U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM SB-2 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
NFOX.COM
---------------------------------------------
(Name of small business issuer in its charter)
Nevada 7372 88-0425098
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification Identification
incorporation or Code Number) Number)
organization)
6216 S. Sandhill Rd., Suite C
Las Vegas, NV 89120
(702) 898-0456
(Address and telephone number of principal executive offices)
---------------------
6216 S. Sandhill Rd., Suite C
Las Vegas, NV 89120
(Address of principal place of business or intended principal place of
business)
Karl Kraft, Chief Executive Officer
NFOX.COM
6216 S. Sandhill Rd., Suite C
Las Vegas, NV 89120
(702) 898-0456
(Name, address and telephone number of agent for service)
--------------------
Copies of Communications to:
Donald J. Stoecklein, Esq.
Sperry Young & Stoecklein
1850 E. Flamingo Rd., Suite 111
Las Vegas, NV 89119
(702) 794-2590
<PAGE>
Approximate date of commencement of proposed sale to public:
As soon as practicable after the registration statement becomes effective
--------------------------
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[ ]
Calculation of Registration Fee
<TABLE>
Proposed
Title of Each Class of Proposed Maximum
Securities to be Amount to Offering Aggregate Amount of
Registered be Price Per Offering Registration
Registered Share (1) Price (1) Fee
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value 2,250,000 $2.00 $4,500,000 $1,251
- ---------------------------------------------------------------------------
TOTAL 2,250,000 N/A $4,500,000 $1,251
===========================================================================
</TABLE>
(1) The proposed maximum offering price is estimated solely for the
purpose of determining the registration fee and calculated pursuant to Rule
457(c).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Subject to Completion, dated September 8, 1999
<PAGE>
PROSPECTUS
2,250,000 Shares
NFOX.COM
COMMON STOCK
NFOX.COM ("NFOX" or the "Company"), a Nevada Corporation, is hereby
offering (the "Offering") to the public a minimum of 500,000 ("Minimum
Offering") and a maximum of 2,250,000 ("Maximum Offering") shares
("Shares") of common stock, $0.001 par value (the "Common Stock"). It is
currently estimated that the initial public offering price will be $2.00
per Share. The offering price per Share is not related to asset value, net
worth or any other established criteria of value. (See "Risk Factors -
Arbitrary Determination of Offering Price; No Public Market for the
Securities.")
Prior to this Offering there has been no public market for the Common
Stock and no assurances can be given that a public market will develop
following the sale of the Common Stock being offered hereby or if
developed, that it will be sustained. Upon completion of this Offering,
assuming a maximum of offering proceeds, the present stockholders of the
Company will own an aggregate of approximately 67% of the outstanding
Shares of Common Stock. (See "Risk Factors", "Plan of Distribution" and
"Description of Securities.")
It is anticipated that the Common Stock will be quoted on the National
Association of Securities Dealers Over-the-Counter Bulletin Board ("NASD")
("OTCBB") under the proposed symbol "NFOX."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN MATTERS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
Selling Proceeds
Shares Price to Commissions to Company
Offered Public (1) (2) (3)
<S> <C> <C> <C> <C>
Per Share... $2.00 $0 $2.00
Minimum Share Amount (4) 500,000 $1,000,000 $0 $1,000,000
Maximum Share Amount 2,250,000 $4,500,000 $0 $4,500,000
</TABLE>
(1) SUBSCRIBERS PURCHASING THE SHARES SHOULD MAKE THEIR CHECK PAYABLE TO
"NFOX.COM." The Shares are offered by the Company's officers, directors
and employees on a "best efforts" basis (500,000 Share minimum / 2,250,000
Share maximum) through April 1, 2000 ("Offering Termination Date."), or
until such earlier date as all such Shares are sold.
(1) The Company will be self funding the offering, and thus no commissions
will be paid for any shares sold.
(1) Before deducting expenses of the Offering payable by the Company,
including copying, printing and advertising of $2,500, legal fees of
$15,000, and miscellaneous expenses estimated at $2,500. After deducting
such estimated expenses, the net proceeds to the Company will be
approximately $980,000 upon meeting the Minimum Offering and $2,480,000
upon meeting the Maximum Offering.
(1) Funds received prior to reaching the Minimum Offering will be held in
an interest bearing money market account and will not be used until the
Minimum Offering is achieved. The Company's officers and directors will
have sole authority over the funds raised, including the funds prior to the
achievement of the Minimum Offering. If the Company were to be
unsuccessful in achieving the Minimum Offering funds, along with any
interest earned, will be redistributed to all investors who have purchased
the Shares offered herein. (See "Plan of Distribution.")
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITIUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITAION, OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE
THE DATE OF THIS PROSPECTUS IS _________________, 1999.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY 1
RISK FACTORS 3
USE OF PROCEEDS 12
DETERMINATION OF OFFERING PRICE 13
PLAN OF DISTRIBUTION 13
CAPITALIZATION 14
SUMMARY FINANCIAL INFORMATION 14
DILUTION 14
LITIGATION 15
MANAGEMENT 15
PRINCIPAL STOCKHOLDERS 16
DESCRIPTION OF SECURITIES 16
LEGAL MATTERS 18
EXPERTS 18
BUSINESS OF THE COMPANY 19
REPORTS TO STOCKHOLDERS 21
MANAGEMENT DISCUSSION AND ANALYSIS 22
FACILITIES 23
CERTAIN TRANSACTIONS 23
MARKET PRICE OF COMMON STOCK 24
DIVIDENDS 24
EXECUTIVE COMPENSATION 24
SHARES ELIGIBLE FOR FUTURE SALE 26
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 26
EXHIBITS
Independent Auditors Report F-1
Balance Sheet F-2
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
<PAGE>
ABOUT THIS PROSPECTUS
Investors should only rely on the information contained in this
Prospectus. The Company has not authorized anyone to provide information
different from that contained in this Prospectus. The Company is offering
to sell, and seeking offers to buy, Shares of Common Stock only in
jurisdictions where offers and sales are permitted. The information
contained in this Prospectus is accurate only as of the date of this
Prospectus, regardless of the time of delivery of this Prospectus or of any
sale of Common Stock.
AVAILABLE INFORMATION
The Company is not subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Once the
Company's securities are registered under the Exchange Act, it will file
reports and other information with the Securities and Exchange Commission
(the "Commission"). The Company intends to register its securities under
Section 12(g) of the Exchange Act. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at the Pacific Regional Office located at 5670 Wilshire Boulevard,
11th Floor, Los Angeles, California 90036-3648, the New York Regional
Office located at Seven World Trade Center, 13th Floor, New York, New York
10048 and the Chicago Regional Office located at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 ("SEC
Regional Offices") and can be reviewed through the Commission's Electronic
Data Gathering Analysis and Retrieval System ("EDGAR") which is publicly
available through the Commission's web site (http://www.sec.gov).
The Company intends to furnish to its stockholders annual reports
containing financial statements audited by its independent certified public
accountants and quarterly reports containing unaudited interim financial
statements for the first three quarters of each fiscal year.
The Company has filed with the Commission a Registration Statement
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission thereunder. For further
information with respect to the Company and the Common Stock offered
hereby, reference is made to such Registration Statement, exhibits and
schedules. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement, including the exhibits and schedules thereto, may
be inspected without charge at the Commission's public reference facilities
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549, at the SEC Regional Offices and copies of all or any part thereof
may be obtained at prescribed rates from the Public Reference Section of
the Commission. Such reports and other information can be reviewed through
EDGAR.
<PAGE>
PROSPECTUS SUMMARY
The following is only a summary and does not contain all the
information that may be important to a prospective investor. Each
prospective investor is urged to read this Prospectus in its entirety,
including but not limited to, the risk factors beginning on page 3.
NFOX is a Development Stage Company, incorporated in the State of
Nevada in April of 1999. NFOX is a developer of portable software
components and frameworks for the transportation and management of
information over computer networks particularly the Internet and related
networks. The company's unique software framework is carefully designed
for processor and interface portability, low memory footprint,
internationalization, and low CPU and network impact. This will allow the
Company to enter a section of the market that has previously been ignored.
NFOX's principal offices are located at 6216 S. Sandhill Rd., Suite C,
Las Vegas, NV 89120 and its telephone number is (702) 898-0456.
The Offering
Securities Offered. 500,000 Shares Minimum
2,250,000 Shares Maximum
of Common Stock, $.001 par
value
Price Per Share. $2.00
Common Stock Outstanding before Offering. 4,517,950 Shares of Common
Stock
Common Stock Outstanding after Offering (1). 5,017,950 Shares - Minimum
Offering
6,767,950 Shares -
Maximum Offering
Estimated Net Proceeds (2). $4,500,000
Proposed OTCBB Symbol. NFOX
(1) Except as otherwise indicated, the share and per share information and
data in this Prospectus do not give effect to 1,500,000 shares of
Common Stock reserved for issuance under the Company's 1999 Stock
Option Plan. (See "Description of Securities.")
(2) Before deducting expenses of the Offering payable by the Company,
including copying, printing and advertising of $2,500, legal fees of
$15,000, and other expenses estimated at $2,500. After deducting such
estimated expenses, the net proceeds to the Company will be
approximately $980,000 upon meeting the Minimum Offering and
$2,480,000 upon meeting the Maximum Offering.
Use of Net Proceeds
The proceeds of the Offering will be used for working capital to
initiate the Company's marketing and promotional program and to establish a
liquidity base to accommodate cash flow requirements. In addition some of
the capital is earmarked for salaries and benefits for employees and
consultants, and as working capital. (See "Use of Proceeds.") To the extent
that management determines it in the best interest of the Company to re-
allocate the proceeds of this Offering, management reserves the right to
allocate such proceeds to the best interest of the Company.
Risk Factors
Investment in the Shares offered hereby involves a high degree of
risk, including the limited operating history of the Company, competition,
and dilution. Investors should carefully consider the various risk factors
before investing in the Shares. (See "Risk Factors.")
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary financial data derived from the
financial statements of the Company. The data should be read in conjunction
with the financial statements, related notes and other financial
information included herein.
<TABLE>
Operating Statement Data:
For the Period
April 14, 1999
(Inception) to
June 30, 1999
(audited)
<S> <C>
Income Statement Data:
Revenues: $0
Expenses:
Total Expenses: $100,890
---------------
Other Income or Expenses
Interest Income $206
=================
Net (Loss) from Operations $(100,684)
=================
Loss per share $(.02)
----------------
</TABLE>
<TABLE>
Balance Sheet Data: At June 30, 1999
(Audited)
<S> <C>
Total Assets. $217,030
Liabilities. $20,764
---------------
Stockholders' Equity. 196,266
===============
</TABLE>
<PAGE>
RISK FACTORS
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED
CAREFULLY, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, IN EVALUATING THE COMPANY AND ITS BUSINESS PROSPECTS AND AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO, THE
TIMING OF PLANNED REGULATORY FILINGS, PLANNED ACTIVITIES OF EXISTING AND
POTENTIAL COLLABORATIVE PARTNERS, THE COMPANY'S STRATEGIC PLANS,
ANTICIPATED EXPENDITURES, THE NEED FOR ADDITIONAL FUNDS AND OTHER EVENTS
AND CIRCUMSTANCES DESCRIBED IN TERMS OF THE COMPANY'S EXPECTATIONS OR
INTENTIONS. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THIS PROSPECTUS AS A RESULT OF VARIOUS FACTORS, INCLUDING, BUT
NOT LIMITED TO THE RISKS DISCUSSED UNDER "RISK FACTORS," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
AND "BUSINESS," AS WELL AS IN THIS PROSPECTUS GENERALLY.
Limited History of Business Operations; Development Stage
The Company, a Development Stage Company, was organized in April of
1999. The Company has yet to generate any revenues from operations and has
been focused on organizational and start-up activities since inception.
Future operating results will depend on many factors, including the ability
of the Company to raise adequate working capital, demand for the Company's
products, the level of competition and the Company's ability to attract and
maintain key management and employees. (See "Management Discussion and
Analysis of Financial Condition and Results of Operations.")
Management of Growth
The Company's ability to manage growth effectively will depend on its
ability to improve and expand its operations, including its financial and
management information systems, and to recruit, train and manage executive
staff and employees, in addition to developing new programs and software to
interact with its existing products. There can be no assurance that
management will be able to manage growth effectively, and the failure to
effectively manage growth may have a materially adverse effect on the
Company's results of operations.
Sufficiency of Funds
Management believes that the proceeds of this Prospectus, together
with funds from operations, will be sufficient to satisfy its anticipated
cash requirements for at least the 12 months following the completion of
this Prospectus. The Company may be required to seek additional capital in
the future to pay salaries, develop new products and fund future growth and
expansion through additional equity or debt financing or credit facilities.
No assurance can be made that such financing would be available, and if
available it may take either the form of debt or equity. In either case,
the financing could have negative impact on the financial conditions of the
Company and its Stockholders. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources.")
Competition
The Software and Operating System market (particularly on the
Internet) is new, rapidly evolving and intensely competitive. Most of the
Company's current and potential competitors have longer operating
histories, larger installed customer bases, longer relationships with
clients and significantly greater financial, technical, marketing and
public relations resources than the Company, and could decide at any time
to increase their resource commitments to the Company's planned market. The
Company expects competition to intensify in the future. There can be no
<PAGE>
assurance that existing or future competitors will not develop or offer
services that provide significant performance, price, creative or other
advantages over those offered by the Company. Such a development could
materially adversely affect on the Company's business, results of
operations and financial condition.
In addition, certain current competitors have established, and certain
other current competitors (as well as future competitors) may in the future
establish, cooperative relationships among themselves or directly with
vendors to obtain exclusive or semi-exclusive sources of merchandise.
Accordingly, new competitors or alliances among competitors and vendors may
emerge and rapidly acquire market share. Increased competition may result
in reduced operating margins, loss of market share and a diminished brand
franchise. As a result of their larger size, competitors may be able to
develop products similar to the Company's on more favorable terms than the
Company's. Moreover, they may be able to respond more quickly to changes in
customer preferences or to devote greater resources to the development,
promotion and sale of their merchandise than the Company can. Any of these
circumstances could materially adversely affect the Company's business,
results of operations and financial condition.
Dependence on Key Personnel
The Company's future performance depends in significant part upon the
continued service of its key technical and programming personnel. The
Company believes that the technological and creative skills of its
personnel are essential to establishing and maintaining a leadership
position, particularly in light of the fact that its intellectual property,
once sold to the public market, is easily replicated. The loss of the
services of one or more of the Company's executive officers or key
technical personnel would have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company is dependent upon the participation of its key executive
officers and consultants, Karl Kraft, Charles Catania, and Ray Waddell; all
of which have five (5) year contracts with the Company (See "Management -
Key Employee Employment Agreements"). The Company's future success also
depends on its continuing ability to attract and retain highly qualified
technical, sales and managerial personnel. Competition for such personnel
is intense, and there can be no assurance that the Company can retain its
key technical, sales and managerial employees or that it can attract,
assimilate or retain other highly qualified technical, sales and managerial
personnel in the future. The loss of Mr. Kraft, Mr. Catania, Mr. Waddell or
the Company's inability to attract and retain other qualified employees
could have a material adverse effect on the Company.
Reliance Upon Directors and Officers and Limited Management Resources
The Company substantially depends upon the efforts and skills of Karl
Kraft, Chairman and the President of the Company. The loss of Mr. Kraft's
services, or his inability to devote sufficient attention to the Company's
operations, could materially and adversely affect its operations. The
Company currently does not maintain key man life insurance on Mr. Kraft. In
addition, there can be no assurance that the current level of management is
sufficient to perform all responsibilities necessary or beneficial for
management to perform. The Company's success in attracting additional
qualified personnel will depend on many factors, including its ability to
provide them with competitive compensation arrangements, equity
participation and other benefits. There is no assurance that the Company
will be successful in attracting highly qualified individuals in key
management positions.
Lack of Relevant Experience by Management
The Company believes that it has ample experience to design and refine
its products. However, marketing and general operations requires management
experience of a different nature. The Company expects that it will
generally have little or no direct experience in the management operations
and marketing of the types of products and services the Company intends to
market. Because of the Company's lack of experience, it may be more
vulnerable than others to certain risks. The Company also may be more
vulnerable to errors in judgment that could have been prevented by more
experienced management. As a result, lack of previous experience could
materially and adversely affect future operations and prospects.
<PAGE>
Proprietary Rights, Risks of Infringement and Source Code Release
The Company relies primarily on confidentiality procedures and
contractual provisions to protect its proprietary rights, with future plans
to file a combination of copyright, trademark and trade secret laws. The
Company also believes that factors such as the technological and creative
skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are
essential to establishing and maintaining a technological leadership
position. The Company intends to protect its software, documentation and
other written materials under trade secret and copyright laws, which afford
only limited protection.
Furthermore, there can be no assurance that others will not develop
technologies that are similar or superior to the Company's technology.
Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products
or to obtain and use information that the Company regards as proprietary.
The nature of many of the Company's products requires the release of the
source code to all customers. As such, policing unauthorized use of the
Company's products is difficult, and while the Company is unable to
determine the extent to which piracy of its software products exists,
software piracy can be expected to be a persistent problem. In addition,
the laws of some foreign countries do not protect the Company's proprietary
rights as fully as do the laws of the United States. There can be no
assurance that the Company's means of protecting its proprietary rights in
the United States or abroad will be adequate or that competition will not
independently develop similar technology.
The Company is not aware that it is infringing any proprietary rights
of third parties. There can be no assurance, however, that third parties
will not claim infringement by the Company of their intellectual property
rights. The Company expects that software product developers will
increasingly be subject to infringement claims as the number of products
and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required,
may not be available on terms acceptable to the Company, if at all. In the
event of a successful claim of product infringement against the Company and
failure or inability of the Company to license the infringed or similar
technology, the Company's business, financial condition and results of
operations would be materially and adversely affected.
In the future, the Company may also need to file lawsuits to enforce
its intellectual property rights, to protect its trade secrets, or to
determine the validity and scope of the proprietary rights of others. Such
litigation, whether successful or unsuccessful, could result in substantial
costs and diversion of resources. Such costs and diversion could materially
and adversely affect the Company's business, results of operations and
financial condition.
Risk of Product Defects
Software products as complex as those offered by the Company
frequently contain errors or failures, especially when first introduced or
when new versions are released. Also, new products or enhancements may
contain undetected errors, or "bugs," or performance problems that, despite
testing, are discovered only after a product has been installed and used by
customers. There can be no assurance that such errors or performance
problems will not be discovered in the future, causing delays in product
introduction and shipments or requiring design modifications that could
materially and adversely affect the Company's competitive position and
operating results. The Company's products are typically intended for use in
applications that may be critical to a customer's business. As a result,
the Company expects that its customers and potential customers have a
greater sensitivity to product defects than the market for software
products generally.
Although the Company has not experienced material adverse effects
resulting from any such errors to date, there can be no assurance that,
despite testing by the Company and by current and potential customers,
errors will not be found in new products or releases after commencement of
commercial shipments, resulting in loss of revenue or delay in market
acceptance, diversion of development resources, the payment of monetary
damages, damage to the Company's reputation, or increased service and
<PAGE>
warranty costs, any of which could have a material adverse effect upon the
Company's business, financial condition and results of operations.
Control by Existing Stockholders
Following the completion of this Offering, existing stockholders of
the Company will beneficially own 4,517,950 shares of the Company's
outstanding Common Stock, or approximately 67% of the outstanding voting
stock, assuming the Maximum Offering is met. As a result, the Company's
existing stockholders will continue to be able to elect a majority of the
Company's Board of Directors, to dissolve, merge, or sell the assets of the
Company, and to direct and control the Company's operations, policies and
business decisions. (See "Principal Stockholders.")
Anti-takeover Effect of Possible Issuance of Preferred Stock and Nevada
Corporate Law
Upon the closing of this Prospectus, the Company will be authorized to
issue up to 10,000,000 shares of authorized but unissued preferred stock,
par value $0.001 per share ("Preferred stock"). Preferred Stock may be
issued in one or more series, the terms of which may be determined at the
time of issuance by the Board of Directors, without further action by
stockholders, and may include voting rights (including the right to vote as
a series on particular matters), preferences as to dividends and
liquidation, conversion and redemption rights and sinking fund provisions.
The Company has no present plans for any issuance of Preferred Stock. The
issuance of any Preferred Stock could adversely affect the rights of the
holders of Common Stock, and therefore reduce the value of the Common Stock
and make it less likely that holders of Common Stock would receive a
premium for the sale of their shares. In particular, specific rights
granted to future holders of Preferred Stock could be issued to restrict
the Company's ability to merge with or sell its assets to a third party,
thereby preserving control of the Company by present owners.
Introduction of New Product Lines
A significant element of the Company's strategy is to expand and to
introduce new product lines. There can be no assurance that the Company
will be able to successfully market new products or that any of the new
product lines will gain market acceptance, and such failure could result in
lower than anticipated sales for such products and affect adversely the
image and value of the Company's products.
Fluctuations in Operating Results
The Company expects that its operating results will fluctuate in the
future due to a number of factors, which are beyond the control of the
Company. These factors may include the following: the level of usage of the
Internet; demand for the Company's products, services and advertising; the
Company's ability to attract new customers at a steady rate; the Company's
ability to attract and retain personnel with the necessary strategic,
technical and creative skills required to service clients effectively; the
Company's ability to pursue and enter into suitable joint ventures and
consummate suitable acquisitions at a steady rate; the rate at which the
Company or its competitors introduce new products, services or Web sites;
technical difficulties affecting the Company's products; the amount and
timing of capital expenditures and other costs relating to the expansion of
the Company's operations; and Government regulation and legal developments
regarding the use of the Internet.
To respond to changes in its competitive environment, the Company may
occasionally make certain service, marketing or supply decisions or
acquisitions. The Company may benefit from these decisions or acquisitions
in the long run, however, in the short run, such decisions or acquisitions
could materially and adversely affect the Company's quarterly results of
operations and financial condition. Due to all of the foregoing factors, in
some future quarter the Company's operating results may fall below the
expectations of investors and any securities analysts who follow the Common
Stock. In such event, the trading price of the Common Stock could be
materially adversely affected.
Further, the Company believes that period-to-period comparisons of its
financial results may not be very meaningful. Accordingly, prospective
investors should not conclude that such comparisons indicate future
performance.
<PAGE>
Possible Future Delisting of Securities from NASDAQ System; Risks of Low
Priced Stocks.
The Company intends to list its Common Shares, at least initially, on
the OTC Bulletin Board and on NASDAQ Small Cap Market upon meeting the
requirements for a NASDAQ listing, if ever. Upon completion of this
Prospectus, the Company will not meet the requirements for a NASDAQ Small
Cap Market listing. The requirements for a NASDAQ listing are net tangible
assets of $4,000,000 or market capitalization of $50,000,000 or net income
(in latest fiscal year or 2 of last 3 fiscal years) of $750,000, a public
float of 1,000,000 Common Shares, a market value of the public float of
$5,000,000, a minimum bid price of $4.00 per share, three market makers,
300 round lot stockholders, an operating history of one year or a market
capitalization of $50,000,000 and compliance with corporate governance. The
OTC Bulletin Board has no quantitative written standards and is not
connected with the NASDAQ. Until the Company obtains a listing on the
NASDAQ Small Cap Market, if ever, the Company's securities may be covered
by a Rule 15g-9 under the Securities Exchange Act of 1934 that imposes
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and institutional
accredited investors (generally institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must furnish to all
investors in penny stocks, a risk disclosure document required by Rule
15g-9 of the Securities Exchange Act of 1934, make a special suitability
determination of the purchaser and have received the purchaser's written
agreement to the transaction prior to the sale. In order to approve a
person's account for transactions in penny stock, the broker or dealer must
(i) obtain information concerning the person's financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on the information required by paragraph (i) that transactions in
penny stock are suitable for the person and that the person has sufficient
knowledge and experience in financial matters that the person reasonably
may be expected to be capable of evaluating the rights of transactions in
penny stock; and (iii) deliver to the person a written statement setting
forth the basis on which the broker or dealer made the determination
required by paragraph (ii) in this section, stating in a highlighted format
that it is unlawful for the broker or dealer to effect a transaction in a
designated security subject to the provisions of paragraph (ii) of this
section unless the broker or dealer has received, prior to the transaction,
a written agreement to the transaction from the person; and stating in a
highlighted format immediately preceding the customer signature line that
the broker or dealer is required to provide the person with the written
statement and the person should not sign and return the written statement
to the broker or dealer if it does not accurately reflect the person's
financial situation, investment experience and investment objectives and
obtain from the person a manually signed and dated copy of the written
statement. A penny stock means any equity security other than a security
(i) registered, or approved for registration upon notice of issuance on a
national securities exchange that makes transaction reports available
pursuant to 17 CFR 11Aa3-1 (ii) authorized or approved for authorization
upon notice of issuance, for quotation in the NASDAQ system; (iii) that has
a price of five dollars or more or (iv) whose issuer has net tangible
assets in excess of $2,000,000 demonstrated by financial statements dated
less than fifteen months previously that the broker or dealer has reviewed
and has a reasonable basis to believe are true and complete in relation to
the date of the transaction with the person. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and
also may affect the ability of purchasers in this Prospectus to sell their
shares in the secondary market.
Dependence upon Consumer Preferences
Sales of the Company's products will depend upon consumer demand for
the Company's products. Demand for the Company's products can be affected
generally by consumer preferences, which are subject to frequent and
unanticipated changes. The Company is dependent on its ability to produce
appealing and popular products that anticipate, gauge and respond in a
timely manner to changing consumer demands and preferences. Failure to
anticipate and respond to changes in consumer preferences could lead to,
among other things, lower sales, excess inventories, diminished consumer
loyalty and lower margins, all of which would have a material adverse
effect on the Company. There can be no assurance that the demand for
products produced by the Company will be sustained or grow, and any decline
in the demand for such products or failure of demand to grow would have a
material adverse effect on the Company.
<PAGE>
Future Capital Needs; Uncertainty of Additional Financing
The Company currently has no constant and continual flow of revenues.
The Company's future liquidity and capital requirements will depend upon
numerous factors, including the success of existing and future services and
the success of the Company's products. The Company may need to raise
additional funds through public or private financing, strategic
relationships or other arrangements. There can be no assurance that such
additional funding (if needed), will be available on acceptable terms.
Furthermore, debt financing (if available and undertaken) may involve
restrictions limiting the Company's operating flexibility.
Moreover, if the Company were to issue equity securities to raise
additional funds, the following results may occur: the percentage ownership
of the existing stockholders will be reduced, the Company's stockholders
may experience additional dilution in net book value per share, and the new
equity securities may have rights, preferences or privileges senior to
those of the holders of the Company's Common Stock. The Company can not
predict any additional capital requirements because of the uncertainty of
the Company's actual growth. However, in order to pursue its business plan
as desired the Company believes that future capital requirements will
exceed its current financial position.
The Company expects to finance operations for fiscal 1999 through cash
flow from operations, funds raised from this Prospectus, and possible
future private placements of equity securities. If adequate funds are not
available on acceptable terms, the Company may be prevented from pursuing
future opportunities or responding to competitive pressures. The failure to
pursue future opportunities or respond properly to competitive pressures
could materially and adversely affect the Company's business, results of
operations and financial condition.
Dependence on the Internet
The Company's future success substantially depends upon continued
growth in the use of the Internet and the Web. Such growth seems necessary
to support the sale of the Company's products and services. Rapid growth in
the use of the Internet and the Web is a recent phenomenon. There can be no
assurance that communication or commerce over the Internet will become more
widespread. In addition, if Internet use continues to grow significantly,
there can be no assurance that the Internet infrastructure will remain
adequate for supporting the increased demands placed upon it. The Internet
could lose its viability due to either: delays in the development or
adoption of new standards and protocols required to handle increased levels
of Internet activity; or increased governmental regulation.
Changes in or insufficient availability of telecommunications services
to support the Internet also could slow response times and adversely affect
usage of the Web. If Internet use fails to continue to grow, or if the
Internet infrastructure fails to support effectively growth that may occur,
the Company's business, operating results and financial condition could be
materially adversely affected.
Risks Associated with Technological Change
The Internet and electronic markets involve certain characteristics
that expose the Company's existing and future technologies, service
practices and methodologies to the risk of obsolescence. These
characteristics included the following: rapid changes in technology; rapid
changes in user and customer requirements; frequent new service or product
introductions embodying new technologies; and the emergence of new industry
standards and practices.
The Company's performance will partially depend on its ability to
license leading technologies, enhance its existing services, and respond to
technological advances and emerging industry standards and practices on a
timely and cost-effective basis. The development of Software and Operating
Systems entails significant technical and business risks. There can be no
assurance that the Company will use new technologies effectively or adapt
its products to consumer, vendor, advertising or emerging industry
standards. If the Company were unable, for technical, legal, financial or
other reasons, to adapt in a timely manner in response to changing market
conditions or customer requirements, the Company's business, results of
operations and financial condition could be materially adversely affected.
<PAGE>
Other Potential Liability
Certain of the Company's products and services will involve the
development, implementation and maintenance of applications that are
critical to the operations of clients' businesses. The Company's failure or
inability to meet a client's expectations in the performance of its
services could injure the Company's business reputation or result in a
claim for substantial damages, regardless of responsibility for such
failure. The Company will attempt to limit contractually damages arising
from negligent acts, errors, mistakes or omissions in rendering its
services. However, there can be no assurance that any contractual
protections will be enforceable in all instances or would otherwise protect
the Company from liability for damages.
In addition, Internet users may be able to download certain materials
from the Company's Web sites and subsequently distribute the materials to
others. Because of this, claims could be asserted against the Company (with
or without merit) in the future on a variety of legal theories (including
defamation, negligence and copyright and trademark infringement) depending
on the nature and content of such materials. For example, the Company could
be liable for any of the following: libel for any defamatory information
the Company provided about a client; any losses incurred by a client in
reliance on incorrect information the Company negligently provided; and
copyright and trademark infringement resulting from information provided by
the Company.
Moreover, the Company expects that it may agree with third parties to
provide links to such third parties' Web sites. A claimant might
successfully argue that by providing such links, the Company is liable for
wrongful actions by such third parties through such Web sites, for such
matters as the following: defamation, negligence, copyright and trademark
infringement, and losses resulting from the products and services sold by
the third party.
The Company is in the process of procuring general liability
insurance. Even if the Company procures this insurance, the insurance may
not cover all potential claims or may not adequately indemnify the Company
for all liability to which it is imposed. Any liability or legal defense
expenses not covered by insurance or exceeding the Company's insurance
coverage could materially and adversely affect the Company's business,
operating results and financial condition.
Future Acquisitions
While there are currently no commitments or negotiations with respect
to any particular acquisition, the Company may in the future pursue
acquisitions of complementary technologies, products or businesses. Future
acquisitions of complementary technologies, products or businesses by the
Company will result in the diversion of management's attention from the day-
to-day operations of the Company's business and may include numerous other
risks, including difficulties in the integration of the operations,
products and personnel of the acquired companies. Future acquisitions by
the Company may also result in dilutive issuances of equity securities, the
incurrence of debt and amortization expenses related to goodwill and other
intangible assets. Failure of the Company to successfully manage future
acquisitions may have a material adverse effect on the Company's business,
financial condition and results of operations.
Arbitrary Determination of Offering Price; No Public Market for the
Securities
The initial public offering price of the Shares has been determined
arbitrarily by the Company. Factors considered in such determination, in
addition to prevailing market conditions, included the history and
prospects for the industry in which the Company competes, the prospects of
the Company, its capital structure and certain other factors deemed
relevant. Therefore, the public offering price of the Shares do not
necessarily bear any relationship to established valuation criteria and may
not be indicative of prices that may prevail at any time or from time to
time in the public market for the Common Stock.
<PAGE>
Minimum Offering Amount; No Escrow of Funds
There will be a 500,000 Share Minimum Offering amount of Shares that
the Company is required to attain before funds are available for use by the
Company. The Company is raising funds on a "best efforts" basis and funds
received prior to reaching the Minimum Offering will be held in an interest
bearing money market account and will not be used until the Minimum
Offering is achieved. The Company will not be under any formal Escrow
agreement for the funds raised in this Offering prior to the achievement of
the Minimum Offering. . The Company's officers and directors will have
sole authority over the funds raised, including the funds prior to the
achievement of the Minimum Offering. There are no assurances that the
Company will be successful in achieving the Minimum Offering. If the
Company were to be unsuccessful in achieving the Minimum Offering, funds,
along with any interest earned, will be redistributed to all investors who
have purchased the Shares offered herein. (See "Plan of Distribution.")
Lack of Dividends
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 Common
Stock will be paid by the Company in the foreseeable future.
Immediate and Substantial Dilution
The offering price of the Shares will be substantially higher than the
net tangible book value of the Common Stock. Investors participating in
this offering will incur immediate and substantial dilution of
approximately $1.31 per share, if the Maximum Offering is achieved, in the
net tangible book value of their investment from the offering price. (See
"Dilution")
Active Public Market May Not Develop; Possible Volatility of Stock Price
Prior to this Offering there has not been a public market for the
Company's Common Stock, and there can be no assurance that a public market
for the Common Stock will develop or be sustained after this Offering. The
trading price of the Company's Common Stock could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcement of new products by the Company or its competitors, and other
events or factors. In addition, in recent years the stock market has
experienced extreme price and volume fluctuations that have had a
substantial effect on the market prices for many emerging growth companies,
which may be unrelated to the operating performance of the specific
companies.
No Secondary Trading Exemption
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 that state or the Company verifies that an
exemption, such as listing in certain recognized securities manuals, is
available for secondary trading in that 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 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.
Year 2000 Issues
Based on information currently available, the Company believes that
the costs associated with Year 2000 compliance, and the consequences of
incomplete or untimely resolution of the Year 2000 problem, will not have a
material adverse effect on the Company's business, financial condition and
results of operations in any given year. However, even if the internal
<PAGE>
systems of the Company are not materially affected by the Year 2000
problem, the Company's business, financial condition and results of
operations could be materially adversely affected through disruption in the
operation of the enterprises with which the Company interacts. There can be
no assurance that third party computer products used by the Company are
Year 2000 compliant. Further, even though the Company believes that its
current products are Year 2000 compliant, there can be no assurance that
under actual conditions such products will perform as expected or that
future products will be Year 2000 compliant. Any failure of the Company's
products to be Year 2000 compliant could result in the loss of or delay in
market acceptance of the Company's products and services, increased service
and warranty costs to the Company or payment by the Company of compensatory
or other damages which could have a material adverse effect on the
Company's business, financial condition and results of operations.
Effect of Certain Anti-Takeover Provisions.
Nevada's "Combination with Interested Stockholders' Statute" and its
"Control Share Acquisition Statute" may have the effect in the future of
delaying or making it more difficult to effect a change in control of the
Company. See "Description of Securities." These statutory anti-takeover
measures may have certain negative consequences, including an effect on the
ability of the stockholders of the Company or other individuals to (i)
change the composition of the incumbent Board of Directors of the Company;
(ii) benefit from certain transactions which are opposed by the incumbent
Board of Directors; and (iii) make a tender offer or attempt to gain
control of the Company, even if such attempt were beneficial to the Company
and its stockholders. Since such measures may also discourage the
accumulations of large blocks of the Company's Common Stock by purchasers
whose objective is to seek control of the Company or have such Common Stock
repurchased by the Company or other persons at a premium, these measures
could also depress the market price of the Company's Common Stock.
Accordingly, stockholders of the Company may be deprived of certain
opportunities to realize the "control premium" associated with take-over
attempts.
Forward Looking Statements
This Prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. All statements other than statements of historical facts
included in this Prospectus, including without limitation, statements under
"Risk Factors", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" regarding the Company's
financial position, business strategy and plans and objectives of
management of the Company for future operations, are forward-looking
statements. Although the Company believes that the expectations reflected
in such forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed under "Risk Factors"
and elsewhere in this Prospectus, including without limitation in
conjunction with the forward-looking statements included in this
Prospectus. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT
FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS DISCLOSURE
DOCUMENT POTENTIAL INVESTORS SHOULD KEEP IN MIND OTHER POSSIBLE RISKS THAT
COULD BE IMPORTANT
<PAGE>
USE OF PROCEEDS
The amounts and timing of expenditures for each purpose may vary
significantly depending on numerous factors, including, without limitation,
the progress of the Company's marketing, distribution and further
development of its products and services; competing technological and
market developments, changes in the Company's existing research
relationships, the ability of the Company to establish collaborative
arrangements, the initiation of commercialization activities, the purchase
of capital equipment and the availability of other financing. The Company
anticipates, based on currently proposed plans and assumptions relating to
its operations, that the Company's available cash and short-term
investments, the proceeds of this Offering and cash flow from operations,
if any, will be adequate to satisfy its capital needs for at least 12
months following consummation of this Offering.
The proceeds from the sale of the Shares offered hereby are estimated
to be approximately $1,000,000 upon meeting the Minimum Offering proceeds
and approximately $4,500,000 upon meeting the Maximum Offering proceeds.
The Company intends to utilize the estimated net proceeds during the 12-
month period following the offering for the following purposes:
<TABLE>
Minimum Maximum
Amount Amount
<S> <C> <C>
Total Proceeds $1,000,000 $4,500,000
Less: Offering Expenses
Legal $15,000 $15,000
Copying, Printing & Advertising $2,500 $2,500
Other expenses $2,500 $2,500
---------- ----------
Net Proceeds from Offering $980,000 $4,480,000
========== ==========
Use of Net Proceeds
General and Administrative fees (1) $650,000 $2,000,000
Legal and Accounting fees $75,000 $150,000
Internet Server Hardware, Software, and $50,000 $300,000
Services
Advertising, Marketing, Promotion $50,000 $750,000
Building and equipment leases $50,000 $150,000
Network Hardware Production Equipment -- $400,000
Working Capital (2) $105,000 $730,000
---------- ----------
Total Use of Proceeds (3) $1,000,000 $4,500,000
</TABLE>
(1) Used to pay for all general and administrative fees, including
salaries, for the following twelve months.
(2) The Company intends to apply the balance of the proceeds of the Offer
to working capital and general corporate purposes. The Company's management
will have broad discretion with respect to the use of proceeds retained as
working capital. Such proceeds may be used to defray overhead expenses and
for future opportunities and contingencies that may arise. The Company
expects that its general and administrative expenses will increase as it
achieves progress in developing its proposed business plan. For example, a
portion of the proceeds allocated to working capital may be used to pay the
salaries, benefits and fees to employees and consultants who assist in the
Company's business. Proceeds allocated to working capital also may be
reallocated to be used for additional future settlement payments.
<PAGE>
DETERMINATION OF OFFERING PRICE
The initial public offering price of the Shares has been determined
arbitrarily by the Company. Factors considered in such determination, in
addition to prevailing market conditions, included the history and
prospects for the industry in which the Company competes, the prospects of
the Company, its capital structure and certain other factors deemed
relevant. Therefore, the public offering price of the Shares do not
necessarily bear any relationship to established valuation criteria and may
not be indicative of prices that may prevail at any time or from time to
time in the public market for the Common Stock.
PLAN OF DISTRIBUTION AND TERMS OF THE OFFERING
The Company is offering a minimum five hundred thousand (500,000)
Shares and a maximum of two million two hundred fifty thousand (2,250,000)
Shares, at two dollars ($2.00) per share. The Shares will be sold on a
"best efforts basis" through the Company's officers, directors and
employees who will not receive compensation therefore, however, will be
reimbursed for their reasonable expenses in connection therewith.
Purchases can be made only by completing and manually executing a
Subscription Agreement and delivering it together with payment in full for
the shares subscribed to, to the Company. No subscription shall be
effective unless and until accepted by the Company.
Minimum Offering Amount. There will be a 500,000 Share Minimum Offering
amount of Shares that the Company is required to attain before funds are
released for use by the Company. Funds received prior to reaching the
Minimum Offering will be held in an interest bearing money market account
and will not be used until the Minimum Offering is achieved. The Company's
officers and directors will have sole authority over the funds raised,
including the funds prior to the achievement of the Minimum Offering. If
the Company were to be unsuccessful in achieving the Minimum Offering,
funds, along with any interest earned, will be redistributed to all
investors who have purchased the Shares offered herein. Upon achieving the
Minimum Offering and the acceptance of a subscription for Shares, the
Company's transfer agent will issue the Shares to the purchasers. The
Company may continue to offer Shares until the earlier of the Offering
Termination Date or the sale of all securities offered hereunder.
CAPITALIZATION
The following table sets forth the capitalization of the Company
at June 30, 1999, after giving effect to and as adjusted to give effect to
the sale of the 500,000 Shares minimum and 2,250,000 Shares maximum offered
hereby.
<TABLE>
ACTUAL AS ADJUSTED
At Minimum Maximum
June 30, Offering Offering
1999 (1) (2)
<S> <C> <C> <C>
Current Liabilities: $20,764 $20,764 $20,764
Stockholders' Equity:
Common Stock, $0.001 par
value; 25,000,000 shares
authorized;
4,517,950 shares issued and
outstanding 4,518
5,017,950 shares issued and
outstanding as adjusted (1) 5,018
6,767,950 shares issued and
outstanding as adjusted (2) 6,768
Additional paid-in capital (3) 292,432 1,272,432 4,722,432
Deficit accumulated during
development stage (100,684) (100,684) (100,684)
--------- ---------- ----------
Shareholders' Equity 196,266 1,176,766 4,628,516
--------- ---------- ----------
Total Capitalization $217,030 $1,197,530 $4,649,280
========= ========== ==========
</TABLE>
<PAGE>
(1) Reflects the 500,000 shares minimum of stock issued pursuant to the
terms and conditions of this Prospectus.
(2) Reflects the 2,250,000 shares maximum of stock issued pursuant to the
terms and conditions of this Prospectus.
(3) As adjusted reflects $20,000 in Offering expenses in both the Minimum
Offering and Maximum Offering.
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary financial data derived from the
financial statements of the Company. The data should be read in conjunction
with the financial statements, related notes and other financial
information included herein.
<TABLE>
Operating Statement Data:
For the Period
April 14, 1999
(Inception) to
June 30, 1999
<S> <C>
Income Statement Data:
Revenues: $0
Expenses:
Total Expenses: $100,890
----------------
Other Income or Expenses
Interest Income $206
================
Net (Loss) from Operations $(100,684)
================
Loss per share $(.02)
----------------
Balance Sheet Data: At June 30, 1999
(Audited)
Total Assets. $217,030
Liabilities. $20,764
----------------
Stockholders' Equity. 196,266
</TABLE>
DILUTION
The difference between the initial public offering price per share of
Common Stock and the pro forma net tangible book value per share of Common
Stock after this Offering constitutes the dilution to investors in this
Offering. Net tangible book value per share is determined by dividing the
net tangible book value of the Company (total tangible assets less total
liabilities) by the number of outstanding Shares of Common Stock.
At June 30, 1999 the Company's Common Stock had a net tangible book
value of approximately $186,266 or $0.04 per share. After giving effect to
the receipt of the net proceeds from the Maximum Offering Shares offered
hereby at an assumed initial offering price of $2.00 per share, the pro
forma net tangible book value of the Company at June 30, 1999, would have
been $4,666,266 or $0.69 per share, representing an immediate increase in
net tangible book value of $0.65 per share to the present stockholders, and
immediate dilution of $1.31 per share to investors, or 65%. The following
table illustrates dilution to investors on a per share basis:
<TABLE>
<S> <C>
Offering price per share (1)... $2.00
Net tangible book value per share before Offering $0.04
Increase per share attributable to investors $0.65
Pro forma net tangible book value per share after Offering $0.69
Dilution per share to investors $1.31
</TABLE>
(1) Offering price before deduction of estimated expenses of the Offering.
<PAGE>
The following table summarizes, as of June 30, 1999, the difference
between the number of shares of Common Stock purchased from the Company,
the total cash consideration paid and the average price per share paid by
existing stockholders of Common Stock and by the new investors purchasing
shares in this Offering, assuming the sale of the 2,250,000 Shares Maximum
offered hereby at an assumed initial public offering price of $2.00 per
Share and before any deduction of estimated offering expenses.
<TABLE>
Shares Purchased Total Cash Average
Consideration Price
Per
Amount Percent Amount Percent Share
<S> <C> <C> <C> <C> <C>
Original
Stockholders 4,517,950 67% $296,950 6% $0.07
Public Stockholders 2,250,000 33% $4,500,000 94% $2.00
------------------- ---------- ------- ---------- -------
Total 6,767,950 100.00% $4,796,950 100%
===================== ========== ======= ========== =======
</TABLE>
LITIGATION
The Company may from time to time be involved in routine legal matters
incidental to its business; however, at this point in time the Company is
currently not involved in any litigation, nor is it aware of any threatened
or impending litigation.
MANAGEMENT
The Company is currently searching for a Chief Executive Officer and a
Vice President of Marketing. The members of the Board of Directors of the
Company serve until the next annual meeting of stockholders, or until their
successors have been elected. The officers serve at the pleasure of the
Board of Directors. Information as to the directors and executive officers
of the Company is as follows:
Name Title
Karl Kraft President, Chairman of the Board
Charles Catania Secretary, Treasurer and Director
Ray Waddell Director
Duties, Responsibilities and Experience
Karl Kraft acts as the Company's President and Chairman of the Board. Mr.
Kraft is the principal designer of the frameworks used in the NFOX
operating system, and will be the leader of the technical team. He has
been involved with Internet communication technologies since 1985,
including news, web site development, web and application servers, and
email. His most recent position was as CEO and CTO for Ensuing
Technologies, a small software development firm focusing on mission
critical custom applications, and shrink wrap software for Unix based
workstations. Mr. Kraft has also created security and encryption
components for the NeXTSTEP and OpenStep operating systems that are now
owned by Apple Computer Inc.
Charles Catania acts as Secretary/Treasurer and as a Director of the
Company. Mr. Catania attended California State University of Fullerton
earning a Bachelor of Arts Degree in Business Administration in 1973. Mr.
Catania has acted as President and a Director of MarJo Investment
Corporation since 1973, and is presently Vice President of TODO
Construction, a General Contracting Firm in Las Vegas, Nevada.
Ray Waddell is a Director of the Company. Mr. Waddell holds a BS in
Business Administration from Los Angeles State. From 1967 to 1975 he was a
general partner of Minnet-Waddell Investment Corporation. Since 1975 he has
been on the board of directors of several corporations including Latta-
Waddell, Todo Construction, Mulberry Hill Construction, Nova Wears and
Wearables, and Ensuing Technologies.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date of this
Prospectus, and as adjusted giving effect to the sale of 500,000 shares
minimum and 2,250,000 shares maximum of Common Stock in this Offering,
relating to the beneficial ownership of Company common stock by those
persons known to the Company to beneficially own more than 5% of the
Company capital stock, by each of the Company's directors, proposed
directors and executive officers, and by all of the Company's directors,
proposed directors and executive officers as a group. The address of each
person is care of the Company.
<TABLE>
Percent Percent
Name & Address of Beneficial Percent After After
Owner(1) Number Before Offering Offering
of Shares Offering (Minimum) (Maximum)
(2) (2) (2)
<S> <C> <C> <C> <C>
Karl Kraft (3) 2,400,000 53.12% 47.83% 35.46%
Charles Catania (4) 770,000 17.04% 15.34% 11.38%
Ray Waddell (5) 800,000 17.71% 15.94% 11.82%
--------- -------- --------- --------
All Directors, Officers and
Principle Stockholders as a 3,970,000 87.87% 79.11% 58.66%
Group
</TABLE>
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote or to direct the voting of, a security, or the sole or shared
investment power with respect to a security (i.e., the power to dispose of
or to direct the disposition of, a security). In addition, for purposes of
this table, a person is deemed, as of any date, to have "beneficial
ownership" of any security that such person has the right to acquire within
60 days after such date.
(2) Figures are rounded to the nearest percent.
(3) Figures do not reflect 500,000 shares of stock options granted to Mr.
Kraft as part of his employment agreement with the Company. (See "Key
Officer Employment Agreements.")
(4) Figures do not reflect 100,000 shares of stock options granted to Mr.
Catania as part of his employment agreement with the Company. (See "Key
Officer Employment Agreements.")
(5) Figures do not reflect 75,000 shares of stock options granted to Mr.
Waddell as part of his employment agreement with the Company. (See "Certain
Transactions.")
DESCRIPTION OF SECURITIES
Common Stock
The Company's Articles of Incorporation authorizes the issuance of
25,000,000 shares of Common Stock, $0.001 par value per share, of which
4,517,950 shares were outstanding as of the date of this Prospectus. Upon
sale of the 500,000 Shares minimum and 2,250,000 Share maximum offered
hereby, the Company will have outstanding 5,017,950 or 6,767,950 Shares of
Common Stock, respectively. Holders of shares of Common Stock are entitled
to one vote for each share on all matters to be voted on by the
stockholders. Holders of Common Stock have no cumulative voting rights.
Holders of shares of Common Stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time by the Board of
Directors in its discretion, from funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, the
holders of shares of common stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities. Holders of Common Stock
have no preemptive rights to purchase the Company's Common Stock. There
are no conversion rights or redemption or sinking fund provisions with
respect to the Common Stock. All of the outstanding shares of Common Stock
are validly issued, fully paid and non-assessable.
Preferred Stock
The Company's Articles of Incorporation authorizes the issuance of
10,000,000 shares of Preferred Stock, $.001 par value per share, of which
no shares were outstanding as of the date of this Prospectus. The
Preferred Stock may be issued from time to time by the Board of Directors
as shares of one or more classes or series. Subject to the provisions of
the Company's Certificate of Incorporation and limitations imposed by law,
the Board of Directors is expressly authorized to adopt resolutions to
issue the shares, to fix the number of shares and to change the number of
shares constituting any series, and to provide for or change the voting
powers, designations, preferences and relative, participating, optional or
other special rights, qualifications, limitations or restrictions thereof,
<PAGE>
including dividend rights (including whether dividends are cumulative),
dividend rates, terms of redemption (including sinking fund provisions),
redemption prices, conversion rights and liquidation preferences of the
shares constituting any class or series of the Preferred Stock, in each
case without any further action or vote by the stockholders.
One of the effects of undesignated Preferred Stock may be to enable
the Board of Directors to render more difficult or to discourage an attempt
to obtain control of the Company by means of a tender offer, proxy contest,
merger or otherwise, and thereby to protect the continuity of the Company's
management. The issuance of shares of Preferred Stock pursuant to the Board
of Director's authority described above may adversely affect the rights of
holders of Common Stock. For example, Preferred stock issued by the Company
may rank prior to the Common Stock as to dividend rights, liquidation
preference or both, may have full or limited voting rights and may be
convertible into shares of Common Stock. Accordingly, the issuance of
shares of Preferred Stock may discourage bids for the Common Stock at a
premium or may otherwise adversely affect the market price of the Common
Stock.
Nevada Laws
The Nevada Business Corporation Law (Nevada Revised Statutes,
Sections78.378 to 78.3793, inclusive) contains a provision governing
"Acquisition of Controlling Interest" (the "Control Share Acquisition
Act"). This law provides generally that any person or entity that acquires
20% or more of the outstanding voting shares of a publicly-held Nevada
corporation in the secondary public or private market may be denied voting
rights with respect to the acquired shares, unless a majority of the
disinterested stockholders of the corporation elects to restore such voting
rights in whole or in part. The Control Share Acquisition Act provides that
a person or entity acquires "control shares" whenever it acquires shares
that, but for the operation of the Control Share Acquisition Act, would
bring its voting power within any of the following three ranges: (i) 20 to
331/3%, (ii) 331/3 to 50%, or (iii) more than 50%. A "control share
acquisition" is generally defined as the direct or indirect acquisition of
either ownership or voting power associated with issued and outstanding
control shares. The stockholders or board of directors of a corporation
may elect to exempt the stock of the corporation from the provisions of the
Control Share Acquisition Act through adoption of a provision to that
effect in the articles of incorporation or bylaws of the corporation. The
Company's articles of incorporation and bylaws do not exempt the Company's
Common Stock from the Control Share Acquisition Act.
The Control Share Acquisition Act is applicable only to shares of
"Issuing Corporations" as defined by the Act. An Issuing Corporation is a
Nevada corporation, which (1) has 200 or more stockholders, with at least
100 of such stockholders being both stockholders of record and residents of
Nevada; and (2) does business in Nevada directly or through an affiliated
corporation. At this time, the Company does not have 100 stockholders of
record resident of Nevada. Therefore, the provisions of the Control Share
Acquisition Act do not apply to acquisitions of the Company's shares and
will not until such time as these requirements have been met.
At such time as they may apply to the Company, the provisions of the
Control Share Acquisition Act may discourage companies or persons
interested in acquiring a significant interest in or control of the
Company, regardless of whether such acquisition may be in the interest of
the Company's stockholders.
The Nevada "Combination with Interested Stockholders Statute"
(Sections 78.411 to 78.444, inclusive, Nevada Revised Statutes) may also
have an effect of delaying or making it more difficult to effect a change
in control of the Company. This Statute prevents an "interested
stockholder" and a resident domestic Nevada corporation from entering into
a "combination," unless certain conditions are met. The Statute defines
"combination" to include any merger or consolidation with an "interested
stockholder," or any sale, lease, exchange, mortgage, pledge, transfer or
other disposition, in one transaction or a series of transactions with an
"interested stockholder" having (i) an aggregate market value equal to 5
percent or more of the aggregate market value of the assets of the
corporation; (ii) an aggregate market value equal to 5 percent or more of
the aggregate market value of all outstanding shares of the corporation; or
(iii) representing 10 percent or more of the earning power or net income of
<PAGE>
the corporation. An "interested stockholder" means the beneficial owner of
10 percent or more of the voting shares of a resident domestic corporation,
or an affiliate or associate thereof. A corporation affected by the
Statute may not engage in a "combination" within three years after the
interested stockholder acquires its shares unless the combination or
purchase is approved by the board of directors before the interested
stockholder acquired such shares. If approval is not obtained, then after
the expiration of the three-year period, the business combination may be
consummated with the approval of the board of directors or a majority of
the voting power held by disinterested stockholders, or if the
consideration to be paid by the interested stockholder is at least equal to
the highest of (i) the highest price per share paid by the interested
stockholder within the three years immediately preceding the date of the
announcement of the combination or in the transaction in which he became an
interested stockholder, whichever is higher; (ii) the market value per
common share on the date of announcement of the combination or the date the
interested stockholder acquired the shares, whichever is higher; or (iii)
if higher for the holders of Preferred Stock, the highest liquidation value
of the Preferred Stock.
DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
No director of the Company will have personal liability to the Company
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director involving any act or omission of any such director since
provisions have been made in the Articles of Incorporation limiting such
liability. The foregoing provisions shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not
in good faith or, which involve intentional misconduct or a knowing
violation of law, (iii) under applicable Sections of the Nevada Revised
Statutes, (iv) the payment of dividends in violation of Section 78.300 of
the Nevada Revised Statutes or, (v) for any transaction from which the
director derived an improper personal benefit.
The By-laws provide for indemnification of the directors, officers,
and employees of the Company in most cases for any liability suffered by
them or arising out of their activities as directors, officers, and
employees of the Company if they were not engaged in willful misfeasance or
malfeasance in the performance of his or her duties; provided that in the
event of a settlement the indemnification will apply only when the Board of
Directors approves such settlement and reimbursement as being for the best
interests of the Corporation. The Bylaws, therefore, limit the liability of
directors to the maximum extent permitted by Nevada law (Section 78.751).
The officers and directors of the Company are accountable to the
Company as fiduciaries, which means they are required to exercise good
faith and fairness in all dealings affecting the Company. In the event that
a shareholder believes the officers and/or directors have violated their
fiduciary duties to the Company, the shareholder may, subject to applicable
rules of civil procedure, be able to bring a class action or derivative
suit to enforce the shareholder's rights, including rights under certain
federal and state securities laws and regulations to recover damages from
and require an accounting by management. Shareholders who have suffered
losses in connection with the purchase or sale of their interest in the
Company in connection with such sale or purchase, including the
misapplication by any such officer or director of the proceeds from the
sale of these securities, may be able to recover such losses from the
Company.
The registrant undertakes the following:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by the Law Offices of Sperry Young & Stoecklein, Las Vegas, Nevada.
The firm beneficially controls 100,000 shares of the Company's Common
Stock. The Company consents to and understands this potential conflict of
interest.
<PAGE>
EXPERTS
The financial statements of NFOX.COM as of June 30,1999 are included
in this Prospectus and have been audited by Barrie L. Friedman, LLP, an
independent auditor, as set forth in his report thereon appearing elsewhere
herein and are included in reliance upon such reports given upon the
authority of such individual as an expert in accounting and auditing.
BUSINESS OF THE COMPANY
OVERVIEW
NFOX is a developer of portable software components and frameworks for
the transportation and management of information over computer networks
particularly the Internet and related networks. The Company's unique
software framework is carefully designed for processor and interface
portability, low memory footprint, internalization, and low CPU and network
impact.
The targeted market space includes enterprise information and
workflow, Internet browsers, information appliances, personal digital
assistants, set top boxes, screen phones, and embedded network devices.
Due to the variety of markets, we will be selling products, services
related to the products, and entering into licensing agreements for third
parties to use portions of our technology.
Our ability to occupy and be a major force in each of these markets is
based on the capability to cross use of component software on both multiple
processor and operating systems; such as IBM, Macintosh, Unix and Linux,
and also through different application delivery methods; including
Graphical user interfaces, command line, web sites, "net stations", Java
clients and Client/Server. As new components are developed, innovative
applications will be emphasized to take advantage of emerging markets. In
addition, the framework allows for components to be shared and transported
over networks, allowing the framework to be functional and usable on
lightweight platforms under heavy load.
The framework and certain components are proprietary to the Company.
We intend to file for various copyrights, trademarks, patents, and will use
certain trade secret agreements in order to protect our intellectual
property. The source code to certain components and the method for writing
components will be released openly and will generally be available to the
public at large.
Revenues will be generated through the use of the Company's framework
offered at its public web site, which the we intend to develop and operate.
The web site will commingle and sort information for many practical uses,
including the use of public company research, price comparisons, online
shopping, and other multi-source information services. This information
will be offered on a subscription basis.
As the Company grows it is anticipated that we will grow our revenue
base and streams by: (1) increasing the number of components available to
end-users; (2) redeploying the framework and components as new products
such as retail software and set top boxes; (3) providing development
services to third parties for the creation of custom components; (4)
licensing the framework and components, either in sections or total
content, to third parties.
The overall strategy and portable design of the framework is unique,
and will give the Company a competitive advantage and ability to work in
several markets. The Company's diverse products will initially focus
primarily on expansion related to component design and development. This is
intended to position the Company to act quickly as infrastructure and
markets develop for future products, such as screen phones, set top boxes,
and Internet appliances.
The Company's distribution strategies and revenue sources will remain
flexible in accordance with evolving product lines.
<PAGE>
IMPACT OF THE INTERNET
The Internet has emerged as a global communications medium, enabling
millions of people to gather information, communicate and conduct business
electronically.
The Internet's ability to empower customers, reduce transaction costs
and product development times and accelerate the pace of business
transactions has dramatically transformed the competitive landscape of a
wide range of industries. The Internet provides customers with a broader
selection, increased purchasing power and unparalleled convenience while
enabling businesses to reach a global audience, increase economies of scale
and operate with minimal infrastructure.
The Internet has facilitated the emergence of new competitors and is
increasingly affecting the methods by which incumbent competitors sell
goods and services and manage relationships with customers. For example, in
the software industry, the Internet is profoundly changing the way that
software is developed and distributed. The Internet has enabled multiple
groups of developers to collaborate on specific projects from remote
locations around the globe. Developers can write code alone or in groups,
make their code available over the Internet, give and receive comments on
other developers' code and modify it accordingly. The Internet has also
provided an avenue not only for less expensive and speedier delivery of
code, but also for support and other online services.
COMPETITION
The market for the Company's products is intensely competitive,
subject to rapid change and significantly affected by new product
introductions and other market activities of industry participants. The
Company's products are targeted at the emerging market for Internet
software parts and programming tools and, to a lesser extent, at the
emerging Java market. The Company's competitors offer a variety of products
and services to address these markets. The Company believes that the
principal competitive factors in this market are product quality,
flexibility, performance, functionality and features, use of standards
based technology, quality of support and service, company reputation and
price. While price is less significant than other factors for corporate
customers, price can be a significant factor for individual programmers.
Direct competitors include Microsoft, IBM, ILOG and several privately held
companies. Microsoft is a particularly strong competitor due to its large
installed base. Microsoft may decide in the future to devote more resources
to or broaden the functions of its products in order to address and more
effectively compete with the functionality of the Company's products. The
Company faces direct competition in the Java market from Borland, JavaSoft
(a business unit of Sun Microsystems), Microsoft, Sybase, Symantec and
other companies for its proposed Java products and it expects to face
significant competition in the future from such companies with respect to
other Java products the Company may introduce. Software applications can
also be developed using software parts and programming tools in
environments other than that in which the Company currently is involved in.
Indirect competitors with such offerings include Microsoft, Borland,
Oracle, ParcPlace-Digitalk and Powersoft (a subsidiary of Sybase). Many of
these competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources, significantly greater
name recognition and larger installed bases of customers than the Company.
In addition, several database vendors, such as Informix, Oracle and Sybase
are increasingly developing robust software parts for inclusion with their
database products and may begin to compete with the Company in the future.
These potential competitors have well-established relationships with
current and potential customers and have the resources to enable them too
more easily offer a single vendor solution. Like the Company's current
competitors, many of these companies have longer operating histories,
significantly greater resources and name recognition and larger installed
bases of customers than the Company. As a result, these potential
competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products than the
Company.
The Company also faces competition from systems integrators and
internal development efforts. Many systems integrators possess industry
specific expertise that may enable them to offer a single vendor solution
more easily, and already have a reputation among potential customers for
offering enterprise-wide solutions to software programming needs. There can
be no assurance that these third parties, many of which have significantly
greater resources than the Company, will not market competitive software
products in the future. It is also possible that new competitors or
<PAGE>
alliances among competitors will emerge and rapidly acquire significant
market share. The Company also expects that competition will increase as a
result of software industry consolidation. Increased competition may result
in price reductions, reduced gross margins and loss of market share, any of
which could materially and adversely affect the Company's business,
operating results and financial condition. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not
materially and adversely affect its business, financial condition and
results of operations.
INTERNET SERVERS
The Company has deployed two general-purpose servers to support its
software product, and to run the Company's web site. One of these servers
is located at the Company's principal place of business. The other is
located in San Jose at a co-location facility owned and operated by
AboveNet . We plan to use part of the proceeds from this offering to
acquire and place additional servers in facilities in Vienna (Virginia,
United States), London (United Kingdom), and Japan.
In addition to these general-purpose servers, the Company also
maintains several servers that are capable of running its portable software
components and frameworks. We plan to use part of the proceeds to purchase
additional servers for this purpose, both for testing and assuring the
portable nature of the frameworks, and for providing operational support
for the Company's web servers and clients.
EMPLOYEES
The Company currently employs 8 people on a full time basis and no
part time employees. Our personnel structure can be divided into two broad
categories; finance and administration (2 of the 8 employees), and software
engineering personnel. Upon the successful closing of the Maximum
Offering, we plan to hire additional software engineering personnel and
additional management personnel, an exact number of personnel to be hired
has not been determined.
None of the Company's employees is represented by a labor union or
subject to a collective bargaining agreement.
REPORTS TO STOCKHOLDERS
The Company is not subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Once
the Company's securities are registered under the Exchange Act, it will
file reports and other information with the Securities and Exchange
Commission (the "Commission"). The Company intends to register its
securities under Section 12(g) of the Exchange Act. Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at the Pacific Regional Office located at
5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648,
the New York Regional Office located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and the Chicago Regional Office located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 ("SEC Regional Offices") and can be reviewed through the
Commission's Electronic Data Gathering Analysis and Retrieval System
("EDGAR") which is publicly available through the Commission's web site
(http://www.sec.gov). Additionally, the Company maintains a website at
www.nfox.com.
The Company intends to furnish annual reports to stockholders, which
will include audited financial statements reported on by its Certified
Public Accountants. In addition, the Company may issue unaudited quarterly
or other interim reports to stockholders, as it deems appropriate.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Following discussion should be read in conjunction with, and is
qualified in its entirety by the Financial Statements section included
herein.
With the exception of historical matters, the matters discussed herein
are forward looking statements that involve risks and uncertainties.
Forward looking statements include, but are not limited to, statements
concerning anticipated trends in revenues and net income, the date of
introduction or completion of the Company's products, projections
concerning operations and available cash flow. The Company's actual results
could differ materially from the results discussed in such forward looking
statements. The following discussion of the Company's financial condition
and results of operations should be read in conjunction with the Company's
financial statements and the related notes thereto appearing elsewhere
herein.
Overview
The Company, which was organized in April 1999, is a Development Stage
Company, engaged in the business of developing portable software components
and frameworks for the transportation and management of information over
computer networks. The Company has a limited operating history and has not
generated revenues from the sale of any products. The Company's activities
have been limited to the development of prototypes and analyzing the market
conditions for the proprietary services and products. Consequently, the
Company has incurred the expenses of start-up. Future operating results
will depend on many factors, including the ability of the Company to raise
adequate working capital, demand for the Company's services and products,
the level of competition and the Company's ability to deliver services and
products while maintaining quality and controlling costs.
Results of Operations
Period from April 14, 1999 (Inception) to June 30, 1999.
The first quarter of existence for the Company achieved three main
goals; The formation of the Company's organization to pursue its business
strategy, development of a production model and achieving the public
company status to assist in funding the Company's objectives.
Revenues. The Company is a development stage enterprise as defined in
SFAS #7, and has yet to generate any revenues. The Company is devoting
substantially all of its present efforts to: (1) developing its technology
and other programs, (2) developing its market, and (3) obtaining sufficient
capital to commence full operations.
Pre-Operating Expenses. Pre-Operating expenses for the period from
April 14, 1999 to June 30, 1999 were $100,890.
Research and Development. Research and Development expenses have not
been a significant portion of the total Pre-Operating expenses.
Plan of Operation
During the next 12 months the Company plans to focus its efforts on
the continued development of its proposed products, search for possible
collaborative partners in its industry and to release the first product on
a beta level to be tested by a limited number of end users.
Liquidity and Capital Resources
Cash and cash equivalents will be increasing primarily due to
commencement of operations. The receipt of funds from this Offering and
loans obtained through private sources by the Company are anticipated to
offset the near term cash equivalents of the Company. Since inception, the
<PAGE>
Company has financed its cash flow requirements through issuance of Common
Stock, and minimal cash balances. As the Company expands its activities, it
may continue to experience net negative cash flows from operations, pending
receipt of sales revenues. Additionally the Company may be required to
obtain additional financing to fund operations through Common Stock
offerings and bank borrowings, to the extent available, or to obtain
additional financing to the extent necessary to augment its working
capital.
Over the next twelve months, the Company intends to increase its
revenues by releasing its products under development to its target markets.
However, the Company will continue the research and development of its
products, increase the number of its employees, and expand its facilities
where necessary to meet product development and completion deadlines. The
Company believes that, funds from the Maximum Offering, existing capital
and anticipated funds from operations will be sufficient to sustain
operations and planned expansion in the next twelve months. However, if
the Company were only to achieve the Minimum Offering it may have to seek
additional financing in order to sustain operations. There can be no
assurance such additional funds will be available or that, if available,
such additional funds will be on terms acceptable to the Company. In either
case, the financing could have negative impact on the financial conditions
of the Company and its Shareholders.
The Company anticipates that it will incur operating losses in the
next twelve months. The Company's lack of operating history makes
predictions of future operating results difficult to ascertain. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets.
Such risks for the Company include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, obtain a customer base,
implement and successfully execute its business and marketing strategy,
continue to develop and upgrade its technology and products, provide
superior customer services and order fulfillment, respond to competitive
developments, and attract, retain and motivate qualified personnel. There
can be no assurance that the Company will be successful in addressing such
risks, and the failure to do so can have a material adverse effect on the
Company's business prospects, financial condition and results of
operations.
Costs Associated with Year 2000 Problem
The Company has incurred minimal expenses associated with the Year
2000 Problem. As a result the Company being a Development Stage
Enterprise, the Company's computer equipment is being purchased as Year
2000 compliant, where possible.
FACILITIES
The Company has leased 2,370 square feet of office space located at
6216 S. Sandhill Rd., Suite C, Las Vegas, Nevada 89120. The lease is for a
three-year term. Management believes that its facilities are adequate for
its purposes at this time.
CERTAIN TRANSACTIONS
Consulting Contracts
In April of 1999, the Company retained the consulting services of Ray
Waddell to assist it in product development and market research. Mr.
Waddell is also a Director of the Company. The Company agreed to pay Mr.
Waddell at the rate of $1,000 per month for said consulting services for a
five (5) year term.
<PAGE>
MARKET PRICE OF COMMON STOCK
The Company intends to file for inclusion of the Common Stock on the
National Association of Securities Dealers, Inc. ("NASD") Over-the-Counter
Bulletin Board ("OTCBB"); however, there can be no assurance that NASD will
approve the inclusion of the Common Stock. Prior to the effective date of
this offering, the Company's Common Stock was not traded.
As of September 1, 1999 there were approximately 127 shareholders of
the Company's Common Stock.
DIVIDENDS
The payment by the Company of dividends is subject to the discretion of
its Board of Directors and will depend, among other things, upon the
Company's earnings, its capital requirements, its financial condition, and
other relevant factors. The Company has not paid or declared any dividends
upon its Common Stock since its inception and, by reason of its present
financial status and its contemplated financial requirements, does not
anticipate paying any dividends upon its Common Stock in the foreseeable
future.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation of the Company's
Chief Executive Officer, Karl Kraft from inception (April 14, 1999) to June
30, 1999. No other officer or director has received or is anticipated to
receive remuneration in excess of $100,000 for fiscal 1999. The
remuneration described in the table does not include the cost to the
Company of benefits furnished to the named executive officer, including
premiums for health insurance and other benefits provided to such
individual that are extended in connection with the conduct of the
Company's business. The value of such benefits cannot be precisely
determined, but the executive officers named below did not receive other
compensation in excess of the lesser of $50,000 or 10% of such officer's
cash compensation.
<TABLE>
Summary Compensation Table
Annual Compensation Long Term
Compensation
Other Annual Restricted
Name and YTD Salary Bonus Compensation Stock Options
Principal (1)
Position
<S> <C> <C> <C> <C> <C> <C>
Karl Kraft,
President, CEO(2) 1999 $41,500 N/A N/A N/A 500,000
</TABLE>
(1) Year to Date for the period April 14, 1999 (inception) to June 30,
1999.
(2) Karl Kraft is subject to a five year employment agreement with the
Company with annual salary of $120,000 and a $600 per month auto allowance.
(See "Key Officer Employment Agreements.")
Key Officer Employment Agreements
Karl Kraft, Chief Executive Officer and President, pursuant to a written
agreement dated April 16, 1999 and continuing for five (5) years, in
consideration for his services to the Company, Mr. Kraft will receive an
annual base Salary of $120,000. Mr. Kraft has agreed to receive a reduced
salary of $5,000 per month and defer payment of the balance of his salary
until the Company releases its first two products or has sufficient capital
to pay his full salary. As additional compensation, Mr. Kraft receives an
auto allowance of $600 per month, such allowance will accrue and be paid
when the Company becomes profitable.
Charles Catania, Secretary and Treasurer, pursuant to a written agreement
dated April 16, 1999 and continuing for five (5) years, in consideration
for his services to the Company, Mr. Catania will receive an annual base
Salary of $48,000 for the first year of employment, increasing to $84,000
per year in the remaining years. Mr. Catania has agreed to receive a
reduced salary of $1,000 per month and defer payment of the balance of his
salary until the Company has sufficient capital to pay his full salary. As
additional compensation, Mr. Catania receives an auto allowance of $600 per
month, such allowance will accrue and be paid when the Company becomes
profitable.
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Company does not currently have a compensation committee of the
Board of Directors. However, the Board of Directors intends to establish a
compensation committee, which is expected to consist of three inside
directors and two independent members.
Stock Option Plan and Non-Employee Directors' Plan
The following descriptions apply to stock option plans which the
Company adopted in April of 1999; 820,600 options have been granted as of
this date.
The Company has reserved for issuance an aggregate of 1,500,000 shares
of Common Stock under its 1999 Stock Option Plan (the "Stock Option Plan")
and Non-Employee Directors' Plan described below (the "Directors' Plan").
These plans are intended to encourage directors, officers, employees and
consultants of the Company to acquire ownership of Common Stock. The
opportunity so provided is intended to foster in participants a strong
incentive to put forth maximum effort for the continued success and growth
of the Company, to aid in retaining individuals who put forth such efforts,
and to assist in attracting the best available individuals to the Company
in the future.
Stock Option Plan
Officers (including officers who are members of the Board of
Directors), directors (other than members of the Stock Option Committee
(the "Committee") to be established to administer the Stock Option Plan and
the Directors' Plan) and other employees and consultants of the Company and
its subsidiaries (if established) will be eligible to receive options under
the planned Stock Option Plan. The Committee will administer the Stock
Option Plan and will determine those persons to whom options will be
granted, the number of options to be granted, the provisions applicable to
each grant and the time periods during which the options may be exercised.
No options may be granted more than ten years after the date of the
adoption of the Stock Option Plan.
Unless the Committee, in its discretion, determines otherwise, non-
qualified stock options will be granted with an option price equal to the
fair market value of the shares of Common Stock to which the non-qualified
stock option relates on the date of grant. In no event may the option
price with respect to an incentive stock option granted under the Stock
Option Plan be less than the fair market value of such Common Stock to
which the incentive stock option relates on the date the incentive stock
option is granted.
Each option granted under the Stock Option Plan will be exercisable
for a term of not more than ten years after the date of grant. Certain
other restrictions will apply in connection with this Plan when some awards
may be exercised. In the event of a change of control (as defined in the
Stock Option Plan), the date on which all options outstanding under the
Stock Option Plan may first be exercised will be accelerated. Generally,
all options terminate 90 days after a change of control.
<PAGE>
Option Grants
The Board of directors adopted and the stockholders approved the
adoption of the Company's 1999 Stock Option Plan pursuant to which
incentive stock options or nonstatutory stock options to purchase up to
1,500,000 shares of common stock may be granted to employees, directors and
consultants. Pursuant to the plan the Company granted stock options as
follows:
<TABLE>
Date Granted Exercise Price Number of Shares
<S> <C> <C>
April 16, 1999
Granted $0.20 675,000
Exercised 0 0
Cancelled 0 0
July 1, 1999
Granted $1.00 145,600
Exercised 0 0
Cancelled 0 0
Total outstanding
September 1, 1999 820,600
</TABLE>
Transfer Agent
The transfer agent for the common stock will be Pacific Stock
Transfer, 5844 S. Pecos Road, Suite D, Las Vegas, Nevada 89120.
SHARES ELIGIBLE FOR FUTURE SALE
Upon sale of the Maximum Offering amount of 2,250,000 shares offered
hereby, the Company will have outstanding 6,767,950 shares of Common Stock
and 820,600 Common Stock options. The 2,250,000 shares of Common Stock
sold in the Prospectus (500,000 shares if only the Minimum Offering amount
is raised) will be unrestricted and will be able to be freely traded when
the Company is listed on an exchange. The remaining 4,517,950 shares are
"Restricted" shares, as defined by the 1933 Act and may only be sold if
registered under the 1933 Act or sold in accordance with an applicable
exemption from registration, such as Rule 144 promulgated under the 1933
Act ("Rule 144").
In general, under Rule 144 (as currently in effect) a person (or
persons whose shares are aggregated) who has beneficially owned shares
acquired privately or indirectly from the Company or from an Affiliate (as
defined in the 1933 Act), for at least one (1) year, or who is an
Affiliate, is entitled to sell within any three-month period a number of
such shares that does not exceed the greater of 1% of the then outstanding
shares of the Company's Common Stock (90,014 shares immediately after the
Offering) or the average weekly trading volume in the Company's Common
Stock during the four calendar weeks immediately preceding such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information
about the Company. A person (or persons whose shares are aggregated) who
is not deemed to have been an Affiliate at any time during the 90 days
preceding a sale, and who has beneficially owned restricted shares for at
least two years, is entitled to sell all such shares under Rule 144 without
regard to the volume limitations, current public information requirements,
manner of sale provisions, or notice requirements.
Any employee, officer, director or consultant of the Company who
purchased shares pursuant to a written compensatory plan or contract and
otherwise in compliance with Rule 701 under the 1933 Act ("Rule 701"), is
entitled to rely on the resale provisions of Rule 701 which permits non-
affiliates to sell their Rule 701 shares without having to comply with the
public-information, holding-period, volume-limitation or notice provisions
of Rule 144 and permits affiliates to sell their Rule 701 shares without
having to comply with Rule 144's holding period restrictions, in each case
commencing 90 days after the date of the Company becoming registered and
reporting with the Securities and Exchange Commission. The Company has
issued 140,000 shares to consultants pursuant to Rule 701.
<PAGE>
The Company is unable to estimate the number of shares that may be
sold in the future by its existing stockholders or the effect, if any, that
sales of shares by stockholders will have on the market price of the Common
Stock prevailing from time to time. Sales of substantial amounts of the
Common Stock of the Company by existing stockholders could adversely affect
prevailing market prices.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
In July 1999, the Company engaged the services of Barrie L. Friedman,
P.C. of Las Vegas, Nevada, to provide an audit of the Company's financial
statements for the period from April 14, 1999 (inception) to June 30, 1999.
This was the Company's first auditor. The Company has no disagreements
with its auditor through the date of this Prospectus.
<PAGE>
NFOX.COM
INDEX TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT F-1
BALANCE SHEET - ASSETS F-2
BALANCE SHEET - LIABILITIES AND STOCKHOLDERS EQUITY F-3
STATEMENT OF OPERATIONS F-4
STATEMENT OF STOCKHOLDERS' EQUITY F-5
STATEMENT OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board Of Directors July 19, 1999
NFOX.COM
Las Vegas, Nevada
I have audited the Balance Sheet of NFOX.COM, (A Development Stage
Company), as of June 30, 1999, and the related Statements of Operations,
Stockholders' Equity and Cash Flows for the period April 14, 1999,
(inception) to June 30, 1999. These financial statements are the
responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe that my audit provides
a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of NFOX.COM, (A
Development Stage Company), as of June 30, 1999, and the results of its
operations and cash flows for the period April 14, 1999, (inception) to
June 30, 1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #3 to the
financial statements, the Company has had no operations and has no
established source of revenue. This raises substantial doubt about its
ability to continue as a going concern. Management's plan in regard to
these matters are also described in Note #3. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Barry L. Friedman
Certified Public Accountant
<PAGE>
<TABLE>
NFOX.COM
(A Development Stage Company)
June 30, 1999
BALANCE SHEET
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 205,923
----------
TOTAL CURRENT ASSETS $ 205,923
----------
FIXED ASSETS:
Equipment (Net) $ 6,610
----------
TOTAL FIXED ASSETS $ 6,610
----------
OTHER ASSETS:
Deposits $ 3,637
Organization Costs (Net) 860
----------
TOTAL OTHER ASSETS $ 4,497
----------
TOTAL ASSETS $217,030
==========
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
<TABLE>
NFOX.COM
(A Development Stage Company)
June 30, 1999
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Payroll Taxes Payable $ 264
Accrued Expenses 20,500
---------
TOTAL CURRENT LIABILITIES $ 20,764
---------
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.001 par value
Authorized 10,000,000 shares
issued and outstanding at
June 30, 1999-None $ 0
Common stock, $.001 par value
Authorized 25,000,000 shares
issued and outstanding at
June 30, 1999-4,517,950 shares 4,518
Additional paid-in capital 292,432
Deficit accumulated during
Development stage (100,684)
----------
TOTAL STOCKHOLDER'S EQUITY $ 196,266
----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 217,030
==========
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
<TABLE>
NFOX.COM
(A Development Stage Company)
April 14, l999,(Inception) to June 30, 1999
STATEMENT OF OPERATIONS
<S> <C>
INCOME:
Revenue $ 0
-----------
EXPENSES:
Amortization $ 45
Auto Allowance 3,000
Bank Charges 4
Consulting Services 37,500
Data Processing 250
Depreciation 228
Entertainment 245
Internet Expense 464
Legal Expense 10,000
Licensing Expense 120
Office Supplies 876
Postage 1,668
Printing 1,982
Promotion 187
Public Offering Expense 590
Rent 3,318
Salary 35,000
Taxes - Other 239
Taxes - Payroll 1,794
Telephone 106
Trade Show Expense 1,099
Travel Expense 2,175
-----------
TOTAL EXPENSES $ 100,890
-----------
NET LOSS OPERATIONS $ (100,890)
Other income or expense
Interest Income 206
-----------
NET INCOME(+)/ OR LOSS(-) $ (100,684)
===========
Weighted average
number of common
shares outstanding 4,237,666
===========
Net Loss
Per Share $ (.0238)
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
<TABLE>
NFOX.COM
(A Development Stage Company)
June 30, 1999
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
accumulated
Additional during
paid in development
Common Stock capital stage
Shares Amount
<S> <C> <C> <C> <C>
April 14, 1999
Issued for cash 4,000,000 $ 4,000 $ 0 $ 0
April 16, 1999
for corporate
services 140,000 140 34,860
May 14, 1999
Public offering
for cash 160,000 160 39,840
June 30,1999
Public offering
for cash 217,950 218 217,732
Net loss,
April 14, 1999
(inception) to
June 30,1999 (100,684)
----------------------------------------------------
Balance,
June 30,1999 4,517,950 $ 4,518 $ 292,432 $ (100,684)
====================================================
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
<TABLE>
NFOX.COM
(A Development Stage Company)
April 14, l999,(Inception) to June 30, 1999
STATEMENT OF CASH FLOWS
<S> <C>
OPERATING ACTIVITIES
Net Income(+)/ Loss(-) $ (100,684)
Adjustments to reconcile net income or
loss to net cash provided by operations:
Amortization 45
Depreciation 228
Issue common stock for
Corporate Services 35,000
Accounts Payable 264
Accrued Expenses 20,500
------------
Net cash provided by Operating Activities $ (44,647)
============
INVESTING ACTIVITIES
Organization Costs $ (905)
Equipment (6,838)
Deposits (3,637)
------------
Net cash provided by Investing Activities $ (11,380)
============
FINANCING ACTIVITIES
Sale of Common Stock $ 261,950
------------
Net cash provided by Financing Activities $ 261,950
============
Net increase in cash $ 205,923
Cash,
Beginning of period 0
------------
Cash,
End of period $ 205,923
============
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
NFOX.COM
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized April 14, 1999, under the laws of the State
of Nevada, as NFOX.COM. The Company has no operations and in accordance
with SFAS #7, the Company is considered a development stage company.
On April 14, 1999, the company issued 4,000,000 shares of its $0.001
par value common stock for cash of $4,000.00 to its directors.
On April 16, 1999, the Company issued a total of 140,000 shares of
common stock for services under Rule 701 of the Securities Act of 1933, as
amended. The shares were valued at $0.25 per share and are considered
"Restricted Securities". All of the shares were issued pursuant to written
agreements between the Company and the consultants on April 16, 1999.
On April 21, 1999, the Company initiated an exempt placement of
securities for 300,000 shares of common stock, pursuant to Rule 504 of Reg.
D, at a price of $0.25 per share. On May 14, 1999, the Company terminated
the Offering following the sale of 160,000 shares for $40,000 in cash
consideration.
On May 21, 1999, the Company initiated an exempt placement of
securities for 925,000 shares of common stock, pursuant to Rule 504 of Reg.
D, at a price of $1.00 per share. On June 30, 1999, the Company terminated
the Offering following the sale of 217,950 shares for $217,950 in cash
consideration.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. The cost of organization, $905.00, is being amortized over a period
of 60 months (April 14, 1999, through April 13, 2004).
3. Earnings per share is computed using the weighted average number of
shares of common stock outstanding.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
<PAGE>
NFOX.COM
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1999
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan to
seek additional capital through future private placements or public
offerings.
NOTE 4 - RELATED PARTY TRANSACTION
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting between the
Company and their other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 5 - OFFICERS ADVANCES
While the Company is seeking additional capital through a private
placement or a public offering, an officer of the Company has advanced
funds on behalf of the Company to pay for any costs incurred by it. These
funds are interest free. As of June 30, 1999, the amount advanced is zero.
NOTE 6 - LEASES
On June 30, 1999, the Company entered into an operating lease for
2,370 square feet of executive office space in Las Vegas, Nevada, which
expires June 30, 2002. Total rent to be paid for the period July 1, 1999,
to June 30, 2002, is $119,448.
<PAGE>
NFOX.COM
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1999
NOTE 7 - EMPLOYMENT CONTRACTS
Karl Kraft, Chief Executive Officer and President, pursuant to a
written agreement dated April 16, 1999, and continuing for five (5) years,
in consideration for his services to the Company, Mr. Kraft will receive an
annual base salary of $120,000. Mr. Kraft has agreed to receive a reduced
salary of $5,000 per month and defer payment of the balance of his salary
until the Company releases its first two products or has sufficient capital
to pay his full salary. As additional compensation, Mr. Kraft receives an
auto allowance of $600 per month, such allowance will accrue and be paid
when the Company becomes profitable. In addition, Mr. Kraft received
options to purchase 500,000 shares of common stock at a price of $0.20 per
share for the term of his agreement. As of June 30, 1999, Mr. Kraft has
accrued $6,500 in consideration
Charles Catania, Secretary and Treasurer, pursuant to a written
agreement dated April 16, 1999, and continuing for five (5) years, in
consideration for his services to the Company, Mr. Catania will receive an
annual base salary of $48,000 for the first year of employment, increasing
to $84,000 per year in the remaining years. Mr. Catania has agreed to
receive a reduced salary of $1,000 per month and defer payment of the
balance of his salary until the Company has sufficient capital to pay his
full salary. As additional compensation, Mr. Catania receives an auto
allowance of $600 per month, such allowance will accrue and be paid when
the Company becomes profitable. In addition, Mr. Catania received options
to purchase 100,000 shares of common stock at a price of $0.20 per share
for the term of his agreement. As of June 30, 1999, Mr. Catania has accrued
$11,500 in consideration.
NOTE 8 - CONSULTING AGREEMENTS
On April 16, 1999, the Company retained the consulting services of Ray
Waddell to assist it in product development and market research. Mr.
Waddell is also a Director of the Company. The Company agreed to pay Mr.
Waddell at the rate of $1,000 per month for said consulting services for a
term of five (5) years. In addition, Mr. Waddell received options to
purchase 75,000 shares of common stock at a price of $0.20 per share for
the term of his agreement. As of June 30, 1999, Mr. Waddell has accrued
$2,500 in consideration.
<PAGE>
NFOX.COM
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1999
NOTE 9 - STOCK OPTIONS
The Board of directors adopted and the shareholders approved the
adoption of the Company's 1999 Stock Option Plan pursuant to which
incentive stock options or nonstatutory stock options to purchase up to
1,500,000 shares of common stock may be granted to employees, directors and
consultants. Pursuant to the plan, on April 16, 1999, the Company granted
675,000 stock options to key management and consultants pursuant to certain
employment and consulting agreements as follows:
<TABLE>
Exercise Price Number of Shares
<S> <C> <C>
Granted $0.20 675,000
Exercised 0 0
Cancelled 0 0
Total outstanding June 30, 1999 675,000
</TABLE>
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Information on this item is set forth in Prospectus under the heading
"Disclosure of Commission Position on Indemnification for Securities Act
Liabilities."
RECENT SALES OF UNREGISTERED SECURITIES
On April 14, 1999, the company issued 4,000,000 shares of its $0.001
par value common stock for cash of $4,000.00 to its directors.
On April 16, 1999, the Company issued a total of 140,000 shares of
common stock for services under Rule 701 of the Securities Act of 1933, as
amended. The shares were valued at $0.25 per share and are considered
"Restricted Securities". All of the shares were issued pursuant to written
agreements between the Company and the consultants on April 16, 1999.
In April of 1999, the Company initiated an exempt private placement of
securities of 300,000 shares of common stock, pursuant to Rule 504 of Reg.
D, at a price of $.25 per share. On May 14, 1999 the Company terminated
the Offering following the sale of 160,000 shares for $40,000 in cash
consideration and 140,000 shares for legal and consulting services.
On May 21, 1999, the Company initiated an exempt placement of
securities for 925,000 shares of common stock, pursuant to Rule 504 of Reg.
D, at a price of $1.00 per share. On June 30, 1999, the Company terminated
the Offering following the sale of 217,950 shares for $217,950 in cash
consideration.
EXHIBITS
The Exhibits required by Item 601 of Regulation S-B, and an index
thereto, are attached.
UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(a) (1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and Notwithstanding the forgoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation From the low or high end of the estimated maximum offering range
may be reflected in the form of prospects filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
<PAGE>
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(d) Provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business
issuer of expenses incurred or paid by a director, officer or controlling
person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorize, in the City of Las Vegas, State of Nevada, on
September 8, 1999.
NFOX.COM
By: /s/ Karl Kraft
Karl Kraft, President
<PAGE>
Special Power of Attorney
The undersigned constitute and appoint Karl Kraft their true and
lawful attorney-in-fact and agent with full power of substitution, for him
and in his name, place, and stead, in any and all capacities, to sign any
and all amendments, including post-effective amendments, to this Form SB-2
Registration Statement, and to file the same with all exhibits thereto, and
all documents in connection therewith, with the Securities and Exchange
Commission, granting such attorney-in-fact the full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that
such attorney in-fact may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
/s/ Karl Kraft President, Chief September 8, 1999
Karl Kraft Executive Officer,
Director
/s/ Charles Catania Vice President, September 8, 1999
Charles Catania Secretary, Director
/s/ Ray Waddell Director September 8, 1999
Ray Waddell
<PAGE>
<TABLE>
EXHIBIT INDEX
Exhibit Description
Number
<S> <C>
(1) N/A
(2) N/A
(3)(I)* Articles of Incorporation
(a) Articles of Incorporation of Anonymous Data Corporation
(3)(ii)* Bylaws
(a) Bylaws of Anonymous Data Corporation
(4)* Instruments defining the rights of security holders:
(4)(I)* (a) Articles of Incorporation for Anonymous Data Corporation, a
Nevada Corporation
(b) Bylaws of Anonymous Data Corporation, a Nevada Corporation
(c) Stock Certificate Specimen
(5)* Opinion re: Legality
(a) Sperry Young & Stoecklein
(6) N/A
(7) N/A
(8) N/A
(9) N/A
(10)(i)* Material Contracts
(a) 1998 Stock Option Plan
(11)* Statement regarding computation of per share earnings
(a) Please see Statement of Operations of the Audited Financials
filed herewith
(12) N/A
(13) N/A
(14) N/A
(15) N/A
(16) N/A
(17) N/A
(18) N/A
(19) N/A
(20) N/A
(21) N/A
(22) N/A
(23)* Consent of experts
(a) Sperry Young & Stoecklein
(b) Barry L. Friedman, C.P.
(24) N/A
(25) N/A
(26) N/A
(27)* Financial Data Schedule
</TABLE>
*Filed herewith.
<PAGE>
No dealer, salesman or any other person
has been authorized to give any
information or to make any representation
other than those contained in this $4,500,000
Prospectus and, if given or made, such
information or representation must not be
relied upon as having been authorized by
the Company. This Prospectus does not
constitute an offer to sell or a
solicitation of any offer to buy any
security other than the Shares of Common
Stock offered by this Prospectus, nor
does it constitute an offer to sell or a
solicitation of any offer to buy the
Shares of a Common Stock by anyone in any
jurisdiction in which such offer or
solicitation is not authorized, or in
which the person making such offer or
solicitation is not qualified to do so,
or to any person to whom it is unlawful
to make such offer or solicitation.
Neither the delivery of this Prospectus
nor any sale made hereunder shall, under
any circumstances create any implication
that information contained herein is
correct as of any time subsequent to the
date hereof.
_____________________ _____________
TABLE OF CONTENTS PROSPECTUS
Page
Prospectus Summary. 1
Risk Factors. 3
Use of Proceeds. 12
Determination of Offering Price. 13
Plan of Distribution. 13
Capitalization. 14
Summary Financial Information. 14
Dilution. 14
Litigation. 15
Management. 15
Principal Stockholders. 16
Description of Securities. 16
Legal Matters. 18
Experts. 18
Business of the Company. 19
Reports to Stockholders. 21 ___________________, 1999
Management Discussion and
Analysis. 22
Facilities. 23
Certain Transactions. 23
Market Price of Common Stock. 24
Dividends. 24
Executive Compensation. 24
Shares Eligible for Future Sale. 26
Changes in and Disagreements
with Accountants. 26
Index to Financial Statements. 27
ARTICLES OF INCORPORATION
OF
NFOX.COM
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, being at least eighteen (18) years of age and
acting as the incorporator of the Corporation hereby being formed under and
pursuant to the laws of the State of Nevada, does hereby certify that:
Article I - NAME
The exact name of this corporation is:
NFOX.COM
Article II - REGISTERED OFFICE AND RESIDENT AGENT
The registered office and place of business in the State of
Nevada of this corporation shall be located at 1850 E. Flamingo Rd., Suite
111, Las Vegas, Nevada. The resident agent of the corporation is DONALD J.
STOECKLEIN, whose address is 1850 E. Flamingo Rd., Suite 111, Las Vegas,
Nevada 89119.
Article III - DURATION
The Corporation shall have perpetual existence.
Article IV - PURPOSES
The purpose, object and nature of the business for which this
corporation is organized are:
(a) To engage in any lawful activity, (b) To carry on such
business as may be necessary, convenient, or desirable to accomplish
the above purposes, and to do all other things incidental thereto
<PAGE>
which are not forbidden by law or by these Articles of Incorporation.
Article V - POWERS
This Corporation is formed pursuant to Chapter 78 of the Nevada
Revised Statutes. The powers of the Corporation shall be those powers
granted by 78.060 and 78.070 of the Nevada Revised Statutes under which
this corporation is formed. In addition, the corporation shall have the
following specific powers:
(a) To elect or appoint officers and agents of the corporation
and to fix their compensation; (b) To act as an agent for any
individual, association, partnership, corporation or other legal
entity; (c) To receive, acquire, hold, exercise rights arising out of
the ownership or possession thereof, sell, or otherwise dispose of,
shares or other interests in, or obligations of, individuals,
association, partnerships, corporations, or governments; (d) To
receive, acquire, hold, pledge, transfer, or otherwise dispose of
shares of the corporation, but such shares may only be purchased,
directly or indirectly, out of earned surplus; (e) To make gifts or
contributions for the public welfare or for charitable, scientific or
educational purposes.
Article VI - CAPITAL STOCK
Section 1. Authorized Shares. The total number of shares which
this corporation is authorized to issue is 25,000,000 shares of Common
Stock of $.001 par value and 10,000,000 shares of Preferred Stock of
$.001 par value. The authority of the Corporation to issue non-voting
convertible and/or non-voting non-convertible preferred shares
<PAGE>
together with additional classes of shares may be limited by
resolution of the Board of Directors of the Corporation. Preferred
shares and additional classes of shares may be issued from time to
time as the Board of Directors may determine in their sole judgment
and without the necessity of action by the holders of Shares.
Section 2. Voting Rights of Stockholders. Each holder of the
Common Stock shall be entitled to one vote for each share of stock
standing in his name on the books of the corporation.
Section 3. Consideration for Shares. The Common Stock shall be
issued for such consideration, as shall be fixed from time to time by
the Board of Directors. In the absence of fraud, the judgment of the
Directors as to the value of any property or services received in full
or partial payment for shares shall be conclusive. When shares are
issued upon payment of the consideration fixed by the Board of
Directors, such shares shall be taken to be fully paid stock and shall
be non-assessable. The Articles shall not be amended in this
particular.
Section 4. Stock Rights and Options. The corporation shall have
the power to create and issue rights, warrants, or options entitling
the holders thereof to purchase from the corporation any shares of its
capital stock of any class or classes, upon such terms and conditions
and at such times and prices as the Board of Directors may provide,
which terms and conditions shall be incorporated in an instrument or
instruments evidencing such rights. In the absence of fraud, the
judgment of the Directors as to the adequacy of consideration for the
issuance of such rights or options and the sufficiency thereof shall
be conclusive.
Article VII - MANAGEMENT
For the management of the business, and for the conduct of the affairs
<PAGE>
of the corporation, and for the future definition, limitation, and
regulation of the powers of the corporation and its directors and
stockholders, it is further provided:
Section 1. Size of Board. The initial number of the Board of
Directors shall be three (3). Thereafter, the number of directors
shall be as specified in the Bylaws of the corporation, and such
number may from time to time be increased or decreased in such manner
as prescribed by the Bylaws. Directors need not be stockholders.
Section 2. Powers of Board. In furtherance and not in
limitation of the powers conferred by the laws of the State of Nevada,
the Board of Directors is expressly authorized and empowered:
(a) To make, alter, amend, and repeal the Bylaws subject to the
power of the stockholders to alter or repeal the Bylaws made by the
Board of Directors;
(b) Subject to the applicable provisions of the Bylaws then in
effect, to determine, from time to time, whether and to what extent,
and at what times and places, and under what conditions and
regulations, the accounts and books of the corporation, or any of
them, shall be open to stockholder inspection. No stockholder shall
have any right to inspect any of the accounts, books or documents of
the corporation, except as permitted by law, unless and until
authorized to do so by resolution of the Board of Directors or of the
stockholders of the Corporation;
(c) To authorize and issue, without stockholder consent,
obligations of the Corporation, secured and unsecured, under such
terms and conditions as the Board, in its sole discretion, may
determine, and to pledge or mortgage, as security therefore, any real
or personal property of the corporation, including after-acquired
property;
<PAGE>
(d) To determine whether any and, if so, what part of the earned
surplus of the corporation shall be paid in dividends to the
stockholders, and to direct and determine other use and disposition of
any such earned surplus;
(e) To fix, from time to time, the amount of the profits of the
corporation to be reserved as working capital or for any other lawful
purpose;
(f) To establish bonus, profit-sharing, stock option, or other
types of incentive compensation plans for the employees, including
officers and directors, of the corporation, and to fix the amount of
profits to be shared or distributed, and to determine the persons to
participate in any such plans and the amount of their respective
participations.
(g) To designate, by resolution or resolutions passed by a
majority of the whole Board, one or more committees, each consisting
of two or more directors, which, to the extent permitted by law and
authorized by the resolution or the Bylaws, shall have and may
exercise the powers of the Board;
(h) To provide for the reasonable compensation of its own
members by Bylaw, and to fix the terms and conditions upon which such
compensation will be paid;
(i) In addition to the powers and authority hereinbefore, or by
statute, expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things as may be
exercised or done by the corporation, subject, nevertheless, to the
provisions of the laws of the State of Nevada, of these Articles of
Incorporation, and of the Bylaws of the corporation.
Section 3. Interested Directors. No contract or transaction
between this corporation and any of its directors, or between this
<PAGE>
corporation and any other corporation, firm, association, or other
legal entity shall be invalidated by reason of the fact that the
director of the corporation has a direct or indirect interest,
pecuniary or otherwise, in such corporation, firm, association, or
legal entity, or because the interested director was present at the
meeting of the Board of Directors which acted upon or in reference to
such contract or transaction, or because he participated in such
action, provided that: (1) the interest of each such director shall
have been disclosed to or known by the Board and a disinterested
majority of the Board shall have, nonetheless, ratified and approved
such contract or transaction (such interested director or directors
may be counted in determining whether a quorum is present for the
meeting at which such ratification or approval is given); or (2) the
conditions of N.R.S. 78.140 are met.
Section 4. Names and Addresses. The name and post office
address of the first Board of Directors which shall consist of three
(3) persons who shall hold office until their successors are duly
elected and qualified, are as follows:
NAME ADDRESS
CHARLES CATANIA 1850 E. FLAMINGO RD., #111
LAS VEGAS, NV 89119
KARL KRAFT 1850 E. FLAMINGO RD., #111
LAS VEGAS, NV 89119
RAY WADDELL 1850 E. FLAMINGO RD., #111
LAS VEGAS, NV 89119
Article VIII - PLACE OF MEETING; CORPORATE BOOKS
Subject to the laws of the State of Nevada, the stockholders and the
directors shall have power to hold their meetings, and the directors shall
<PAGE>
have power to have an office or offices and to maintain the books of the
Corporation outside the State of Nevada, at such place or places as may
from time to time be designated in the Bylaws or by appropriate resolution.
Article IX - AMENDMENT OF ARTICLES
The provisions of these Articles of Incorporation may be amended,
altered or repealed from time to time to the extent and in the manner
prescribed by the laws of the State of Nevada, and additional provisions
authorized by such laws as are then in force may be added. All rights
herein conferred on the directors, officers and stockholders are granted
subject to this reservation.
Article X - INCORPORATOR
The name and address of the incorporator signing these Articles of
Incorporation are as follows:
NAME POST OFFICE ADDRESS
KARL KRAFT 1850 E. FLAMINGO RD., #111
LAS VEGAS, NV 89119
Article XI - LIMITED LIABILITY OF OFFICERS AND DIRECTORS
Except as hereinafter provided, the officers and directors of the
corporation shall not be personally liable to the corporation or its
stockholders for damages for breach of fiduciary duty as a director or
officer. This limitation on personal liability shall not apply to acts or
omissions which involve intentional misconduct, fraud, knowing violation of
law, or unlawful distributions prohibited by Nevada Revised Statutes
Section 78.300.
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator has executed
these Articles of Incorporation this 13th day of April, 1999.
/s/ Karl Kraft
_________________________________
KARL KRAFT
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
On April 13, 1999, personally appeared before me, a Notary
Public, KARL KRAFT, who acknowledged to me that he executed the foregoing
Articles of Incorporation.
_________________________________
NOTARY PUBLIC
BYLAWS
OF
NFOX.COM,
a Nevada corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The principal office shall be
in the City of Las Vegas, County of Clark, State of Nevada.
Section 2. OTHER OFFICES. The board of directors may at any
time establish branch or subordinate offices at any place or places where
the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall
be held at any place within or without the State of Nevada designated by
the board of directors. In the absence of any such designation,
stockholders' meetings shall be held at the principal executive office of
the corporation.
Section 2. ANNUAL MEETINGS. The annual meetings of
stockholders shall be held at a date and time designated by the board of
directors. (At such meetings, directors shall be elected and any other
proper business may be transacted by a plurality vote of stockholders.)
Section 3. SPECIAL MEETINGS. A special meeting of the
stockholders, for any purpose or purposes whatsoever, unless prescribed by
statute or by the articles of incorporation, may be called at any time by
the president and shall be called by the president or secretary at the
request in writing of a majority of the board of directors, or at the
request in writing of stockholders holding shares in the aggregate entitled
to cast not less than a majority of the votes at any such meeting.
The request shall be in writing, specifying the time of such
meeting, the place where it is to be held and the general nature of the
business proposed to be transacted, and shall be delivered personally or
sent by registered mail or by telegraphic or other facsimile transmission
to the chairman of the board, the president, any vice president or the
secretary of the corporation. The officer receiving such request forthwith
shall cause notice to be given to the stockholders entitled to vote, in
<PAGE>
accordance with the provisions of Sections 4 and 5 of this Article II, that
a meeting will be held at the time requested by the person or persons
calling the meeting, not less than thirty-five (35) nor more than sixty
(60) days after the receipt of the request. If the notice is not given
within twenty (20) days after receipt of the request, the person or persons
requesting the meeting may give the notice. Nothing contained in this
paragraph of this Section 3 shall be construed as limiting, fixing or
affecting the time when a meeting of stockholders called by action of the
board of directors may be held.
Section 4. NOTICE OF STOCKHOLDERS' MEETINGS. All notices of
meetings of stockholders shall be sent or otherwise given in accordance
with Section 5 of this Article II not less than ten (10) nor more than
sixty (60) days before the date of the meeting being noticed. The notice
shall specify the place, date and hour of the meeting and (i) in the case
of a special meeting the general nature of the business to be transacted,
or (ii) in the case of the annual meeting those matters which the board of
directors, at the time of giving the notice, intends to present for action
by the stockholders. The notice of any meeting at which directors are to
be elected shall include the name of any nominee or nominees which, at the
time of the notice, management intends to present for election.
If action is proposed to be taken at any meeting for approval of
(i) contracts or transactions in which a director has a direct or indirect
financial interest, (ii) an amendment to the articles of incorporation,
(iii) a reorganization of the corporation, (iv) dissolution of the
corporation, or (v) a distribution to preferred stockholders, the notice
shall also state the general nature of such proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of stockholders shall be given either personally or
by first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the stockholder at the address of such stockholder
appearing on the books of the corporation or given by the stockholder to
the corporation for the purpose of notice. If no such address appears on
the corporation's books or is given, notice shall be deemed to have been
given if sent by mail or telegram to the corporation's principal executive
office, or if published at least once in a newspaper of general circulation
in the county where this office is located. Personal delivery of any such
notice to any officer of a corporation or association or to any member of a
partnership shall constitute delivery of such notice to such corporation,
association or partnership. Notice shall be deemed to have been given at
the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication. In the event of the
transfer of stock after delivery or mailing of the notice of and prior to
the holding of the meeting, it shall not be necessary to deliver or mail
notice of the meeting to the transferee.
If any notice addressed to a stockholder at the address of such
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
stockholder at such address, all future notices or reports shall be deemed
to have been duly given without further mailing if the same shall be
available to the stockholder upon written demand of the stockholder at the
<PAGE>
principal executive office of the corporation for a period of one year from
the date of the giving of such notice.
An affidavit of the mailing or other means of giving any notice
of any stockholders' meeting shall be executed by the secretary, assistant
secretary or any transfer agent of the corporation giving such notice, and
shall be filed and maintained in the minute book of the corporation.
Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 6. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
stockholders shall constitute a quorum for the transaction of business,
except as otherwise provided by statute or the articles of incorporation.
The stockholders present at a duly called or held meeting at which a quorum
is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum, if any
action taken (other than adjournment) is approved by at least a majority of
the shares required to constitute a quorum.
Section 7. ADJOURNED MEETING AND NOTICE THEREOF. Any
stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of
the shares represented at such meeting, either in person or by proxy, but
in the absence of a quorum, no other business may be transacted at such
meeting.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at a meeting
at which the adjournment is taken. At any adjourned meeting the
corporation may transact any business which might have been transacted at
the original meeting.
Section 8. VOTING. Unless a record date set for voting
purposes be fixed as provided in Section 1 of Article VII of these bylaws,
only persons in whose names shares entitled to vote stand on the stock
records of the corporation at the close of business on the business day
next preceding the day on which notice is given (or, if notice is waived,
at the close of business on the business day next preceding the day on
which the meeting is held) shall be entitled to vote at such meeting. Any
stockholder entitled to vote on any matter other than elections of
directors or officers, may vote part of the shares in favor of the proposal
and refrain from voting the remaining shares or vote them against the
proposal, but, if the stockholder fails to specify the number of shares
such stockholder is voting affirmatively, it will be conclusively presumed
that the stockholder's approving vote is with respect to all shares such
stockholder is entitled to vote. Such vote may be by voice vote or by
ballot; provided, however, that all elections for directors must be by
ballot upon demand by a stockholder at any election and before the voting
begins.
When a quorum is present or represented at any meeting, the vote
of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before
<PAGE>
such meeting, unless the question is one upon which by express provision of
the statutes or of the articles of incorporation a different vote is
required in which case such express provision shall govern and control the
decision of such question. Every stockholder of record of the corporation
shall be entitled at each meeting of stockholders to one vote for each
share of stock standing in his name on the books of the corporation.
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT
STOCKHOLDERS. The transactions at any meeting of stockholders, either
annual or special, however called and noticed, and wherever held, shall be
as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each person entitled to vote, not present in
person or by proxy, signs a written waiver of notice or a consent to a
holding of the meeting, or an approval of the minutes thereof. The waiver
of notice or consent need not specify either the business to be transacted
or the purpose of any regular or special meeting of stockholders, except
that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 4 of this
Article II, the waiver of notice or consent shall state the general nature
of such proposal. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall also constitute a
waiver of notice of such meeting, except when the person objects, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened, and except that attendance at a
meeting is not a waiver of any right to object to the consideration of
matters not included in the notice if such objection is expressly made at
the meeting.
Section 10. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Any action which may be taken at any annual or special meeting of
stockholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the
holders of outstanding shares 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. All
such consents shall be filed with the secretary of the corporation and
shall be maintained in the corporate records. Any stockholder giving a
written consent, or the stockholder's proxy holders, or a transferee of the
shares of a personal representative of the stockholder of their respective
proxy holders, may revoke the consent by a writing received by the
secretary of the corporation prior to the time that written consents of the
number of shares required to authorize the proposed action have been filed
with the secretary.
Section 11. PROXIES. Every person entitled to vote for
directors or on any other matter shall have the right to do so either in
person or by one or more agents authorized by a written proxy signed by the
person and filed with the secretary of the corporation. A proxy shall be
deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission or otherwise) by
the stockholder or the stockholder's attorney in fact. A validly executed
proxy which does not state that it is irrevocable shall continue in full
<PAGE>
force and effect unless revoked by the person executing it, prior to the
vote pursuant thereto, by a writing delivered to the corporation stating
that the proxy is revoked or by a subsequent proxy executed by, or
attendance at the meeting and voting in person by the person executing the
proxy; provided, however, that no such proxy shall be valid after the
expiration of six (6) months from the date of such proxy, unless coupled
with an interest, or unless the person executing it specifies therein the
length of time for which it is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution. Subject to the
above and the provisions of Section 78.355 of the Nevada General
Corporation Law, any proxy duly executed is not revoked and continues in
full force and effect until an instrument revoking it or a duly executed
proxy bearing a later date is filed with the secretary of the corporation.
Section 12. INSPECTORS OF ELECTION. Before any meeting of
stockholders, the board of directors may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are appointed, the chairman of
the meeting may, and on the request of any stockholder or his proxy shall,
appoint inspectors of election at the meeting. The number of inspectors
shall be either one (1) or three (3). If inspectors are appointed at a
meeting on the request of one or more stockholders or proxies, the holders
of a majority of shares or their proxies present at the meeting shall
determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment by the board of directors
before the meeting, or by the chairman at the meeting.
The duties of these inspectors shall be as follows:
(a) Determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence
of a quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine the election result; and
(f) Do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
<PAGE>
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the Nevada
General Corporation Law and any limitations in the articles of
incorporation and these bylaws relating to action required to be approved
by the stockholders or by the outstanding shares, the business and affairs
of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors shall have
the power and authority to:
(a) Select and remove all officers, agents, and employees
of the corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the articles of incorporation or these bylaws,
fix their compensation, and require from them security for faithful
service.
(b) Change the principal executive office or the principal
business office from one location to another; cause the corporation to be
qualified to do business in any other state, territory, dependency, or
foreign country and conduct business within or without the State; designate
any place within or without the State for the holding of any stockholders'
meeting, or meetings, including annual meetings; adopt, make and use a
corporate seal, and prescribe the forms of certificates of stock, and alter
the form of such seal and of such certificates from time to time as in
their judgment they may deem best, provided that such forms shall at all
times comply with the provisions of law.
(c) Authorize the issuance of shares of stock of the
corporation from time to time, upon such terms as may be lawful, in
consideration of money paid, labor done or services actually rendered,
debts or securities cancelled, tangible or intangible property actually
received.
(d) Borrow money and incur indebtedness for the purpose of
the corporation, and cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations, or other evidences of debt and
securities therefor.
Section 2. NUMBER OF DIRECTORS. The authorized number of
directors shall be no fewer than three (3) nor more than seven (7). The
exact number of authorized directors shall be set by resolution of the
board of directors, within the limits specified above. The maximum or
minimum number of directors cannot be changed, nor can a fixed number be
substituted for the maximum and minimum numbers, except by a duly adopted
amendment to this bylaw duly approved by a majority of the outstanding
shares entitled to vote.
<PAGE>
Section 3. QUALIFICATION, ELECTION AND TERM OF OFFICE OF
DIRECTORS. Directors shall be elected at each annual meeting of the
stockholders to hold office until the next annual meeting, but if any such
annual meeting is not held or the directors are not elected at any annual
meeting, the directors may be elected at any special meeting of
stockholders held for that purpose, or at the next annual meeting of
stockholders held thereafter. Each director, including a director elected
to fill a vacancy, shall hold office until the expiration of the term for
which elected and until a successor has been elected and qualified or until
his earlier resignation or removal or his office has been declared vacant
in the manner provided in these bylaws. Directors need not be
stockholders.
Section 4. RESIGNATION AND REMOVAL OF DIRECTORS. Any
director may resign effective upon giving written notice to the chairman of
the board, the president, the secretary or the board of directors of the
corporation, unless the notice specifies a later time for the effectiveness
of such resignation, in which case such resignation shall be effective at
the time specified. Unless such resignation specifies otherwise, its
acceptance by the corporation shall not be necessary to make it effective.
The board of directors may declare vacant the office of a director who has
been declared of unsound mind by an order of a court or convicted of a
felony. Any or all of the directors may be removed without cause of such
removal is approved by the affirmative vote of a majority of the
outstanding shares entitled to vote. No reduction of the authorized number
of directors shall have the effect of removing any director before his term
of office expires.
Section 5. VACANCIES. Vacancies in the board of directors,
may be filled by a majority of the remaining directors, though less than a
quorum, or by a sole remaining director. Each director so elected shall
hold office until the next annual meeting of the stockholders and until a
successor has been elected and qualified.
A vacancy in the board of directors exists as to any authorized
position of directors which is not then filled by a duly elected director,
whether caused by death, resignation, removal, increase in the authorized
number of directors or otherwise.
The stockholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors, but any such
election by written consent shall require the consent of a majority of the
outstanding shares entitled to vote. If the resignation of a director is
effective at a future time, the board of directors may elect a successor to
take office when the resignation becomes effective.
If after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder
or holders of an aggregate of five percent or more of the total number of
shares at the time outstanding having the right to vote for such directors
may call a special meeting of the stockholders to elect the entire board.
The term of office of any director not elected by the stockholders shall
terminate upon the election of a successor.
<PAGE>
Section 6. PLACE OF MEETINGS. Regular meetings of the board
of directors shall be held at any place within or without the State of
Nevada that has been designated from time to time by resolution of the
board. In the absence of such designation, regular meetings shall be held
at the principal executive office of the corporation. Special meetings of
the board shall be held at any place within or without the State of Nevada
that has been designated in the notice of the meeting or, if not stated in
the notice or there is not notice, at the principal executive office of the
corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in such meeting can hear one another, and all such directors
shall be deemed to be present in person at such meeting.
Section 7. ANNUAL MEETINGS. Immediately following each
annual meeting of stockholders, the board of directors shall hold a regular
meeting for the purpose of transaction of other business. Notice of this
meeting shall not be required.
Section 8. OTHER REGULAR MEETINGS. Other regular meetings of
the board of directors shall be held without call at such time as shall
from time to time be fixed by the board of directors. Such regular
meetings may be held without notice, provided the notice of any change in
the time of any such meetings shall be given to all of the directors.
Notice of a change in the determination of the time shall be given to each
director in the same manner as notice for special meetings of the board of
directors.
Section 9. SPECIAL MEETINGS. Special meetings of the board
of directors for any purpose or purposes may be called at any time by the
chairman of the board or the president or any vice president or the
secretary or any two directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by
first-class mail or telegram, charges prepaid, addressed to each director
at his or her address as it is shown upon the records of the corporation.
In case such notice is mailed, it shall be deposited in the United States
mail at least four (4) days prior to the time of the holding of the
meeting. In case such notice is delivered personally, or by telephone or
telegram, it shall be delivered personally or by telephone or to the
telegraph company at least forty-eight (48) hours prior to the time of the
holding of the meeting. Any oral notice given personally or by telephone
may be communicated to either the director or to a person at the office of
the director who the person giving the notice has reason to believe will
promptly communicate it to the director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held at the
principal executive office of the corporation.
Section 10. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of business, except
to adjourn as hereinafter provided. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the board of directors,
subject to the provisions of Section 78.140 of the Nevada General
Corporation Law (approval of contracts or transactions in which a director
has a direct or indirect material financial interest), Section 78.125
(appointment of committees), and Section 78.751 (indemnification of
directors). A meeting at which a quorum is initially present may continue
<PAGE>
to transact business notwithstanding the withdrawal of directors, if any
action taken is approved by at least a majority of the required quorum for
such meeting.
Section 11. WAIVER OF NOTICE. The transactions of any meeting
of the board of directors, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call
and notice if a quorum be present and if, either before or after the
meeting, each of the directors not present signs a written waiver of
notice, a consent to holding the meeting or an approval of the minutes
thereof. The waiver of notice of consent need not specify the purpose of
the meeting. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting. Notice
of a meeting shall also be deemed given to any director who attends the
meeting without protesting, prior thereto or at its commencement, the lack
of notice to such director.
Section 12. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another
time and place.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and
place of holding an adjourned meeting need not be given, unless the meeting
is adjourned for more than twenty-four (24) hours, in which case notice of
such time and place shall be given prior to the time of the adjourned
meeting, in the manner specified in Section 8 of this Article III, to the
directors who were not present at the time of the adjournment.
Section 14. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the board of directors may be taken without a
meeting, if all members of the board shall individually or collectively
consent in writing to such action. Such action by written consent shall
have the same force and effect as a unanimous vote of the board of
directors. Such written consent or consents shall be filed with the
minutes of the proceedings of the board.
Section 15. FEES AND COMPENSATION OF DIRECTORS. Directors and
members of committees may receive such compensation, if any, for their
services, and such reimbursement of expenses, as may be fixed or determined
by resolution of the board of directors. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF DIRECTORS. The board of directors
may, by resolution adopted by a majority of the authorized number of
directors, designate one or more committees, each consisting of one or more
directors, to serve at the pleasure of the board. The board may designate
<PAGE>
one or more directors as alternate members of any committees, who may
replace any absent member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the board, shall
have all the authority of the board, except with regard to:
(a) the approval of any action which, under the Nevada
General Corporation Law, also requires stockholders' approval or approval
of the outstanding shares;
(b) the filing of vacancies on the board of directors or in
any committees;
(c) the fixing of compensation of the directors for serving
on the board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of
new bylaws;
(e) the amendment or repeal of any resolution of the board
of directors which by its express terms is not so amendable or repealable;
(f) a distribution to the stockholders of the corporation,
except at a rate or in a periodic amount or within a price range determined
by the board of directors; or
(g) the appointment of any other committees of the board of
directors or the members thereof.
Section 2. MEETINGS AND ACTION BY COMMITTEES. Meetings and
action of committees shall be governed by, and held and taken in accordance
with, the provisions of Article III, Sections 6 (place of meetings), 8
(regular meetings), 9 (special meetings and notice), 10 (quorum), 11
(waiver of notice), 12 (adjournment), 13 (notice of adjournment) and 14
(action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board
of directors and its members, except that the time or regular meetings of
committees may be determined by resolutions of the board of directors and
notice of special meetings of committees shall also be given to all
alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of
any committee not inconsistent with the provisions of these bylaws. The
committees shall keep regular minutes of their proceedings and report the
same to the board when required.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall
be a president, a secretary and a treasurer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board,
one or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in
<PAGE>
accordance with the provisions of Section 3 of this Article V. Any two or
more offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the
corporation, except such officers as may be appointed in accordance with
the provisions of Section 3 or Section 5 of this Article V, shall be chosen
by the board of directors, and each shall serve at the pleasure of the
board, subject to the rights, if any, of an officer under any contract of
employment. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, a vice president, a
secretary and a treasurer, none of whom need be a member of the board. The
salaries of all officers and agents of the corporation shall be fixed by
the board of directors.
Section 3. SUBORDINATE OFFICERS, ETC. The board of directors
may appoint, and may empower the president to appoint, such other officers
as the business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in the bylaws or as the board of directors may from time to time
determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. The officers
of the corporation shall hold office until their successors are chosen and
qualify. Subject to the rights, if any, of an officer under any contract
of employment, any officer may be removed, either with or without cause, by
the board of directors, at any regular or special meeting thereof, or,
except in case of an officer chosen by the board of directors, by any
officer upon whom such power or removal may be conferred by the board of
directors.
Any officer may resign at any time by giving written notice to
the corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. Any such resignation is without
prejudice to the rights, if any, of the corporation under any contract to
which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office
because of death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in these bylaws for regular
appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board,
if such an officer be elected, shall, if present, preside at all meetings
of the board of directors and exercise and perform such other powers and
duties as may be from time to time assigned to him by the board of
directors or prescribed by the bylaws. If there is no president, the
chairman of the board shall in addition be the chief executive officer of
the corporation and shall have the powers and duties prescribed in
Section 7 of this Article V.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the board of directors to the chairman of the
board, if there be such an officer, the president shall be the chief
<PAGE>
executive officer of the corporation and shall, subject to the control of
the board of directors, have general supervision, direction and control of
the business and the officers of the corporation. He shall preside at all
meetings of the stockholders and, in the absence of the chairman of the
board, of if there be none, at all meetings of the board of directors. He
shall have the general powers and duties of management usually vested in
the office of president of a corporation, and shall have such other powers
and duties as may be prescribed by the board of directors or the bylaws.
He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to
some other officer or agent of the corporation.
Section 8. VICE PRESIDENTS. In the absence or disability of
the president, the vice presidents, if any, in order of their rank as fixed
by the board of directors or, if not ranked, a vice president designated by
the board of directors, shall perform all the duties of the president, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors or the bylaws,
the president or the chairman of the board.
Section 9. SECRETARY. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and
shall record, keep or cause to be kept, at the principal executive office
or such other place as the board of directors may order, a book of minutes
of all meetings of directors, committees of directors and stockholders,
with the time and place of holding, whether regular or special, and, if
special, how authorized, the notice thereof given, the names of those
present at directors' and committee meetings, the number of shares present
or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all
stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of stockholders and of the board of directors required by the
bylaws or by law to be given, and he shall keep the seal of the corporation
in safe custody, as may be prescribed by the board of directors or by the
bylaws.
Section 10. TREASURER. The treasurer shall keep and maintain,
or cause to be kept and maintained, adequate and correct books and records
of accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements,
gains, losses, capital, retained earnings and shares. The books of account
shall at all reasonable times be open to inspection by any director.
<PAGE>
The treasurer shall deposit all moneys and other valuables in the
name and to the credit of the corporation with such depositories as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to
the president and directors, whenever they request it, an account of all of
his transactions as treasurer and of the financial condition of the
corporation, and shall have other powers and perform such other duties as
may be prescribed by the board of directors or the bylaws.
If required by the board of directors, the treasurer shall give
the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
Section 1. ACTIONS OTHER THAN BY THE CORPORATION. The
corporation may 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,
except 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 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 the action, suit or
proceeding if he acted in good faith and in a manner which 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 was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding,
he had reasonable cause to believe that his conduct was unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation may
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
amounts paid in settlement and attorneys' fees, actually and reasonably
incurred by him in connection with the defense or settlement of the action
or suit if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which
<PAGE>
such a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the
extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that in view of
all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a
director, officer, employee or agent of the corporation has been successful
on the merits or otherwise in defense of any action, suit or proceeding
referred to in Sections 1 and 2, or in defense of any claim, issue or
matter therein, he must be indemnified by the corporation against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection with the defense.
Section 4. REQUIRED APPROVAL. Any indemnification under
Sections 1 and 2, unless ordered by a court or advanced pursuant to Section
5, must be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must
be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or
proceeding;
(c) If a majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
Section 5. ADVANCE OF EXPENSES. The articles of
incorporation, the bylaws or an agreement made by the corporation may
provide that the expenses of officers and directors incurred in defending a
civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of
the action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to
be indemnified by the corporation. The provisions of this section do not
affect any rights to advancement of expenses to which corporate personnel
other than directors or officers may be entitled under any contract or
otherwise by law.
Section 6. OTHER RIGHTS. The indemnification and advancement
of expenses authorized in or ordered by a court pursuant to this
Article VI:
<PAGE>
(a) Does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, for either an action in his
official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant to
Section 2 or for the advancement of expenses made pursuant to Section 5,
may not be made to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
(b) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
Section 7. INSURANCE. The corporation may 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
for 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 the provisions of this Article VI.
Section 8. RELIANCE ON PROVISIONS. Each person who shall act
as an authorized representative of the corporation shall be deemed to be
doing so in reliance upon the rights of indemnification provided by this
Article.
Section 9. SEVERABILITY. If any of the provisions of this
Article are held to be invalid or unenforceable, this Article shall be
construed as if it did not contain such invalid or unenforceable provision
and the remaining provisions of this Article shall remain in full force and
effect.
Section 10. RETROACTIVE EFFECT. To the extent permitted by
applicable law, the rights and powers granted pursuant to this Article VI
shall apply to acts and actions occurring or in progress prior to its
adoption by the board of directors.
ARTICLE VII
RECORDS AND BOOKS
Section 1. MAINTENANCE OF SHARE REGISTER. The corporation
shall keep at its principal executive office, or at the office of its
transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its stockholders, giving
the names and addresses of all stockholders and the number and class of
shares held by each stockholder.
<PAGE>
Section 2. MAINTENANCE OF BYLAWS. The corporation shall keep
at its principal executive office, or if its principal executive office is
not in this State at its principal business office in this State, the
original or a copy of the bylaws as amended to date, which shall be open to
inspection by the stockholders at all reasonable times during office hours.
If the principal executive office of the corporation is outside this state
and the corporation has no principal business office in this state, the
secretary shall, upon the written request of any stockholder, furnish to
such stockholder a copy of the bylaws as amended to date.
Section 3. MAINTENANCE OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the stockholders
and the board of directors and any committee or committees of the board of
directors shall be kept at such place or places designated by the board of
directors, or, in the absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written
form and the accounting books and records shall be kept either in written
form or in any other form capable of being converted into written form.
Every director shall have the absolute right at any reasonable
time to inspect and copy all books, records and documents of every kind and
to inspect the physical properties of this corporation and any subsidiary
of this corporation. Such inspection by a director may be made in person
or by agent or attorney and the right of inspection includes the right to
copy and make extracts. The foregoing rights of inspection shall extend to
the records of each subsidiary of the corporation.
Section 4. ANNUAL REPORT TO STOCKHOLDERS. Nothing herein
shall be interpreted as prohibiting the board of directors from issuing
annual or other periodic reports to the stockholders of the corporation as
they deem appropriate.
Section 5. FINANCIAL STATEMENTS. A copy of any annual
financial statement and any income statement of the corporation for each
quarterly period of each fiscal year, and any accompanying balance sheet of
the corporation as of the end of each such period, that has been prepared
by the corporation shall be kept on file in the principal executive office
of the corporation for twelve (12) months.
Section 6. ANNUAL LIST OF DIRECTORS, OFFICERS AND RESIDENT
AGENT. The corporation shall, on or before April 14 of each year, file
with the Secretary of State of the State of Nevada, on the prescribed form,
a list of its officers and directors and a designation of its resident
agent in Nevada.
<PAGE>
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE. For purposes of determining the
stockholders entitled to notice of any meeting or to vote or entitled to
receive payment of any dividend or other distribution or allotment of any
rights or entitled to exercise any rights in respect of any other lawful
action, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days prior to
the date of any such meeting nor more than sixty (60) days prior to any
other action, and in such case only stockholders of record on the date so
fixed are entitled to notice and to vote or to receive the dividend,
distribution or allotment of rights or to exercise the rights, as the case
may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date fixed as aforesaid, except as otherwise
provided in the Nevada General Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled
to give consent to corporate action in writing without a meeting, when no
prior action by the board has been taken, shall be the day on which the
first written consent is given.
(c) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the
board adopts the resolution relating thereto, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
Section 2. CLOSING OF TRANSFER BOOKS. The directors may
prescribe a period not exceeding sixty (60) days prior to any meeting of
the stockholders during which no transfer of stock on the books of the
corporation may be made, or may fix a date not more than sixty (60) days
prior to the holding of any such meeting as the day as of which
stockholders entitled to notice of and to vote at such meeting shall be
determined; and only stockholders of record on such day shall be entitled
to notice or to vote at such meeting.
Section 3. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered on
its books as the owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Nevada.
<PAGE>
Section 4. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All
checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the
corporation, shall be signed or endorsed by such person or persons and in
such manner as, from time to time, shall be determined by resolution of the
board of directors.
Section 5. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The board of directors, except as in the bylaws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances; and, unless so authorized or ratified by the board of directors
or within the agency power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for
any purpose or to any amount.
Section 6. STOCK CERTIFICATES. A certificate or certificates
for shares of the capital stock of the corporation shall be issued to each
stockholder when any such shares are fully paid, and the board of directors
may authorize the issuance of certificates or shares as partly paid
provided that such certificates shall state the amount of the consideration
to be paid therefor and the amount paid thereon. All certificates shall be
signed in the name of the corporation by the president or vice president
and by the treasurer or an assistant treasurer or the secretary or any
assistant secretary, certifying the number of shares and the class or
series of shares owned by the stockholder. When the corporation is
authorized to issue shares of more than one class or more than one series
of any class, there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the corporation
will furnish to any stockholders upon request and without charge, a full or
summary statement of the designations, preferences and relatives,
participating, optional or other special rights of the various classes of
stock or series thereof and the qualifications, limitations or restrictions
of such rights, and, if the corporation shall be authorized to issue only
special stock, such certificate must set forth in full or summarize the
rights of the holders of such stock. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon
a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were an officer,
transfer agent or registrar at the date of issue.
No new certificate for shares shall be issued in place of any
certificate theretofore issued unless the latter is surrendered and
canceled at the same time; provided, however, that a new certificate may be
issued without the surrender and cancellation of the old certificate if the
certificate thereto fore issued is alleged to have been lost, stolen or
destroyed. In case of any such allegedly lost, stolen or destroyed
certificate, the corporation may require the owner thereof or the legal
representative of such owner to give the corporation a bond (or other
adequate security) sufficient to indemnify it against any claim that may be
made against it (including any expense or liability) on account of the
alleged loss, theft or destruction of any such certificate or the issuance
of such new certificate.
<PAGE>
Section 7. DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the articles of
incorporation, if any, may be declared by the board of directors at any
regular or special meeting pursuant to law. Dividends may be paid in cash,
in property, or in shares of the capital stock, subject to the provisions
of the articles of incorporation.
Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as
a reserve or reserves to meet contingencies, or for equalizing dividends,
or for repairing or maintaining any property of the corporation, or for
such other purpose as the directors shall think conducive to the interest
of the corporation, and the directors may modify or abolish any such
reserves in the manner in which it was created.
Section 8. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the board of directors.
Section 9. SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its incorporation and the
words "Corporate Seal, Nevada."
Section 10. REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the president, or any vice president, or any
other person authorized by resolution of the board of directors by any of
the foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations,
foreign or domestic, standing in the name of the corporation. The
authority herein granted to said officers to vote or represent on behalf of
the corporation any and all shares held by the corporation in any other
corporation or corporations may be exercised by any such officer in person
or by any person authorized to do so by proxy duly executed by said
officer.
Section 11. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction, and
definitions in the Nevada General Corporation Law shall govern the
construction of the bylaws. Without limiting the generality of the
foregoing, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation
and a natural person.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY STOCKHOLDERS. New bylaws may be
adopted or these bylaws may be amended or repealed by the affirmative vote
of a majority of the outstanding shares entitled to vote, or by the written
assent of stockholders entitled to vote such shares, except as otherwise
provided by law or by the articles of incorporation.
<PAGE>
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of
the stockholders as provided in Section 1 of this Article, bylaws may be
adopted, amended or repealed by the board of directors.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting secretary of NFOX.COM,
a Nevada corporation; and
2. That the foregoing Amended and Restated Bylaws, comprising
twenty (20) pages, constitute the Bylaws of said corporation as duly
adopted and approved by the board of directors of said corporation by a
Unanimous Written Consent dated as of April 22, 1999 and duly adopted and
approved by the stockholders of said corporation at a special meeting held
on April 22, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of said corporation this 22nd day of April, 1999.
/s/ Charles Catania
_________________________________
Charles Catania, Secretary
NFOX.COM
INCORPORATED UNDER THE LAWS OF THIS STATE OF NEVADA
25,000,000 SHARES COMMON STOCK AUTHORIZED, $.001 PAR VALUE
THIS
CERTIFIES CUSIP 65334R 10 0
THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
NFOX.COM
transferable on the books of the corporation in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are subject to the laws
of this State of Nevada, and to the Certificate of Incorporation and Bylaws
of the Corporation, as now hereafter amended. This certificate is not
valid unless countersigned by the Transfer Agent. WITNESS the facsimile
seal of the Corporation and the signature of its duly authorized officers.
DATE
NFOX.COM
Corporate Seal
Nevada
Karl Kraft Charles Catania
PRESIDENT SECRETARY
SPERRY YOUNG & STOECKLEIN
Telephone (702) 794-2590
Facsimile (702) 794-0744
DONALD J. STOECKLEIN
ATTORNEY AT LAW
Practice Limited to Federal Securities
- --------------------------------------------------------------------------
1850 E. Flamingo Rd. Suite 111, Las Vegas, Nevada 89119
September 13, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: NFOX.COM REGISTRATION STATEMENT ON FORM SB-2
Ladies and Gentlemen:
As counsel to NFOX.COM (the "Company"), we are rendering this opinion
in connection with a proposed sale of those certain shares of the Company's
newly-issued Common Stock as set forth in the Registration Statement on
Form SB-2 to which this opinion is being filed as Exhibit 5(a) & 23(a) (the
"Shares") pursuant to Rule 462(b) under the Securities Act of 1933, as
amended. We have examined all instruments, documents and records which we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents submitted to
us as copies.
We express no opinion with respect to (i) the availability of
equitable remedies, including specific performance, or (ii) the effect of
bankruptcy, insolvency, reorganization, moratorium or equitable principles
relating to or limiting creditors' rights generally.
Based on such examination, we are of the opinion that the Shares
identified in the above-referenced Registration Statement will be, upon
effectiveness of the Registration Statement and receipt by the Company of
payment therefor, validly authorized, legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the use of our name wherever
it appears in said Registration Statement, including the Prospectus
constituting a part thereof, as originally filed or as subsequently
amended.
Respectfully submitted,
/s/ Sperry Young & Stoecklein
Sperry Young & Stoecklein
1999 STOCK OPTION PLAN
1. PURPOSE. The purpose of the NFOX.COM 1999 Stock Option Plan (the
"Plan") is to strengthen NFOX.COM, a Nevada corporation ("Corporation"), by
providing to employees, officers, directors, consultants and independent
contractors of the Corporation or any of its subsidiaries (including
dealers, distributors, and other business entities or persons providing
services on behalf of the Corporation or any of its subsidiaries) added
incentive for high levels of performance and unusual efforts to increase
the earnings of the Corporation. The Plan seeks to accomplish this purpose
by enabling specified persons to purchase shares of the common stock of the
Corporation, $.001 par value, thereby increasing their proprietary interest
in the Corporation's success and encouraging them to remain in the employ
or service of the Corporation.
2. CERTAIN DEFINITIONS. As used in this Plan, the following words
and phrases shall have the respective meanings set forth below, unless the
context clearly indicates a contrary meaning:
2.1 "Board of Directors": The Board of Directors of the
Corporation.
2.2 "Committee": The Committee which shall administer the Plan
shall consist of the entire Board of Directors.
2.3 "Fair Market Value Per Share": The fair market value per
share of the Shares as determined by the Committee in good faith. The
Committee is authorized to make its determination as to the fair market
value per share of the Shares on the following basis: (i) if the Shares
are traded only otherwise than on a securities exchange and are not quoted
<PAGE>
on the National Association of Securities Dealers' Automated Quotation
System ("NASDAQ"), but are quoted on the bulletin board or in the "pink
sheets" published by the National Daily Quotation Bureau, the greater of
(a) the average of the mean between the average daily bid and average daily
asked prices of the Shares during the thirty (30) day period preceding the
date of grant of an Option, as quoted on the bulletin board or in the "pink
sheets" published by the National Daily Quotation Bureau, or (b) the mean
between the average daily bid and average daily asked prices of the Shares
on the date of grant, as published on the bulletin board or in such "pink
sheets;" (ii) if the Shares are traded only otherwise than on a securities
exchange and are quoted on NASDAQ, the greater of (a) the average of the
mean between the closing bid and closing asked prices of the Shares during
the thirty (30) day period preceding the date of grant of an Option, as
reported by the Wall Street Journal and (b) the mean between the closing
bid and closing asked prices of the Shares on the date of grant of an
Option, as reported by the Wall Street Journal; (iii) if the Shares are
admitted to trading on a securities exchange, the greater of (a) the
average of the daily closing prices of the Shares during the ten (10)
trading days preceding the date of grant of an Option, as quoted in the
Wall Street Journal, or (b) the daily closing price of the Shares on the
date of grant of an Option, as quoted in the Wall Street Journal; or (iv)
if the Shares are traded only otherwise than as described in (i), (ii) or
(iii) above, or if the Shares are not publicly traded, the value determined
by the Committee in good faith based upon the fair market value as
determined by completely independent and well qualified experts.
2.4 "Option": A stock option granted under the Plan.
<PAGE>
2.5 "Incentive Stock Option": An Option intended to qualify for
treatment as an incentive stock option under Code Sections 421 and 422A,
and designated as an Incentive Stock Option.
2.6 "Nonqualified Option": An Option not qualifying as an
Incentive Stock Option.
2.7 "Optionee": The holder of an Option.
2.8 "Option Agreement": The document setting forth the terms
and conditions of each Option.
2.9 "Shares": The shares of common stock $.001 par value of the
Corporation.
2.10 "Code": The Internal Revenue Code of 1986, as amended.
2.11 "Subsidiary": Any corporation of which fifty percent (50%)
or more of total combined voting power of all classes of stock of such
corporation is owned by the Corporation or another Subsidiary (as so
defined).
3. ADMINISTRATION OF PLAN.
3.1 In General. This Plan shall be administered by the
Committee. Any action of the Committee with respect to administration of
the Plan shall be taken pursuant to (i) a majority vote at a meeting of the
Committee (to be documented by minutes), or (ii) the unanimous written
consent of its members.
3.2 Authority. Subject to the express provisions of this Plan,
the Committee shall have the authority to: (i) construe and interpret the
Plan, decide all questions and settle all controversies and disputes which
<PAGE>
may arise in connection with the Plan and to define the terms used therein;
(ii) prescribe, amend and rescind rules and regulations relating to
administration of the Plan; (iii) determine the purchase price of the
Shares covered by each Option and the method of payment of such price,
individuals to whom, and the time or times at which, Options shall be
granted and exercisable and the number of Shares covered by each Option;
(iv) determine the terms and provisions of the respective Option Agreements
(which need not be identical); (v) determine the duration and purposes of
leaves of absence which may be granted to participants without constituting
a termination of their employment for purposes of the Plan; and (vi) make
all other determinations necessary or advisable to the administration of
the Plan. Determinations of the Committee on matters referred to in this
Section 3 shall be conclusive and binding on all parties howsoever
concerned. With respect to Incentive Stock Options, the Committee shall
administer the Plan in compliance with the provisions of Code Section 422A
as the same may hereafter be amended from time to time. No member of the
Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option.
4. ELIGIBILITY AND PARTICIPATION.
4.1 In General. Only officers, employees and directors who are
also employees of the Corporation or any Subsidiary shall be eligible to
receive grants of Incentive Stock Options. Officers, employees and
directors (whether or not they are also employees) of the Corporation or
any Subsidiary, as well as consultants, independent contractors or other
service providers of the Corporation or any Subsidiary shall be eligible to
receive grants of Nonqualified Options. Within the foregoing limits, the
Committee, from time to time, shall determine and designate persons to whom
<PAGE>
Options may be granted. All such designations shall be made in the
absolute discretion of the Committee and shall not require the approval of
the stockholders. In determining (i) the number of Shares to be covered by
each Option, (ii) the purchase price for such Shares and the method of
payment of such price (subject to the other sections hereof), (iii) the
individuals of the eligible class to whom Options shall be granted,
(iv) the terms and provisions of the respective Option Agreements, and
(v) the times at which such Options shall be granted, the Committee shall
take into account such factors as it shall deem relevant in connection with
accomplishing the purpose of the Plan as set forth in Section 1. An
individual who has been granted an Option may be granted an additional
Option or Options if the Committee shall so determine. No Option shall be
granted under the Plan after April 22, 2009, but Options granted before
such date may be exercisable after such date.
4.2 Certain Limitations. In no event shall Incentive Stock
Options be granted to an Optionee such that the sum of (i) aggregate fair
market value (determined at the time the Incentive Stock Options are
granted) of the Shares subject to all Options granted under the Plan which
are exercisable for the first time during the same calendar year, plus (ii)
the aggregate fair market value (determined at the time the options are
granted) of all stock subject to all other incentive stock options granted
to such Optionee by the Corporation, its parent and Subsidiaries which are
exercisable for the first time during such calendar year, exceeds One
Hundred Thousand Dollars ($100,000). For purposes of the immediately
preceding sentence, fair market value shall be determined as of the date of
grant based on the Fair Market Value Per Share as determined pursuant to
Section 2.3.
<PAGE>
5. AVAILABLE SHARES AND ADJUSTMENTS UPON CHANGES IN
CAPITALIZATION.
5.1 Shares. Subject to adjustment as provided in
Section 5.2 below, the total number of Shares to be subject to Options
granted pursuant to this Plan shall not exceed One Million Five Hundred
Thousand (1,500,000) Shares. Shares subject to the Plan may be either
authorized but unissued shares or shares that were once issued and
subsequently reacquired by the Corporation; the Committee shall be
empowered to take any appropriate action required to make Shares available
for Options granted under this Plan. If any Option is surrendered before
exercise or lapses without exercise in full or for any other reason ceases
to be exercisable, the Shares reserved therefore shall continue to be
available under the Plan.
5.2 Adjustments. As used herein, the term "Adjustment Event"
means an event pursuant to which the outstanding Shares of the Corporation
are increased, decreased or changed into, or exchanged for a different
number or kind of shares or securities, without receipt of consideration by
the Corporation, through reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split, stock dividend, stock
consolidation or otherwise. Upon the occurrence of an Adjustment Event,
(i) appropriate and proportionate adjustments shall be made to the number
and kind of shares and exercise price for the shares subject to the Options
which may thereafter be granted under this Plan, (ii) appropriate and
proportionate adjustments shall be made to the number and kind of and
exercise price for the shares subject to the then outstanding Options
granted under this Plan, and (iii) appropriate amendments to the Option
Agreements shall be executed by the Corporation and the Optionees if the
Committee determines that such an amendment is necessary or desirable to
<PAGE>
reflect such adjustments. If determined by the Committee to be
appropriate, in the event of an Adjustment Event which involves the
substitution of securities of a corporation other than the Corporation, the
Committee shall make arrangements for the assumptions by such other
corporation of any Options then or thereafter outstanding under the Plan.
Notwithstanding the foregoing, such adjustment in an outstanding Option
shall be made without change in the total exercise price applicable to the
unexercised portion of the Option, but with an appropriate adjustment to
the number of shares, kind of shares and exercise price for each share
subject to the Option. The determination by the Committee as to what
adjustments, amendments or arrangements shall be made pursuant to this
Section 5.2, and the extent thereof, shall be final and conclusive. No
fractional Shares shall be issued under the Plan on account of any such
adjustment or arrangement.
6. TERMS AND CONDITIONS OF OPTIONS.
6.1 Intended Treatment as Incentive Stock Options. Incentive
Stock Options granted pursuant to this Plan are intended to be "incentive
stock options" to which Code Sections 421 and 422A apply, and the Plan
shall be construed and administered to implement that intent. If all or
any part of an Incentive Stock Option shall not be an "incentive stock
option" subject to Sections 421 or 422A of the Code, such Option shall
nevertheless be valid and carried into effect. All Options granted under
this Plan shall be subject to the terms and conditions set forth in this
Section 6 (except as provided in Section 5.2) and to such other terms and
conditions as the Committee shall determine to be appropriate to accomplish
the purpose of the Plan as set forth in Section 1.
<PAGE>
6.2 Amount and Payment of Exercise Price.
6.2.1 Exercise Price. The exercise price per Share for
each Share which the Optionee is entitled to purchase under a Nonqualified
Option shall be determined by the Committee but shall not be less than
eighty-five percent (85%) of the Fair Market Value Per Share on the date of
the grant of the Nonqualified Option. The exercise price per Share for
each Share which the Optionee is entitled to purchase under an Incentive
Stock Option shall be determined by the Committee but shall not be less
than the Fair Market Value Per Share on the date of the grant of the
Incentive Stock Option; provided, however, that the exercise price shall
not be less than one hundred ten percent (110%) of the Fair Market Value
Per Share on the date of the grant of the Incentive Stock Option in the
case of an individual then owning (within the meaning of Code Section
425(d)) more than ten percent (10%) of the total combined voting power of
all classes of stock of the Corporation or of its parent or Subsidiaries.
6.2.2 Payment of Exercise Price. The consideration to
be paid for the Shares to be issued upon exercise of an Option, including
the method of payment, shall be determined by the Committee and may consist
of promissory notes, shares of the common stock of the Corporation or such
other consideration and method of payment for the Shares as may be
permitted under applicable state and federal laws.
6.3 Exercise of Options.
6.3.1 Each Option granted under this Plan shall be
exercisable at such times and under such conditions as may be determined by
the Committee at the time of the grant of the Option and as shall be
permissible under the terms of the Plan; provided, however, in no event
shall an Option be exercisable after the expiration of ten (10) years from
<PAGE>
the date it is granted, and in the case of an Optionee owning (within the
meaning of Code Section 425(d)), at the time an Incentive Stock Option is
granted, more than ten percent (10%) of the total combined voting power of
all classes of stock of the Corporation or of its parent or Subsidiaries,
such Incentive Stock Option shall not be exercisable later than five (5)
years after the date of grant.
6.3.2 An Optionee may purchase less than the total
number of Shares for which the Option is exercisable, provided that a
partial exercise of an Option may not be for less than One Hundred (100)
Shares and shall not include any fractional shares.
6.4 Nontransferability of Options. All Options granted under
this Plan shall be nontransferable, either voluntarily or by operation of
law, otherwise than by will or the laws of descent and distribution, and
shall be exercisable during the Optionee's lifetime only by such Optionee.
6.5 Effect of Termination of Employment or Other Relationship.
Except as otherwise determined by the Committee in connection with the
grant of Nonqualified Options, the effect of termination of an Optionee's
employment or other relationship with the Corporation on such Optionee's
rights to acquire Shares pursuant to the Plan shall be as follows:
6.5.1 Termination for Other than Disability or Cause.
If an Optionee ceases to be employed by, or ceases to have a relationship
with, the Corporation for any reason other than for disability or cause,
such Optionee's Options shall expire not later than three (3) months
thereafter. During such three (3) month period and prior to the expiration
<PAGE>
of the Option by its terms, the Optionee may exercise any Option granted to
him, but only to the extent such Options were exercisable on the date of
termination of his employment or relationship and except as so exercised,
such Options shall expire at the end of such three (3) month period unless
such Options by their terms expire before such date. The decision as to
whether a termination for a reason other than disability, cause or death
has occurred shall be made by the Committee, whose decision shall be final
and conclusive, except that employment shall not be considered terminated
in the case of sick leave or other bona fide leave of absence approved by
the Corporation.
6.5.2 Disability. If an Optionee ceases to be employed
by, or ceases to have a relationship with, the Corporation by reason of
disability (within the meaning of Code Section 22(e)(3)), such Optionee's
Options shall expire not later than one (1) year thereafter. During such
one (1) year period and prior to the expiration of the Option by its terms,
the Optionee may exercise any Option granted to him, but only to the extent
such Options were exercisable on the date the Optionee ceased to be
employed by, or ceased to have a relationship with, the Corporation by
reason of disability and except as so exercised, such Options shall expire
at the end of such one (1) year period unless such Options by their terms
expire before such date. The decision as to whether a termination by
reason of disability has occurred shall be made by the Committee, whose
decision shall be final and conclusive.
6.5.3 Termination for Cause. If an Optionee's
employment by, or relationship with, the Corporation is terminated for
cause, such Optionee's Option shall expire immediately; provided, however,
the Committee may, in its sole discretion, within thirty (30) days of such
termination, waive the expiration of the Option by giving written notice of
<PAGE>
such waiver to the Optionee at such Optionee's last known address. In the
event of such waiver, the Optionee may exercise the Option only to such
extent, for such time, and upon such terms and conditions as if such
Optionee had ceased to be employed by, or ceased to have a relationship
with, the Corporation upon the date of such termination for a reason other
than disability, cause, or death. Termination for cause shall include
termination for malfeasance or gross misfeasance in the performance of
duties or conviction of illegal activity in connection therewith or any
conduct detrimental to the interests of the Corporation. The determination
of the Committee with respect to whether a termination for cause has
occurred shall be final and conclusive.
6.6 Withholding of Taxes. As a condition to the exercise, in
whole or in part, of any Options the Board of Directors may in its sole
discretion require the Optionee to pay, in addition to the purchase price
of the Shares covered by the Option an amount equal to any Federal, state
or local taxes that may be required to be withheld in connection with the
exercise of such Option.
6.7 No Rights to Continued Employment or Relationship.
Nothing contained in this Plan or in any Option Agreement shall obligate
the Corporation to employ or have another relationship with any Optionee
for any period or interfere in any way with the right of the Corporation to
reduce such Optionee's compensation or to terminate the employment of or
relationship with any Optionee at any time.
6.8 Time of Granting Options. The time an Option is granted,
sometimes referred to herein as the date of grant, shall be the day the
Corporation executes the Option Agreement; provided, however, that if
appropriate resolutions of the Committee indicate that an Option is to be
granted as of and on some prior or future date, the time such Option is
granted shall be such prior or future date.
<PAGE>
6.9 Privileges of Stock Ownership. No Optionee shall be
entitled to the privileges of stock ownership as to any Shares not actually
issued and delivered to such Optionee. No Shares shall be purchased upon
the exercise of any Option unless and until, in the opinion of the
Corporation's counsel, any then applicable requirements of any laws or
governmental or regulatory agencies having jurisdiction and of any
exchanges upon which the stock of the Corporation may be listed shall have
been fully complied with.
6.10 Securities Laws Compliance. The Corporation will diligently
endeavor to comply with all applicable securities laws before any Options
are granted under the Plan and before any Shares are issued pursuant to
Options. Without limiting the generality of the foregoing, the Corporation
may require from the Optionee such investment representation or such
agreement, if any, as counsel for the Corporation may consider necessary or
advisable in order to comply with the Securities Act of 1933 as then in
effect, and may require that the Optionee agree that any sale of the
Shares will be made only in such manner as is permitted by the Committee.
The Committee in its discretion may cause the Shares underlying the Options
to be registered under the Securities Act of 1933, as amended, by the
filing of a Form S-8 Registration Statement covering the Options and Shares
underlying such Options. Optionee shall take any action reasonably
requested by the Corporation in connection with registration or
qualification of the Shares under federal or state securities laws.
6.11 Option Agreement. Each Incentive Stock Option and
Nonqualified Option granted under this Plan shall be evidenced by the
appropriate written Stock Option Agreement ("Option Agreement") executed by
<PAGE>
the Corporation and the Optionee in a form substantially the same as the
appropriate form of Option Agreement attached as Exhibit I or II hereto
(and made a part hereof by this reference) and shall contain each of the
provisions and agreements specifically required to be contained therein
pursuant to this Section 6, and such other terms and conditions as are
deemed desirable by the Committee and are not inconsistent with the purpose
of the Plan as set forth in Section 1.
7. PLAN AMENDMENT AND TERMINATION.
7.1 Authority of Committee. The Committee may at any time
discontinue granting Options under the Plan or otherwise suspend, amend or
terminate the Plan and may, with the consent of an Optionee, make such
modification of the terms and conditions of such Optionee's Option as it
shall deem advisable; provided that, except as permitted under the
provisions of Section 5.2, the Committee shall have no authority to make
any amendment or modification to this Plan or any outstanding Option
thereunder which would: (i) increase the maximum number of shares which
may be purchased pursuant to Options granted under the Plan, either in the
aggregate or by an Optionee (except pursuant to Section 5.2); (ii) change
the designation of the class of the employees eligible to receive Incentive
Stock Options; (iii) extend the term of the Plan or the maximum Option
period thereunder; (iv) decrease the minimum Incentive Stock Option price
or permit reductions of the price at which shares may be purchased for
Incentive Stock Options granted under the Plan; or (v) cause Incentive
<PAGE>
Stock Options issued under the Plan to fail to meet the requirements of
incentive stock options under Code Section 422A. An amendment or
modification made pursuant to the provisions of this Section 7 shall be
deemed adopted as of the date of the action of the Committee effecting such
amendment or modification and shall be effective immediately, unless
otherwise provided therein, subject to approval thereof (1) within twelve
(12) months before or after the effective date by stockholders of the
Corporation holding not less than a majority vote of the voting power of
the Corporation voting in person or by proxy at a duly held stockholders
meeting when required to maintain or satisfy the requirements of Code
Section 422A with respect to Incentive Stock Options, and (2) by any
appropriate governmental agency. No Option may be granted during any
suspension or after termination of the Plan.
7.2 Ten (10) Year Maximum Term. Unless previously terminated by
the Committee, this Plan shall terminate on April 22, 2009, and no Options
shall be granted under the Plan thereafter.
7.3 Effect on Outstanding Options. Amendment, suspension or
termination of this Plan shall not, without the consent of the Optionee,
alter or impair any rights or obligations under any Option theretofore
granted.
8. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of April
22, 2009, the date the Plan was adopted by the Board of Directors, subject
to the approval of the Plan by the affirmative vote of a majority of the
issued and outstanding Shares of common stock of the Corporation
represented and voting at a duly held meeting at which a quorum is present
within twelve (12) months thereafter. The Committee shall be authorized
and empowered to make grants of Options pursuant to this Plan prior to such
approval of this Plan by the stockholders; provided, however, in such event
the Option grants shall be made subject to the approval of both this Plan
and such Option grants by the stockholders in accordance with the
provisions of this Section 8.
<PAGE>
9. MISCELLANEOUS PROVISIONS.
9.1 Exculpation and Indemnification. The Corporation shall
indemnify and hold harmless the Committee from and against any and all
liabilities, costs and expenses incurred by such persons as a result of any
act, or omission to act, in connection with the performance of such
persons' duties, responsibilities and obligations under the Plan, other
than such liabilities, costs and expenses as may result from the gross
negligence, bad faith, willful conduct and/or criminal acts of such
persons.
9.2 Governing Law. The Plan shall be governed and construed in
accordance with the laws of the State of Nevada and the Code.
9.3 Compliance with Applicable Laws. The inability of the
Corporation to obtain from any regulatory body having jurisdiction
authority deemed by the Corporation's counsel to be necessary to the lawful
issuance and sale of any Shares upon the exercise of an Option shall
relieve the Corporation of any liability in respect of the non-issuance or
sale of such Shares as to which such requisite authority shall not have
been obtained.
As approved by the Board of Directors of
NFOX.COM on April 22, 1999.
By:
Charles Catania, Secretary
<PAGE>
EXHIBIT I
[FORM OF]
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is entered into as
of , 1999, by and between NFOX.COM, a Nevada
corporation ("Corporation"), and ("Optionee").
R E C I T A L S
A. On April 22, 1999, the Board of Directors of the Corporation
adopted, subject to the approval of the Corporation's shareholders, the
NFOX.COM 1999 Stock Option Plan (the "Plan").
B. Pursuant to the Plan, on ________________, the Board of Directors
of the Corporation acting as the Plan Committee ("Committee") authorized
granting to Optionee options to purchase shares of the common stock, $.001
par value, of the Corporation ("Shares") for the term and subject to the
terms and conditions hereinafter set forth.
A G R E E M E N T
It is hereby agreed as follows:
1. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the
context otherwise clearly requires, terms with initial capital letters used
herein shall have the meanings assigned to such terms in the Plan.
2. GRANT OF OPTIONS. The Corporation hereby grants to Optionee,
options ("Options") to purchase all or any part of Shares, upon and
subject to the terms and conditions of the Plan, which is incorporated in
full herein by this reference, and upon the other terms and conditions set
forth herein.
<PAGE>
3. OPTION PERIOD. The Options shall be exercisable at any time
during the period commencing on the following dates (subject to the
provisions of Section 18) and expiring on the date five (5) years from the
date of grant, unless earlier terminated pursuant to Section 7:
[terms of option vesting to be set forth here]
4. METHOD OF EXERCISE. The Options shall be exercisable by Optionee
by giving written notice to the Corporation of the election to purchase and
of the number of Shares Optionee elects to purchase, such notice to be
accompanied by such other executed instruments or documents as may be
required by the Committee pursuant to this Agreement, and unless otherwise
directed by the Committee, Optionee shall at the time of such exercise
tender the purchase price of the Shares he has elected to purchase. An
Optionee may purchase less than the total number of Shares for which the
Option is exercisable, provided that a partial exercise of an Option may
not be for less than One Hundred (100) Shares. If Optionee shall not
purchase all of the Shares which he is entitled to purchase under the
Options, his right to purchase the remaining unpurchased Shares shall
continue until expiration of the Options. The Options shall be exercisable
with respect of whole Shares only, and fractional Share interests shall be
disregarded.
5. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be
per Share.
6. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or
bank cashier's check payable to the Corporation, the purchase price for all
Shares then being purchased. Provided, however, the Board of Directors
may, in its sole discretion, permit payment by the Corporation of the
purchase price in whole or in part with Shares. If the Optionee is so
<PAGE>
permitted, and the Optionee elects to make payment with Shares, the
Optionee shall deliver to the Corporation certificates representing the
number of Shares in payment for new Shares, duly endorsed for transfer to
the Corporation, together with any written representations relating to
title, liens and encumbrances, securities laws, rules and regulatory
compliance, or other matters, reasonably requested by the Board of
Directors. The value of Shares so tendered shall be their Fair Market
Value Per Share on the date of the Optionee's notice of exercise.
7. EFFECT OF TERMINATION OF EMPLOYMENT. If an Optionee's employment
or other relationship with the Corporation (or a Subsidiary) terminates,
the effect of the termination on the Optionee's rights to acquire Shares
shall be as follows:
7.1 Termination for Other than Disability or Cause. If an
Optionee ceases to be employed by, or ceases to have a relationship with,
the Corporation or a Subsidiary for any reason other than for disability or
cause, such Optionee's Options shall expire not later than three (3) months
thereafter. During such three (3) month period and prior to the expiration
of the Option by its terms, the Optionee may exercise any Option granted to
him, but only to the extent such Options were exercisable on the date of
termination of his employment or relationship and except as so exercised,
such Options shall expire at the end of such three (3) month period unless
such Options by their terms expire before such date. The decision as to
whether a termination for a reason other than disability, cause or death
has occurred shall be made by the Committee, whose decision shall be final
and conclusive, except that employment shall not be considered terminated
in the case of sick leave or other bona fide leave of absence approved by
the Corporation.
7.2 Disability. If an Optionee ceases to be employed by, or
ceases to have a relationship with, the Corporation or a Subsidiary by
<PAGE>
reason of disability (within the meaning of Code Section 22(e)(3)), such
Optionee's Options shall expire not later than one (1) year thereafter.
During such one (1) year period and prior to the expiration of the Option
by its terms, the Optionee may exercise any Option granted to him, but only
to the extent such Options were exercisable on the date the Optionee ceased
to be employed by, or ceased to have a relationship with, the Corporation
or Subsidiary by reason of disability. The decision as to whether a
termination by reason of disability has occurred shall be made by the
Committee, whose decision shall be final and conclusive.
7.3 Termination for Cause. If an Optionee's employment by, or
relationship with, the Corporation or a Subsidiary is terminated for cause,
such Optionee's Option shall expire immediately; provided, however, the
Committee may, in its sole discretion, within thirty (30) days of such
termination, waive the expiration of the Option by giving written notice of
such waiver to the Optionee at such Optionee's last known address. In the
event of such waiver, the Optionee may exercise the Option only to such
extent, for such time, and upon such terms and conditions as if such
Optionee had ceased to be employed by, or ceased to have a relationship
with, the Corporation or a Subsidiary upon the date of such termination for
a reason other than disability, cause or death. Termination for cause
shall include termination for malfeasance or gross misfeasance in the
performance of duties or conviction of illegal activity in connection
therewith or any conduct detrimental to the interests of the Corporation or
a Subsidiary. The determination of the Committee with respect to whether
a termination for cause has occurred shall be final and conclusive.
8. NONTRANSFERABILITY OF OPTIONS. The Options shall not be
transferable, either voluntarily or by operation of law, otherwise than by
will or the laws of descent and distribution and shall be exercisable
during the Optionee's lifetime only by Optionee.
<PAGE>
9. ADDITIONAL RESTRICTIONS REGARDING DISPOSITIONS OF SHARES. The
Shares acquired pursuant to the exercise of Options shall be subject to the
restrictions set forth in Exhibit "A" attached hereto and incorporated
herein as if fully set forth.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the
term "Adjustment Event" means an event pursuant to which the outstanding
Shares of the Corporation are increased, decreased or changed into, or
exchanged for a different number or kind of shares or securities, without
receipt of consideration by the Corporation, through reorganization,
merger, recapitalization, reclassification, stock split, reverse stock
split, stock dividend, stock consolidation or otherwise. Upon the
occurrence of an Adjustment Event, (i) appropriate and proportionate
adjustments shall be made to the number and kind and exercise price for the
shares subject to the Options, and (ii) appropriate amendments to this
Agreement shall be executed by the Corporation and Optionee if the
Committee determines that such an amendment is necessary or desirable to
reflect such adjustments. If determined by the Committee to be
appropriate, in the event of an Adjustment Event which involves the
substitution of securities of a corporation other than the Corporation, the
Committee shall make arrangements for the assumptions by such other
corporation of the Options. Notwithstanding the foregoing, any such
adjustment to the Options shall be made without change in the total
exercise price applicable to the unexercised portion of the Options, but
with an appropriate adjustment to the number of shares, kind of shares and
exercise price for each share subject to the Options. The determination by
the Committee as to what adjustments, amendments or arrangements shall be
made pursuant to this Section 10, and the extent thereof, shall be final
and conclusive. No fractional Shares shall be issued on account of any
such adjustment or arrangement.
<PAGE>
11. NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Agreement shall obligate the Corporation to employ or
have another relationship with Optionee for any period or interfere in any
way with the right of the Corporation to reduce Optionee's compensation or
to terminate the employment of or relationship with Optionee at any time.
12. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be
.
13. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to
the privileges of stock ownership as to any Shares not actually issued and
delivered to Optionee. No Shares shall be purchased upon the exercise of
any Options unless and until, in the opinion of the Corporation's counsel,
any then applicable requirements of any laws, or governmental or regulatory
agencies having jurisdiction, and of any exchanges upon which the stock of
the Corporation may be listed shall have been fully complied with.
14. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any stock is
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation
may consider necessary in order to comply with the Securities Act of 1933
as then in effect, and may require that the Optionee agree that any sale of
the Shares will be made only in such manner as is permitted by the
Committee. The Committee may in its discretion cause the Shares underlying
the Options to be registered under the Securities Act of 1933 as amended by
<PAGE>
filing a Form S-8 Registration Statement covering the Options and the
Shares underlying the Options. Optionee shall take any action reasonably
requested by the Corporation in connection with registration or
qualification of the Shares under federal or state securities laws.
15. INTENDED TREATMENT AS INCENTIVE STOCK OPTIONS. The Options
granted herein are intended to be "incentive stock options" to which
Sections 421 and 422A of the Internal Revenue Code of 1986, as amended from
time to time ("Code") apply, and shall be construed to implement that
intent. If all or any part of the Options shall not be subject to
Sections 421 and 422A of the Code, the Options shall nevertheless be valid
and carried into effect.
16. PLAN CONTROLS. The Options shall be subject to and governed by
the provisions of the Plan. All determinations and interpretations of the
Plan made by the Committee shall be final and conclusive.
17. SHARES SUBJECT TO LEGEND. If deemed necessary by the
Corporation's counsel, all certificates issued to represent Shares
purchased upon exercise of the Options shall bear such appropriate legend
conditions as counsel for the Corporation shall require.
18. CONDITIONS TO OPTIONS.
18.1 Compliance with Applicable Laws. THE CORPORATION'S
OBLIGATION TO ISSUE SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS
IS EXPRESSLY CONDITIONED UPON THE COMPLETION BY THE CORPORATION OF ANY
REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES UNDER ANY STATE AND/OR
FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY GOVERNMENTAL REGULATORY BODY,
OR THE MAKING OF SUCH INVESTMENT REPRESENTATIONS OR OTHER REPRESENTATIONS
AND UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE
OPTION IN ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION FROM ANY
SUCH REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE COMMITTEE
<PAGE>
SHALL, IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH REQUIRED
REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE REPRESENTATIONS AND AGREEMENTS
THAT THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION (i) IS NOT
PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii) AGREES TO HAVE PLACED UPON
THE FACE AND REVERSE OF ANY CERTIFICATES A LEGEND SETTING FORTH ANY
REPRESENTATIONS AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE COMMITTEE OR
A REFERENCE THERETO.
18.2 SHAREHOLDER APPROVAL OF PLAN. IF THE OPTIONS GRANTED HEREBY
ARE GRANTED PRIOR TO APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE
CORPORATION PURSUANT TO SECTION 8 OF THE PLAN, THE GRANT OF THE OPTIONS
MADE HEREBY IS EXPRESSLY CONDITIONED UPON AND SUCH OPTIONS SHALL NOT BE
EXERCISABLE UNTIL THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE
CORPORATION IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8 OF THE PLAN.
18.3 Maximum Exercise Period. Notwithstanding any provision of
this Agreement to the contrary, the Options shall expire no later than ten
years from the date hereof or five years if, as of the date hereof, the
Optionee owns or is considered to own by reason of Code Section 425(d) more
than 10% of the total combined voting power of all classes of stock of the
Corporation or any
Subsidiary or parent corporation of the Corporation.
<PAGE>
19. MISCELLANEOUS
19.1 Binding Effect. This Agreement shall bind and inure to the
benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
19.2 Further Acts. Each party agrees to perform any further acts
and execute and deliver any documents which may be necessary to carry out
the provisions of this Agreement.
19.3 Amendment. This Agreement may be amended at any time by the
written agreement of the Corporation and the Optionee.
19.4 Syntax. Throughout this Agreement, whenever the context so
requires, the singular shall include the plural, and the masculine gender
shall include the feminine and neuter genders. The headings and captions
of the various Sections hereof are for convenience only and they shall not
limit, expand or otherwise affect the construction or interpretation of
this Agreement.
19.5 Choice of Law. The parties hereby agree that this Agreement
has been executed and delivered in the State of California and shall be
construed, enforced and governed by the laws thereof. This Agreement is in
all respects intended by each party hereto to be deemed and construed to
have been jointly prepared by the parties and the parties hereby expressly
agree that any uncertainty or ambiguity existing herein shall not be
interpreted against either of them.
19.6 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be
construed to have any effect on, the remaining provisions of this
Agreement.
<PAGE>
19.7 Notices. All notices and demands between the parties hereto
shall be in writing and shall be served either by registered or certified
mail, and such notices or demands shall be deemed given and made
forty-eight (48) hours after the deposit thereof in the United States mail,
postage prepaid, addressed to the party to whom such notice or demand is to
be given or made, and the issuance of the registered receipt therefor. If
served by telegraph, such notice or demand shall be deemed given and made
at the time the telegraph agency shall confirm to the sender, delivery
thereof to the addressee. All notices and demands to Optionee or the
Corporation may be given to them at the following addresses:
If to Optionee:
If to Corporation: NFOX.COM
1850 E. Flamingo Rd #111
Las Vegas, NV 89119
Such parties may designate in writing from time to time such other place or
places that such notices and demands may be given.
19.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter
hereof, this Agreement supersedes all prior and contemporaneous agreements
and understandings of the parties, and there are no warranties,
representations or other agreements between the parties in connection with
<PAGE>
the subject matter hereof except as set forth or referred to herein. No
supplement, modification or waiver or termination of this Agreement shall
be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall constitute a waiver
of any other provision hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
19.9 Attorneys' Fees. In the event that any party to this
Agreement institutes any action or proceeding, including, but not limited
to, litigation or arbitration, to preserve, to protect or to enforce any
right or benefit created by or granted under this Agreement, the prevailing
party in each respective such action or proceeding shall be entitled, in
addition to any and all other relief granted by a court or other tribunal
or body, as may be appropriate, to an award in such action or proceeding of
that sum of money which represents the attorneys' fees reasonably incurred
by the prevailing party therein in filing or otherwise instituting and in
prosecuting or otherwise pursuing or defending such action or proceeding,
and, additionally, the attorneys' fees reasonably incurred by such
prevailing party in negotiating any and all matters underlying such action
or proceeding and in preparation for instituting or defending such action
or proceeding.
IN WITNESS WHEREOF, the parties have entered into this Agreement as
of the date first set forth above.
"CORPORATION"
NFOX.COM
a Nevada corporation
By:
"OPTIONEE"
<PAGE>
EXHIBIT II
[FORM OF]
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Agreement") is entered
into as of , by and between NFOX.COM, a Nevada
corporation ("Corporation"), and ____________________ ("Optionee").
R E C I T A L S
A. On April 22, 1999, the Board of Directors of the Corporation
adopted, subject to the approval of the Corporation's shareholders, the
NFOX.COM 1999 Stock Option Plan (the "Plan").
B. Pursuant to the Plan, on , the Board of
Directors of the Corporation acting as the Plan Committee ("Committee")
authorized granting to Optionee options to purchase shares of the common
stock, $.001 par value, of the Corporation ("Shares") for the term and
subject to the terms and conditions hereinafter set forth.
A G R E E M E N T
It is hereby agreed as follows:
1. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the
context otherwise clearly requires, terms with initial capital letters used
herein shall have the meanings assigned to such terms in the Plan.
2. GRANT OF OPTIONS. The Corporation hereby grants to Optionee,
options ("Options") to purchase all or any part of __________ Shares, upon
and subject to the terms and conditions of the Plan, which is incorporated
in full herein by this reference, and upon the other terms and conditions
set forth herein.
<PAGE>
3. OPTION PERIOD. The Options shall be exercisable at any time
during the period commencing on the following dates (subject to the
provisions of Section 18) and expiring on the date five (5) years from the
date of grant, unless earlier terminated pursuant to Section 7:
[Terms of vesting to be set forth here]
4. METHOD OF EXERCISE. The Options shall be exercisable by Optionee
by giving written notice to the Corporation of the election to purchase and
of the number of Shares Optionee elects to purchase, such notice to be
accompanied by such other executed instruments or documents as may be
required by the Committee pursuant to this Agreement, and unless otherwise
directed by the Committee, Optionee shall at the time of such exercise
tender the purchase price of the Shares he has elected to purchase. An
Optionee may purchase less than the total number of Shares for which the
Option is exercisable, provided that a partial exercise of an Option may
not be for less than One Hundred (100) Shares. If Optionee shall not
purchase all of the Shares which he is entitled to purchase under the
Options, his right to purchase the remaining unpurchased Shares shall
continue until expiration of the Options. The Options shall be exercisable
with respect of whole Shares only, and fractional Share interests shall be
disregarded.
5. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be $
per Share.
6. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or
bank cashier's check payable to the Corporation, the purchase price for all
Shares then being purchased. Provided, however, the Board of Directors
<PAGE>
may, in its sole discretion, permit payment by the Corporation of the
purchase price in whole or in part with Shares. If the Optionee is so
permitted, and the Optionee elects to make payment with Shares, the
Optionee shall deliver to the Corporation certificates representing the
number of Shares in payment for new Shares, duly endorsed for transfer to
the Corporation, together with any written representations relating to
title, liens and encumbrances, securities laws, rules and regulatory
compliance, or other matters, reasonably requested by the Board of
Directors. The value of Shares so tendered shall be their Fair Market
Value Per Share on the date of the Optionee's notice of exercise.
7. EFFECT OF TERMINATION OF RELATIONSHIP OR DEATH. If Optionee's
relationship with the Corporation as a director terminates (whether
voluntarily or involuntarily because he is not re-elected by the
shareholders), or if optionee dies, all options which have previously
vested shall expire six (6) months thereafter. All unvested options shall
laps and automatically expire. During such six (6) month period (or such
shorter period prior to the expiration of the Option by its own terms),
such Options may be exercised by the Optionee, his executor or
administrator or the person or persons to whom the Option is transferred by
will or the applicable laws of descent and distribution, as the case may
be, but only to the extent such Options were exercisable on the date
Optionee ceased to have a relationship with the Corporation as a director
or died.
8. NONTRANSFERABILITY OF OPTIONS. The Options shall not be
transferable, either voluntarily or by operation of law, otherwise than by
will or the laws of descent and distribution and shall be exercisable
during the Optionee's lifetime only by Optionee.
<PAGE>
9. ADDITIONAL RESTRICTIONS REGARDING DISPOSITIONS OF SHARES. The
Shares acquired pursuant to the exercise of Options shall be subject to the
restrictions set forth in Exhibit "A" attached hereto and incorporated
herein as if fully set forth.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the
term "Adjustment Event" means an event pursuant to which the outstanding
Shares of the Corporation are increased, decreased or changed into, or
exchanged for a different number or kind of shares or securities, without
receipt of consideration by the Corporation, through reorganization,
merger, recapitalization, reclassification, stock split, reverse stock
split, stock dividend, stock consolidation or otherwise. Upon the
occurrence of an Adjustment Event, (i) appropriate and proportionate
adjustments shall be made to the number and kind and exercise price for the
shares subject to the Options, and (ii) appropriate amendments to this
Agreement shall be executed by the Corporation and Optionee if the
Committee determines that such an amendment is necessary or desirable to
reflect such adjustments. If determined by the Committee to be
appropriate, in the event of an Adjustment Event which involves the
substitution of securities of a corporation other than the Corporation, the
Committee shall make arrangements for the assumptions by such other
corporation of the Options. Notwithstanding the foregoing, any such
adjustment to the Options shall be made without change in the total
exercise price applicable to the unexercised portion of the Options, but
with an appropriate adjustment to the number of shares, kind of shares and
exercise price for each share subject to the Options. The determination by
the Committee as to what adjustments, amendments or arrangements shall be
made pursuant to this Section 10, and the extent thereof, shall be final
and conclusive. No fractional Shares shall be issued on account of any
such adjustment or arrangement.
<PAGE>
11. NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Agreement shall obligate the Corporation to employ or
have another relationship with Optionee for any period or interfere in any
way with the right of the Corporation to reduce Optionee's compensation or
to terminate the employment of or relationship with Optionee at any time.
12. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be
___________________.
13. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to
the privileges of stock ownership as to any Shares not actually issued and
delivered to Optionee. No Shares shall be purchased upon the exercise of
any Options unless and until, in the opinion of the Corporation's counsel,
any then applicable requirements of any laws, or governmental or regulatory
agencies having jurisdiction, and of any exchanges upon which the stock of
the Corporation may be listed shall have been fully complied with.
14. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any stock is
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation
may consider necessary in order to comply with the Securities Act of 1933
as then in effect, and may require that the Optionee agree that any sale of
the Shares will be made only in such manner as is permitted by the
Committee. The Committee may in its discretion cause the Shares underlying
<PAGE>
the Options to be registered under the Securities Act of 1933 as amended by
filing a Form S-8 Registration Statement covering the Options and the
Shares underlying the Options. Optionee shall take any action reasonably
requested by the Corporation in connection with registration or
qualification of the Shares under federal or state securities laws.
15. INTENDED TREATMENT AS NON-QUALIFIED STOCK OPTIONS. The Options
granted herein are intended to be non-qualified stock options described in
U.S. Treasury Regulation ("Treas. Reg.") 1.83-7 to which Sections 421 and
422A of the Internal Revenue Code of 1986, as amended from time to time
("Code") do not apply, and shall be construed to implement that intent. If
all or any part of the Options shall not be described in Treas. Reg.
1.83-7 or be subject to Sections 421 and 422A of the Code, the Options
shall nevertheless be valid and carried into effect.
16. PLAN CONTROLS. The Options shall be subject to and governed by
the provisions of the Plan. All determinations and interpretations of the
Plan made by the Committee shall be final and conclusive.
17. SHARES SUBJECT TO LEGEND. If deemed necessary by the
Corporation's counsel, all certificates issued to represent Shares
purchased upon exercise of the Options shall bear such appropriate legend
conditions as counsel for the Corporation shall require.
18. CONDITIONS TO OPTIONS.
18.1 Compliance with Applicable Laws. THE CORPORATION'S
OBLIGATION TO ISSUE SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS
IS EXPRESSLY CONDITIONED UPON THE COMPLETION BY THE CORPORATION OF ANY
REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES UNDER ANY STATE AND/OR
FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY GOVERNMENTAL REGULATORY BODY,
OR THE MAKING OF SUCH INVESTMENT REPRESENTATIONS OR OTHER REPRESENTATIONS
AND UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE
OPTION IN ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION FROM ANY
<PAGE>
SUCH REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE COMMITTEE
SHALL, IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH REQUIRED
REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE REPRESENTATIONS AND AGREEMENTS
THAT THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION (i) IS NOT
PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii) AGREES TO HAVE PLACED UPON
THE FACE AND REVERSE OF ANY CERTIFICATES A LEGEND SETTING FORTH ANY
REPRESENTATIONS AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE COMMITTEE OR
A REFERENCE THERETO.
18.2 SHAREHOLDER APPROVAL OF PLAN. IF THE OPTIONS GRANTED HEREBY
ARE GRANTED PRIOR TO APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE
CORPORATION PURSUANT TO SECTION 8 OF THE PLAN, THE GRANT OF THE OPTIONS
MADE HEREBY IS EXPRESSLY CONDITIONED UPON AND SUCH OPTIONS SHALL NOT BE
EXERCISABLE UNTIL THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE
CORPORATION IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8 OF THE PLAN.
19. MISCELLANEOUS.
19.1 Binding Effect. This Agreement shall bind and inure to the
benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
<PAGE>
19.2 Further Acts. Each party agrees to perform any further acts
and execute and deliver any documents which may be necessary to carry out
the provisions of this Agreement.
19.3 Amendment. This Agreement may be amended at any time by the
written agreement of the Corporation and the Optionee.
19.4 Syntax. Throughout this Agreement, whenever the context so
requires, the singular shall include the plural, and the masculine gender
shall include the feminine and neuter genders. The headings and captions
of the various Sections hereof are for convenience only and they shall not
limit, expand or otherwise affect the construction or interpretation of
this Agreement.
19.5 Choice of Law. The parties hereby agree that this Agreement
has been executed and delivered in the State of California and shall be
construed, enforced and governed by the laws thereof. This Agreement is in
all respects intended by each party hereto to be deemed and construed to
have been jointly prepared by the parties and the parties hereby expressly
agree that any uncertainty or ambiguity existing herein shall not be
interpreted against either of them.
19.6 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be
construed to have any effect on, the remaining provisions of this
Agreement.
19.7 Notices. All notices and demands between the parties hereto
shall be in writing and shall be served either by registered or certified
mail, and such notices or demands shall be deemed given and made
forty-eight (48) hours after the deposit thereof in the United States mail,
postage prepaid, addressed to the party to whom such notice or demand is to
<PAGE>
be given or made, and the issuance of the registered receipt therefor. If
served by telegraph, such notice or demand shall be deemed given and made
at the time the telegraph agency shall confirm to the sender, delivery
thereof to the addressee. All notices and demands to Optionee or the
Corporation may be given to them at the following addresses:
If to Optionee: _________________________
_________________________
_________________________
If to Corporation: NFOX.COM
1850 E. Flamingo Rd. #111
Las Vegas, NV 89119
Such parties may designate in writing from time to time such other place or
places that such notices and demands may be given.
19.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter
hereof, this Agreement supersedes all prior and contemporaneous agreements
and understandings of the parties, and there are no warranties,
representations or other agreements between the parties in connection with
the subject matter hereof except as set forth or referred to herein. No
supplement, modification or waiver or termination of this Agreement shall
be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall constitute a waiver
of any other provision hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
19.9 Attorneys' Fees. In the event that any party to this
Agreement institutes any action or proceeding, including, but not limited
to, litigation or arbitration, to preserve, to protect or to enforce any
right or benefit created by or granted under this Agreement, the prevailing
party in each respective such action or proceeding shall be entitled, in
addition to any and all other relief granted by a court or other tribunal
<PAGE>
or body, as may be appropriate, to an award in such action or proceeding of
that sum of money which represents the attorneys' fees reasonably incurred
by the prevailing party therein in filing or otherwise instituting and in
prosecuting or otherwise pursuing or defending such action or proceeding,
and, additionally, the attorneys' fees reasonably incurred by such
prevailing party in negotiating any and all matters underlying such action
or proceeding and in preparation for instituting or defending such action
or proceeding.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first set forth above.
"CORPORATION"
NFOX.COM
a Nevada corporation
By:
"OPTIONEE"
SPERRY YOUNG & STOECKLEIN
Telephone (702) 794-2590
Facsimile (702) 794-0744
DONALD J. STOECKLEIN
ATTORNEY AT LAW
Practice Limited to Federal Securities
- --------------------------------------------------------------------------
1850 E. Flamingo Rd. Suite 111, Las Vegas, Nevada 89119
September 13, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: NFOX.COM REGISTRATION STATEMENT ON FORM SB-2
Ladies and Gentlemen:
As counsel to NFOX.COM (the "Company"), we are rendering this opinion
in connection with a proposed sale of those certain shares of the Company's
newly-issued Common Stock as set forth in the Registration Statement on
Form SB-2 to which this opinion is being filed as Exhibit 5(a) & 23(a) (the
"Shares") pursuant to Rule 462(b) under the Securities Act of 1933, as
amended. We have examined all instruments, documents and records which we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents submitted to
us as copies.
We express no opinion with respect to (i) the availability of
equitable remedies, including specific performance, or (ii) the effect of
bankruptcy, insolvency, reorganization, moratorium or equitable principles
relating to or limiting creditors' rights generally.
Based on such examination, we are of the opinion that the Shares
identified in the above-referenced Registration Statement will be, upon
effectiveness of the Registration Statement and receipt by the Company of
payment therefor, validly authorized, legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the use of our name wherever
it appears in said Registration Statement, including the Prospectus
constituting a part thereof, as originally filed or as subsequently
amended.
Respectfully submitted,
/s/ Sperry Young & Stoecklein
Sperry Young & Stoecklein
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors NFOX.COM:
September 13, 1999
I consent to the use of my report included herein and to the
references to my firm under the headings "Selected Consolidated Financial
Data" and "Experts" in the prospectus.
Very truly yours,
/s/ Barry L. Friedman
Barry L. Friedman
Certified Public Accountant
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