumer products, will allow them to develop a
successful marketing and distribution company which will have the advantages of,
among other things, greater availability of capital and potential for growth
through the vehicle of a public company as compared to a privately-held company.
The time required to be devoted by Dervaes and Bonnier, to manage the day-to-day
affairs of the Company is presently estimated to be approximately five to ten
hours per week. This time commitment is expected to increase at such time, if
ever, as EZT obtains sufficient funding with which to commence the search for a
corporate headquarters. (See Part I, Item 1. "Description of Business," (b)
"Business of Issuer - Risk Factors.")
The Company will be dependent upon management and their marketing
expertise, to develop a client base which may purchase their product. Dervaes
and Bonnier have extensive experience in international marketing as well as
finance. The Company plans to use to its advantage Dervaes' international
reputation and Bonnier's expertise in designing marketing and sales strategies
for consumer products. Nevertheless, while both Dervaes and Bonnier have been
successful in the past, there can be no assurance that they will be successful
in building the client base necessary for the successful operation of the
Company. (See Part I, Item 1. "Description of Business" (b) "Business of Issuer
- - Risk Factors", "Dependence on Management.")
The Company intends to sell and distribute a hands-free mobile speaker
phone technology, initially in the Palm Beach County, Florida area, then
enlarging to the entire State of Florida and thereafter in selected areas
world-wide.
In its initial phase, the Company will operate out of the facility provided
by Dervaes. Dervaes and Bonnier will then design a marketing and sales plan to
find clients for the Company's product. In the event the Company requires
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additional capital during this phase, Dervaes has committed to fund the
operation until such time as additional capital is available.
Due to the limited capital available to the Company, the principal risks
during this phase are that the Company is solely dependent upon Dervaes' and
Bonnier's efforts and that the Company will not be able to establish a
sufficiently large and profitable client base to establish the company's
business. (See Part I, Item 1. "Description of Business," (b) "Business of
Issuer - Risk Factors", "Dependence on Management")
In the event such placement is successful, the Company believes that it
will have sufficient operating capital to meet its initial expansion goals and
operating costs for a period of six (6) months. In the event the Company is not
successful in raising such funds, the Company believes that it will not be able
to continue operations past a period of six(6) to nine (9) months.
Even if the Company is successful at raising this additional money, there
can be no assurance that the implementation of the expansion of the initial plan
will increase the number of potential clients. By expanding, the Company may
face unforeseen costs associated with entry into the portable phone accessories
market. The Company still will be largely dependent upon Dervaes and Bonnier to
find suitable clients on a profitable and timely basis. Additionally, Dervaes
and Bonnier may have a conflict between the time demands of an expanding
business and the time requirements of their existing employment positions.
Although the Company believes $100,000 is sufficient to cover operations for the
projected period, there can be no assurance that such funding can cover the
additional risks associated with expansion. (See Part I, Item 1. "Description of
Business," (b) "Business of Issuer Risk Factors", "Conflict of Interest.")
If the Company is able to generate enough revenue during the initial phase
to support the business in Palm Beach County, in the medium term, the Company
plans to expand its distribution to one (1) additional geographic center each
quarter until such time as it has four (4) geographic marketing centers. The
Company intends to open the first expansion territory outside of Palm Beach,
County and in the Northeastern United States, with New York City, specifically,
as the base city in this Northeastern geographic territory since Bonnier is
familiar with the business environment there. The Company anticipates that it
will require an additional $125,000 to fund one (1) year of operations at this
second location, acquisition of office space, equipment and wages for clerical
staff. The Company also believes that Dervaes will be capable of managing the
Palm Beach County operation at this time, while Bonnier will oversee New York
City. If the Company is not successful in raising additional funds, the Company
believes that it will not be able to operate a second location without creating
a financial drain on the first location. Even if it is successful, there can be
no assurance that the Company will achieve any acceptance in the Palm Beach
County marketplace and may not establish a sufficient client base to make the
venture viable.
During the first quarter in which the New York City office is operating,
the Company intends to seek funding through an additional Rule 506 offering,
seeking an additional $300,000. Such funds will be utilized to open a third and
fourth geographic territory during the following two quarters. While office
space, clerical help, equipment costs and operations for a one (1) year period
are not anticipated to exceed $100,000, the Company believes that both Mr.
Dervaes and Ms. Bonnier should be placed on an annual salary and that
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advertising and promotional costs must be increased in order to increase the
accessability to a broader range of potential clients. Also, in order to be
competitive with other portable phone accessory provider companies, the Company
must implement an employee benefit program. The Company plans to open its third
office in Los Angeles, California, since it is the Company's belief that this
geographic territory will provide it very high company recognition in addition
to the Company's belief that this area may have the greatest concentration of
population and portable phone usage in the entire United States. The Company
believes that by covering these geographic territories, that it will have access
to a broader range of potential clients. Further, it believes that operations in
the above mentioned geographic territories will lead to economies of scale which
will increase the potential profitability of the Company. Specific financial
areas in which the Company believes it will have the benefit of the greatest
economies of scale are advertising and expenses in addition to the availability
of a larger portable phone usage market which may lead directly to a higher
dollar volume of portable phone accessory product sales.
The principal risks of these expanded operations would be unforeseen costs
associated with entry into the expanded market, increased costs associated with
a larger geographic area of coverage, and additional clerical employee related
claims associated with a larger support staff, inability to establish a presence
in the expanded market place, increased competition and increased risk
associated with the lapse between sales and the receipt of the stream of cash
flows related to each sale. Should the Company incur any large liabilities
because of its operations, which risk increases as the Company's geographic
coverage expands, such liabilities could have a substantially detrimental effect
upon the Company's financial condition. Further, should the Company be unable to
secure the financing required for the additional expansion, the anticipated
revenues from a reduced operation, while potentially able to meet the operating
needs of the Company, would impede the likelihood of incremental revenue
increases necessary for the long term financial success of the Company. (See
Part I, Item 1. "Description of Business - (b) Business of Issuer - Risk
Factors", "Lack of Working Capital Funding Source.")
The Company plans to monitor closely its medium term operations for
approximately one (1) year. (See Part I, Item 1. "Description of Business - (b)
Business of Issuer - "Business Strategy.") If it has been successful in securing
the necessary financing and if each geographic territory is capable of
sustaining itself, the Company intends to seek additional financing through the
offering of additional equity securities pursuant to Rule 506, conventional bank
financing, small business administration financing, venture capital or the
private placement of corporate debt for a total of approximately $1,000,000.
There can be no assurance that any of these financing sources will be available
to the Company. If the Company plan to seek additional financing is successful,
the Company intends to open additional offices which compliment the Southern
Florida, Northeastern and Far West operations, beginning in the Midwest and,
then expanding into the Southeast. In addition, the Company foresees the need to
add a marketing manager to oversee these additional operations. The Company
believes that such expansion will achieve similar economies of scale as those
which are anticipated by the Palm Beach County and Northeastern expansion.
Further, the Company believes that such expansion will place the Company in a
position to be a major force in the portable phone accessory product market. If
such further expansion is implemented, Dervaes and Bonnier believe that they
will be able to oversee the operation with the addition of a marketing manager.
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The Company has not sought, as of yet, any debt financing since it believes
that any qualified venture capital firm will not loan any funds to the Company
until such time as it is fully reporting and has completed at least two years of
profitable operations. Once it has met their criteria, the Company intends to
seek out funds from licensed venture capital firms and to negotiate terms which
will fit the financial capabilities of the Company. Since the Company does not
intend to seek debt financing until such time as it has several locations
operating successfully, it believes that it can negotiate appropriate placement
and repayment terms for such borrowing. However, there can be no assurance that
such funds will be available to it or that suitable terms which are most
advantageous to the Company can be negotiated. In addition, the Company does
not, at this time, anticipate that it will require substantial leverage to fund
the expanded operations. However, in the event the Company did receive debt
financing and in the event the Company is not successful in sustaining
operations or meeting such debt and defaulted in its payments on the debt, then
such debt financing would result in foreclosure upon the Company's assets to the
detriment of its shareholders.
Although the Company is authorized to borrow funds, as discussed, it does
not intend to do so until such time as it has been operating for a given period
of time. At such time as the Company seeks borrowed funds, it does not intend to
use the proceeds to make payments to the Company's promoters(if any), management
(except as reasonable salaries, benefits and out of pocket expenses) or their
respective affiliates or associates, if any. The Company has no present
intention of acquiring any assets or other property owned by any promoter,
management or their respective affiliates or associates or acquiring or merging
with a business or company in which the Company's promoters, management or their
respective affiliates or associates directly or indirectly have an ownership
interest. Existing conflict of interest provisions are set forth in the Articles
of Incorporation for the Company. Management is not aware of any circumstances
under which this policy, through their own initiative, may be changed. Although
there is no present potential for a related party transaction, in the event that
any payments are to be made to promoters and management such will be disclosed
to the security holders and no such payments will be made in breach of the
fiduciary duty such related persons have to the Company.
There are no arrangements, agreements or understandings between
non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of the Company's affairs. There are no arrangements, agreements or
understandings under which non-management shareholders will exercise their
voting rights to continue to elect the current directors to the Company's Board
of Directors.
In the event the Company is successful in securing the additional financing
for its long term expansion, it plans to seek acquisitions of qualified
companies which the Company believes will compliment its overall strategy inside
and outside of the State of Florida. The Company will seek acquisitions of
related companies and expand its operations to eventually encompass the entire
United States. At such time as the Company enters the portable phone accessory
product market outside the State of Florida, the Company will be required to
comply with applicable state regulations regarding such entities. (See Part I,
Item 1. "Description of Business," (b) "Business of Issuer - Industry
Regulations - ;and (b) "Business of Issuer - Risk Factors", Governmental
Regulation and Litigation")
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Such increased expansion may increase greatly the risks associated with the
Company's operations. The Company will continue to be dependent upon obtaining a
sufficient client base which may support a high volume of cellular phone
accessory product sales. Increased operations and expansion into other
geographic areas expose the Company to the potential of unfavorable
interpretation of government regulations. In addition, the larger the geographic
market, the greater the chance of increased support staff costs. Furthermore,
expansion will expose the Company to competition from larger and more
established portable phone accessory type firms, many of whom have greater
resources than the Company. The Company anticipates that revenues from such
expanded operations may result in greater revenue fluctuations as a result of
seasonal variations in consumer consumption patterns and the Company's support
staffing needs. Also, the Company will be required to pay wages to a larger
support staff while still experiencing possible delays in direct payments
received from time payment receivables. In addition, with expansion and
implementation of an employee benefit plan which is necessary in order to be
competitive for qualified employees, in the event such plan were to be
disallowed, loss of qualified status could have an adverse effect upon the
Company. Finally, as a larger Company, it could face possible adverse effects
from fluctuations in the general economy and business of its clients. (See Part
I, Item 1. "Description of Business," (b) "Business of Issuer - Risk Factors",
"Competition", "Sensitivity to Interest Rates.")
Another avenue available to the Company to aid its ability to expand is to
seek a reverse merger with a larger, public company. While the Company has no
present intention to seek such a merger, in the event that an appropriate
vehicle were to become known to the Company, the Board of EZT would evaluate the
relative risks and merits of such a merger to the overall plans for the Company.
The Company may also seek to expand by acquisitions of unrelated companies which
engage in related services such as consumer electronic manufacturers and
distributors, cellular phone accessories manufacturers and distributors as well
as other related companies.
As a reporting company, the Company is required to file quarterly reports
on Form 10-QSB and annually on Form 10-KSB and in each case, is required to
provide the financial and other information specified in such forms. In
addition, the Company would be required to file on Form 8-K in the event there
was a change of control, if the Company acquires or disposes of assets, if there
is a bankruptcy or receivership, if the Company changes its certified
accountants, upon the occurrence of other events which may be pertinent to the
security holders, and after certain resignations of directors. Being subject to
such reporting requirements reduces the pool of potential acquisitions or merger
candidates for the Company since such transactions require that certified
financials must be provided for the acquiring, acquired or merging candidate
within a specified period of time. That is why the Company intends to expand
through internal operations through the short and medium term. At such time as
the Company will seek acquisitions or mergers, it will limit itself to companies
which either already have certified financial statements or companies whose
operations lend themselves to review for a certified audit within the required
time.
Business Strategy
The Company's business strategy, which is dependent upon its obtaining
sufficient financing with which to implement its business plan (of which there
is no assurance), is to acquire the rights to sell, under its own private label
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or under the label of a manufacturer, a hands-free mobile speaker for portable
phones. The Company's primary revenues will be based upon its ability to market
and distribute the aforementioned product. The Company's secondary revenue
source will be based upon the income earned from the interest charged to
purchasers who are directly financed by the Company. The Company's revenues are
dependent upon: (i) its ability to acquire the rights to market and distribute a
hands-free mobile speaker for portable phones(of which there is no assurance);
(ii) on the number of clients which purchase its product, (iii) the contracts it
chooses to finance; (iv) the percentage of non-performing receivables and the
Company's ability to sell these receivables to public and/or private investors.
The Company, where possible, will re-sell in the secondary market via a
public and/or private offering or through the sale to a public and/or private
institution or individual buyer, its receivables in order to make available
otherwise committed capital. This reselling of receivables will enable the
Company to re-use its cash which it will re-commit to finance the purchase of
additional product and to replenish its working capital.
The Company's primary direct costs will be (i) salaries to Dervaes and
Bonnier(payroll cost), (ii) marketing and sales related costs, (iii) employment
related taxes and (iv) health benefits. (See Part I, Item 1, "Description of
Business,") Employment related taxes consist of the employer's portion of
payroll taxes required under the Federal Income Contribution Act ("FICA"), which
includes Social Security and Medicare, and federal and state unemployment taxes.
The federal tax rates are defined by the appropriate federal regulations. State
of Florida unemployment tax rates are effected by claims experience, of which
the Company has none at this time. Health benefits are comprised primarily of
medical insurance costs, but also include costs of other employee benefits such
as prescription coverage, vision care, disability insurance and employee
assistance plans.
The Company's gross profit margin will be determined in part by its ability
to minimize and control operating costs; to minimize the discounts provided to
prospective bulk purchasers as an incentive to purchase the Company's product;
and, how successful the Company will be in re-selling its receivables to public
and/or private investors. The Company will attempt to minimize the discounts it
provides to bulk purchasers; however, it will not have many direct costs over
which it can minimize much further with the exception of marketing and sales
related costs.
The Company's objective is to become a dominant market leader in the sales
of hands-free portable phone speaker systems, beginning in Palm Beach County,
Florida,(the Southeastern United States), expanding to New York City (the
Northeastern United States), and then to Los Angeles(Far West United States)
and, eventually throughout the entire United States, thereafter into selected
geographical territories world-wide. To achieve this objective, and assuming
that sufficient operating capital becomes available, the Company intends to: (i)
provide a comprehensive hands-free portable phone speaker packages with
associated financing programs to both individuals and bulk purchasers and, (ii)
focus initially on Palm Beach County (the Southeastern) and New York
City(Northeastern) United States markets which have high growth opportunities.
Management expects, in the event EZT achieves commercial success initially,
to increase the Company's market penetration through aggressive expansion and,
thereafter, through selected acquisitions. Such acquisitions could include
<PAGE>
other cellular phone accessory distributors and suppliers and/or the forming of
joint venture/co-marketing agreement. Management believes that in the current
market, expansion into markets beyond the State of Florida and the Southeastern
United States could be especially attractive because it is believed that the
internal structuring of a successful operation in Florida and the Southeastern
United States can be replicated in other selected geographic areas with high
growth opportunities. However, such expansion presents certain challenges and
risks. There is no assurance that EZT, even if it is successful in establishing
a presence in its targeted markets, will be able to profitably penetrate these
additional geographic territories.
Proposed Company Staffing and Services
Under Dervaes and Bonnier's direction, the Company plans to offer an
attractive hands-free portable phone speaker package with associated financing
programs to both individuals and bulk purchasers. It is anticipated, and subject
to the availability of additional funding, that the Company will employ a
marketing manager, additional clerical support and an accountant as its business
and geographical territories expand.
The Company believes that its initial success will be due in part to the
reputation of Dervaes and the marketing expertise of Bonnier. They will visit
clients and prospective clients on a regular schedule to allow for the necessary
lead time to permit the development of strong client relationships and sales. To
insure client satisfaction, Dervaes and Bonnier will pursue a pro-active
approach with prospective and existing clients. This pro-active approach will
include the providing of customized marketing information illustrating the
Company's product and various financing program alternatives which may be used
to close a sale with a customer.
Management is unable at this time to forecast with any degree of certainty
the acceptance of the Company's product and financing programs or the expenses
of doing business; however, EZT intends to market its programs competitively in
the Company's target markets.
Sales and Marketing
The Company plans to market its cellular phone hands-free speaker products
through a combination of marketing channels including direct sales, franchises
and strategic alliances. The Company believes that this multi-channel approach
will allow the Company to quickly access a large consumer base, develop regional
awareness in the market and ultimately lead to becoming a market leader. Of the
three marketing channels intended to be employed by the Company, direct sales is
widely recognized as the most common in the industry due to the nature of the
consuming public; furthermore, strategic alliances have often been used to
provide strong brand name recognition. Franchising is an alternative means
whereby the Company can further expand its revenue stream not only in obtaining
additional outlets for its products but also by the receipt of franchise
revenues. In addition, another benefit to franchising has been the ability to
provide further recognition of a company's brand-name in the marketplace by
consumers. However, there can be no assurance that any of these techniques will
be used or that they will prove to be successful. The Company intends to
compete, assuming that it is successful in obtaining sufficient financing, with
other companies in its target markets who are currently providing cellular phone
accessory product and financing programs.
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The Company anticipates that its initial marketing efforts will be in the
area of direct sales. Good quality presentations and professional follow-up with
the clients will be essential to the Company's success. Initially, both Dervaes
and Bonnier will secure the Company's client base. However, the Company
anticipates that it will retain qualified sales personnel either as employees
and/or as independent contractors to establish new customer accounts. The
Company believes that by employing qualified independent contractors and
commission based compensated sales personnel it will be able to penetrate
additional markets at minimal costs. This commission based compensation program
will also reduce overhead costs to the Company.
The Company's ability to obtain the right to sell a cellular phone
hands-free speaker product and, eventually its sales force is, of course
dependent upon management's ability to obtain necessary financing, of which
there can be no assurance. Assuming the availability of adequate funding, EZT
intends to stay abreast of changes in the marketplace by ensuring that it remain
in the field where clients and competitors can be observed firsthand. EZT does
not anticipate obtaining long-term written contracts with clients since such
contracts are not common in the sale of consumer products on an individual
basis; however, management believes that it will be able to obtain medium term
distribution contracts for periods of 2 to 5 years with independent distributors
located in strategic geographic territories.
The Company will attempt to maintain geographic diversity within its
territorial distribution in order to decrease its exposure to downturns or
volatility in any particular distribution area. As part of this territorial
selection strategy, the Company intends to offer its products in those areas
which have a high percentage of cellular phone users per capita as well as a
sufficiently large cellular phone usage population base.
Competition
Many large manufacturers and distributors of cellular phone accessory
equipment, some of which have substantially greater financial resources than
EZT, will compete with EZT's portable phone hands-free speaker systems
equipment. EZT will attempt to focus on specific specialized fields within the
marketplace that require sophisticated technology and support services. EZT
plans to compete principally on the basis of product quality and service.
There are numerous manufacturers of cellular phone accessories that supply
their equipment to United States government agencies and friendly foreign
governments. There is substantial competition within the market and the Company
is not a major competitor. Due to fixed-price contracts and pre-defined contract
specifications prevalent within this market, the Company competes primarily on
the basis of its ability to provide state-of-the-art solutions in this
technologically demanding marketplace while maintaining its competitive pricing.
Industry Regulation
Environment
The Company engages in activities to comply with various federal, state and
local laws and regulations involving the protection of the environment.
Compliance with such laws and regulations does not currently have a
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significant effect on the Company's capital expenditures, earnings, or
competitive position. In addition, the Company has no knowledge of any
environmental condition that might individually or in the aggregate have a
material adverse effect on the Company's financial condition.
Regulation
The Company is not directly regulated by any governmental agency in the
United States. However, most of the telecommunications industry generally, are
subject to regulation by the Federal Communications Commission (the "FCC"). The
FCC controls the allocation of transmission frequencies and the performance
characteristics of cellular phone products. As a result of these controls, EZT's
hands-free speaker design specifications must be conformed on an ongoing basis
to meet FCC requirements. The Company believes that this regulation will not
adversely effect EZT's operations.
Outside of the United States, where EZT believes may exist a substantial
amount of future business, many of EZT's customers are government owned and
operated entities, where changes in government economic policy and
communications regulation may be expected to affect in the future, EZT's non-
U.S. business. However, the effect of regulation in countries other than the
U.S., in which EZT does not conduct business, will not be detrimental to EZT's
operations.
As an employer, the Company is subject to all federal, state and local
statutes and regulations governing its relationship with its employees and
affecting businesses generally.
Seasonality
Due to variability of shipments under large contracts, consumer's seasonal
buying patterns , potential variations in the Company's product mix and the
profitability of individual orders, the Company can experience wide quarterly
fluctuations in net sales and income. Consequently, the Company believes it is
more meaningful to focus on annual rather than interim results.
Employees and Consultants
The Company has had no employees since its organization. In addition,
Dervaes and Bonnier, have served in their positions without compensation through
the date hereof. Dervaes was compensated, in the form of company common stock
for specialized services, including the organization of the company. Bonnier was
compensated, in the form of company common stock, for specialized services
relating to the formation of the Company and for consulting services.
The Company will be dependent upon Dervaes and Bonnier to develop the
client base to buy the Company's product. Dervaes has many years of
international experience as a designer of exclusive consumer products. and was
the co-founder and then Chairman of the A.R. Dervaes Company, Inc. from 1961 to
1982, a 125 employee manufacturer and supplier of equipment to heavy industry.
For the past six (6) years Dervaes has served as the CEO and Chairman of Secured
Retirement International, Inc., specializing in the design and marketing of
proprietary mutual funds. The Company plans to use to its advantage Dervaes'
reputation and extensive business experience. Nevertheless, while Dervaes has
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been successful in the past, there can be no assurance that he will be
successful in building the client base and client solicitation program necessary
for the successful operation of the Company.
In addition, the Company plans to use to its advantage the marketing and
sales experience of Ms. Bonnier who has been in charge of the U.S. marketing and
sales for a New York based French cosmetics company.
Facilities
The Company maintains its office at 222 Lakeview Avenue, Suite 160, West
Palm Beach, Florida 33401. Its telephone number is (561) 832-5699. The Company
anticipates that it will have continued use of this location on a rent-free
basis for the foreseeable future and that this arrangement will be adequate for
the Company's needs while it is in the development stage. Assuming that EZT
obtains the necessary additional financing and is successful in implementing its
business plan, no assurance of which can be made, the Company will require its
own offices in Palm Beach County. In such event, management believes that EZT
would be able to locate adequate facilities at reasonable rental rates in Palm
Beach County, suitable for its future needs.
Risk Factors
Before making an investment decision, prospective investors in the
Company's Common Stock should carefully consider, along with other matters
referred to herein, the following risk factors inherent in and affecting the
business of the Company.
1. Development Stage Company. EZT was only recently organized on June 10,
1998, and accordingly, is in the early form of development stage and must be
considered promotional. Management's efforts, since inception, have been
allocated primarily to organizational and fund raising activities and the
ability of the Company to establish itself as a going concern is dependent upon
the receipt of additional funds from operations or other sources to continue
those activities. Potential investors should be aware of the difficulties
normally encountered by a new enterprise in its development stage, including
under-capitalization, cash shortages, limitations with respect to personnel,
technological, financial and other resources and lack of a client base and
market recognition, most of which are beyond the Company's control. The
likelihood that the Company will succeed must be considered in light of the
problems, expenses and delays frequently encountered in connection with the
competitive environment in which the Company will operate. The Company's success
depends to a large extent on establishing a meaningful client base. There is no
guarantee that the Company's proposed activities will attain the level of
recognition and acceptance necessary for the Company to find a niche in the
cellular phone accessories market. There are numerous competitors in Palm Beach
County, Florida, New York, New York and nationwide, several of which are large
public companies, which are already positioned in the business and which are
better financed than the Company. There can be no assurance that the Company,
with its very limited capitalization, will be able to compete with these
companies and achieve profitability. (See Part I, Item 1. "Description of
Business.")
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2. No Operating History, Revenues or Earnings. As of the date hereof, the
Company has not yet commenced operations and, accordingly, has received no
operating revenues or earnings. Since its inception, most of the time and
resources of EZT's management have been spent in organizing the Company,
obtaining interim financing and developing a business plan. The Company's
success is dependent upon its obtaining additional financing from intended
operations, from placement of its equity or debt or from third party funding
sources. The Company's success in the business of selling cellular phone
accessories is dependent upon attaining a large volume of sales which are not
expected for the foreseeable future, and/or additional financing to enable the
Company to continue in operation. There is no assurance that EZT will be able to
obtain additional debt or equity financing from any source. The Company, during
the development stage of its operations, can be expected to sustain substantial
operating expenses without generating any operating revenues or the operating
revenues generated can be expected to be insufficient to cover expenses. Thus,
for the foreseeable future, unless the Company attains profitable operations,
which is not anticipated, the Company's financial statements will show an
increasing net operating loss. (See Part I, Item 1. "Description of Business.")
3. Minimal Assets, Working Capital and Net Worth. As of February 28, 1999, the
Company's total assets in the amount of $58,242, consisted, principally, of
paid-in capital of $59,895 less accrued expenses. As a result of its minimal
assets, as of February 28, 1999, the Company has very minimal net worth
presently. Further, EZT's working capital is presently minimal and there can be
no assurance that the Company's financial condition will improve. The Company is
expected to continue to have minimal working capital or a working capital
deficit as a result of current liabilities. The Company, at inception, issued
1,000,000 shares of the Company's Common Stock: 850,000 to Mr. A. Rene Dervaes,
President and director of EZT, in consideration and exchange therefore for
services in connection with the organization of EZT performed for the Company,
and 150,000 to Ms. Johanna Bonnier, Secretary and Treasurer, for consulting
services rendered in connection with the organization of the Company. During
June, 1998, the Company issued and sold an aggregate of 500,000 shares of Common
Stock for cash consideration totaling $5,000. During July, 1998, the Company
issued and sold an aggregate of 500,000 shares of Common Stock for cash
consideration totaling $5,000. In September 1998, the Company issued and sold an
aggregate of 50,000 shares of Common Stock for cash consideration totaling
$50,000.(See Part II. Item 10. "Recent Sales of Unregistered Securities.")
Even though management believes, without assurance, that it will obtain
sufficient capital with which to implement its business plan on a limited scale,
the Company is not expected to continue in operation without an infusion of
capital. In order to obtain additional equity financing, management may be
required to dilute the interest of existing shareholders or forego a substantial
interest of its revenues, if any. (See Part I, Item 1. "Description of
Business")
4. Need for Additional Capital: Going Concern Qualification Expressed by
Auditor. Without an infusion of capital or profits from operations, the Company
is not expected to continue in operation after the expiration of the period of
six (6)to nine(9)months from the date hereof. Accordingly, the Company is not
expected to become a viable business entity unless additional equity and/or debt
financing is obtained. EZT's independent certified public accountant has
expressed this as a "going concern" qualification to the opinion of Durland and
Company, CPAs P.A. on the Company's financial statements. The Company does not
anticipate the receipt of operating revenues until management successfully
implements its business plan, which is not assured. Further, EZT may incur
significantunanticipated expenditures which deplete its capital at a more
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rapid rate because of among other things, the development stage of its business,
its limited personnel and other resources, its lack of an existing contract to
sell cellular phone hands free speakers and its lack of clients and market
recognition. Because of these and other factors, management is presently unable
to predict what additional costs might be incurred by the Company beyond those
currently contemplated to obtain additional financing and achieve market
penetration on a commercial scale in its proposed line of business, i.e.
cellular phone accessory sales. EZT has no identified sources of funds, and
there can be no assurance that resources will be available to the Company when
needed.
5. Dependence on Management: Lack of Experience in Cellular Phone Accessory
Sales. The possible success of the Company is expected to be largely dependent
on the continued services of Dervaes and Bonnier. Virtually all decisions
concerning the clients to contact, the type of financing programs to design and
direct marketing material to disseminate and the establishment of a client
profile database by the Company will be made or significantly influenced by
Dervaes and Bonnier. They are presently serving as managers of other companies
and are required to devote a significant amount of time to the conduct of their
present positions. Dervaes and Bonnier are expected to devote only such time and
effort to the business and affairs of the Company as may be necessary to perform
their responsibilities as executive officers of EZT. The loss of the services of
either Dervaes or Bonnier would adversely affect the conduct of the Company's
business and its prospects for the future. The Company presently holds no
key-man life insurance on the lives of Dervaes or Bonnier, and has no employment
contract or other agreement with them.
6. No Existing Product or Customer Base. The Company was only recently
organized. While EZT intends to engage in the sale of a hands free cellular
phone speaker product, the Company currently has not obtained the right to sell
and distribute, under its own label and/or under a manufacturer's label, a hands
free cellular phone speaker product. Furthermore, the Company presently has no
customers. In addition, the very limited funding currently available to the
Company will not permit it to commence business operations in the cellular phone
accessory market except on a very limited scale. There can be no assurance that
the debt and/or equity financing, which is expected to be required by the
Company in order for EZT to continue in business after the expiration of the
next six(6)to nine(9)months, will be available. The Company has no customers
presently and there can be no assurance that it will be successful in obtaining
customers in its initial prospective marketing area encompassing Palm Beach
County and the Southeastern United States. EZT does not anticipate establishing
any substantial long-term contracts with any distributors; thus, management
believes that the Company must, in order to survive, obtain the loyalty of a
large volume of purchasers. The Company could be expected to experience
substantial difficulty in attracting the high volume of customers in the
prospective target market which would enable EZT to achieve commercial
viability. The Company will be dependent upon Dervaes and Bonnier, who combined
have more that 40 years of experience in sales and finance to consumers. (See
Part I, Item 1. "Description of Business," (b) "Business of Issuer - Business
Strategy; and - Sales and Marketing.")
7. High Risks and Unforeseen Costs Associated with EZT's Entry into the
Cellular Phone Accessory Products Market. There can be no assurance that the
costs for the establishment of a client base or for the obtaining of a
substantial volume of product sales to consumers by EZT will not be
significantly greater than those estimated by Company management. Therefore, the
Company may expend significant unanticipated funds or significant funds may
<PAGE>
be expended by EZT without development of a commercially viable cellular phone
accessory product business. There can be no assurance that cost overruns will
not occur or that such cost overruns will not adversely affect the Company.
Further, unfavorable general economic conditions and/or a downturn in client
confidence has in the past had, and could be expected in the future to have, an
adverse affect on client willingness to purchase hands free portable phone
speakers which could, in turn, adversely affect the Company's business.
Additionally, competitive pressures and changes in client mix, among other
things, which management expects the Company to experience in the uncertain
event that it achieves commercial viability, could reduce the Company's gross
profit margin from time to time. Accordingly, there can be no assurance that EZT
will be capable of establishing itself in a commercially viable position in the
local, regional and national marketplace. (See Part I, Item 1. "Description of
Business," (b) "Business of Issuer", and "Seasonality.")
8. Conflict of Interest. There are existing and potential conflicts of
interest, including time, effort and corporate opportunity, involved in the
participation by the Company's executive officers and directors in other
business entities and transactions. Dervaes and Bonnier, are actively employed
by other businesses, which will divide their time and effort between the Company
and their existing employment. Accordingly, Dervaes and Bonnier may become
subject to direct conflicts of interest and the corporate opportunities doctrine
with respect to business opportunities in the cellular phone accessory product
business which come to their attention. The Company's Articles of Incorporation
provide that any related party contract or transaction must be authorized,
approved or ratified at a meeting of the Board of Directors by sufficient vote
thereon by directors not interested therein or the transaction must be fair and
reasonable to the Company. Nevertheless, it would still be possible for the
Board of Directors of the Company, by a vote of a sufficient number of
disinterested directors, to authorize, approve or ratify such a contract or
transaction with Dervaes and/or Bonnier's existing employers or any other
affiliate even if the terms were unfair to the Company and unreasonable.
Because of the existing and/or potential future associations of the Company's
executive officers and directors in various capacities with other firms involved
in a range of business activities and because of the limited or minimal amount
of time and effort which is expected to be devoted to the Company by such
persons, there are existing and potential conflicts of interest in their acting
as executive officers and directors of the Company. None of the executive
officers or the directors of the Company will be able to devote a significant
amount of time or effort to the business and affairs of the Company because of
their simultaneous participation in, employment by and/or commitments to other
firms involved in a range of business activities. In addition, all of such
persons are or may become, in their individual capacities, officers, directors,
controlling shareholders and/or partners of other entities involved in a variety
of businesses which are engaged, or may in the future engage, in various
transactions, or compete directly, with the Company. Conflicts of interest and
transactions which are not at arm's-length may arise in the future because the
Company's executive officers and/or directors are involved in the management of
any company which transacts business, or competes directly with, the Company.
(See Part I, Item 1. "Description of Business," (b) Business of Issuer -
General.")
9. Governmental Regulation and Litigation. The Company's business is subject
to federal, state and local regulation and supervision. Such regulation, among
other things, requires the Company's potential products to meet certain FCC
standards applied to cellular phones and related equipment, fees and other
<PAGE>
charges related to doing business in the cellular phone industry. Such
regulations exist primarily for the benefit of consumers, rather than for the
protection of dealers of accessory cellular phone products and could limit the
Company's discretion in operating its business. Noncompliance with any
applicable statutes or regulations could result in the suspension or revocation
of any license at issue, as well as the imposition of civil fines and criminal
penalties.(See: "Potential for Unfavorable Interpretation of Government
Regulations" and Part I, Item 1. "Description of Business" (b) "Business of
Issuer-Industry Regulation)
10. Ability to Grow. The Company expects to grow through internal growth, by
achieving successful sales volumes, granting franchises, distributorships and
through acquisitions. The Company plans to expand its business from its current
location by entry into other attractive geographic markets. There can be no
assurance that the Company will be able to create a market presence, or if such
market presence is created, to profitably expand its market presence or
successfully enter other markets. The ability of the Company to grow will depend
on a number of factors, including the availability of working capital to support
such growth, existing and emerging competition and the Company's ability to
maintain sufficient profit margins in the face of an increasingly competitive
industry. The Company must also manage costs in a changing regulatory
environment, adapt its infrastructure and systems to accommodate growth and
recruit and train qualified personnel.
The Company also plans to expand its business, in part, through acquisitions
primarily of independently owned and operated cellular phone accesory product
and distributors. Although the Company will continuously review potential
acquisition candidates, it has not entered into any agreement, understanding or
commitment with respect to any acquisitions at this time. There can be no
assurance that the Company will be able to successfully identify suitable
acquisition candidates, complete acquisitions on favorable terms, or at all, or
integrate acquired businesses into its operations. Moreover, there can be no
assurance that acquisitions will not have a material adverse affect on the
Company's operating results, particularly in the fiscal quarters immediately
following the consummation of such transactions, while the operations of the
acquired business are being integrated into the Company's operations. Once
integrated, acquisitions may not achieve comparable levels of revenues,
profitability or productivity as at then existing Company-owned locations or
otherwise perform as expected. The Company is unable to predict whether or when
any prospective acquisition candidate will become available or the likelihood
that any acquisitions will be completed. The Company will be competing for
acquisition and expansion opportunities with entities that have substantially
greater resources than the Company. In addition, acquisitions involve a number
of special risks, such as diversion of management's attention, difficulties in
the integration of acquired operations and retention of personnel, unanticipated
problems or legal liabilities, and tax and accounting issues, some or all of
which could have a material adverse affect on the Company's results of
operations and financial condition.
Franchise growth poses the additional risk of the inability of the Company to
control the quality of services provided by its franchise associates. Moreover,
the failure of any franchise associate to pay royalties due to the Company could
have a material adverse affect on the Company's financial condition and results
of operations (See Part I, Item 1. "Description of Business (b) "Business
Strategy.")
<PAGE>
At such time as the Company enters into franchise agreements, the Company may be
subject to claims asserting that it is vicariously liable for the damages
allegedly caused by the franchisees. Generally, franchisor liability for the
acts or inactions of its franchisees are based on agency concepts. The Company
intends for its franchise agreements to state that the parties are not agents
and that the franchisees control the day-to-day operations of their businesses.
Furthermore, it is intended that the franchise agreements will require the
franchisees to undertake certain efforts to inform the public that they are not
agents of the Company and that they are independently owned and operated.
Moreover, the Company will take certain additional steps to insulate its
potential liability based on claims from the franchisee's conduct including
requiring the franchisees to indemnify the franchiser for such claims and
mandating that the franchisees carry certain insurance coverage naming the
Company as an additional insured. Despite these efforts to minimize the risk of
vicarious liability, there can be no assurance that a claim will not be made
against the Company, nor that the indemnification requirements and insurance
coverage will be sufficient to cover any judgments, settlements or costs
relating to such a claim.
11. Competition. The cellular phone accessory product sales market is highly
competitive. The Company's competitors include local, regional and national
companies, many of which are larger and have greater financial and marketing
resources than the Company. Historically, cellular phone providers supply a wide
array of accessory products, many of these cellular phone companies have
significantly greater resources than the Company. To the extent that such
companies expand their accessory products to include hands-free speaker phone
accessories, the Company's financial condition, results of operations or cash
flows could be materially and adversely affected.
All of the Company's competitors have significantly greater name recognition and
have greater marketing, financial and other resources than the Company. The
Company expects that there will be significant consolidation in the cellular
phone accessory product business, resulting in increased competition from larger
national and regional companies. There can be no assurance that the Company will
be able to compete effectively against such competitors in the future. (See Part
I. Item 1. "Description of Business," (b) "Business of Issuer-Competition.")
12. Sensitivity to Interest Rates. The Company's revenues will also be derived
from the financing income which results from company financed consumer and
distributor purchases. These additional revenues are directly related to the
interest rate it pays on the funds it borrows and the rate of interest it earns
pursuant to the finance contracts it generates related to sales. While the
finance contracts that the Company services bear interest at fixed rates, the
Company's indebtedness generally bears interest at floating rates. In the event
the Company's interest expense increases, the Company would seek to compensate
for such increases by raising the interest rates on its new finance contracts.
To the extent the Company is unable to do so because of legal limitations or
otherwise, the net margins on the Company's finance contracts would decrease,
thereby adversely affecting the Company's financial condition, results of
operations or cash flows.
13. Business Cycle Exposure. The Company believes that the cellular phone
industry and related accessory sales thereto will experience cyclical growth
which follows general economic cycles, closely tracking consumer personal
consumption patterns. In times of economic downturns which impact consumer
personal consumption, the Company believes the cellular phone industry and
related accessory sales thereto will experience similar periods of decline and
<PAGE>
recession as those experienced by the general economy. Cellular phone sales and
the sale of related products thereto are greatly influenced by consumer
confidence, employment rates, general economic conditions, interest rates,
levels of personal discretionary spending and credit availability. There can be
no assurance that the cellular phone industry and the sale of accessory products
thereto will not experience protracted periods of decline in sales in the
future. Any protracted declines will have an adverse negative impact on the
Company's financial condition, results of operations and/or cash flows.
14. Lack of Working Capital Funding Source. The Company expects to receive
payments on the financed hands-free cellular phone speaker receivables on a
timely basis. However, the nature of the market will require that the Company
plan for a reserve to be held for non-performing receivables. In the event that
such reserve for non-performing receivables increases substantially the
Company's working capital will be negatively impacted directly impairing
operations. In addition, as new expansion efforts are undertaken in other
geographic territories, or as the existing office is expanded, there will be
increasing requirements for cash to fund the Company's plans for expansion. The
Company has no current source of working capital funds, and should the Company
be unable to secure additional financing on acceptable terms, its business,
financial condition, results of operations and liquidity would be materially
adversely affected.
15. Absence of Public Market for Shares. The Company's shares of Common Stock
are not registered with the U.S. Securities and Exchange Commission under the
Act. There is no public market for the shares of Common Stock and no assurance
that one will develop. Of such shares, 1,050,000 thereof are "free-trading"
because of their issuance to persons unaffiliated with EZT pursuant to an
exemption from registration provided by Rule 504 of Regulation D promulgated
under Section 3(b) of the Act and, the balance of 1,000,000 of such shares are
"restricted securities." Rule 144 of the Act provides, in essence, that holders
of restricted securities, for a period of one year after the acquisition thereof
from the Company or an affiliate of the Company, may, every three months, sell
to a market maker or in ordinary brokerage transactions an amount equal to one
percent of the Company's then outstanding securities. Non-affiliates of the
Company who hold restricted securities for a period of two years may sell their
securities without regard to volume limitations or other restrictions. Resales
of the free-trading shares of Common Stock by "affiliates, control persons
and/or underwriters" of EZT, as those terms are defined in the Act, will be
subject to the volume limitations, described in paragraph (e) of Rule 144. Any
transfer or resale of the shares of EZT's Common Stock will be subject, in
addition to the Federal securities laws, to the "blue sky" laws of each state in
which such transfer or resale occurs. A total of 1,000,000 shares of the
Company's Common Stock will be available for resale under Rule 144 commencing on
June 10, 1999. Sales of shares of Common Stock under Rule 144 may have a
depressive effect on the market price of the Company's Common Stock, should a
public market develop for such stock. Such sales also might impede future
financing by the Company. (See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Managers.")
16. No Dividends. While payments of dividends on the Common Stock rests with
the discretion of the Board of Directors, there can be no assurance that
dividends can or will ever be paid. Payment of dividends is contingent upon,
among other things, future earnings, if any, and the financial condition of the
Company, capital requirements, general business conditions and other factors
which cannot now be predicted. It is highly unlikely that cash dividends on the
<PAGE>
Common Stock will be paid by the Company in the foreseeable future.
17. No Cumulative Voting. The election of directors and other questions will be
decided by a majority vote. Since cumulative voting is not permitted and
one-third of the Company's outstanding Common Stock constitute a quorum,
investors who purchase shares of the Company's Common Stock may not have the
power to elect even a single director and, as a practical matter, the current
management will continue to effectively control the Company.
18. Control by Present Shareholders. The present shareholders of the Company's
Common Stock will, by virtue of their percentage share ownership and the lack of
cumulative voting, be able to elect the entire Board of Directors, establish the
Company's policies and generally direct its affairs. Accordingly, persons
investing in the Company's Common Stock will have no significant voice in
Company management, and cannot be assured of ever having representation on the
Board of Directors. (See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Managers.")
19. Potential Anti-Takeover and Other Effects of Issuance of Preferred Stock
May Be Detrimental to Common Shareholders. Potential Anti-Takeover and Other
Effects of Issuance of Preferred Stock May Be Detrimental to Common
Shareholders. The Company is authorized to issue up to 10,000,000 shares of
preferred stock. $.0001 par value per share (hereinafter referred to as the
"Preferred Stock"); none of which shares has been issued. The issuance of
Preferred Stock does not require approval by the shareholders of the Company's
Common Stock. The Board of Directors, in its sole discretion, has the power to
issue shares of Preferred Stock in one or more series and to establish the
dividend rates and preferences, liquidation preferences, voting rights,
redemption and conversion terms and conditions and any other relative rights and
preferences with respect to any series of Preferred Stock. Holders of Preferred
Stock may have the right to receive dividends, certain preferences in
liquidation and conversion and other rights; any of which rights and preferences
may operate to the detriment of the shareholders of the Company's Common Stock.
Further, the issuance of any shares of Preferred Stock having rights superior to
those of the Company's Common Stock may result in a decrease in the value of
market price of the Common Stock provided a market exists, and additionally,
could be used by the Board of Directors as an anti-takeover measure or device to
prevent a change in control of the Company.
20. No Secondary Trading Exemption. In the event a market develops in the
Company's shares, of which there can be no assurance, secondary trading in the
Common Stock will not be possible in each state until the shares of Common Stock
are qualified for sale under the applicable securities laws of the state or the
Company verifies that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. There can
be no assurance that the Company will be successful in registering or qualifying
the Common Stock for secondary trading, or availing itself of an exemption for
secondary trading in the Common Stock, in any state. If the Company fails to
register or qualify, or obtain or verify an exemption for the secondary trading
of, the Common Stock in any particular state, the shares of Common Stock could
not be offered or sold to, or purchased by, a resident of that state. In the
event that a significant number of states refuse to permit secondary trading in
<PAGE>
the Company's Common Stock, a public market for the Common Stock will fail to
develop and the shares could be deprived of any value.
21. Possible Adverse Effect of Penny Stock Regulations on Liquidity of Common
Stock in any Secondary Market. In the event a market develops in the Company's
shares, of which there can be no assurance, then if a secondary trading market
develops in the shares of Common Stock of the Company, of which there can be no
assurance, the Common Stock is expected to come within the meaning of the term
"penny stock" under 17 CAR 240.3a51-1 because such shares are issued by a small
company; are low-priced (under five dollars); and are not traded on NASDAQ or on
a national stock exchange. The Securities and Exchange Commission has
established risk disclosure requirements for broker-dealers participating in
penny stock transactions as part of a system of disclosure and regulatory
oversight for the operation of the penny stock market. Rule 15g-9 under the
Securities Exchange Act of 1934, as amended, obligates a broker-dealer to
satisfy special sales practice requirements, including a requirement that it
make an individualized written suitability determination of the purchaser and
receive the purchaser's written consent prior to the transaction. Further, the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990 require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure instrument that provides information about penny
stocks and the risks in the penny stock market. Additionally, the customer must
be provided by the broker-dealer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and the salesperson in the
transaction and monthly account statements showing the market value of each
penny stock held in the customer's account. For so long as the Company's Common
Stock is considered penny stock, the penny stock regulations can be expected to
have an adverse effect on the liquidity of the Common Stock in the secondary
market, if any, which develops.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
Since its inception, the Company has conducted minimal business operations
except for organizational and capital raising activities. The Company has not
realized significant revenues since its inception due to the fact that its
executives, Dervaes and Bonnier have been primarily engaged in organizational
and promotional activities on behalf of the Company. As a result, from inception
(June 10, 1998) through February 28, 1999, the Company had $0.00 revenue. Total
Company operations and operating expenses as of February 28, 1999 were $8,743.
The Company proposes to engage in the business of manufacturing and sale of
cellular phone accessory products.
Dervaes and Bonnier agreed to develop the business of manufacturing and
sale of cellular phone accessory products for the Company for the following,
among other, reasons: (i) because of their belief that a public company could
exploit its talents, services and business reputation to commercial advantage
and (ii) to observe directly whether the perceived advantages of a public
company, including, among others, greater ease in raising capital, liquidity of
securities holdings and availability of current public information, would
translate into greater profitability for a public, as compared to a
locally-owned cellular phone accessory products company.
<PAGE>
If the Company is unable to generate sufficient revenue from operations to
implement its expansion plans, management intends to explore all available
alternatives for debt and/or equity financing, including but not limited to
private and public securities offerings. Depending upon the amount of revenue,
if any, generated by the Company, management anticipates that it will be able to
satisfy its cash requirements for the next approximately six (6) to nine (9)
months without raising funds via debt and/or equity financing or from third
party funding sources. Accordingly, management expects that it will be necessary
for EZT to raise additional funds in the next six(6) months, if only a minimal
level of revenue is generated in accordance with management's expectations.
Dervaes and Bonnier, at least initially, will be solely responsible for
developing EZT's cellular phone accessory product business. However, at such
time, if ever, as sufficient operating capital becomes available, management
expects to employ additional staffing and sales personnel. In addition, the
Company expects to continuously engage in market research in order to monitor
new market trends, seasonality factors and other critical information deemed
relevant to EZT's business.
In addition, at least initially, the Company intends to operate out of the
West Palm Beach office. EZT may in the future establish its own facilities
and/or acquire computer equipment if the necessary capital becomes available;
however, the Company's financial condition does not permit management to
consider the acquisition of office space or equipment at this time.
Financial Condition, Capital Resources and Liquidity
At February 28, 1999, the Company had assets totaling $58,242 and
liabilities of $8743 attributable to accrued legal expenses, organization
expenses and professional fees. Since the Company's inception, it has received
$60,000 in cash contributed as consideration for the issuance of shares of
Common Stock.
EZT's working capital is presently minimal and there can be no assurance
that the Company's financial condition will improve. The Company is expected to
continue to have minimal working capital or a working capital deficit as a
result of current liabilities. The Company, at inception, issued 1,000,000
shares of the Company's Common Stock to Mr. A. Rene Dervaes (850,000 shares),
President and Director of EZT, for the fair value of services rendered valued at
$85.00, and Ms. Johanna Bonnier (150,000 shares), Secretary and Treasurer of
EZT, for the fair value of services rendered valued at $15.00. During June,
1998, and July, 1998 the Company issued and sold an aggregate of 1,000,000
shares of Common Stock to New York, Florida and the Country of France residents
for cash consideration totaling $10,000. No underwriter was employed in
connection with the offering and sale of the shares. The Company claimed the
exemption from registration in connection with each of the offerings provided
under Section 3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder, Section 359-(f)(2) of the New York Statutes and Section 517.061(11)
of the Florida Code. On or about September 15, 1998, the Company issued and sold
50,000 shares of unrestricted Common Stock to five(5) French nationals for cash
consideration totaling $50,000 at $1.00 per share.
The Company claimed the exemption from registration in connection with each
of the offerings provided under Section 3(b) of the Act and Rule 504 of
Regulation D promulgated thereunder, and Section 517.061(11) of the Florida
Code. Even though management believes, without assurance, that
<PAGE>
it will obtain sufficient capital with which to implement its business plan on a
limited scale, the Company is not expected to continue in operation without an
infusion of capital. In order to obtain additional equity financing, management
may be required to dilute the interest of existing shareholders or forego a
substantial interest of its revenues, if any. (See Part I, Item 1. "Description
of Business"; See Part I, Item 4. "Security Ownership of Certain Beneficial
Owners and Managers" and Part I, Item 7. "Certain Relationships and Related
Transactions.")
The Company has no potential capital resources from any outside sources at
the current time. In its initial phase, the Company will operate out of an
office provided by Dervaes. Dervaes and Bonnier will begin by finding customers
for the Company's hands-free portable phone product. To attract products from
manufacturers and distributors, Dervaes and Bonnier will place strategic ads in
heavily traveled locations so that cellular phone users in cars can see the
features and benefits of purchasing a hands-free cellular phone speaker from
EZT. The Company will place advertising in local area newspapers in Palm Beach
County to directly solicit prospective purchasers. In the event the Company
requires additional capital during this phase, Dervaes has committed to fund the
operation until such time as additional capital is available. The Company
believes that it will require six (6) to nine (9) months in order to determine
the market demand potential.
The ability of the Company to continue as a going concern is dependent upon
its ability to obtain the right to distribute and sell a cellular phone hand
free speaker product and/or products and clients who will purchase the Company's
products. Even if the Company can obtain the rights to a cellular phone hands
free speaker product and/or products, there is no assurance that the Company can
attract an adequate number of distributors to sell the Company's product. The
Company believes that in order to be able to expand its initial operations, it
must rent offices in Palm Beach County, hire clerical staff and acquire through
purchase or lease computer and office equipment to maintain accurate financial
accounting and client data. The Company believes that there is adequate and
affordable rental space available in Palm Beach County and sufficiently trained
personnel to provide such clerical services at affordable rates. Further, the
Company believes that the type of equipment necessary for the operation is
readily accessible at competitive rates.
To implement such plan, also during this initial phase, the Company intends
to initiate a selfdirected private placement under Rule 506 in order to raise an
additional $100,000. In the event such placement is successful, the Company
believes that it will have sufficient operating capital to meet the initial
expansion goals and operating costs for a period of one (1) year. In the event
the Company is not successful in raising such funds, the Company believes that
it will not be able to continue operations past a period of four (4) to six(6)
months.
Net Operating Losses
The Company has net operating loss carry-forwards of $8,643 expiring at
February 28, 2019. The company has a $1,700 deferred tax asset resulting from
the loss carry-forwards, for which it has established a 100% valuation
allowance. Until the Company's current operations begin to produce earnings, it
is unclear as to the ability of the Company to utilize such carry-forwards.
<PAGE>
Year 2000 Compliance
The Company is currently in the process of evaluating its information
technology for Year 2000 compliance. The Company does not expect that the cost
to modify its information technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of operations. The
Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-SB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), business
strategy, expansion and growth of the Company's business and operations, and
other such matters are forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of its experience
and its perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results or developments will conform with
the Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which are
beyond the control of the Company. Consequently, all of the forward-looking
statements made in this Form 10-SB are qualified by these cautionary statements
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially realized,
that they will have the expected consequence to or effects on the Company or its
business or operations. The Company assumes no obligations to update any such
forward-looking statements.
Item 3. Description of Property:
The Company's offices are located at 222 Lakeview Avenue, Suite 160, West
Palm Beach, Florida 33401. Mr. Dervaes is furnishing, at his own expense, the
facilities until additional funding is obtained. Its telephone number is (561)
832-5699. The Company owns no real or personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Managers
The following table sets forth information as of February 28, 1999,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five per cent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the shares of Common Stock
beneficially owned. Amount Name and Address of Beneficially Percent of
<PAGE>
Beneficial Owner Owned Class (1)
---------------- ----- ---------
A. Rene Dervaes, Jr. 850,000 41.46%
222 Lakeview Ave., Ste.160
West Palm Beach, FL 33401
Johanna Bonnier 150,000 7.32%
222 Lakeview Ave., Ste. 160
West Palm Beach, FL 33401
All Executive Officers, Directors 1,000,000 48.78%
- -------------------
(1) Based upon 2,050,000 shares of the Company's Common
Stock issued and outstanding as of February 28, 1999.
Item 5. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.
Executive Officers and Directors
Set forth below are the names, ages, positions with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
- - ---- --- ------------------------
A. Rene Dervaes, Jr.(2) 61 President & Director
Johanna Bonnier(2) 27 Secretary & Treasurer
- ------------------------
(2) The above-named person may be deemed to be "promoters" and "parents" of
the Company, as those terms are defined under the Rules and Regulations
promulgated under the Act.
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Director. Dervaes and Bonnier will devote
such time and effort to the business and affairs of the Company as may be
necessary to perform their responsibilities as executive officers and/or
directors of the Company.
Aside from the above officer and director, there are no other persons whose
activities will be material to the operations of the Company at this time.
Dervaes and Bonnier are the sole "promoters" of the Company as such term is
defined under the Act.
<PAGE>
Family Relationships
There are no family relationships between or among the executive officers
and director of the Company.
Business Experience
A. Rene Dervaes has served as the President and Director of the Company
since its inception(June 10, 1998).
Mr Dervaes has served as the President and Director of the Company since
its inception on June 10, 1998. As such he acts as the CEO. Mr. Dervaes was the
co-founder and then Chairman of the A.R. Dervaes Company, Inc. from 1961 to
1982, a 125 employee manufacturer and supplier of equipment to heavy industry.
From 1982 to 1985 he was the President of Khonbu Industries, a designer and
nationwide distributor of exclusive consumer products. From 1978 to 1986 he was
the Chairman and CEO of Eagle Rock Corporation. From 1986 to 1990 he was the
Chairman and CEO of Vantage Industries, an international marketing firm. From
1991 to 1997 he was the Chairman and CEO of Secured Retirement International,
Inc., specializing in the design and marketing of proprietary U.S. Treasury and
municipal bond mutual funds. Mr. Dervaes also co-invented a unique finance
product that pays increasing distributions through a patented method for pooling
and distributing bond income.
Ms. Johanna Bonnier has served since the Company's inception (June 10,
1998) as the Company's Secretary and Treasurer.
Ms. Bonnier has served as the Secretary and Treasurer of the Company since
its inception on June 10, 1998. As such she acts as the CFO. Ms. Bonnier
graduated from Cap Sante in Paris, France, where she majored in Marketing and
Business Science, and has been working in various sales capacities. Since
September 1996 Ms. Bonnier has been a sales representative for COSMECO, a French
cosmetics company. She left COSMECO in August, 1998 to work as the Marketing and
Sales Director for the U.S. operations of DMI, another French cosmetics company.
Ms. Bonnier brings valuable marketing and sales knowledge to the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (hereinafter referred to as the "Commission")
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership, of Common Stock and other equity
securities of the Company on Forms 3, 4 and 5, respectively. Executive officers,
directors and greater than 10% shareholders are required by Commission
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, Mr. Dervaes comprises all of the Company's
executive officers, directors and greater than 10% beneficial owners of its
<PAGE>
common Stock, and has complied with Section 16(a) filing requirements applicable
to him during the Company's fiscal year ended February 28, 1998.
Item 6. Executive Compensation:
The Company, in consideration for various services performed for the
Company, issued to Mr. Rene Dervaes, Jr., the Company's President and Director
850,000 shares of restricted common stock. The Company issued 150,000 shares of
restricted common stock to Ms. Johanna Bonnier for various services performed
for the Company. Except for the above-described compensation, it is not
anticipated that any executive officer of the Company will receive any cash or
non-cash compensation for his or her services in all capacities to the Company
until such time as the Company commences business operations. At such time as
EZT commences operations, it is expected that the Board of Directors will
approve the payment of salaries in a reasonable amount to each of its officers
for their services in the positions of President/Treasurer, Executive Vice
President and Secretary respectively, of the Company. At such time, the Board of
Directors may, in its discretion, approve the payment of additional cash or
non-cash compensation to the foregoing for their services to the Company.
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans but has the intention of implementing
such plans in the future.
Compensation of Directors
The Company has no standard arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.
Item 7. Certain Relationships and Related Transactions:
On June 10, 1998, at inception, the Company issued 850,000 shares of
restricted Common Stock to Mr. A. Rene Dervaes, the President and Director of
the Company and record and beneficial owner of approximately 41.46% of the
Company's outstanding Common Stock, in consideration and exchange therefore for
services in connection with the organization of EZT performed for the Company by
him.
On June 10, 1998, at inception, the Company issued 150,000 shares of
restricted Common Stock to Ms. Johanna Bonnier, the Secretary and Treasurer of
the Company and record and beneficial owner of approximately 7.32% of the
Company's outstanding Common Stock, in exchange for services for the Company in
connection with the organization of EZT.
At the current time, the Company has no provision to issue any additional
securities to management, promoters or their respective affiliates or
associates. At such time as the Board of Directors adopts an employee stock
option or pension plan, any issuance would be in accordance with the terms
thereof and proper approval. Although the Company has a very large amount of
authorized but unissued Common Stock and Preferred Stock which may be issued
without further shareholder approval or notice, the Company intends to reserve
such stock for the Rule 506 offerings contemplated
<PAGE>
to implement continued expansion, for acquisitions and for properly approved
employee compensation at such time as such plan is adopted. (See Part I, Item 1.
"Description of Business - (b) Business of Issuer.")
Item 8. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
PART II
Item 9. Market for Common Equity and Related Stockholder Matters.
No matter was submitted during the Fourth Quarter of the fiscal year ended
February 28, 1999, covered by this report to a vote of the Company's
shareholders, through the solicitation of proxies or otherwise.
(a) Market Information.
There has been no established public trading market for the Common Stock
since the Company's inception on June 10, 1998.
(b) Holders.
As of March 31, 1999, the Company had 36 shareholders of record of its
2,050,000 outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 10. Recent Sales of Unregistered Securities
On June 10, 1998, at inception, the Company issued 850,000 shares of
restricted Common Stock to Mr. A. Rene Dervaes, the President and Director of
the Company and record and beneficial owner of approximately 41.46% of the
Company's outstanding Common Stock, in consideration and exchange therefore for
services in connection with the organization of EZT performed for the Company by
him.
On June 10, 1998, at inception, the Company issued 150,000 shares of
restricted Common Stock to Ms. Johanna Bonnier, the Secretary and Treasurer of
the Company and record and beneficial
<PAGE>
owner of approximately 7.32% of the Company's outstanding Common Stock, in
exchange for services for the Company in connection with the organization of
EZT.
On or about June 15, 1998, and on or about July 15, 1998 the Company issued
and sold 1,000,000 shares of Common Stock to New York, Florida and French
residents for cash consideration totaling $10,000 (873,000 shares) to thirty(30)
New York residents at $.01 per share, (30,000 shares) to one(1) Florida resident
at $.01 per share, and (97,000 shares) to three(3) French residents at $.01 per
share).
On or about September 15, 1998, the Company issued and sold 50,000 shares
of unrestricted Common Stock to five(5) French nationals for cash consideration
totaling $50,000 at $1.00 per share.
The facts relied upon the by the Company to make the federal exemption
available include the following: (i) the aggregate offering price for the
offering of the shares of Common Stock did not exceed $1,000,000, less the
aggregate offering price for all securities sold within the twelve months before
the start of and during the offering of the shares in reliance on any exemption
under Section 3(b) of, or in violation of Section 5(a) of, the Act; (ii) no
general solicitation or advertising was conducted by the Company in connection
with the offering of any of the shares; (iii) the fact that the Company has not
been since its inception (a) subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended; (b) an "investment
Company" within the meaning of the Investment Company Act of 1940, as amended;
or (c) a development stage Company that either has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies, or other entity or
person; and (iv) the required number of manually executed originals and true
copies of Form D were duly and timely filed with the U.S. Securities and
Exchange Commission.
The facts relied upon to make the New York Exemption available include the
following: (i) the aggregate number of persons purchasing the Company's stock
during the 12 month period ending on the date of issuance did not exceed 40
persons(including offerees who reside outside the State of New York); (ii)
neither the offer nor the sale of any of the shares was accomplished by a public
solicitation or advertisement; (iii) that at the time of filing no offering had
yet been made to any resident of the State of New York, (iv) that the offering
is to be made to personal friends, relatives and business associates and other
principals of the issuer, (v) these common shares have been issued or sold in
reliance of Section 359-f(2) of the New York General Business Law, (vi) each
purchaser executed a statement to the effect that the securities purchased have
been purchased for their own account and not for the resale to any other
persons; (vii) that they have adequate means of providing for their current
needs and possible personal contingencies; and (viii) they do not have a need
for liquidity of this investment.
The facts relied upon to make the Florida exemption available include the
following: (i) sales of the shares of Common Stock were not made to more than 35
persons; (ii) neither the offer nor the sale of any of the shares was
accomplished by the publication of any advertisement; (iii) all purchasers
either had a preexisting personal or business relationship with one or more of
the executive officers of EZT or, by reason of their business or financial
experience, could be reasonably assumed to have the capacity to protect their
own interests in connection with the transaction; (iv) each purchaser
<PAGE>
represented that he was purchasing for his own account and not with a view to or
for sale in connection with any distribution of the shares; and (v) prior to
sale, each purchaser had reasonable access to or was furnished all material
books and records of the Company, all material contracts and documents relating
to the proposed transaction, and had an opportunity to question the executive
officers of the Company. Pursuant to Rule 3E-500.005, in offerings made under
Section 517.061(11) of the Florida Statutes, an offering memorandum is not
required; however each purchaser (or his representative) must be provided with
or given reasonable access to full and fair disclosure of material information.
An issuer is deemed to be satisfied if such purchaser or his representative has
been given access to all material books and records of the issuer; all material
contracts and documents relating to the proposed transaction; and an opportunity
to question the appropriate executive officer. In the regard, Dervaes and
Bonnier supplied such information and was available for such questioning.
Item 11. Description of Securities.
The Company is authorized to issue 50,000,000 shares of Common Stock,
$0.0001 par value. The issued and outstanding shares of Common Stock being
registered hereby are validly issued, fully paid and non-assessable. The holders
of outstanding shares of Common Stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the Board
of Directors may from time to time determine.
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, have one vote per share in all matters to be voted upon
by the stockholders. A majority vote is required on all corporate action.
Cumulative voting in the election of directors is not allowed, which means that
the holders of more than 50% of the outstanding shares can elect all the
directors as they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any directors. The shares of Common
Stock have no preemptive, subscription, conversion or redemption rights and can
only be issued as fully paid and non-assessable shares. Upon liquidation,
dissolution or winding-up of the Company, the holders of Common Stock are
entitled to receive a pro rata of the assets of the Company which are legally
available for distribution to stockholders.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of Preferred Stock,
$0.0001 par value. Currently there are no issued and outstanding preferred
shares of the Company.
Transfer Agent
The transfer agent and address for the Company:
Interwest Transfer Co., Inc.
1981 E. Murray Holiday Road
Suite 100
Salt Lake City, Utah 84117
(801) 272-9294
<PAGE>
Certain Provision of Florida Law.
Section 607.0902 of the Florida Business Corporation Act prohibits the
voting of shares in a publicly-held Florida corporation that are acquired in a
"control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition or
unless the articles of incorporation or bylaws specifically state that this
section does not apply. A "control share acquisition" is defined as an
acquisition that immediately thereafter entitles the acquiring party to vote in
the election of directors within each of the following ranges of voting power:
(i) one-fifth or more, but less than one-third of such voting power: (ii)
one-third or more, but less than a majority of such voting power; and, (iii)
more than a majority of such voting power. The Amended Articles of Incorporation
of the Company specifically state that Section 607.0902 does not apply to
control-share acquisitions of shares of the Company.
Item 12. Indemnification of Directors and Officers.
Article X of the Company's Articles of Incorporation contains provisions
providing for the indemnification of directors and officers of the Company as
follows:
(a) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was otherwise serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe his conduct to be unlawful.
The termination of any action, suit or proceeding, by judgment, order,
settlement, conviction upon a plea of nolo contendere or its equivalent, shall
not of itself create a presumption that the person did not act in good faith in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe the action was unlawful.
(b) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action or
suit by or in the right of the Corporation, to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to whether such person
<PAGE>
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation, unless, and only to the extent that,
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the officer,
director, employee or agent is proper under the circumstances, because he has
met the applicable standard of conduct set forth in Section (a) or (b) of this
Article. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for that purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
(f) The Board of Directors may exercise the Corporation's power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Articles of Incorporation, the Bylaws, agreements, vote of
the shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs and
personal representatives of such a person.
<PAGE>
The Company has no agreements with any of its directors or executive
offices providing for indemnification of any such persons with respect to
liability arising out of their capacity or status as officers and directors.
At present, there is no pending litigation or proceeding involving a
director or executive officer of the Company as to which indemnification is
being sought.
Item 13. Financial Statements.
The Financial Statements of EZ Talk, Inc., and Notes to Financial
Statements together with the Independent Auditor's Report of Durland and
Company, CPA's, P.A., required by this Item 13 commence on page F-1 hereof and
are incorporated herein by this reference. The Financial Statements filed as
part of this Report on Form 10-SB are listed in the Index to Financial
Statements below:
Item 14. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
Because the Company has been generally inactive since its inception, it has
had no independent accountant until the retention in November 1998 of Durland
and Company, CPA's, P.A., 340 Royal Palm Way, Suite 204, Palm Beach, Florida
33480. There has been no change in the Company's independent accountant during
the period commencing with the Company's retention of Durland and Company,
CPA's, P.A. through the date hereof.
PART F/S
The Financial Statements of EZT required by Item 310 of Regulation SB
commence on page F-1 hereof in response to Part F/S of this Registration
Statement on Form 10-SB and are incorporated herein by this reference.
INDEX TO AUDITED FINANCIAL STATEMENTS
For the period from June 10, 1998 (Inception) through
February 28, 1999
Independent Auditors' Report..........................F-2
Balance Sheet.........................................F-3
Statement of Operations...............................F-4
Statement of Stockholders' Equity.....................F-5
Statement of Cash Flows...............................F-6
Notes to Financial Statements.........................F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO: The Board of Directors
EZ Talk, Inc.
Palm Beach, Florida
We have audited the accompanying balance sheet of EZ Talk, Inc., a development
stage enterprise, as of February 28, 1999 and the related statement of loss,
changes in stockholders' equity and cash flows for the period from June 10, 1998
(Inception) through February 28, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EZ Talk, Inc. as of February
28, 1999 and the results of its operations and its cash flows for the period
from June 10, 1998 (Inception) through February 28, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has experienced a loss since inception. The
Company's financial position and operating results raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 4. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
March 25, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
EZ TALK, INC.
(A Development Stage Enterprise)
Balance Sheet
February 28, 1999
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 58,242
-------------
Total Current Assets 58,242
-------------
Total Assets $ 58,242
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 6,885
-------------
Total Current Liabilities 6,885
-------------
Total Liabilities 6,885
-------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value, authorized 10,000,000
shares; none issued 0
Common stock, $0.0001 par value, authorized 50,000,000
shares; 2,050,000 issued and outstanding. 205
Additional paid in capital 59,895
Deficit accumulated during the development stage (8,743)
-------------
Total Stockholders' Equity 51,357
-------------
Total Liabilities and Stockholders' Equity $ 58,242
=============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
EZ TALK, INC.
(A Development Stage Enterprise)
Statement of Operations
For the Period From June 10, 1998 (Inception) to February 28, 1999
<S> <C>
Revenues $ 0
-------------
Expenses
Bank charges 43
Consulting fees 55
Consulting fees - related parties 100
Organization expenses 385
Professional fees 6,500
Transfer agent fees 1,660
-------------
Total expenses 8,743
-------------
Net loss $ (8,743)
=============
Net loss per weighted average share, basic $ (.004)
=============
Weighted average number of shares 1,955,513
=============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
EZ TALK, INC.
(A Development Stage Enterprise)
Statement of Changes in
Stockholders' Equity For the Period From June
10, 1998 (Inception) to February 28, 1999
Deficit
Accumulat
Addition ed Total
Number Preferre Comm al During the Stockholder
of d on Paid-in Developme s'
Shares Stock Stock Capital nt Equity
Stage
----------- ------------ ---------- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
June 10, 1998 (Inception) 0 $ 0 $ 0 $ 0 $ 0 $ 0
June 10, 1998 - services ($0.0001/sh) 1,000,000 0 100 0 0 100
June 15, 1998 - cash ($0.01/sh) 500,000 0 50 4,950 0 5,000
July 15, 1998 - cash ($0.01/sh) 500,000 0 50 4,950 0 5,000
September 15, 1998 - cash ($1.00/sh) 50,000 0 5 49,995 0 50,000
servicecashsssssssssssssssss ssssss (
Net loss 0 0 0 0 (8,743) (8,743)
----------- ------------ ---------- ------------ -------------- ----------------
BALANCE, February 28, 1999 2,050,000 $ 0 $ 205 $ 59,895 $ (8,743) $ 51,357
=========== ============ ========== ============ ============== ================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
EZ TALK, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
For the Period From June 10, 1998 (Inception) to February 28, 1999
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
<S> <C>
Net loss $ (8,743)
Adjustments to reconcile net loss to net cash used for
development activities
Stock issued in lieu of cash - related parties 100
Change in assets and liabilities
Increase in accrued expenses 6,885
------------------
Net cash used by development activities (1,758)
------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 60,000
------------------
Net cash provided by financing activities 60,000
------------------
Net increase in cash 58,242
CASH, beginning of period 0
------------------
CASH, end of period $ 58,242
==================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
EZ TALK, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles
The Company EZ Talk, Inc. is a Florida chartered development stage
corporation which conducts business from its headquarters in Palm Beach,
Florida. The Company was incorporated on June 10, 1998.
The Company has not yet engaged in its expected operations. The Company's
future operations will be to market a hands-free speaker system for
telephones to various consumer groups. Current activities include raising
additional equity and negotiating with potential key personnel and
facilities.
There is no assurance that any benefit will result from such activities.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that effect the
reported amounts of assets and liabilities as of the date of the statements
of financial condition and operations for the period then ended. Actual
results may differ significantly from those estimates.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Start-up costs Costs of start-up activities, including organization
costs, are expensed as incurred, in accordance with Statement of Position
(SOP) 98-5.
b) Net loss per share Basic is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.0001 par value common stock and 10,000,000 shares of $0.0001 par value
preferred stock. The Company had 2,050,000 shares of common stock issued
and outstanding at February 28, 1999. The Company, on June 10, 1998, issued
850,000 shares to its president for the value of services rendered in
connection with the organization of the Company. On the same date, the
Company issued 150,000 shares to its secretary/treasurer and director for
the value of consulting services rendered in connection with the
organization of the Company. On June 15, 1998, the Company issued 500,000
shares of common stock at $0.01 per share for $5,000 in cash. On July 15,
1998,
F-7
<PAGE>
the Company issued 500,000 shares of common stock at $0.01 per share for
$5,000. On September 15, 1998, the Company issued 50,000 shares of common
stock at $1.00 per share for $50,000 in cash.
The Company has no shares of preferred stock issued and outstanding at
February 28, 1999.
(3) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax and
financial reporting purposes. The Company has net operating loss
carryforwards for income tax purposes of approximately $8,643, expiring at
February 28, 2019.
The amount recorded as deferred tax assets as of February 28, 1999 is
$1,700, which represents the amount of tax benefit of the loss
carryforward. The Company has established a valuation allowance against
this deferred tax asset, as the Company has no history of profitable
operations.
(4) Going Concern As shown in the accompanying financial statements, the
Company incurred a net loss of $8,743 for the period from June 10, 1998
(Inception) through February 28, 1999. The ability of the Company to
continue as a going concern is dependent upon commencing operations and
obtaining additional capital and financing. The financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern. The Company is currently seeking financing to
allow it to begin its planned operations.
(5) Related parties During the formation of the Company, the president and
director received 850,000 shares and the secretary/treasurer and director
received 150,000 shares for consulting services. A complete description is
included in Note 2.
Related party amount for the period ended February 28, 1999 is as follows:
Consulting fees - related parties $ 100
=====================
F-8
<PAGE>
Item 15. Financial Data Schedules and Exhibits and Reports on Form 8-K
Index to Exhibits
Description
3.1 Articles of Incorporation of EZ Talk, Inc. filed June 11, 1998 with an
effective date of June 10, 1998 (filed electronically as Exhibit 3(i).1)
3.2 Bylaws of SD Products Corp. (filed electronically as Exhibit 3(ii))
27 Audited Financial Data Schedule from inception, June 10, 1998 through
February 28, 1999 fiscal year end
(a) No Reports on Form 8-K were filed during the last quarter of the fiscal
year ended September 30, 1997, covered by this Report on Form 10-SB.
<PAGE>
SIGNATURES
--------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EZ Talk, Inc.
(Registrant)
Date:June 9, 1999 By: /s/ A. Rene Dervaes, Jr.
---------------------------------
A Rene Dervaes, Jr., President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date Signature Title
- ---- --------- -----
June 9, 1999 By: /s/ A. Rene Dervaes, Jr. President & Director
--------------------------
A. Rene Dervaes, Jr.
June 9, 1999 By: /s/ Johanna Bonnier Secretary and Treasurer
---------------------------
Johanna Bonnier
EXHIBIT 3.(i).1
ARTICLES OF INCORPORATION
OF
EZ TALK, Inc.
The undersigned subscriber to these Articles of Incorporation, a natural
person competent to contract, hereby forms a corporation under the laws of the
State of Florida.
ARTICLE I. NAME
The name of the corporation shall be: EZ TALK, Inc. The principal place of
business of this corporation shall be 222 Lakeview Avenue, West Palm Beach, FL
33401.
ARTICLE II. NATURE OF BUSINESS
This corporation may engage or transact in any and all lawful activities or
business permitted under the laws of the United States, the State of Florida or
any other state, country, territory or nation.
ARTICLE III. CAPITAL STOCK
The maximum number of shares of stock that this corporation is authorized
to have outstanding at any one time is 50,000,000 shares of common stock having
$.0001 par value per share and 10,000,000 shares of preferred stock having
$.0001 par value per share.
ARTICLE IV. ADDRESS
The street address of the initial registered office of the corporation
shall be 265 Sunrise Avenue, Suite 204, Palm Beach, FL 33480, and the name of
the registered agent of the corporation at that address is Donald F. Mintmire.
<PAGE>
ARTICLE V. TERM OF EXISTENCE
This corporation is to exist perpetually.
ARTICLE VI. DIRECTORS
This corporation shall have no Directors, initially. The affairs of the
Corporation will be managed by the shareholders until such time as Directors are
designated as provided by the Bylaws.
ARTICLE VII. INCORPORATOR
The name and street address of the incorporator to these Articles of
Incorporation is:
Donald F. Mintmire, Esq.
Mintmire & Associates
265 Sunrise Avenue
Suite 204
Palm Beach, Florida 33480.
ARTICLE VIII. EFFECTIVE DATE
The corporation shall commence its existence on June 10, 1998.
ARTICLE IX. CONFLICT OF INTEREST
Any related party contract or transaction must be authorized, approved or
ratified at a meeting of the Board of Directors by sufficient vote thereon by
directors not interested therein or the transaction must be fair and reasonable
to the Corporation.
ARTICLE X. INDEMNIFICATION
The Corporation shall indemnify its Officers, Directors, Employees and
Agents in accordance with the following:.
(a) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was otherwise serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the Corporation, and, with respect
<PAGE>
to any criminal action or proceeding, has no reasonable cause to believe his
conduct to be unlawful. The termination of any action, suit or proceeding, by
judgment, order, settlement, conviction upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the person did not act
in good faith in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had reasonable cause to believe the action was unlawful.
(b) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action or
suit by or in the right of the Corporation, to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to whether such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation, unless, and only to the extent that, the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the officer,
director, employee or agent is proper under the circumstances, because he has
met the applicable standard of conduct set forth in Section (a) or (b) of this
Article. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for that purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
(f) The Board of Directors may exercise the Corporation's power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint
<PAGE>
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Articles of Incorporation, the Bylaws, agreements, vote of
the shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs and
personal representatives of such a person.
Article XI. Law Applicable to Control-Share Voting Rights.
The provisions set forth in Fl. Stat. 607.0902 do not apply to
control-share acquisitions of shares of the Corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal on
this 10th day of June, 1998.
/s/ Donald F. Mintmire
------------------------------
Donald F. Mintmire
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 10th day of June,
1998 by Donald F. Mintmire, who is personally known to me and who (did/did not)
take an oath.
/s/Lisa R. Coppa
------------------------------
Notary Public
Donald F. Mintmire, having been designated to act as Registered Agent,
hereby agrees to act in this capacity.
/s/ Donald F. Mintmire
------------------------------
Donald F. Mintmire
EXHIBIT 3.2
BY-LAWS
OF
EZ TALK, INC.
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Florida shall be
located in the City of Palm Beach. The Corporation may have such other offices,
either within or without the State of Florida, as the business of the
Corporation may require from time to time.
The Registered Office of the Corporation may be, but need not be,
identical with its principal office in the State of Florida and the address of
the Registered Office may be changed from time to time by the Board of
Directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders shall be held
in the month of July of each year, beginning with the year 1998 on such date, at
such time and place as the Board of Directors shall determine for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the election of directors shall not be held on the day
designated for any annual meeting, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders to be held as soon thereafter as may be convenient.
SECTION 2. SPECIAL MEETING. Special meetings of the shareholders may be
called by the President, by the Board of Directors or any member thereof, or by
the holders of not less than one-fifth (1/5) of the voting power of all
shareholders of the Corporation.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place
within or without the State of Florida as the place of meeting for any annual
meeting, or any place either within or without the State of Florida as the place
of meeting for any special meeting called by the Board of Directors.
A waiver of notice signed before or after the meeting by all shareholders
may designate any place, either within or without the State of Florida as the
place for the holding of such meeting. If no such designation is made, or if a
special meeting is called by any person other than the Board of Directors, the
place of meeting shall be the principal office of the Corporation in the State
of Florida, except as otherwise provided in Section 5 of this Article.
<PAGE>
SECTION 4. NOTICE OF MEETINGS AND WAIVER. Written or printed notice stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman of the
Board, the President, or the Secretary, or the officer or persons calling the
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail in a sealed envelope addressed to the shareholder at
his address as it appears on the records of the Corporation, with postage
thereon prepaid. Notice of any shareholders' meeting may be waived in writing by
any shareholder at any time before or after the meeting.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall
meet at any time and place, either within or without the State of Florida, and
consent to the holding of a meeting, such meeting shall be valid without call or
notice, and at such meeting any corporate action may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of
Directors of the Corporation may close its stock transfer books for a period not
exceeding sixty (60) (but, if closed, for not less than ten (10)) days prior to
the date of any meeting of shareholders, or the date for the payment of any
dividend or for the allotment of rights, or the date when any exchange or
reclassification of shares shall be effective; or in lieu thereof, may fix in
advance a date, not exceeding sixty (60) and not less than ten (10) days prior
to the date of any meeting of shareholders, or to the date for the payment of
any dividend or for the allotment of rights, or to the date when any exchange or
reclassification of shares shall be effective, as the record date for the
determination of shareholders entitled to receive payment of any such dividend
or to receive any such allotment of rights, or to exercise rights in respect of
any exchange or reclassification of shares; and the shareholders of record on
such date shall be the shareholders entitled to notice of and to vote at, such
meeting, or to receive payment of such dividend or to receive such allotment of
rights, or to exercise such rights, in the event of an exchange or
reclassification of shares, as the case may be. If the transfer books are not
closed and no record date is fixed by the Board of Directors, the date on which
notice of the meeting is mailed shall be deemed to be the record date for the
determination of shareholders entitled to vote at such meeting. Transferees of
shares which are transferred after the record date shall not be entitled to
notice of or to vote at such meeting.
SECTION 7. VOTING LISTS. The officer or agent having charge of the transfer
book for shares of the Corporation shall make, at least ten (10) days before
each meeting of shareholders, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address and the
number of shares held by each shareholder, which list, for a period of ten (10)
days prior to such meeting, shall be kept on file at the office of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share ledger or
stock transfer book, or a duplicate thereof kept in this State, shall be prima
facie evidence as to who are the shareholders entitled to examine such list or
share ledger or stock transfer book or to vote at any meeting of shareholders.
SECTION 8. QUORUM. A majority of the outstanding shares of the Corporation,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders; provided, that if less than a majority of the outstanding shares
are represented at said meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice.
<PAGE>
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy, and such proxy may be withdrawn at any time.
SECTION 10. VOTING OF SHARES. Each outstanding share of Common Stock shall
be entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the By-Laws of such corporation may prescribe, or, in the
absence of such provision, as the Board of Directors of such corporation may
determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, conservator, or trustee may be voted by such fiduciary,
either in person or by proxy.
Shares standing in the name of a trustee may be voted by him, either in
person or by proxy, but no trustee shall be entitled to vote shares held by him
without a transfer of such shares into his name.
Shares standing in the joint names of four (4) or more fiduciaries shall be
voted in the manner determined by the majority of such fiduciaries, unless the
instrument or order appointing such fiduciaries otherwise directs.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority to do so is
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares (except that if the right to vote be expressly given in writing to the
pledgee and notice thereof delivered to the Corporation in writing by the
pledgee, the shareholder shall not have the right to vote the shares so pledged)
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
SECTION 13. ADJOURNMENTS. If a meeting is adjourned to another time or
place, notice of the adjourned meeting need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken. The
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days or a new
record is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each shareholder of record entitled to vote at the meeting.
ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS AND EXECUTIVE COMMITTEE. The
business and affairs of the Corporation shall be managed by its Board of
Directors. The Board of Directors may, by resolution passed
<PAGE>
by a majority of the whole Board, designate two (2) or more of its number to
constitute an Executive Committee, who, to the extent provided in the
resolution, shall have and exercise the authority of the Board of Directors in
the management of the Corporation.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors which
shall constitute the whole Board of Directors shall be fixed from time to time
by resolution passed by the Board or by the shareholders (any such resolution of
either the Board of Directors or shareholders being subject to any later
resolution by either of them) but in no event shall such number be less than
one. No resolution shall have the effect of shortening the term of any incumbent
director. Directors shall be elected at the annual meeting of shareholders and
shall continue in office until their successors shall have been elected and
qualified. Directors need not be residents of Florida nor need they be the
holder of any shares of the capital stock of the Corporation.
SECTION 3. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held without other notice than this By-Law, immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Florida, for holding of additional regular meetings without other
notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board, the President or
any two (2) directors. The person or persons authorized to call special meetings
of the Board of Directors may fix any place, either within or without the State
of Florida, as the place for holding any special meeting of the Board of
Directors called by them.
SECTION 5. NOTICE. Written notice of any special meeting shall be given to
each director at least two (2) days before the meeting, either by personal
delivery or by mail, telegram or cablegram. Any director may waive notice of any
meeting. The attendance of a director at any meeting shall constitute a waiver
of notice of such meeting, and a waiver of any and all objections to the place
of meeting, the time of meeting, or the manner in which it was called or
convened, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver or notice of such a meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by or in the
manner prescribed in the By-Laws of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors,
provided, that if less than a majority of the directors are present at that
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 7. MANNER OF ACTING. The act of majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors.
SECTION 8. INFORMAL ACTION BY DIRECTORS. Any action required to be taken at
a meeting of the Directors of a corporation or any action which may be taken at
such meeting may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all directors and such consent
shall have the same effect as a unanimous vote.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors or in
a directorship to be filled by reason of an increase in the number of directors,
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office
or until the next succeeding annual meeting of shareholders. Any directorship to
be filled by reason of an increase in the number of directors may be filled
<PAGE>
by election by the Board of Directors for a term of office continuing only until
the next election of the directors by the shareholders.
SECTION 10. COMPENSATION. Directors, as such, shall not receive any stated
salaries for their services, but by resolution of the Board of Directors, a
fixed sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board of Directors; provided, that
nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 11. REMOVAL. At a meeting or shareholders called expressly for
that purpose, directors may be removed, with or without cause, by a vote of the
majority of the shares then entitled to vote at an election of directors.
ARTICLE IV
OFFICERS
SECTION 1. CLASSES. The officers of the Corporation shall be a
President, a Treasurer, and a Secretary, and such other officers and assistant
officers as from time to time may be deemed necessary by the Board of Directors
and elected in accordance with the provisions of this Article. Any two (2) or
more offices may be held by the same person, except that the offices of
President and Secretary may not be held by the same person if there is more than
one shareholder. The failure to elect a President, Secretary or Treasurer shall
not effect the existence of this Corporation.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as convenient. Vacancies may be filled or new offices
created and filled at any meeting of the Board of Directors. Each officer shall
hold office until his successor shall have been duly elected and shall have
qualified or until his death, his resignation or his removal from office in the
manner hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the Board
of Directors may be removed by the Board of Directors whenever, in its judgment,
the best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. PRESIDENT. The President shall be the principal executive
officer of the Corporation and shall in general supervise and control all of the
business and affairs of the Corporation. He shall preside at all meetings of the
shareholders and of the Board of Directors. He may sign, with the Secretary or
any other proper officer of the Corporation thereunto authorized by the Board of
Directors, certificates for shares of the Corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors have
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. VICE PRESIDENT. In the absence of the President or in the event
of his inability or refusal to act, the Vice President shall perform the duties
of the President, and when so acting, shall have all the
<PAGE>
powers of and be subject to all the restrictions upon the President. The Vice
President shall perform such other duties as from time to time may be assigned
to him by the President or by the Board of Directors.
SECTION 7. TREASURER. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine. He shall: (a)
have charge and custody of and be responsible for all funds and securities of
the Corporation; (b) receive and give receipts for monies due and payable to the
Corporation from any source whatsoever, and deposit all such monies in the name
of the Corporation in such banks, trust companies, or other depositories as
shall be selected in accordance with the provisions of Article V of these
By-Laws; and (c) in general perform all the duties as from time to time may be
assigned to him by the President or the Board of Directors.
SECTION 8. SECRETARY. The Secretary shall: (a) keep the minutes of the
shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation under this seal is duly authorized in accordance with the provisions
of these By-Laws; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or Vice President, certificates for shares of the
Corporation, the issue of which shall have been authorized by resolution of the
Board of Directors; (f) sign with the President, or Vice President, certificates
for shares for the Corporation, the issue of which shall have been authorized by
resolution of the Board of Directors; (g) have personal charge of the stock
transfer books of the Corporation; and (h) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or the Board of Directors.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The Assistant Secretaries, as and if
authorized by the Board of Directors, may sign with the President or Vice
President certificates for shares of the Corporation, the issue of which shall
have been authorized by a resolution of the Board of Directors. The Assistant
Treasurers and Assistant Secretaries in general shall perform such duties as
shall be assigned to them by the Treasurer or Secretary, respectively, or by the
President or the Board of Directors.
SECTION 10. SALARIES. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE V
CONTRACTS, LOANS, CHECK AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instruments in the name of and on behalf of the Corporation and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the Corporation
and no evidence of indebtedness shall be issued in its name unless authorized by
a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
<PAGE>
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents, of
the Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the President and shall be
sealed with the seal of the Corporation. All certificates for shares shall be
consecutively numbered. The name of the persons owning the shares represented
thereby with the number of shares and date of issue shall be entered on the
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, destroyed or mutilated certificate,
a new one may be issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the Corporation shall
be made only by the registered holder thereof or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of the certificate for such
share. The person in whose name shares stand on the books of the Corporation
shall be deemed the owner thereof for all purposes as regards the Corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the resolution of
the Board of Directors.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE IX
SEAL
The Board of Directors shall provide a corporate seal which shall be in the
form of a circle and shall have inscribed thereon appropriate wording.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions
of these By-Laws, or under the provisions of the Articles of Incorporation, or
under the provisions of the corporation laws of the State of Florida, waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
<PAGE>
ARTICLE XI
AMENDMENT
The Board of Directors shall have the power and authority to alter, amend
or rescind the By-Laws of the Corporation at any regular or special meeting at
which a quorum is present by a vote of a majority or the whole Board of
Directors, subject to the power of the shareholders to change or repeal such
By-Laws at any annual or special meeting of shareholders at which a quorum is
present, by a vote of a majority of the stock represented at such meeting,
provided, that the notice of such meeting shall have included notice of any
proposed alteration, amendment or rescission.
I certify that these are the By-Laws adopted by the Board of Directors
of the Corporation.
/s/ Johanna Bonnier
-----------------------------
Johanna Bonnier, Secretary
Date signed: ___________________
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