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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
REGISTRATION NO. ________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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JAGNOTES.COM INC.
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(Name of Small Business Issuer in its Charter)
Nevada
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(State of Incorporation)
8999 - Services, Nec
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(Primary Standard Industrial Classification Code No.)
88-0380546
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(IRS Employer I.D. No.)
2421 Atlantic Avenue, Suite 103, Manasquan, New Jersey 08736, (732) 292-1800
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(Address and Telephone Number of Principal Executive Office
and Principal Place of Business)
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Gary Valinoti Copy to:
President Caldwell R. Campbell, Esq.
JagNotes.com Inc. Day & Campbell, LLP
2421 Atlantic Avenue, Suite 103 3070 Bristol Street, Suite 450
Manasquan, New Jersey 08736 Costa Mesa, California 92626
(732) 292-1800 (714) 429-2900
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(Name, address and telephone number of agent for service)
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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 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 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 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>
<CAPTION>
=========================================================================================================================
Proposed Proposed
Title of each class of maximum maximum
securities to be Amount to be offering price aggregate offering Amount of
registered registered per unit(1) price(1) registration fee
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<S> <C> <C> <C> <C>
Common Stock
$.00001 par value 2,575,520 $ 7.63(3) $19,651,217(3) $5,797
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Common Stock
$.00001 par value 100,000(4) $16.25 $ 1,625,000 $ 479
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TOTALS 2,675,520(2) $21,276,217 $6,276
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee under Rule 457.
(2) Comprised of: (a) 1,785,390 shares presently outstanding, and (b) 890,130
shares issuable upon exercise of options or warrants.
(3) Based upon the average of the bid and asked prices for the Common Stock on
July 27, 1999, as reported by the OTC Bulletin Board.
(4) Comprised of 100,000 shares issuable upon exercise of warrants.
---------------
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.
<PAGE> 2
JAGNOTES.COM INC.
CROSS REFERENCE SHEET
Between Items of Form SB-2 and Prospectus
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION
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<S> <C>
1. Forepart of the Registration Statement and Outside Front Outside Front Cover Page
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Cover Page; Plan of Distribution
9. Legal Proceedings The Company
10. Directors, Executive Officers, Promoters and Control Management and Executive Compensation
Persons
11. Security Ownership of Certain Beneficial Owners and Security Ownership of Certain Beneficial
Management Owners and Management Principal Stockholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Indemnification for Management and Executive Compensation
Securities Act Liabilities
15. Organization Within Last 5 Years Not Applicable
16. Description of Business The Company
17. Management's Discussion and Analysis or Plan of Management's Discussion and Analysis of
Operations Financial Condition and Results of
Operations
18. Description of Property The Company
19. Certain Relationships and Related Transactions Related Party Transactions
20. Market Price for Common Equity and Related Stockholder Market for Common Stock and Related
Matters Stockholder Matters
21. Executive Compensation Management and Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Accountants on Experts
Accounting and Financial Disclosure
</TABLE>
ii
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JAGNOTES.COM INC
PROSPECTUS
2,675,520 shares of Common Stock
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These shares of common stock will be sold from time to time by the
selling stockholders listed on page 32. These stockholders previously purchased
the shares, or will purchase the shares upon exercise of warrants, from the
company in private transactions. The shares are "restricted securities" under
Rule 144 and we are registering them at our own expense to allow the selling
stockholders to resell them to the public without restriction. The company will
not receive any part of the proceeds from the sales.
Our common stock is traded in the over the counter market and quoted on
the Nasdaq OTC Bulletin Board under the symbol "JNOT." The bid and asked prices
on July 27, 1999 were $7.50 and $7.75, respectively.
-----------------
Brokers or dealers effecting transactions in these shares should
confirm that the shares are registered under applicable state law or that an
exemption from registration is available.
THESE SHARES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION NOR HAVE THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INVESTMENT IS HIGHLY SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD PURCHASE THESE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR MORE INFORMATION.
UNTIL _________, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES MAY BE REQUIRED TO DELIVER A PROSPECTUS.
-----------------
July 30, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND IT MAY BE AMENDED IN THE
FUTURE. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SEC, BUT THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
<PAGE> 4
TABLE OF CONTENTS
PAGE
----
Prospectus Summary......................................................... 3
The Company................................................................ 3
Risk Factors............................................................... 6
Note Regarding Forward Looking Statements.................................. 13
Selected Financial Data.................................................... 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 15
Business................................................................... 19
Management and Executive Compensation...................................... 27
Principal Stockholders..................................................... 28
Security Ownership of Certain Beneficial Owners and Management............. 29
Selling Stockholders....................................................... 30
Plan of Distribution....................................................... 32
Description of Capital Stock............................................... 33
Legal Matters.............................................................. 33
Experts.................................................................... 33
Further Information........................................................ 34
Index to Financial Statements.............................................. F-1
2
<PAGE> 5
SUMMARY
This section highlights selected information only and may not contain
all of the information that may be important to you. Please read this entire
Prospectus before making your investment decision. This summary, including the
summary financial information, is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
Throughout this Prospectus, when we refer to "JagNotes" or "the
Company," or when we speak of ourselves generally, we are referring collectively
to JagNotes.com Inc. and its subsidiary unless the context indicates otherwise
or as otherwise noted. When we refer to "New Jag," we are referring to New Jag,
Inc.
JagNotes(TM) is a trademark of the Company.
THE COMPANY
JagNotes is an Internet based provider of financial and investment
information. At our web-site, www.JagNotes.com, our subscribers can access
timely financial information, reports and commentary as well as "JagNotes," a
daily early-morning investment report that summarizes newly issued research,
analyst opinions, upgrades, downgrades and analyst coverage changes from leading
financial institutions. While our target market in the past has been primarily
limited to institutional investors, we are now, through the Internet, targeting
retail subscribers in an effort to rapidly expand our subscriber base. A
detailed description of our business strategy is provided under the heading "The
Company" below.
We incorporated in New Jersey as New Jag, Inc. in 1992. We operated as
New Jag until March 1999, when we were acquired by Professional Perceptions,
Inc., which subsequently changed its name to JagNotes.com Inc. Professional
Perceptions, Inc. was incorporated in Nevada in 1997 to provide "mystery
shopper" services to assist retail businesses in assessing and enhancing
customer satisfaction. Professional Perceptions did not break out of the
development stage, however, and was an inactive business when it acquired New
Jag.
Our address is 2421 Atlantic Avenue, Suite 103, Manasquan, New Jersey
08736 and our telephone number is (732) 292-1800.
3
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THE SELLING STOCKHOLDER OFFERING
These shares of common stock will be sold from time to time by the
selling stockholders listed on page 33. JagNotes will not receive any of the
proceeds from the sale of these shares.
<TABLE>
<S> <C>
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JagNotes.com Inc. Common Stock outstanding as of
July 27, 1999(1) 13,976,290 shares
Shares offered by the selling stockholders(2) 2,675,520 shares
Risk Factors This offering involves a high
degree of risk. Please read "Risk
Factors" beginning on page 6, and
the rest of this Prospectus, before
making your investment decision.
Nasdaq Symbol JNOT
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</TABLE>
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(1) Does not include 890,130 shares issuable upon the exercise of
outstanding options or warrants as of the date of this Prospectus
(2) Includes 890,130 shares issuable upon exercise of warrants held by the
selling stockholders as of the date of this Prospectus
4
<PAGE> 7
SUMMARY FINANCIAL DATA
The consolidated statement of operations data for the years ended July
31, 1998 and 1997 and the consolidated balance sheet data as of July 31, 1998
have been derived from financial statements which have been audited by Stephen
R. Russo, CPA, independent certified public accountant, and included elsewhere
in this Prospectus. The consolidated statement of operations data for the nine
months ended April 30, 1999 and 1998 and the consolidated balance sheet dated as
of April 30, 1999 have not been audited, but have been derived from unaudited
financial information prepared, in management's opinion, on the same basis as
the audited financial statements. In the management's opinion, this unaudited
financial information includes all adjustments, consisting of normal recurring
adjustments, necessary to present such information fairly.
CONSOLIDATED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Fiscal Year Ended July 31, Nine Months Ended April 30,
---------------------------- ---------------------------
1998 1997 1999 1998
--------- --------- --------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Subscription Revenues $ 932,553 $ 952,385 $ 641,963 $ 738,294
Net Income (Loss) $ 2,649 $ (23,361) $ (41,618) $ (2,265)
Basic Net Earnings (Loss) per Share $ -- $ (.01) $ (.01) $ --
Basic Weighted Average Common
Shares Outstanding 3,500,000 3,500,000 7,461,901 3,500,000
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
Fiscal Year Ended July 31, 1998 April 30, 1999
------------------------------- --------------
(Unaudited)
<S> <C> <C>
Total Assets $ 171,812 $8,299,329
Total Liabilities $ 280,418 $ 938,137
Stockholders' Equity (Deficiency) $(108,606) $7,361,192
</TABLE>
5
<PAGE> 8
RISK FACTORS
An investment in these shares is highly speculative and involves a high
degree of risk. In this section of the Prospectus we highlight certain specific
risks with respect to JagNotes, its business and the purchase of these shares.
These risk factors are not a complete list of all risks factors that may affect
the Company or its stock. Please carefully consider these risk factors and the
other information contained in this Prospectus, before deciding to purchase
these shares.
WE ARE NEW TO THE RETAIL MARKETPLACE AND TO THE INTERNET
Until recently our business was limited to distributing reports by fax
to a limited number of institutional traders, brokers, investment managers and
the like. We did not launch our web site or begin to focus on expansion into the
public retail market until December 1998. Accordingly, there is a limited
operating history upon which to judge our current operations. In deciding
whether to purchase these shares, you should consider our prospects in light of
the risks, expenses, and difficulties frequently encountered by a small business
beginning operations in a highly competitive industry. We expect our operating
expenses to increase significantly as a result of our expansion of the business
and, since we have a limited operating history marketing our products and
services to the public over the Internet, we cannot assure you that our business
will be profitable or that we will ever generate sufficient revenues to meet our
expenses and support our anticipated activities. See "Business" and "Financial
Statements."
WE HAVE A LIMITED OPERATING HISTORY AND WE HAVE LOST, AND MAY CONTINUE TO LOSE,
MONEY
We have only a limited operating history and we have incurred losses to
date of approximately $224,000. The company expects to incur additional losses
in 1999. In addition, we expect to continue to incur significant operating
expenses. As a result, we will need to generate significant revenues to achieve
profitability, which may not occur. Even if we do achieve profitability, we may
be unable to sustain or increase profitability on a quarterly or annual basis in
the future. See "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
WE ARE IN AN INTENSELY COMPETITIVE BUSINESS WITH LOW BARRIERS TO ENTRY
Providing financial information and analysis over the Internet is a
relatively new business, but it is already intensely competitive. An increasing
number of web-based financial information providers are competing for
subscribers, customers, advertisers, content providers, analysts, commentators
and staff, and we continue to face competition from traditional news and
information sources including television and print. We expect competition from
both sources to intensify and increase in the future.
Our largest competitors include:
o Online financial news and information providers including
TheStreet.com, MarketWatch.com and The Motley Fool
o Traditional media sources such as The Wall Street Journal, Barrons,
CNNfn, and CNBC, many or most of whom also have an Internet
presence
o Terminal based financial news providers including Bloomberg,
Reuters and Dow Jones
o Online brokerage firms such as E*Trade, Charles Schwab or DLJ
Direct
o Internet giants such as Yahoo, Go Network and America Online
6
<PAGE> 9
Many of our current and potential competitors have greater name
recognition, financial, technical or marketing resources, and more extensive
customer bases than we do, all of which could be leveraged to gain market share
to our detriment.
The barriers to entry into our business are relatively low - i.e., it
is not difficult for new competitors to enter the market. Much of the
information we provide is publicly available and we do not have any patented or
otherwise protected technologies that would preclude or inhibit competitors from
entering our markets. Our current and future competitors may develop or offer
services that have significant price, substantive, creative or other advantages
over the services we provide. If they do so and we are unable to respond
satisfactorily, our business and financial condition will likely be adversely
effected. See "The Company - Competition."
OUR GROWTH AND SUCCESS DEPENDS ON CONTINUED GROWTH AND COMMERCIAL ACCEPTANCE OF
THE INTERNET
The Internet has grown rapidly in the past few years, but we cannot
guarantee you that people, business, advertisers and those seeking financial
information specifically, will continue to accept and use the Internet. Our
projections take into account, and our success depends on, continued growth and
widespread acceptance of the Internet as a source of information and vehicle for
commerce. If the Internet does not continue to grow generally, if it loses or
does not continue to gain acceptance as a commercial medium, or if the
technology behind the Internet cannot adequately support continued growth, our
business will suffer or fail.
WE MAY NOT BE ABLE TO GENERATE ENOUGH CASH TO SUPPORT OUR OPERATIONS
We may not be able to generate enough cash from our operations to
support our targeted level of operations. If our plans change, our assumptions
prove to be inaccurate or we are otherwise unable to generate sufficient
revenues, income or cash flows, we may require additional funds to maintain our
operations and in any case we will require more capital to achieve our business
objectives. If such funds are unavailable we may have to substantially curtail
operations or cease operations altogether. If we do require additional funds we
will have to seek additional equity or debt financing, bank loans, or other
financing to sustain our planned expansion and growth. Such financing may not be
available and, even if it is, it may be on terms that are materially adverse to
your interests with respect to dilution of book value, dividend preferences,
liquidation preferences, or other terms.
We do not have any current commitments for additional financing and we
cannot guarantee that we would be able to obtain additional financing if we
needed it. If our operations require additional financing and we are unable to
obtain it on reasonable terms, we could be forced to restructure, file
bankruptcy, sell assets or cease operations, any of which could put your
investment dollars at significant risk. See "Management's Discussion and
Analysis."
WE MAY NOT BE ABLE TO ADEQUATELY EXPAND OUR SUBSCRIBER BASE
We must expand our subscriber base to be successful. We have put, and
will continue to put, measures in place to expand our subscriber base, but we
cannot promise you that we will be successful in doing so. The measures we
implement may be ineffective at generating subscriptions, our competitors may be
more successful than we are in attracting customers, the number of Internet
users seeking or willing to pay for financial information may not increase or
may decrease, all of which would be to our detriment. Moreover, many of our
competitors offer financial information for free and could continue to do so at
an increasing rate. Our current and potential subscribers may be unwilling to
pay for our service if they feel they can receive comparable information for
free. If we cannot expand our subscriber base, we will have little, if any,
financial success. See "The Company - Our Business Strategy."
7
<PAGE> 10
WE MAY NOT BE SUCCESSFUL AT BUILDING BRAND AWARENESS OR BUILDING STRATEGIC
RELATIONSHIPS
Our growth and success depends in part on our ability to build
awareness of the JagNotes.com name. The JagNotes.com name has only limited
recognition within the financial community and little if any recognition among
the general public. Our ability to build our subscriber base, offer new services
or otherwise expand the business will be limited if we cannot increase that
recognition. We cannot guarantee that we will be successful in doing so. See
"The Company - Our Business Strategy."
WE MAY EXPERIENCE DIFFICULTIES IN DEVELOPING NEW AND ENHANCED SERVICES AND
FEATURES FOR OUR WEB SITE
We believe that our Web site will be more attractive to subscribers if
we introduce additional or enhanced services in the future in order to retain
our current users and attract new users. If we introduce a service that is not
favorably received, our current users may not continue using our service as
frequently. New users could also choose a competitive service over ours.
We may also experience difficulties that could delay or prevent us from
introducing new services. Furthermore, these services may contain errors that
are discovered after the services are introduced. We may need to significantly
modify the design of these services on our Web site to correct these errors. Our
business could be adversely affected if we experience difficulties in
introducing new services or if these new services are not accepted by users.
WE MAY NOT SUCCESSFULLY ATTRACT OR MANAGE ACQUISITIONS AND STRATEGIC ALLIANCES
Our growth and expansion plans include evaluating and pursuing
potential acquisitions. Acquisitions entail a number of risks and difficulties.
One or more acquisitions would significantly strain our managerial, operational
and financial resources and a high level of managerial skill is required to
successfully assimilate an acquired company. We have little or no experience in
evaluating acquisitions and assimilating acquired companies, and we cannot
guarantee that we will be able to successfully do so in the future.
Our growth and expansion plans also include the pursuit of strategic
alliances, partnerships and/or joint ventures. A high level of managerial skill
is also required to successfully evaluate, implement and maintain such
relationships. There will also be intense competition for these alliances from
our current and future competitors. If we are unable to successfully enter into
or maintain such strategic relationships, or if we are unable to do so on
reasonable terms, our business, and your investment, may be adversely affected.
WE MAY NOT BE ABLE TO SUCCESSFULLY ESTABLISH A FOREIGN MARKET
Our growth strategy involves expansion into European, Asian or other
foreign markets, but we have little or no experience in such markets.
Accordingly, we cannot guarantee that we will be able to successfully implement
our foreign growth strategy or that we can otherwise successfully expand into
foreign markets.
WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH
Our business strategy requires us to rapidly grow our business. We may
not be able to do so, however, and if we do, that growth will put a strain on
our financial, managerial, technical and operational resources. Growth on this
scale will demand that we rapidly and successfully expand our staff and
operations and will require a high level of managerial skill. We have little
experience in managing this sort of expansion. If we fail to successfully do so,
our business and your investment will likely suffer.
8
<PAGE> 11
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
To protect our rights to our intellectual property, we rely on a
combination of trademark and copyright law, trade secret protection,
confidentiality agreements and other contractual arrangements with our
employees, affiliates, clients, strategic partners and others. The protective
steps we have taken may be inadequate to deter misappropriation of our
proprietary information. We may be unable to detect the unauthorized use of, or
take appropriate steps to enforce, our intellectual property rights. Effective
trademark, copyright and trade secret protection may not be available in every
country in which we offer or intend to offer our services. Failure to adequately
protect our intellectual property could harm our brand, devalue our proprietary
content and affect our ability to compete effectively. Further, defending our
intellectual property rights could result in the expenditure of significant
financial and managerial resources, which could materially adversely affect our
business, results of operations and financial condition.
WE MAY HAVE TO DEFEND AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AND
LIBEL AND DEFAMATION CLAIMS, WHICH MAY CAUSE SIGNIFICANT OPERATIONAL
EXPENDITURES
Although we believe that our proprietary rights do not infringe on the
intellectual property rights of others, other parties may assert infringement
claims against us or claims that we have violated a patent or infringed a
copyright, trademark or other proprietary right belonging to them. Licensed
third-party content is a major component of our site. In these license
agreements, the licensors have generally agreed to defend, indemnify and hold us
harmless with respect to any claim by a third party that the licensed content
infringes any patent or other proprietary right. Further, the license agreements
with our commentators also generally require them to defend, indemnify and hold
us harmless with respect to any third party claim for libel or defamation in
connection with our commentators' work product. We cannot assure you that these
provisions will be adequate to protect us from such claims. Any such claims,
even if not meritorious, could result in the expenditure of significant
financial and managerial resources on our part, which could materially adversely
affect our business, results of operations and financial condition.
WE DEPEND ON KEY PEOPLE IN MANAGEMENT AND OPERATIONS
Our success will be largely dependent on our ability to retain our
existing executive officers and to attract and retain additional qualified
managers, officers and other key personnel in the future. We cannot guarantee
that we will be able to do so. We have not entered into written or formal
employment agreements with any of these people, nor do we have key person life
insurance policies on any of our key personnel. If we lose the services of any
of our key personnel or are unable to attract, hire, train and retain qualified
officers, managers and operating, marketing and financial personnel, our
business, and your investment, could be adversely affected. See "Business" and
"Management."
WE MAY NOT BE ABLE TO ATTRACT AND RETAIN ANALYSTS AND COMMENTATORS
Our success will in large part depend on our ability to attract and
retain the services of top analysts and commentators. Competition for these
professionals is intense and we expect it to become more so. As of the date of
this Prospectus, we have contracts with terms of up to two years with the
following analysts and commentators: Dan Dorfman; Elaine Garzarelli;
Mastrapasqua & Associates, Inc.; Vince Boening; Seth Tobias; Ralph Bloch; Tom
Taulli; Dorsey, Wright & Associates, Inc.; Mark Leibovit; L. Douglas Lee; and
E*Offering Corp., and we intend to enter into similar agreements with additional
commentators in the future. We cannot guarantee that we will be able to maintain
and/or renew these contracts, nor can we guarantee that we will be able to
attract additional or replacement commentators and analysts now or in the
future. If we are unable to do so, our business could suffer.
9
<PAGE> 12
WE MAY FACE DIFFICULTIES CONCERNING CONTINUED AVAILABILITY OF OUR SOURCES OF
INFORMATION FOR CERTAIN PRODUCTS
Certain products that we offer through our site, including JagNotes and
the Rumor Room, rely on information from independent third party sources. We do
not maintain written agreements with these sources for the provision of this
information, therefore we cannot guarantee that any of these sources will
continue to provide the information necessary to maintain these products as
viable content on our site. If information from these sources is altered,
curtailed or discontinued (in whole or part) this could adversely affect the
viability of these products, or even result in our inability to further offer
these products through our site. This, in turn, could decrease the demand for
our site or otherwise materially adversely affect our business.
WE MAY SUFFER CASH FLOW SHORTAGES AS WE TRANSITION TO INTERNET-BASED
SUBSCRIPTIONS
Our current institutional and retail subscribers pay a higher
subscription rate than our retail Internet subscribers will pay. We expect our
current retail subscribers to convert to the cheaper Internet-based pricing
structure, which could result in a reduction in short term revenues. It is also
possible that a portion of our institutional subscriber base will attempt to
discontinue service under their current fee structure and re-subscribe at the
lower Internet retail rate, which also could result in a reduction in revenues.
SYSTEM SLOWDOWNS OR FAILURES COULD HURT OUR BUSINESS
In order for our business to be successful, we must provide
consistently fast and reliable access to our web site. Unfortunately, slowdowns,
breakdowns or failures in our computer and communication systems, or of the
Internet generally, many of which are beyond our control, could jeopardize
access to our site at any time. In addition, heavy traffic on our site or on the
Internet generally could severely slow access to, and the performance of, our
site. Repeated system slowdowns will likely impair our ability to service and
maintain our existing subscriber base and attract new subscribers. Failures of
or damage to our computer or communications systems could render us unable to
operate our site, or even our business, for extended periods of time.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OURSELVES AGAINST SECURITY RISKS
All Internet businesses are subject to electronic and computer security
risks. We have taken steps to protect ourselves from unauthorized access to our
systems and use of our site, but we cannot guarantee that these measures will be
effective. If our security measures are ineffective, unauthorized parties could
alter, misappropriate, or otherwise disrupt our service or information. If such
unauthorized parties were able to access certain of our, or our customers',
proprietary information, including subscribers' credit card numbers, we would
face significant unexpected costs and a risk of material loss, either of which
could adversely affect our business.
OUR BUSINESS IS DEPENDENT ON THE CONTINUED SUCCESS OF THE ECONOMY AND THE RISE
OF THE STOCK MARKET
The recent success of the economy generally and of the stock market
specifically has generated unprecedented public interest in the stock market.
Our success as retail financial information providers depends upon the continued
maintenance or growth of this interest. A number of factors that are out of our
control could lead to a general economic downturn or a depressed stock market.
If this were to happen, it is likely that we would lose a significant percentage
of our then current and potential subscriber base.
10
<PAGE> 13
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY THE YEAR 2000 PROBLEMS OF OTHER
PARTIES
We believe that we are Year 2000 compliant (see the "Year 2000
Readiness Disclosure" on page 18). Nevertheless, we cannot guarantee that our
subscribers, potential subscribers, advertisers, vendors and others on whom we
depend to successfully operate our business are Year 2000 compliant. If any of
these parties, including a significant number of our subscribers, suffer
disruptions or difficulties as a result of the Year 2000 problem, our business
could be adversely affected in the short or long term.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE WEB COULD INCREASE
OUR COSTS OF TRANSMITTING DATA AND INCREASE OUR LEGAL AND REGULATORY
EXPENDITURES AND COULD DECREASE OUR READER BASE
Existing domestic and international laws or regulations specifically
regulate communications or commerce on the web. Further, laws and regulations
that address issues such as user privacy, pricing, online content regulation,
taxation and the characteristics and quality of online products and services are
under consideration by federal, state, local and foreign governments and
agencies. Several telecommunications companies have petitioned the federal
Communications Commission to regulate Internet service providers and online
services providers in a manner similar to the regulation of long distance
telephone carriers and to impose access fees on such companies. This regulation,
if imposed, could increase the cost of transmitting data over the web. Moreover,
it may take years to determine the extent to which existing laws relating to
issues such as intellectual property ownership and infringement, libel,
obscenity and personal privacy are applicable to the web. The Federal Trade
Commission and governmental agencies in certain states have been investigating
certain Internet companies regarding their use of personal information. We could
incur additional expenses if any new regulations regarding the use of personal
information are introduced or if these agencies chose to investigate our privacy
practices. Any new laws or regulations relating to the web, or certain
application or interpretation of existing laws could decrease the demand of our
web site or otherwise materially adversely affect our business.
A LARGE PERCENTAGE OF OUR STOCK IS OWNED BY RELATIVELY FEW PEOPLE, INCLUDING
OFFICERS AND DIRECTORS
As of the date of this Prospectus, our officers and directors
beneficially owned or controlled a total of 3,087,500 shares, or approximately
22% of our outstanding Common Stock. See "Security Ownership of Certain
Beneficial Ownership and Management." If you purchase shares covered by this
Prospectus, you may be subject to certain risks due to the concentrated
ownership of our Common Stock. For example, these stockholders could, if they
were to act together, affect the outcome of other stockholder votes which could,
among other things, affect elections of directors, delay or prevent a change in
control or other transaction that might be beneficial to you as a stockholder.
A LARGE NUMBER OF OUR SHARES ARE ELIGIBLE FOR FUTURE SALE
We had 13,976,290 shares of Common Stock outstanding on July 27, 1999.
Of these, approximately 5,804,650 are freely tradeable and approximately
8,171,640 shares (including 1,785,390 of the shares covered by this Prospectus)
are "restricted securities" under Rule 144 of the Securities Act of 1933. An
additional 890,130 shares underlying options and warrants (all of which are
covered by this Prospectus) will be restricted securities if and when they are
issued. Restricted securities may be sold only if they are registered under the
Securities Act or if an exemption from the registration requirements of the
Securities Act is available. Rule 144 provides certain terms under which
stockholders may sell restricted stock.
Generally, under Rule 144, each person having held restricted
securities for one year may, every three months, sell in ordinary brokerage
transactions up to the greater of one percent (1%) of our then outstanding
Common Stock or the average weekly volume of trading of our shares during the
preceding four calendar weeks. A person who has not been an affiliate of the
Company for at least three months immediately preceding the sale and who has
beneficially owned shares of the Common Stock for the currently required period
of two years may sell his or her restricted shares without regard to any of the
limitations described above.
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<PAGE> 14
Approximately 3,500,000 of the currently outstanding restricted
securities may be eligible for resale under Rule 144 on or after March, 2000 and
approximately 1,665,390 currently outstanding restricted securities may be
eligible for resale under Rule 144 on or after April and May 2000. 890,130
shares underlying options and warrants will be eligible for resale from time to
time following their issuance and expiration of the holding period described
above.
Sales, or even the mere prospect of sales, of restricted stock by our
current or future stockholders under Rule 144 or otherwise, may have a
depressive effect on the price of our stock See "Principal Stockholders."
THE MARKET FOR OUR STOCK IS LIMITED
Our stock is traded on the Nasdaq OTC Bulletin Board, but there was
only very limited and sporadic trading activity prior to March 26, 1999, and
trading activity since that time has fluctuated and at times been limited. We
cannot guarantee that a consistently active trading market for our stock will
develop at any time in the future, especially while we remain on the Bulletin
Board. See "Market for Common Stock and Related Stockholder Matters.
OUR STOCK - AND TECHNOLOGY AND INTERNET STOCKS GENERALLY - HAVE BEEN AND MAY
CONTINUE TO BE VOLATILE
The market for our stock has been and is likely to continue to be
highly volatile and subject to wide price fluctuations. These price variations
are the result of many factors, most of which are beyond our control.
Furthermore, Internet and technology related stocks generally have been subject
to wide fluctuations in price and volume that often appear to be unrelated to
the operating success of these companies. Such volatility can present risks for
investors. Moreover, such volatility often leads to securities litigation and,
although we are not aware of any pending or threatened suit or basis therefor,
such suits are costly and we could be adversely affected if such a suit were
brought against us.
NO DIVIDENDS
We have never paid any cash or other dividends on our common stock and
we expect to use foreseeable future earnings, if any, to grow the business or
for other corporate purposes. We do not expect to pay cash or any other
dividends on our Common Stock in the foreseeable future. See "Dividend Policy."
FAILURE TO MAINTAIN OUR REPUTATION FOR TRUSTWORTHINESS MAY REDUCE THE NUMBER OF
OUR READERS, WHICH MAY HARM OUR BUSINESS
It is very important that we maintain our reputation as a trustworthy
provider of financial news and commentary. The occurrence of events, including
our misreporting a news story or the non-disclosure of stock ownership by one or
more of our commentators, could harm our reputation for trustworthiness. These
events could result in a significant reduction in the number of our readers,
which could materially adversely affect our business, results of operations and
financial condition.
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<PAGE> 15
NOTE REGARDING FORWARD LOOKING STATEMENTS
Some of the statements in this Prospectus are forward-looking
statements within the meaning of the federal securities laws. Generally
forward-looking statements can be identified by the use of terms like "may,"
"will," "expect," "anticipate," "plan," "hope" and similar words, although this
is not a complete list and some forward-looking statements may be expressed
differently. Our discussions relating to the Year 2000 problem, our business
strategy, our competition, and the future of the Internet, among others, contain
such statements. Our actual results may differ materially from those contained
in our forward-looking statements for a variety of reasons including those
expressly set forth under "Risk Factors" or as otherwise detailed from time to
time in our filings with the SEC.
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<PAGE> 16
SELECTED FINANCIAL DATA
The consolidated statement of operations data for the years ended July
31, 1998 and 1997 and the consolidated balance sheet data as of July 31, 1998
have been derived from financial statements of the Company which have been
audited by Stephen R. Russo, CPA, independent certified public accountant, and
included herein. The unaudited consolidated statement of operations data for the
nine months ended April 30, 1999 and 1998 and the unaudited consolidated balance
sheet dated as of April 30, 1999 have been derived from unaudited financial
information prepared, in management's opinion, on the same basis as the audited
financial statements. In management's opinion, this unaudited financial
information includes all adjustments, consisting of normal recurring
adjustments, necessary to present such information fairly.
CONSOLIDATED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Fiscal Year Ended July 31, Nine Months Ended April 30,
---------------------------- ----------------------------
1998 1997 1999 1998
--------- --------- --------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Subscription Revenues $ 932,553 $952,385 $ 641,963 $ 738,294
Cost of Revenues $ 112,362 $151,629 $ 107,881 $ 87,073
Operating Expenses $ 782,692 $791,487 $ 574,862 $ 651,221
Net Income (Loss) $ 2,649 $(23,361) $ (41,618) $ (2,265)
Basic Earnings (Loss) per Share $ -- $ (.01) $ (.01) $ --
Basic Weighted Average Common
Shares Outstanding 3,500,000 3,500,000 7,461,901 3,500,000
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
Fiscal Year Ended July 31, 1998 April 30, 1999
------------------------------- --------------
(Unaudited)
<S> <C> <C>
Total Assets $ 171,812 $8,299,329
Total Liabilities $ 280,418 $ 938,137
Stockholders' Equity (Deficiency) $(108,606) $7,361,192
</TABLE>
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following discussion should be read in conjunction with the
consolidated financial statements and the notes to those statements that appear
elsewhere in this Prospectus. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and elsewhere in this prospectus, particularly
in " Risk Factors".
RESULTS OF OPERATIONS
Nine Months Ended April 30, 1999 as compared to the nine months ended April 30,
1998
Subscription Revenues:
Subscription revenues are derived from annual, semi-annual, quarterly
and monthly subscriptions to the Company's product "Jag Notes". Jag Notes is a
daily consolidated investment report that summarizes newly issued research,
analyst opinions, upgrades, downgrades and analyst coverage changes from leading
financial institutions that was originally faxed to a limited audience of
financial professionals. During the nine months ended April 30, 1999, the
Company completed the development of its Web page and changed its focus to also
include the retail investor. As a result of this change in focus, the Company's
revenues showed a decline for the nine months ended April 30, 1999 of
approximately $96,000 to approximately $642,000 from approximately $738,000 for
the nine months ended April 30, 1998. Management believes the decline in
revenues will be temporary and that in periods subsequent to April 30, 1999, the
Company's revenues will reflect the introduction of the monthly $9.95 retail
customer subscription rate in April 1999.
Cost of Revenues:
Cost of revenues includes the cost to transmit the product over the
telephone and fax lines, as well as the on-line service charges for the
Company's Web page. During the nine months ended April 30, 1999, the cost of
revenues increased by approximately $21,000 to approximately $108,000 from
approximately $87,000 for the nine months ended April 30, 1998. The primary
cause of this increase was the introduction of the on-line services during the
nine months ended April 30, 1999 which accounted for approximately $14,000 of
this increase. The balance of the increase was attributable to an overall
increase in the number of telephone and fax lines in anticipation of the
Company's growth in periods subsequent to April 30, 1999.
Selling Expenses:
Selling expenses consist primarily of advertising and other costs
incurred in order to promote the Company's business. During the nine months
ended April 30, 1999, the Company's selling expenses increased by approximately
$40,000 to approximately $79,000 from $39,000 for the nine months ended April
30, 1998. This increase was primarily attributable to an increase in travel
expenses incurred in connection with the Company's new focus on retail customers
and the introduction of the new Web page.
General and Administrative Expenses:
General and administrative expenses consist primarily of compensation
and benefits for the officers, other compensation, occupancy costs, professional
fees and other office expenses. General and administrative expenses decreased by
approximately $91,000 during the nine months ended April 30, 1999 to
approximately $496,000 from approximately $587,000 for the nine months ended
April 30, 1998. This decrease was primarily attributable to (1) the Company
accruing approximately a $92,000 profit sharing contribution during the nine
months ending April 30, 1998 and none for the same period ending April 30, 1999,
and (2) the reduction in the Company's compensation levels by approximately
$50,000 during the nine months ended April 30, 1999 compared to the levels
incurred for the nine
15
<PAGE> 18
months ended April 30, 1998. These decreases were partially offset by an
increase of approximately $44,000 in fees for various consultants and other
non-employees who provided services to the Company. Other general and
administrative expenses were in line in the nine months ended April 30, 1999 and
1998.
Operating income (loss):
As a result of the above, the Company incurred an operating loss of
approximately $42,000 for the nine months ended April 30, 1999, as compared to a
loss of approximately $2,000 for the comparable period ending April 30, 1998.
Year Ended July 31, 1998 as compared to year ended July 31, 1997
Subscription Revenues:
Until March 1998 when it introduced its Web page, the Company only
targeted a limited audience of financial professionals for its subscriptions .
That accounted for revenues approximating the same levels for both fiscal years
ending July 31, 1998 ($933,000) and 1997 ($952,000). For both periods
approximately 70% of the subscriptions were on the quarterly basis.
Cost of Revenues:
Cost of revenues decreased by approximately $39,000 from approximately
$151,000 for the year ended July 31, 1997 to approximately $112,000 for the year
ended July 31, 1998. The decrease was mainly attributable to the Company paying
outside contributors approximately $17,000 of fees during the year ended July
31, 1997 and a minimal amount for the year ended July 31, 1998. The balance of
the decrease was attributable to a reduction in telephone and fax charges.
Selling Expenses:
During the year ended July 31, 1998, selling expenses decreased by
approximately $17,000 from approximately $55,000 for the year ended July 31,
1997 to approximately $38,000 for the year ended July 31, 1998. This decrease
was associated with a general reduction in corporate spending in this area as
the Company focused on developing its Web page.
General and Administrative Expenses:
General and administrative expenses increased by approximately $7,000
from approximately $737,000 for the year ended July 31, 1997 to approximately
$744,000 for the year ended July 31, 1998. The increase was mainly attributable
to (1) payments of $28,000 as directors' fees for the year ended July 31, 1998
and none during the year ended July 31, 1997, (2) an increase in insurance
expense of approximately $10,000 and (3) a general increase in other corporate
expenses. These increases were partially offset by a reduction in the amount
contributed to the Company's profit sharing plan of approximately $52,000 to
approximately $51,000 for the year ended July 31, 1998 from approximately
$103,000 for the year ended July 31, 1997.
Operating income:
As a result of the Company reducing its operating costs as discussed
above, it was able to increase its income from operations from approximately
$9,000 for the year ended July 31, 1997 to approximately $37,000 for the year
ended July 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
From inception through May 1999, the Company funded its operations from
the sale of 6,655,390 shares of common stock and 555,130 warrants to purchase
shares of common stock. The sales were made through private placements exempt
from registration under the Securities Act of 1933. Each warrant entitles the
holder to purchase one
16
<PAGE> 19
share of common stock at $14.00 per share through April 2000. These private
placements raised the Company approximately $6,565,000. As of April 30, 1999,
the Company had working capital of approximately $7,328,000.
Cash provided by operations was approximately $400,000 for the nine
months ended April 30, 1999 as compared to approximately $25,000 for the nine
months ended April 30, 1998. A significant component of this increase is the
accrual of fees incurred in completing the private placements which were not
paid until after April 30, 1999.
Cash provided by financing operations was approximately $7,500,000 for
the nine months ended April 30, 1999 as compared to none in the nine months
ended April 30, 1998. The approximate $7,500,000 was the net proceeds from the
private placements which were completed during March and April 1999.
The Company's operations did not generate any significant amount of
cash during either the year ended July 31, 1998 or 1997.
The Company believes that its current cash, will be sufficient to meet
the anticipated needs for working capital and capital expenditures for at least
the next twelve months. Thereafter, if the cash generated from operations is not
sufficient to fund its liquidity requirements or planned growth, 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 or strategic alliances, if needed, will be available on terms
attractive to the Company, or at all. The failure to raise capital when needed
could materially adversely affect the Company's business, results of operations
and financial condition. The Company does not believe that its business is
subject to seasonal trends or inflation. On an ongoing basis, the Company will
attempt to minimize any effect of inflation on its operating results by
controlling operating costs and whenever possible, seeking to insure that
subscription rates reflect increases in costs due to inflation.
YEAR 2000 READINESS DISCLOSURE
The Company is in the process of implementing and executing a Year 2000
assessment with the objective of having all of its significant business systems
functioning properly with respect to the Year 2000 issue before January 1, 2000.
This process includes (i) evaluating the Company's information technology's time
and date dependent code; (ii) obtaining assurances or warranties from
third-party vendors and licensors of material hardware, software and services
that are related to the delivery of the Company's service; and (iii) evaluating
the need for, and preparing and implementing a contingency plan if required.
To date the Company's assessment has determined that its material
internally developed software and systems are Year 2000 compliant and its
material hardware, software and service vendors have informed them that the
products used are compliant. All material commercial software on which the
Company depends on is either year 2000 compliant or will be updated to be
compliant in the normal course of business.
The Company is not currently aware of any operational issues or costs
associated with preparing its systems for the Year 2000. Nevertheless it may
experience material unexpected costs caused by undetected errors or defects in
the technology used in its systems or because of the failure of a material
vendor to be Year 2000 compliant.
Notwithstanding its Year 2000 compliance efforts, the failure of a
material system or vendor, or the Internet generally, to be Year 2000 compliant
could harm the operation of its systems or prevent or delay the delivery of its
service being offered, or have other unforeseen, material adverse consequences
on the Company.
The Company is also subject to external Year 2000-related failures or
disruptions that might generally affect industry and commerce, such as utility
or transportation Company Year 2000 compliance failures and related service
interruptions. All of these factors could materially effect its business,
results of operations and financial condition.
The Company has not yet developed a contingency plan to address
situations that may result if it is unable to achieve Year 2000 compliance. The
cost of developing and implementing such a plan, if necessary, could be
material.
17
<PAGE> 20
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded in the over-the-counter
market on the OTC Bulletin Board under the symbol JNOT since approximately March
26, 1999. Prior to that date, the stock was traded under the symbol PFSS with
only limited and sporadic trading.
The following table reflects quarterly high and low bid prices of the
Company's Common Stock for the last year as reported by the OTC Bulletin Board.
The average daily trading volume during this period was 141,289 shares, with a
high daily volume of 1,335,700 shares and a low of 10,100 shares. Such prices
are inter-dealer quotations without retail mark-ups, mark-downs or commissions,
and may not represent actual transactions.
High Low
------ ------
1999
----
Third Quarter* $21.50 $7.375
Fourth Quarter** $13.50 $5.06
- ---------------
* As described above, third quarter information is limited to the period
from March 26 through April 31, 1999.
** Fourth quarter information is limited to the period from May 1, 1999
through July 27, 1999
As of July 27, 1999, there were approximately 173 stockholders of
record of the Company's Common Stock. On July 27, 1999, the closing bid price
for the Company's Common Stock was $7.50.
The Company has never paid any cash dividends on its Common Stock and
anticipates that, for the foreseeable future, no cash dividends will be paid on
its Common Stock. Payment of future cash dividends will be determined by the
Company's Board of Directors based upon conditions then existing, including the
Company's financial condition, capital requirements, cash flow, profitability,
business outlook and other factors. In addition, the Company's future credit
arrangements may restrict the payment of dividends.
18
<PAGE> 21
THE COMPANY
OUR BUSINESS GENERALLY
We have been providing financial and investment information within the
investment community since 1989. In May 1999, we began offering our services to
the general public for the first time through our web site. At www.JagNotes.com,
our subscribers access timely financial data and reports and commentary from the
financial community.
We incorporated in New Jersey as New Jag, Inc. in 1992. Prior to that
time (from 1989-1992) we operated as an unincorporated business entity. We
operated as New Jag until March 1999, when we were acquired by Professional
Perceptions, Inc., which subsequently changed its name to JagNotes.com Inc.
Professional Perceptions, Inc. was incorporated in Nevada in 1997 to provide
"mystery shopper" services to assist retail businesses in assessing and
enhancing customer satisfaction. Professional Perceptions did not break out of
the development stage, however, and was an inactive business when it acquired
New Jag. New Jag continues as the wholly owned subsidiary of JagNotes.
Until recently, we targeted only a limited audience of financial
professionals and, although our subscriber base did grow gradually through
referrals and word of mouth, we did not engage in organized sales and marketing
efforts. As discussed in more detail below, in 1999 we decided to change our
focus by expanding onto the Internet and targeting retail subscribers with the
hope of rapidly expanding our subscriber base and, accordingly, our business.
OUR INDUSTRY GENERALLY
The growth of the Internet has changed the way investors seek
information and manage their portfolios. Individual investors are increasingly
seeking access to information that was formerly available only to financial
professionals. Professional investors who have traditionally relied on print and
other media for information are demanding faster information and greater
accessibility. As more and more investors begin to trade online, we expect the
demands for financial information over the Internet to increase significantly.
It was recently estimated that 25% of retail stock trades in the U.S.
are executed on the Internet while an estimated 760 U.S. households per hour are
accessing the Internet for the first time.(1) An even more recent report by
Credit Suisse First Boston Corp. indicated that online trading of securities
grew 47.3% during the first quarter of 1999, the industry's single highest
sequential growth rate in history. The use of the Internet to research
securities may even exceed its use for trading. The latest U.S. Trust Survey of
Affluent Americans has concluded that while one-third of the most affluent 1% of
Americans trade online, two-thirds of them use computers to research
investments, exceeding the percent that uses the Internet for shopping or travel
planning.
- ------------------------
(1) Win Treese, The Internet Index, February 28, 1999 at
www.openmarket.com/intindex/99-02.htm.
19
<PAGE> 22
OUR PRODUCTS
We offer our subscribers certain investor information products that we
believe make our web site attractive to active investors. These products fall
into three categories:
o Commentaries from experienced, respected and high profile
journalists, money managers, analysts and other Wall Street
professionals.
o The delivery of breaking news and potentially market moving
information.
o Select financial data targeted at the active investor and trader.
Commentaries
The commentaries on our web site are provided by experienced, respected
and high profile journalists, money managers, analysts and other Wall Street
professionals who provide commentary ranging from technical analysis of
individual stocks to analysis of broader market and economic matters. We believe
that these commentaries will provide our subscribers, in a single location, with
the type of insights into financial matters that previously were available only
to institutional investors and traders or high net-worth individuals. Our
commentators have been selected so as to offer our subscribers a broad range of
analysis to appeal to their broad range of investment and trading styles. As of
the time of this prospectus, the following commentators provide technical
analysis and commentary for our web site:
Elaine Garzarelli - Ms. Garzarelli has been engaged in quantitative
analysis of the stock market for over twenty years. Her education and training
is in economics and statistics and she holds a doctorate from Drexel University.
Ms Garzarelli uses her proprietary "Sector Analysis" methodology to predict
industry earnings and general market movements. Ms. Garzarelli is presently the
president of Garzarelli Capital, Inc. and Garzarelli.com and she also manages
money through her Chicago-based firm, Garzarelli Investment Management. Ms
Garzarelli is also a frequent guest on ABC Good Morning America, CNBC, The
Nightly Business Report, CNN's MoneyLine, and Fox Business News.
Ms. Garzarelli provides reports, based on her quantitative analysis,
each Friday.
Seth Tobias - During his thirteen years of Wall Street experience, Mr.
Tobias has worked on both the buy and sell side. Since January, 1996, Mr. Tobias
has managed the Circle T Partners family of hedge funds. Preceding the formation
of Circle T Partners, Mr. Tobias held positions as a proprietary futures trader,
equity sales trader and assistant portfolio manager at JRO Associates.
Mr. Tobias provides his market reports Monday-Thursday each week.
Ralph Bloch - Mr. Bloch has been involved in technical analysis of the
stock market for over forty years. He began his career at Merrill Lynch and is
presently Senior Vice President and Chief Market Analyst at Raymond James &
Associates, Inc. Mr. Bloch has lectured at the University of Florida, New York
University Graduate School and Fairleigh Dickinson University. Mr. Bloch is also
routinely quoted by prominent news organizations such as Reuters, the Dow Jones
Wire, U.S. News and World Report, The Wall Street Journal, Barron's, Investor's
Business Daily, and various foreign publications.
Mr. Bloch provides daily market recap reports.
Mastrapasqua & Associates - Mastrapasqua & Associates is an
independently owned money management firm located in Nashville, TN. The firm
manages approximately $650 million, which is equally divided between high net
worth individuals and institutions. The firm was started in 1993 with an
investment style focused on growth at reasonable prices. The two principals who
write the weekly reports for our site are:
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<PAGE> 23
Frank Mastrapasqua - Mr. Mastrapasqua began his career in the academic
world as faculty member at Northeastern University and at the
University of Houston where he was a department chair and professor of
finance. After serving as chief economist to American General Capital
Management, Faulkner, Dawkins and Sullivan and L.F. Rothschild,
Unterberg, Towbin, in 1981, he joined Smith Barney where he was Senior
Vice President, Chief Economist and Director of Fixed Income Research.
He subsequently joined J.C. Bradford & Co. in 1986 as Partner, Director
of Research and Chief Investment Strategist.
Tad Trantum - Mr. Trantum, President and Co-Founder of Mastrapasqua &
Associates, worked as an analyst on Wall Street with H.C. Wainwright &
Co. and L.F. Rothschild, Unterberg, Towbin. He was appointed by
President Carter to serve as a Commissioner for the Interstate Commerce
Commission in 1979. He subsequently served as President and CEO of a
regional railroad, before becoming a Partner and Senior Security
Analyst with J.C. Bradford & Co. in 1987.
Mr. Mastrapasqua provides capital market reports and Mr.Trantum
provides a sector report, both on Monday each week.
Dorsey, Wright & Associates, Inc. - Dorsey, Wright & Associates is a
privately owned registered investment advisory firm that provides management of
equity portfolios for investors and investment research services on a worldwide
basis for institutions and broker-dealers.
Thomas J. Dorsey - Mr. Dorsey, the firm's president, founded Dorsey,
Wright & Associates in January 1987. He previously worked nine years at
Wheat, First Securities where he developed and managed their Risk
Management & Options Strategy department, before which he was an
account executive at Merrill, Lynch.
Mr. Dorsey conducts Risk Management seminars across the country on
behalf of the major stock exchanges in the United States for industry
professionals as well as individual investors. He has written numerous
articles on equity market and options analysis for such publications as
The Wall Street Journal, Barron's, Technical Analysis of Stocks and
Commodities Magazine, and Futures Magazine. He is also the author of
Point & Figure Charting, The Essential Application for forecasting and
tracking market prices as well as a member of the Philadelphia Stock
Exchange Board of Advisors.
Watson H. Wright - Mr. Wright, the firm's secretary and treasurer,
worked as an account executive at Wheat, First Securities, and its
Options Strategy department, where he became Vice President and
assistant Director, before leaving to help found Dorsey, Wright &
Associates.
Dorsey, Wright & Associates will provide several "Point and Figure"
charts with custom commentary each weekday.
Thomas Taulli - Mr. Taulli is an analyst with Edgar-Online and is the
author of the book "Investing in IPO's" (Bloomberg Press). Mr. Taulli has
written for numerous publications including, Forbes.com, Bloomberg Personal
Investor, MSN Investor, Gomez.com, CMP's TechWeb, ZDII and Registered
Representative. Mr. Taulli has also been quoted extensively in the Wall Street
Journal, USA Today, Los Angeles Times, Washington Post and Barron's and has
appeared on CNBC, Bloomberg TV and CNN.
Mr. Taulli will provide IPO reports on Tuesday and Thursday each week.
Mark Leibovit - Since 1979 Mr. Leibovit has published his VRS
newsletter which provides information on short swing, high performance stock
trades and intra-day market timing based on his proprietary trading program. In
1999, Mr. Leibovit founded vrtrader.com which provides various products based
upon Mr. Leibovit's "Volume Reversal"(TM) methodology. In the mid 1970's, Mr.
Leibovit was a market maker on the Midwest Options Exchange and the Chicago
Board Options Exchange. Mr. Leibovit also served as an "Elf" on Louis Rukeyser's
"Wall Street Week" for seven years and has also been a frequent guest on PBS'
"The Nightly Business Report with Paul Kangas," CNBC, CNN, the Business News
Network and other radio and television programs.
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<PAGE> 24
Mr. Leibovit will provide market reports based on his "Volume
Reversal"(TM) methodology on Monday - Thursday. with updates of those reports
issued twice daily.
L. Douglas Lee - Mr. Lee is Chief Economist at Washington Analysis
Corporation which he joined in 1984. Prior to assuming his present position, he
served as Chief U.S. Economist for HSBC Securities. Prior to that, he was also
Chief U.S. Economist for NatWest USA. From 1981-1983 Mr. Lee was a senior
economist at Data Resources Inc. and manager of their Defense Information
Service. Before that he served as senior economist and research director for
the Joint Economic Committee of Congress. Mr. Lee has published numerous
articles, is quoted frequently in national newspapers and magazines, and
appears regularly on CNBC, CNN, Nightly Business Report, and in other media.
Mr. Lee will provide daily early morning reports focusing on various
economic indicators and their potential effect on the market, various sectors
and industries and individual companies.
E*Offering - E*Offering is an online investment banking firm funded in
part by E*TRADE Group Inc. and Sandy Robertson, founder and former CEO of
Robertson Stephens & Co. It provides full-service investment research and
capital markets capabilities to institutional and individual investors.
E*Offering will provide market reports that will be authorized, on a
rotating basis, by its team of analysts.
Breaking News and Market Moving Information
To meet investors' demand for more timely and market moving information
we offer our subscribers three targeted products.
Streetside with Dan Dorfman - For more than 30 years Dan Dorfman has
covered Wall Street in print and on television. His credentials include
reportage for CNN, CNBC, the Wall Street Journal, USA Today, Esquire and New
York and Money magazines. Based on Mr. Dorfman's historical ability to break
major financial stories, we believe that our subscribers should have access to
some of the timeliest financial news available on the Internet.
Mr. Dorfman's column appears each weekday at 1:00 p.m.
JagNotes - JagNotes is a daily consolidated investment report that
summarizes newly issued research, analyst opinions, upgrades, downgrades and
analyst coverage changes from leading financial institutions. Each morning we
gather this information, then compile and release it in a concise, easy to read
format before the markets open. We believe that this early, convenient, access
to potentially market moving information gives our subscribers access to some of
the information traditionally available when the market opens to institutional
investors, professional traders and high net worth individuals.
The Rumor Room - Because rumors can move equities, we have established
the "Rumor Room" where we post rumors about various stocks that have been heard
on the street. When we hear rumors, we post the information in the Rumor Room
and indicate the date and time of the rumor. We also attempt to contact the
company or companies involved in the rumors for a comment and post the results
of this inquiry with the rumor. While we realize that rumors are inherently
unreliable (and a cautionary note introducing this portion of our site so
indicates), we believe that every trader and investor - large and small - should
have access to this information to determine its usefulness.
The Rumor Room is available to our subscribers and updated throughout
the day.
Select Financial Data
To complement our other investor information products, we also provide
our subscribers with access to various financial data that we believe is
attractive to the active investor. This data is housed in an area of the site we
refer to as the "Trading Center." It includes information such as Quotes, Splits
& Dividends, OTC Short Interest, Charting, Insider Buying & Selling and other
similar publicly available data that is typically useful to the active investor
or trader.
SUBSCRIPTIONS
Most of the content on our web site is accessible only to paid
subscribers. Subscriptions are offered at rate of $9.95 per month, or $99.95 per
year. We have offered, and may from time to time offer, free trial
subscriptions.
We also maintain our original JagNotes fax-based service for a number
of mostly institutional subscribers. We also allow these subscribers access to
our Internet-based information by providing them with a specified number of
access codes.
ADVERTISING REVENUE
While the primary source of the Company's revenue is expected to be
subscriptions, we may supplement this with advertising and sponsorship based
revenue. Since we have not yet implemented our marketing plan (as described
below), we have also elected not to begin selling advertising and sponsorship on
the site, and have, therefore, not realized any advertising revenue. When we
implement our marketing plan,
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<PAGE> 25
we intend to aggressively pursue advertisers and sponsors for the site.
Financial service companies (especially those with an Internet presence) will
initially be the primary target of our advertising and sponsorship effort.
OUR BUSINESS STRATEGY
Our goal is to position JagNotes as a leading Internet-based worldwide
financial research and information provider. In time, we hope that JagNotes will
become a primary financial information resource for institutional investors and
the general public alike.
The success of our business is dependent on our ability to expand our
subscriber base. While we plan to continue to service and grow the institutional
segment of our business, we recognize that retail subscribers represent our
largest potential market and are the key to our development.
We will use an integrated marketing model to attract new subscribers,
employing a mix of communications media. Our goal is to increase name awareness
in the retail market and increase visits by potential subscribers with a view to
ultimately generating new subscribers. Specific avenues we are exploring to
attract new subscribers include:
o Expanding on and improving web site content (see below)
o Web-based marketing and promotions including targeted banner
advertisements on search engines, web portals and financial web
sites
o Offering free trial subscriptions
o Traditional media marketing and public relations
o Leveraging JagNotes' reputation among financial professionals to
attract their customers as retail subscribers
o Co-promoting services through financial institutions, particularly
those who currently subscribe to JagNotes
o Pursuing distribution arrangements with third party information
providers that service financial institutions and individual
investors
o Pursuing strategic alliances with, or acquisition of, existing web
based information providers and other media companies
Additional facets of our business strategy include:
Web Site Development. Our goal is to develop www.JagNotes.com into a
comprehensive source for financial information and analysis and a primary source
for such information and analysis for our subscribers. In addition to the
existing content, we plan to continue to improve and expand the features of our
site to provide greater value to our subscribers. Additional features we plan to
offer include:
o A fixed income section that will provide commentary and data on
corporate and government bonds
o Additional specialized commentators, including those who specialize
in providing "bear" market perspectives and identifying investment
opportunities in "turnaround" companies
o An educational corner that will provide an ongoing series of
market-related seminars and training sessions intended to improve
the skills of investors and traders
Build Brand Awareness. The JagNotes name is synonymous with timely
financial research and information among our institutional subscribers. By
increasing our name recognition in the financial community, while creating and
expanding name recognition among the general public, we believe that we can
leverage the strength of the JagNotes name to gain access into new markets and
revenue sources.
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<PAGE> 26
Leverage the Reputation of our Commentators. Because most of our
commentators are high profile individuals in the financial world, we plan to use
their association with the Company as a marketing tool. Many of our commentators
are frequent guests on television and radio financial programs and we expect
that this exposure should further enhance the reputation of our commentators and
our site.
Develop New Geographic Markets. Our Internet presence allows us to
access investors and financial information seekers worldwide. To take advantage
of the unlimited reach of the Internet, we plan to establish web sites serving
three key financial regions:
o Europe
o Asia
o Latin America
These regional web sites will be structured in a fashion similar to our
U.S. site, but will offer content specific to the region. These sites will focus
on:
o Commentaries from experienced, respected and high profile
journalists, money managers, analysts and other financial
professionals from the region.
o The delivery of breaking news and potentially market moving
information from the region.
o Select financial data from local markets targeted at the active
investor and trader.
o Educational content intended to make regional subscribers better
informed about various investment matters.
All of our subscribers will have access to our U.S. and regional sites.
We have not yet determined the subscription rates for our regional sites but we
anticipate that these subscription rates will be in line with the rate presently
being charge charged through our U.S. site, but the amount and method of
compensation may vary from market to market. Educational content will be a
particularly important component of our regional sites because online investing
has not yet penetrated these regional markets to the extent it has in the U.S.
In July 1999 we established JagNotes-Euro.com, Ltd., which has been
incorporated in England as a wholly owned subsidiary of JagNotes.com Inc.
Pursue acquisitions and/or strategic alliances. Although we do not have
any current agreements or negotiations under way, we believe that we can
effectively grow our business by pursuing strategic acquisitions, affiliations,
partnerships, joint ventures or other relationships with strategic partners. We
are currently pursuing alliances with investment firms, online brokerage houses,
market news providers, web portals and cable television networks in an effort to
obtain additional content, expand our name recognition and increase our
subscriber base.
Note: These are our strategies, goals and targets. We believe in them,
but we cannot guarantee that we will be successful in implementing them or that,
even if implemented, they will be effective in creating a profitable business.
In addition we are dependent on having sufficient cash to carry out our
strategy. Please read "Risk Factors" beginning on page 6 before making any
investment decision.
24
<PAGE> 27
COMPETITION
Providing financial information and analysis over the Internet is a
relatively new business, but it is already intensely competitive. An increasing
number of web-based financial information providers are competing for
subscribers, customers, advertisers, content providers, analysts, commentators
and staff, and we continue to face competition from traditional news and
information sources including television and print. We expect competition from
both sources to intensify and increase in the future.
Our largest competitors include:
o Online financial news and information providers including
TheStreet.com, MarketWatch.com and The Motley Fool
o Traditional media sources such as The Wall Street Journal, Barrons,
CNNfn, and CNBC, many or most of whom also have an Internet
presence
o Terminal based financial news providers including Bloomberg,
Reuters and Dow Jones
o Online brokerage firms such as E*Trade, Charles Schwab or DLJ
Direct
o Internet giants such as Yahoo, Go Network and America Online
Many of our current and potential competitors have greater name
recognition, larger financial, technical or marketing resources, and more
extensive customer bases than we do, all of which could be leveraged to gain
market share to our detriment.
The barriers to entry into our business are relatively low - i.e., it
is not difficult for new competitors to enter the market. Much of the
information we provide is publicly available and we do not have any patented or
otherwise protected technologies that would preclude or inhibit competitors from
entering our markets. Our current and future competitors may develop or offer
services that have significant price, content, creative or other advantages over
the services we provide.
In order for us to successfully compete in this business, we will need
to reliably provide valuable services at a competitive price to a large
subscriber base. We believe that a successful implementation of our business
strategy will allow us to do so and to compete successfully as a leading
financial information provider.
WEB-SITE TECHNICAL INFORMATION
We own three servers on which all content for the site is maintained.
Our primary server is maintained by Exodus Communications and is located in
their Jersey City, New Jersey facility. Our back-up two servers are maintained
by Above.net and PC Communications and are located in their San Jose, California
and Jersey City, New Jersey facilities, respectively.
Our U.S. web site was designed by Muffin-Head, a unit of DVCI
Technologies. They also handle ongoing design matters for the site and also
assist us in placing content on the site.
EMPLOYEES
As of July 27, 1999, we had 8 employees. As of that date, we had not
entered into employment agreements with any of our employees.
FACILITIES
We operate from an office suite located in an office building at 2421
Atlantic Avenue, Suite 103, Manasquan, NJ 08736. The space houses 8 employees
and is approximately 815 square feet. This space houses all of the Company's
executive and administrative personnel and related administrative equipment.
This office does not house the servers for the site, which are housed at
separate locations as indicated above (see "Web Site Technical Information").
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<PAGE> 28
JagNotes-Euro.com, Ltd., our wholly owned subsidiary, maintains offices
in a full service office suite located at 60 Lombard Street, Suite 3.16, London
EC3.
LEGAL PROCEEDINGS
There are no currently pending law suits or similar administrative
proceedings and, to the best of our knowledge, there is presently no basis for
any suit or proceeding.
The Company is presently making arrangements through its insurance
broker, Marsh & McLennan, to obtain Internet Professional Liability insurance
coverage that will insure various risks related to our Internet operations.
26
<PAGE> 29
MANAGEMENT AND EXECUTIVE COMPENSATION
MANAGEMENT
Following is certain information about our executive officers and
directors. We have not entered into employment agreements with any of our
executive officers.
Gary Valinoti, age 41, was a co-founder of JagNotes.com, Inc. and has
served as its President and Chief Executive Officer since it was formed in
March, 1999. Mr. Valinoti is also a member of the Board of Directors of the
Company. From August 1992 - March, 1999 Mr. Valinoti served as President, and as
a member of the Board of Directors, of New JAG, Inc., the company that produced
the JagNotes fax service throughout that period. Prior to his involvement with
New Jag, Inc., Mr. Valinoti held positions with various firms in the securities
industry including Mosely, Hallgarten, Estabrook & Weeden where he was involved
in institutional and currency trading, and started the firm's arbitrage
department. Mr. Valinoti attended Wagner College.
Thomas J. Mazzarisi, age 42, has served as Executive Vice President and
General Counsel of the Company since it was formed in March, 1999 and is also a
member of the Board of Directors of the Company. From 1997 until joining the
Company Mr. Mazzarisi practiced law from his own firm in New York, specializing
in international commercial transactions. From 1988 until 1997, Mr. Mazzarisi
was a Senior Associate at the law firm of Coudert Brothers where he also
specialized in international commercial transactions. Prior to joining Coudert
Brothers, Mr. Mazzarisi was Deputy General Counsel of the New York Convention
Center Development Corporation. Mr. Mazzarisi is a graduate of Fordham
University where he received a B.A. in Political Economy and was elected to Phi
Beta Kappa. Mr. Mazzarisi received his J.D. from Hofstra University School of
Law.
Stephen R. Russo, age 38, has served as the Chief Financial Officer of
the Company since it was formed in March, 1999. Since 1984, Mr. Russo has also
served as President of Stephan R. Russo & Co., Certified Public Accountants.
From 1981-1984 Mr. Russo served as Senior Staff Accountant for Edwin Weinberg &
Associates, where he was responsible for certified audits of corporate accounts,
as well as corporate and individual tax matters. Mr. Russo is a graduate of St.
Thomas Aquinas College where he received a B.S. in Accounting. Mr. Russo is a
member of the New York State Society of Certified Public Accountants, the
American Institute of Certified Public Accountants and the Rockland County
Business Association.
Jeffrey Goss, age 38, was a co-founder of JagNotes.com, Inc. and has
served as its Vice President since it was formed in March, 1999. From August
1992 - March, 1999 Mr. Goss served as a Vice President, and member of the Board
of Directors, of New JAG, Inc., the company that produced the JagNotes fax
service throughout that period. Prior to his involvement with New Jag, Inc. Mr.
Goss held positions with various firms in the securities industry including
First Montauk Securities where he was an account representative. Mr. Goss also
worked in the accounting department of Chase Manhattan Bank. Mr. Goss is a
graduate of Mount Saint Mary's College.
Stephen J. Schoepfer, age 40, is a member of the Board of Directors of
the Company. He is presently a Financial Advisor with the investment firm of
Legg Mason Wood Walker. Prior to joining Legg Mason, Mr. Schoepfer served as a
Financial Advisor and Training Coordinator at Prudential Securities. Mr.
Schoepfer attended Wagner College.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information regarding
compensation paid by the Company for services rendered during the fiscal years
ended July 31, 1996, 1997 and 1998, respectively, to the Company's Chief
Executive Officer and certain executive officers. No other executive officer
holding office in fiscal 1998 received total annual salary and bonus exceeding
$100,000. No officers have been awarded any stock options, stock appreciation
rights or other long term or incentive compensation not reflected below.
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<PAGE> 30
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------
Other
Name and Principal Fiscal Annual All Other
Position Year Salary Bonus Compensation Compensation
------------------ ------ -------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gary Valinoti, President 1998 $110,550 -- -- --
Jeffrey Goss, Secretary 1998 $110,550 -- -- --
and Vice President
Anthony Salandra* 1998 $110,550 -- -- --
(Mr. Salandra served as
executive officer and
director of NewJag, Inc.
during fiscal year 1998).
Barry Belzer*, 1998 $110,550 -- -- --
(Mr. Belzer served as
executive officer and
director of NewJag, Inc.
during fiscal year 1998).
</TABLE>
- -------------
* Messrs. Salandra and Belzer are no longer employed by the Company.
The Company is in the process of expanding its staff and, accordingly,
it expects that its executive compensation expenses will increase in the future.
DIRECTOR COMPENSATION
We currently do not compensate our directors.
EMPLOYMENT CONTRACTS
We have not entered into employment agreements with any of our officers
or employees.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Articles of Incorporation provide that we shall indemnify our
officers, directors, employees and agents to the full extent permitted by Nevada
law. Our Bylaws include provisions to indemnify our officers and directors and
other persons against expenses (including judgments, fines and amounts paid for
settlement) incurred in connection with actions or proceedings brought against
them by reason of their serving or having served as officers, directors or in
other capacities. We do not, however, indemnify them in actions in which it is
determined that they have not acted in good faith or have acted unlawfully or
not in the best interest of the Company. In the case of an action brought by or
in the right of the Company, we shall indemnify them only to the extent of
expenses actually and reasonably incurred by them in connection with the defense
or settlement of these actions and we shall not indemnify them in connection
with any matter as to which they have been found to be liable to the Company,
unless the deciding court determines that, notwithstanding such liability, that
person is fairly entitled to indemnity in light of all the relevant
circumstances.
We do not currently maintain director's and officer's liability
insurance but we may do so in the future.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors and officers of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
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<PAGE> 31
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of July 27, 1999 by (i) each person
known by the Company to be the beneficial owner of more than five percent of the
Common Stock, (ii) each executive officer and director of the Company, and (iii)
all executive officers and directors of the Company as a group. See also
"Management and Executive Compensation."
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address of Beneficial Owner Beneficially Owned(1) of Class(2)
- ------------------------------------ --------------------- -----------
<S> <C> <C>
Gary Valinoti (President, CEO and Director) 2,098,500(3) 15%
2421 Atlantic Avenue, Suite 103
Manasquan, New Jersey 08736
Stephen Russo (Chief Financial Officer) 14,000(4) x
2421 Atlantic Avenue, Suite 103
Manasquan, New Jersey 08736
Jeffrey J. Goss (Corporate Secretary) 800,000 5.7%
2421 Atlantic Avenue, Suite 103
Manasquan, New Jersey 08736
Thomas Mazzarisi (Executive Vice 100,000 x
President, General Counsel and Director)
2421 Atlantic Avenue, Suite 103
Manasquan, New Jersey 08736
Stephen Schoepfer (Director) 2421 75,000 x
Atlantic Avenue, Suite 103 Manasquan,
New Jersey 08736
All executive officers and directors as
a group (5 persons) 3,087,500 22.0%
S.A.C. Capital Associates, LLC 900,000 6.0%
777 Long Ridge Road Stamford,
Connecticut 06902
</TABLE>
- -------------------
x Less than one percent.
(1) Includes, for the following persons, the following number of shares which
the beneficial owner has the right to acquire within 60 days from options,
warrants or otherwise: S.A.C. Capital Associates, LLC (225,000).
(2) Based on 13,976,290 shares outstanding as of July 27, 1999, plus the
number of shares which the beneficial owner has the right to acquire
within 60 days, if any, as indicated in footnote (1) above.
(3) Includes 900,000 shares owned by members of Mr. Valinoti's immediate
family.
(4) Includes 4,000 shares owned by members of Mr. Russo's immediate family.
29
<PAGE> 32
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by the selling stockholders
as of July 27, 1999 and as adjusted to reflect the sale of the shares.
<TABLE>
<CAPTION>
Shares Beneficially Owned
after Offering (Assuming
Maximum Number Sale of All Shares Covered
Number of Shares of Shares to Be Sold by this Prospectus) (3)
Beneficially Owned Pursuant to this ----------------------------
Name Prior to Offering (1) Prospectus (2) Number Percent
- ----- --------------------- --------------------- ----------- -----------
<S> <C> <C> <C> <C>
S.A.C. Capital Associates, LLC 675,000 900,000 0 0
Stephen Gluck 11,400 15,200 0 0
Circle T International, Ltd. 77,400 103,200 0 0
Circle T Partners L.P. 150,000 200,000 0 0
Greene Street Partners 125,010 166,680 0 0
William Monness 6,150 8,200 0 0
Joseph P. DeMatteo 3,075 4,100 0 0
Joseph P. DeMatteo IRA 3,075 4,100 0 0
Robert F. Dall 12,510 16,680 0 0
Stanley L. Cohen 200,010 266,680 0 0
ASC Capital Partners 125,010 166,680 0 0
Peter Zecca Jr. 1,140 1,520 0 0
Alexander A. Zecca 1,140 1,520 0 0
Brian and Vicki Warner 25,020 33,360 0 0
Neil Crespi 25,020 33,360 0 0
Thomas Dering 11,400 15,200 0 0
Warren R. Marcus 12,510 16,680 0 0
Lappin Capital Management L.P. 10,500 14,000 0 0
Apex Limited Partners L.P. 45,600 60,800 0 0
AIG Trading Group Inc.
Deferred Compensation Plan Trust 12,510 16,680 0 0
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
Shares Beneficially Owned
after Offering (Assuming
Maximum Number Sale of All Shares Covered
Number of Shares of Shares to Be Sold by this Prospectus) (3)
Beneficially Owned Pursuant to this ----------------------------
Name Prior to Offering (1) Prospectus (2) Number Percent
- ----- --------------------- --------------------- ----------- -----------
<S> <C> <C> <C> <C>
AIG Trading Group Inc.
Deferred Compensation Plan Trust 37,500 50,000 0 0
AIG Trading Group Inc.
Deferred Compensation Plan Trust 50,010 66,680 0 0
Paul C. Orwicz 6,000 8,000 0 0
Delaware Charter
Guarantee & Trust TTEE
FBO Brett Fialkoff SEP IRA 6,600 8,800 0 0
David Ganek 22,500 30,000 0 0
John M. Fenlin 6,300 8,400 0 0
L. Gregory Rice 3,000 4,000 0 0
Dan Dorfman 0 100,000 0 0
Mastrapasqua & Associates, Inc. 20,000 20,000 0 0
Vince Boening 0 60,000 0 0
Ralph Bloch 0 60,000 0 0
Thomas Taulli 0 10,000 0 0
Dorsey, Wright & Associates, Inc. 0 65,000 0 0
Mark Leibovit 0 30,000 0 0
Seth Tobias 100,000 100,000 0 0
L. Douglas Lee 0 10,000 0 0
TOTAL 1,785,390 2,675,520 0 0
</TABLE>
- ---------------
(1) This column does not include shares which may be acquired upon exercise of
options or warrants.
(2) This column includes, for the following persons, the following number of
shares which may be acquired upon exercise of warrants: S.A.C. Capital
Associates, LLC (225,000); Stephen Gluck (3,800); Circle T International,
Ltd. (25,800); Circle T Partners, L.P. (50,000); Greene Street Partners
(41,671); William Monness (2,050); Joseph P. DeMatteo (1,025); Joseph P.
DeMatteo IRA (1,025); Robert F. Dall (4,170); Stanley L. Cohen (66,670);
ASC Capital Partners (41,670); Peter Zecca Jr. (380); Alexander A. Zecca
(380); Brian and Vicki Warner (8,340); Neil Crespi (8,340); Thomas Dering
(3,800); Warren R. Marcus (4,170); Lappin Capital Management L.P. (3,500);
Apex Limited Partners L.P. (15,200); AIG Trading
31
<PAGE> 34
Group, Inc. (4,170); AIG Trading Group, Inc. (12,500); AIG Trading Group,
Inc. (16,670); Paul C. Orwicz (2,000); Delaware Charter Guarantee & Trust
TTE FBO Brett Fialkoff SEP IRA (2,200); David Ganek (7,500); John M.
Fenlin (8,400); L. Gregory Rice (1,000).
This column Includes, for the following persons, the following number of
shares which may be acquired upon exercise of options: Dan Dorfman
(100,000); Vince Boening (60,000); Ralph Bloch (60,000); Tom Taulli
(10,000); Dorsey, Wright & Associates, Inc. (65,000); Mark Leibovit
(30,000).
(3) Assumes the sale of all shares covered by this Prospectus. There can be no
assurance that any of the selling stockholders will sell any or all of the
shares of Common Stock offered by them hereunder.
PLAN OF DISTRIBUTION
The shares covered by this Prospectus will be offered and sold by the
selling stockholders for their own accounts. We will not receive any of the
proceeds from the sale of shares pursuant to this Prospectus. We have agreed to
bear the expenses of the registration of these shares, including legal and
accounting fees. We estimate these expenses to be approximately ($_________).
The selling stockholders may offer and sell these shares from time to
time in transactions in the over-the-counter market or in negotiated
transactions, at market prices prevailing at the time of sale or at negotiated
prices. The selling stockholders have advised the Company that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their shares, nor is there
an underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling stockholders. Sales may be made directly or to or
through broker-dealers who may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders or the purchasers of
shares for whom such broker-dealers may act as agent or to whom they may sell as
principal, or both (which compensation as to a particular broker-dealer may be
in excess of customary commissions).
The selling stockholders and any broker-dealers acting in connection
with the sale of the shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act, and any commissions received by them
and any profit realized by them on the resale of shares as principals may be
deemed underwriting compensation under the Act.
The Company has informed the selling stockholders that the
anti-manipulative rules contained in Regulation M under the Securities Exchange
Act of 1934, as amended, may apply to their sales in the market and has
furnished each Selling Stockholder with a copy of these Rules and has informed
them of the need for delivery of copies of this Prospectus.
Selling stockholders may also use Rule 144 under the Act to sell the
shares if they meet the criteria and conform to the requirements of such Rule.
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<PAGE> 35
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorizes the issuance of
100,000,000 shares of Common Stock, $.00001 par value, of which 13,976,290
shares were outstanding as of July 27, 1999.
Holders of shares of Common Stock are entitled to one vote for each
share on all matters to be voted on by the stockholders and are not entitled to
cumulate their votes in the election of directors. 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 or other subscription rights, and
there are no conversion rights or redemption or sinking fund provisions with
respect to such shares.
OPTIONS
As of the date of this Prospectus, there were options outstanding to
purchase:
o 100,000 shares of the Company's common stock at $16.25 per share at
any time prior to June 29, 2000; and
o An aggregate of 235,000 shares of the Company's common stock at
$2.00 per share , subject to certain vesting requirements, at any
time prior to June or July 2009, provided, however, that certain of
these options will expire prior June 2009 upon the termination of
certain contracts with the Company.
WARRANTS
As of the date of this Prospectus, there were warrants outstanding to
purchase, at any time prior to May 3, 2001, 555,130 shares of Common Stock at
$14.00 per share.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Company's Common Stock is
American Securities Transfer, Inc., 938 Quail Street, Suite 101, Lakewood,
Colorado 80215-5513.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the Company by
Day & Campbell, LLP, 3070 Bristol Street, Suite 450, Costa Mesa, California
92626. As of the date of this Prospectus, a member of the firm owned a total of
168,700 shares of the Company's Common Stock.
EXPERTS
The financial statements of the Company as of July 31, 1998 and for the
fiscal years ended July 31, 1998 and 1997 included in this Prospectus have been
audited by Stephen R. Russo, CPA, independent certified public accountant, as
set forth in his report, dated October 12, 1998, included herein, and have been
so included in reliance upon his report and his authority as an expert in
accounting and auditing.
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<PAGE> 36
On March 22, 1999, Stephen Russo, CPA, resigned as the Company's
independent public accountant in order to join the Company as its Chief
Financial Officer. In addition, as of the date of this Prospectus, Mr. Russo was
the beneficial owner of 14,000 shares of the Company's common stock. The reports
issued by Mr. Russo on the Company's financial statements for the fiscal years
ended July 31, 1998 and 1997 did not contain any adverse opinion or disclaimer
of opinion and were not qualified as to audit scope or accounting principles,
nor were there any material disagreements with the former accountant on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure during these years.
At the Company's request, Mr. Russo has furnished the Company with a
letter addressed to the Securities and Exchange Commission stating that he
agrees with the foregoing statements. This letter is attached as an Exhibit to
the Registration Statement that contains this Prospectus.
The Company engaged J.H. Cohn LLP as its new independent public
accountants in April, 1999. The Company did not consult with any other
accounting firm regarding the application of accounting principles to a
specified transaction, either contemplated or proposed, or the type of opinion
that might be rendered regarding the Company's financial statements, nor did the
Company consult with J.H. Cohn LLP with respect to any accounting disagreement
or any reportable event, at any time prior to the appointment of such firm.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
Shortly after the registration statement that contains this Prospectus
becomes effective, we will be required to file annual, quarterly and special
reports, proxy statements and other information with the SEC. You can read and
copy any of this information at the SEC's public reference rooms in Washington,
D.C., New York, and Chicago. Please call the SEC at (800) SEC-0330 if you would
like further information on the public information rooms. This information is
also available from the SEC's web site at HTTP://WWW.SEC.GOV.
In the future we intend to distribute annual reports containing audited
financial statements and other information to our stockholders after the end of
each fiscal year. We do not intend to regularly distribute quarterly reports to
our stockholders, but we will gladly send them to you upon your written request
to our Corporate Secretary.
OTHER INFORMATION
This Prospectus is part of a registration statement on Form SB-2 that
we have filed with the SEC. Certain information is contained in the registration
statement that is not contained in this Prospectus. Please consult the
registration statement for further information.
You should rely only on the information contained in this Prospectus.
We have not authorized any person to provide any other information. You should
not assume that the information in this Prospectus or any supplement is accurate
as of any date other than the date on the front of this Prospectus or any
supplement. This Prospectus is neither offering to sell nor seeking an offer to
buy any securities other than the shares covered by this Prospectus, nor is this
Prospectus offering to sell or seeking an offer to buy securities in any
unlawful way.
34
<PAGE> 37
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Index to Financial Statements
PAGE
----
Report of Certified Public Accountant F-2
Consolidated Balance Sheets
July 31, 1998 and April 30, 1999 (Unaudited) F-3
Consolidated Statements of Operations
Years Ended July 31, 1998 and 1997 and Nine Months Ended
April 30, 1999 and 1998 (Unaudited) F-4
Consolidated Statements of Stockholders' Equity (Deficiency)
Years Ended July 31, 1998 and 1997 and Nine Months Ended
April 30, 1999 (Unaudited) F-5
Consolidated Statements of Cash Flows
Years Ended July 31, 1998 and 1997 and Nine Months Ended
April 30, 1999 and 1998 (Unaudited) F-6/7
Notes to Consolidated Financial Statements F-8/14
* * *
F-1
<PAGE> 38
Report of Certified Public Accountant
To the Board of Directors and Stockholders
JagNotes.com Inc.
I have audited the accompanying consolidated balance sheet of JagNotes.com Inc.
and Subsidiary (formerly New Jag, Inc.) as of July 31, 1998, and the related
consolidated statements of operations, stockholders' equity (deficiency) and
cash flows for the years ended July 31, 1998 and 1997. 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 audits.
I conducted my audits 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 audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of JagNotes.com Inc.
and Subsidiary as of July 31, 1998, and their results of operations and cash
flows for the years ended July 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
Stephen R. Russo, CPA
Nanuet, New York
October 12, 1998
F-2
<PAGE> 39
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Consolidated Balance SheetS
July 31, 1998 and April 30, 1999 (Unaudited)
ASSETS
<TABLE>
<CAPTION>
1998 1999
---------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,901 $ 7,894,886
Accounts receivable 63,554 57,350
Loans receivable from officer 24,839 24,839
Current deferred tax assets 56,370 49,885
Other current assets 239,506
----------- -----------
Total current assets 150,664 8,266,466
Equipment, net of accumulated depreciation of $16,509 and $17,484 3,578 2,603
Capitalized software development costs 16,500
Noncurrent deferred tax assets 17,570 13,760
----------- -----------
Totals $ 171,812 $ 8,299,329
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable and accrued expenses $ 75,731 $ 753,431
Deferred revenues 204,687 184,706
----------- -----------
Total liabilities 280,418 938,137
----------- -----------
Commitments and contingencies
Stockholders' equity (deficiency):
Common stock - - 100,000,000 shares
authorized; 3,500,000 shares issued and
outstanding at July 31, 1998 with no par
value; 13,976,290 shares issued and
outstanding at April 30, 1999 with a par
value of $.00001 per share 73,445 140
Additional paid-in capital 7,674,321
Unearned compensation (89,600)
Accumulated deficit (182,051) (223,669)
----------- -----------
Total stockholders' equity (deficiency) (108,606) 7,361,192
----------- -----------
Totals $ 171,812 $ 8,299,329
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 40
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Consolidated Statements of Operations
Years Ended July 31, 1998 and 1997 and
Nine Months Ended April 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended July 31, April 30,
------------------------- --------------------------
1998 1997 1999 1998
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Subscription revenues $ 932,553 $ 952,385 $ 641,963 $ 738,294
Cost of revenues 112,362 151,629 107,881 87,073
---------- ---------- ---------- ----------
Gross profit 820,191 800,756 534,082 651,221
---------- ---------- ---------- ----------
Operating expenses:
Selling expenses 38,115 54,680 78,584 38,573
General and administrative expenses 744,577 736,807 496,278 586,656
---------- ---------- ---------- ----------
Totals 782,692 791,487 574,862 625,229
---------- ---------- ---------- ----------
Income (loss) from operations 37,499 9,269 (40,780) 25,992
Provision for income taxes 34,850 32,630 838 28,257
---------- ---------- ---------- ----------
Net income (loss) $ 2,649 $ (23,361) $ (41,618) $ (2,265)
========== ========== ========== ==========
Basic net earnings (loss) per share $ -- $ (.01) $ (.01) $ --
========== ========== ========== ==========
Basic weighted average common
shares outstanding 3,500,000 3,500,000 7,461,901 3,500,000
========== =========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 41
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Consolidated Statements of Stockholders' Equity (Deficiency)
Years Ended July 31, 1998 and 1997 and Nine Months Ended
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Common Stock
-------------------------- Additional
Number of Paid-in Unearned Accumulated
Shares Amount Capital Compensation Deficit Total
------------ ------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 1, 1996 (as retroactively
adjusted to reflect shares effectively
issued prior to the reverse
acquisition in March 1999) 3,500,000 $73,445 $(161,339) $ (87,894)
Net loss (23,361) (23,361)
--------- ------- --------- ----------
Balance, July 31, 1997 3,500,000 73,445 (184,700) (111,255)
Net income 2,649 2,649
--------- ------- --------- ----------
Balance, July 31, 1998 3,500,000 73,445 (182,051) (108,606)
Shares effectively issued in
connection with reverse
acquisition 3,820,900 (73,372) $ 73,372
Sales of units of common stock
and warrants through private
placements, net of expenses
of $707,700 6,655,390 67 7,504,949 7,505,016
Effects of issuance of stock option 96,000 $(96,000)
Amortization of unearned compensation 6,400 6,400
Net loss (41,618) (41,618)
---------- ------- ---------- ------- --------- ----------
Balance, April 30, 1999 13,976,290 $ 140 $7,674,321 $(89,600) $(223,669) $7,361,192
========== ======= ========== ======== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 42
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Consolidated Statements of Cash Flows
Years Ended July 31, 1998 and 1997 and
Nine Months Ended April 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended July 31, April 30,
------------------------ ------------------------
1998 1997 1999 1998
--------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Operating activities:
Net income (loss) $ 2,649 $ (23,361) $ (41,618) $ (2,265)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation 1,336 9,033 975 1,336
Amortization of unearned compensation 6,400
Deferred income taxes 8,135 4,585 10,295 2,160
Changes in operating assets and liabilities:
Accounts receivable 1,967 (2,040) 6,204 (2,360)
Other current assets (239,506) (10,211)
Accounts payable and accrued expenses (10,652) 18,995 677,700 28,639
Deferred revenues (6,335) 6,569 (19,981) 7,600
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities (2,900) 13,781 400,469 24,899
--------- --------- --------- ---------
</TABLE>
F-6
<PAGE> 43
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Consolidated Statements of Cash Flows (continued)
Years Ended July 31, 1998 and 1997 and
Nine Months Ended April 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended July 31, April 30,
---------------------- ------------------------
1998 1997 1999 1998
-------- -------- ----------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Investing activities:
Net proceeds (repayments) of loans to officer $ 396 $(13,050) $ (404)
Purchases of equipment (6,914)
Software development costs capitalized $ (16,500)
-------- -------- ----------- -------
Net cash provided by (used in) investing
activities 396 (19,964) (16,500) (404)
-------- -------- ----------- -------
Financing activities - proceeds from private place-
ments units of common stock and warrants 7,505,016
===========
Net increase (decrease) in cash and
cash equivalents (2,504) (6,183) 7,888,985 24,495
Cash and cash equivalents, beginning of period 8,405 14,588 5,901 8,405
-------- -------- ----------- -------
Cash and cash equivalents, end of period $ 5,901 $ 8,405 $ 7,894,886 $32,900
======== ======== =========== =======
Supplemental disclosure of cash flow information:
Income taxes paid $ 26,715 $ 28,045 $ 30,049 $ 500
======== ======== =========== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE> 44
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Notes To Consolidated Financial Statements
(Information as of April 30, 1999 and
for the Nine Months Ended April 30, 1999 and
1998 is Unaudited)
Note 1 - Organization and business:
JagNotes.com Inc. ("JagNotes") was originally incorporated during 1997
in Nevada as Professional Perceptions, Inc. to develop operations as a
consultant to retailers. However, JagNotes never generated any
significant revenues or expenses in connection with such operations and
it was inactive at the time of the exchange of shares described below.
New Jag, Inc. ("NewJag") and its predecessor have been providing
financial and investment information within the financial community
since 1989. NewJag was incorporated during August 1992 in the State of
New Jersey. NewJag gathers and compiles information regarding analyst
upgrades, downgrades and new coverage initiated by financial
institutions and releases such information to subscribers on a timely
basis through facsimile transmissions and a web site, WWW.JAGNOTES.COM.
Prior to 1999, NewJag's customers were primarily financial
professionals. During 1999, NewJag began to focus its marketing efforts
on retail subscribers. Management considers all of the financial
services provided to be within the same business segment.
As of March 16, 1999, JagNotes had 3,820,900 outstanding shares of
common stock, with a par value of $.00001 per share. Effective as of
that date, certain stockholders of NewJag purchased a total of
2,900,000 of the outstanding shares of JagNotes common stock and
JagNotes issued 3,500,000 shares of common stock to acquire all of the
1,000 shares of common stock, which had no par value, of NewJag then
outstanding (the "Exchange"). As a result, NewJag became a wholly-owned
subsidiary of JagNotes, and JagNotes had 7,320,000 shares of common
stock outstanding, of which 6,400,000 shares, or 87.4%, were owned by
the former stockholders of NewJag and 920,000, or 12.6%, were owned by
the former stockholders of JagNotes. However, since the former
stockholders of NewJag became the owners of a majority of the
outstanding common shares of JagNotes after the Exchange and JagNotes
had no significant operating activities or assets and liabilities prior
to the Exchange, the Exchange was treated effective as of March 16,
1999 as a "purchase business combination" and a "reverse acquisition"
for accounting purposes in which JagNotes was the legal acquirer and
NewJag was the accounting acquirer. The assets and liabilities of
NewJag were recorded at their historical carrying values as of March
16, 1999; and the historical financial statements prior to March 16,
1999 are those of NewJag. Common stock and additional paid-in capital
were adjusted as of March 16, 1999 to reflect the $.00001 per share par
value of the JagNotes shares. All references to the number of shares of
common stock of NewJag as of dates or for periods prior to the Exchange
have been restated to reflect the ratio of the number of common shares
of JagNotes effectively exchanged for common shares of NewJag.
The "Company" as used herein refers to NewJag prior to March 16, 1999
and JagNotes together with NewJag subsequent to that date.
F-8
<PAGE> 45
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Notes To Consolidated Financial Statements
(Information as of April 30, 1999 and for the
Nine Months Ended April 30, 1999 and 1998 is
Unaudited)
Note 2 - Summary of significant accounting policies:
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
Principles of consolidation:
The accompanying consolidated financial statements include the
accounts of JagNotes and NewJag, its wholly-owned subsidiary, for
the period subsequent to March 16, 1999. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Revenue recognition:
Fees for subscriptions are generally billed in advance on a monthly,
quarterly, semi-annual or annual basis. Revenues from subscriptions
are recognized ratably over the subscription period. Subscription
fees collected that relate to periods subsequent to the date of the
consolidated balance sheet are included in deferred revenues.
Cash equivalents:
Cash equivalents consist of highly liquid investments with a
maturity of three months or less when acquired.
Equipment:
Equipment is stated at cost, net of accumulated depreciation.
Depreciation is provided using accelerated methods over the
estimated useful lives of the assets which range from five to seven
years.
Capitalized software costs:
The Company capitalizes purchased software which is ready for
service and software development costs incurred from the time
technological feasibility of the software is established until the
software is ready for use in the provision of services to customers.
Research and development costs and other computer software
maintenance costs related to software development are expensed as
incurred. Software development costs and costs of purchased software
are amortized using the straight-line method over their estimated
useful lives which do not exceed five years. The carrying value of
software development costs is regularly reviewed by management, and
a loss is recognized when the net realizable value falls below the
unamortized cost.
F-9
<PAGE> 46
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Notes To Consolidated Financial Statements
(Information as of April 30, 1999 and for the
Nine Months Ended April 30, 1999 and 1998 is
Unaudited)
Note 2 - Summary of significant accounting policies (continued):
Advertising:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations amounted to
$27,198 and $46,166 for the years ended July 31, 1998 and 1997,
respectively.
Income taxes:
The Company accounts for income taxes pursuant to the asset and
liability method which requires deferred income tax assets and
liabilities to be computed annually for temporary differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. The
income tax provision or credit is the tax payable or refundable for
the period plus or minus the change during the period in deferred
tax assets and liabilities.
Net earnings (loss) per share:
The Company presents "basic" earnings (loss) per share and, if
applicable, "diluted" earnings per share pursuant to the provisions
of Statement of Financial Accounting Standards No. 128, Earnings per
Share ("SFAS 128"). Basic earnings (loss) per share is calculated by
dividing net income or loss by the weighted average number of shares
outstanding during each period. The calculation of diluted earnings
(loss) per share is similar to that of basic earnings per share,
except that the denominator is increased to include the number of
additional common shares that would have been outstanding if all
potentially dilutive common shares, such as those issuable upon the
exercise of stock options and warrants, were issued during the
period.
Diluted earnings per share has not been presented in the
accompanying consolidated statements of operations because the
Company did not have any potentially dilutive common shares as of
July 31, 1998 and the assumed effect of the exercise of warrants
outstanding at April 30, 1999 would have been antidilutive.
Recent accounting pronouncements:
The Financial Accounting Standards Board and the Accounting
Standards Executive Committee of the American Institute of Certified
Public Accountants had issued certain accounting pronouncements as
of July 31, 1998 and April 30, 1999 that will become effective in
subsequent periods; however, management of the Company does not
believe that any of those pronouncements would have significantly
affected the Company's financial accounting measurements or
disclosures had they been in effect as of July 31, 1998 and/or April
30, 1999.
F-10
<PAGE> 47
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Notes To Consolidated Financial Statements
(Information as of April 30, 1999 and for
the Nine Months Ended April 30, 1999 and 1998
is Unaudited)
Note 2 - Summary of significant accounting policies (concluded):
Unaudited interim financial statements:
In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments,
consisting of normal recurring accruals, necessary to present fairly
the financial position of the Company as of April 30, 1999, its
results of operations and cash flows for the nine months ended April
30,1999 and 1998 and its changes in stockholders' equity
(deficiency) for the nine months ended April 30, 1999. Pursuant to
rules and regulations of the Securities and Exchange Commission,
certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these consolidated
financial statements unless significant changes have taken place
since the end of the most recent fiscal year.
The results of operations for the nine months ended April 30, 1999
are not necessarily indicative of the results of operations for the
full year ending July 31, 1999.
Note 3 - Loans receivable from officer:
Loans receivable from an officer, which totaled $24,839 at July 31,
1998 and April 30, 1999, were noninterest bearing and due on demand.
Note 4 - Income taxes:
The net provisions for income taxes consisted of the following
provisions (credits):
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended July 31, April 30,
----------------------- -----------------------
1998 1997 1999 1998
------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Federal:
Current $19,823 $26,708 $(7,326) $20,212
Deferred 6,300 3,550 7,975 1,680
------- ------- ------- -------
Totals 26,123 30,258 649 21,892
------- ------- ------- -------
State:
Current 6,892 1,337 (2,131) 5,885
Deferred 1,835 1,035 2,320 480
------- ------- ------- -------
Totals 8,727 2,372 189 6,365
------- ------- ------- -------
Totals $34,850 $32,630 $ 838 $28,257
======= ======= ======= =======
</TABLE>
F-11
<PAGE> 48
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Notes To Consolidated Financial Statements
(Information as of April 30, 1999 and for
the Nine Months Ended April 30, 1999 and 1998
is Unaudited)
Note 4 - Income taxes (concluded):
The provisions for income taxes differ from the amounts computed using
the Federal statutory rate of 34% as a result of the following:
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
July 31, April 30,
---------------- -----------------
1998 1997 1999 1998
---- ---- ----- ----
(Unaudited)
<S> <C> <C> <C> <C>
Tax at Federal statutory rate 34% 34% (34)% 34%
Increase (decrease) from effects of:
State income taxes, net of Federal
income tax benefit 15 17 16
Nondeductible life insurance and
other expenses 45 308 24 65
Other (primarily surtax exemptions) (1) (7) 12 (6)
--- --- --- ---
Totals 93% 352% 2% 109%
=== === === ===
</TABLE>
Deferred income tax assets at July 31, 1998 and April 30, 1999 were
primarily attributable to temporary differences relating to the net
deferral of subscription revenues and the amortization of certain costs
allocated to intangible assets for income tax purposes.
Note 5 - Employee benefit plans:
The Company maintains a profit-sharing plan and a money purchase plan
for the benefit of all eligible employees. The Company's contributions
to these defined contribution plans, which are made on a discretionary
basis, aggregated $50,844 and $102,939 for the years ended July 31,
1998 and 1997, respectively.
Note 6 - Fair value of financial instruments:
The Company's material financial instruments at July 31, 1998 for which
disclosure of estimated fair value is required by certain accounting
standards consisted of cash and cash equivalents, accounts receivable
and accounts payable. In the opinion of management, cash and cash
equivalents, accounts receivable and accounts payable were carried at
values that approximated their fair values at July 31, 1998 because of
their liquidity and/or their short-term maturities.
F-12
<PAGE> 49
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Notes To Consolidated Financial Statements
(Information as of April 30, 1999 and for
the Nine Months Ended April 30, 1999 and 1998 is Unaudited)
Note 7 - Commitments and contingencies:
Concentrations of credit risk:
Financial instruments which subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents and
accounts receivable. The Company maintains cash and cash equivalents
in bank deposit and other accounts the balances of which, at times,
may exceed Federally insured limits. Exposure to credit risk is
reduced by placing such deposits or other temporary investments in
high quality financial institutions.
The Company performs ongoing credit evaluations of its customers.
Generally, the Company does not require any collateral. The Company
establishes an allowance for doubtful accounts receivable based upon
factors surrounding the credit risk of customers, historical trends
and other information. Through April 30, 1999, losses arising from
uncollectible accounts had not been material.
Consulting and stock option agreements:
In March 1999, the Company entered into a consulting agreement and a
stock option agreement with a newspaper and television investment
analyst and commentator (the "Commentator"). Pursuant to the
consulting agreement which expires March 31, 2000, the Commentator
will write a daily financial news report for the Company and will be
paid a total of $360,000 for his services.
Pursuant to the stock option agreement, the Commentator has the
right to purchase 100,000 shares of the Company's common stock at an
exercise price of $16.25 per share through June 29, 2000. The
Company recorded unearned compensation of $96,000 based on the
estimated fair value of the option which is being amortized to
expense on a straight-line basis over the period from April 1, 1999
to the date the option expires.
F-13
<PAGE> 50
JagNotes.com Inc. and Subsidiary
(Formerly New Jag, Inc.)
Notes To Consolidated Financial Statements
(Information as of April 30, 1999 and for
the Nine Months Ended April 30, 1999 and 1998 is Unaudited)
Note 8 - Private placement of common stock:
During March and April 1999, the company received net proceeds of
approximately $7,500,000 from the sale of 6,655,390 shares of common
stock and 555,130 warrants to purchase shares of common stock. The
sales were made through private placements exempt from registration
under the Securities Act of 1933. Each warrant entitles the holder to
purchase one share of common stock at $14.00 per share through April
2000.
Note 9 - Subsequent events:
From May 1, 1999 through July 26, 1999, the Company entered into
consulting agreements with another nine investment analysts and
commentators. Each agreement has an initial term of one year and is
renewable at the option of the Company for another year. The aggregate
consideration paid by the Company in connection with the consulting
agreements consisted of cash payments of $300,000, the issuance of
20,000 shares of the Company's common stock and the issuance of options
to purchase 235,000 shares of the Company's common stock at $2.00 per
share that expire at various dates through July 2009.
* * *
F-14
<PAGE> 51
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws and Articles of Incorporation and certain
provisions the Nevada Revised Code provide for indemnification of directors and
officers against certain liabilities. Officers and directors of the Company are
indemnified generally against expenses actually and reasonably incurred in
connection with actions, suits or proceedings, whether civil or criminal,
provided that it is determined that they acted in good faith, and, in any
criminal matter, had reasonable cause to believe that their conduct was not
unlawful.
Other Expenses of Issuance and Distribution.
Registration fee
------
Blue Sky fees and expenses
------
Legal fees and expenses
------
Accounting fees and expenses
------
Printing
------
Miscellaneous
------
TOTAL
======
All of the above expenses except the SEC registration fee are
estimated. All of the above expenses will be paid by the Company.
Recent Sales of Unregistered Securities.
The Company has made the following sales of unregistered securities
within the last three years:
In May 1999 the Company closed a private sale of 1,655,390 shares of
common stock and 555,130 warrants to 27 accredited investors for cash
consideration of approximately $7,327,000 received in March and April of 1999.
The issuance of such securities was exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) thereof and Rule 506 of
Regulation D promulgated thereunder.
In May 1999 the Company issued 20,000 shares of its common stock to one
person in exchange for services. The issuance of such shares was exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2) thereof
and/or Rule 506 of Regulation D promulgated thereunder.
In March 1999 the Company (then known as Professional Perceptions,
Inc.) issued a total of 4,990,000 shares of common stock to 9 sophisticated
investors for cash consideration of $940,000. The issuance of such securities
was exempt from registration under the Securities Act of 1933 pursuant to Rule
504 of Regulation D promulgated thereunder.
In March 1999 the Company (then known as Professional Perceptions,
Inc.) issued 3,500,000 shares of common stock to the stockholders of New Jag,
Inc. in exchange for all of the outstanding shares of New Jag, Inc. The issuance
of such securities was exempt from registration under the Securities Act of 1933
pursuant to Section 4(2) thereof and Regulation D promulgated thereunder.
In March and April 1998 the Company (then known as Professional
Perceptions, Inc.) sold 720,900 shares of common stock to approximately 30
investors for cash consideration totaling approximately $70,000. The issuance of
such securities was exempt from registration under the Securities Act of 1933
pursuant to Rule 504 of Regulation D promulgated thereunder.
II-1
<PAGE> 52
In December 1997 the Company (then known as Professional Perceptions,
Inc.) sold 3,100,000 shares of common stock to the three founders of the Company
in exchange for $5,275. The issuance of such securities was exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2) thereof
and Regulation D promulgated thereunder.
Exhibits
2.1 Agreement and Plan of Reorganization dated March 16, 1999
between Professional Perceptions, Inc. (now known as
JagNotes.com Inc.); Harold Kaufman, Jr., an officer, director
and principal stockholder thereof; NewJag, Inc.; and the
stockholders of NewJag, Inc.
3.1 Articles of Incorporation of JagNotes.com Inc., as amended*
3.2 Bylaws of JagNotes.com Inc.*
5.1 Opinion of Day & Campbell, LLP*
10.1 Certain Material Contracts*
16.1 Letter Regarding Change in Certifying Accountant
21.1 List of Subsidiaries
23.1 Consent of Stephen Russo, CPA
23.2 Consent of Day & Campbell, LLP, counsel for the Registrant,
included in Exhibit 5.1.
27 Financial Data Schedule
- -------------------
* To be filed by amendment.
Undertakings
A. Supplementary and Periodic Information, Documents and Reports
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority in that
Section.
B. Item 512 Undertaking with Respect to Rule 415 Under the Securities
Act of 1933
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
II-2
<PAGE> 53
(b) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
C. Indemnification
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Securities Act") may be permitted to directors,
officers or persons controlling the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of 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.
D. Item 512 Undertaking with Respect to Rule 430A
The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act of 1933, the registrant will treat the information omitted
from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act as part of this
registration statement as of the time it was declared
effective.
(ii) For the purpose of determining any liability under the
Securities Act of 1933, the registrant will treat each
post-effective amendment that contains a form of prospectus as
a new registration statement for the securities offered in the
registration statement, and the offering of such securities at
that time as the initial bona fide offering thereof.
II-3
<PAGE> 54
SIGNATURES
Pursuant to 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 of filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Manasquan, State of New Jersey on July 30, 1999.
JAGNOTES.COM INC.
By: /s/ Gary Valinoti
-------------------------------
Gary Valinoti, President
Each person whose signature to this Registration Statement appears
below hereby appoints Gary Valinoti as his attorney-in-fact to sign on his
behalf individually and in the capacity stated below and to file all amendments
and post-effective amendments to this Registration Statement as such
attorney-in-fact may deem necessary or appropriate.
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 dates indicated.
/s/ Gary Valinoti July 30, 1999
- ------------------------------------------
Gary Valinoti, President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Stephen Russo July 30, 1999
- ------------------------------------------
Stephen Russo, Chief Financial Officer
(Principal Financial Officer)
/s/ Thomas Mazzarisi July 30, 1999
- ------------------------------------------
Thomas Mazzarisi, Executive Vice President
and Director
/s/ Stephen Schoepfer July 30, 1999
- ------------------------------------------
Stephen Schoepfer, Director
II-4
<PAGE> 55
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Reorganization dated March 16, 1999
between Professional Perceptions, Inc. (now known as
JagNotes.com Inc.); Harold Kaufman, Jr., an officer, director
and principal stockholder thereof; NewJag, Inc.; and the
stockholders of NewJag, Inc.
3.1 Articles of Incorporation of JagNotes.com Inc., as amended*
3.2 Bylaws of JagNotes.com Inc.*
5.1 Opinion of Day & Campbell, LLP*
10.1 Certain Material Contracts*
16.1 Letter Regarding Change in Certifying Accountant
21.1 List of Subsidiaries
23.1 Consent of Stephen Russo, CPA
23.2 Consent of Day & Campbell, LLP, counsel for the Registrant,
included in Exhibit 5.1.
27 Financial Data Schedule
- -------------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") made and
entered into as of March 16, 1999, is by and among Professional Perceptions,
Inc., a Nevada corporation (hereinafter referred to as the "Company"), Harold
Kaufman, Jr., an officer, director and principal stockholder of the Company
(hereinafter referred to as "Kaufman"), NEW JAG, Inc., a New Jersey corporation
(hereinafter referred to as "JAG") and each of the holders of shares of Common
Stock of JAG listed on Exhibit A hereto (sometimes hereinafter collectively
referred to as the "JAG Stockholders").
RECITALS
WHEREAS, the JAG Stockholders own a total of One Thousand (1,000)
shares of JAG Common Stock (the "JAG Shares") which constitutes all of the
issued and outstanding Common Stock of JAG; and
WHEREAS, the Company desires to acquire all of the JAG Shares and the
JAG Stockholders desire to exchange all of the JAG Shares for shares of Common
Stock of the Company in a transaction intended to qualify under Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in reliance upon the representations and warranties
hereinafter set forth, the parties agree as follows:
1. EXCHANGE OF THE SHARES AND CONSIDERATION
1.1 Shares Being Exchanged. Subject to the terms and
conditions of this Agreement, at the closing provided for in Section 2 hereof
(the "Closing"), each of the JAG Stockholders shall sell, assign, transfer and
deliver to the Company the number of JAG Shares set forth opposite each such JAG
Stockholder's name on Exhibit A attached hereto.
1.2 Consideration. Subject to the terms and conditions of this
Agreement and in consideration of the sale, assignment, transfer and delivery of
the JAG Shares to the Company, at the Closing the Company shall issue, sell and
deliver to the JAG Stockholders a total of Three Million Five Hundred Thousand
(3,500,000) shares of Common Stock of the Company (hereinafter referred to as
the "Company Shares"), each JAG Stockholder to receive, as full consideration
for the JAG Shares sold to the Company by such JAG Stockholder, the number of
Company Shares set forth opposite each such JAG Stockholder's name on Exhibit A
attached hereto.
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<PAGE> 2
2. THE CLOSING
2.1 Time and Place. The closing of the transactions
contemplated by this Agreement shall be held at the offices of Conrad C. Lysiak,
Esq., 601 West First Avenue, Suite 503, Spokane, Washington 99204, at 10:00 a.m.
on March 16, 1999, or on such other date and at such other time and place as the
parties may agree upon in writing (the "Closing").
2.2 Deliveries by the JAG Stockholders. At the Closing, each
JAG Stockholder shall deliver to the Company the following: (a) stock
certificates representing the number of JAG Shares set forth opposite the name
of such JAG Stockholder on Exhibit A hereto, duly endorsed or accompanied by
stock powers duly executed in blank and otherwise in form acceptable for
transfer on the books of JAG, and (b) an investment letter in the form attached
hereto as Exhibit B executed by such JAG Stockholder.
2.3 Deliveries by JAG. At the Closing, JAG shall deliver to
the Company the documents referred to in Section 9.1 hereof.
2.4 Deliveries by the Company. At the Closing, in addition to
the documents referred to in Section 9.2 hereof, the Company shall deliver to
the JAG Stockholders the following: (a) a stock certificate issued in the name
of each JAG Stockholder representing the number of Company Shares set forth
opposite the name of such JAG Stockholder on Exhibit A attached hereto, and (b)
the Company's minute book, corporate seal and copies of all corporate and
financial books and records.
3. INDIVIDUAL REPRESENTATIONS AND WARRANTIES BY THE JAG
STOCKHOLDERS
Each of the JAG Stockholders, severally but not jointly,
represents and warrants to the Company as follows:
3.1 Title. Such JAG Stockholder owns the number of JAG Shares
set forth opposite such JAG Stockholder's name on Exhibit A hereto, and shall
transfer to the Company at the Closing good and valid title to the JAG Shares
owned by such JAG Stockholder, free and clear of all liens, claims, options,
charges, and encumbrances of every kind, character or description.
3.2 Authority. Such JAG Stockholder has full power and
authority to execute this Agreement and consummate the transactions contemplated
hereby, and this Agreement is binding on such JAG Stockholder and enforceable in
accordance with its terms. The execution and delivery of this Agreement and
consummation of the transactions contemplated hereby do not violate or conflict
with or constitute a default under any contract, commitment, agreement,
understanding, arrangement or restriction of any kind to which such JAG
Stockholder is a party or by which such JAG Stockholder or such JAG
Stockholder's property is bound, or to such JAG Stockholder's knowledge any
existing applicable law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over such JAG Stockholder or any of such JAG Stockholder's
property.
2
<PAGE> 3
3.3 Investment Representation. Such JAG Stockholder intends to
acquire the Company Shares for investment and not with a view to the public
distribution or resale thereof, and such JAG Stockholder shall confirm such
intention to the Company by delivering to the Company at the Closing an
investment letter in the form attached as Exhibit B hereto. Such JAG Stockholder
agrees that the Company may endorse on any stock certificate for the Company
Shares to be delivered pursuant to this Agreement an appropriate legend
referring to the provisions of the investment letter attached as Exhibit B
hereto, and that the Company may instruct its transfer agent not to transfer any
Company Shares unless advised by the Company that such provisions have been
complied with.
4. REPRESENTATIONS AND WARRANTIES OF JAG
JAG represents and warrants to the Company as follows:
4.1 Authority. JAG has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated herein. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have been duly authorized
and approved by all necessary corporate action on the part of JAG. This
Agreement has been duly executed and delivered by JAG and constitutes the valid
and binding obligation of JAG, enforceable in accordance with its terms.
4.2 Organization.
(a) JAG is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey. JAG has
the corporate power and authority to carry on its business as presently
conducted, possesses all licenses, franchises, rights and privileges material to
the conduct of its business, and is qualified to do business in all
jurisdictions where the failure to be so qualified would have a material adverse
effect on its business or financial condition.
(b) The copies of the Articles of Incorporation of
JAG and all amendments thereto, as certified by the Secretary of State of New
Jersey, and the Bylaws of JAG and all amendments thereto, as certified by the
Secretary of JAG, which have heretofore been delivered to the Company, are
complete and correct copies of the Articles of Incorporation and Bylaws of JAG
as amended and in effect on the date hereof.
4.3 Capitalization.
(a) The authorized capital stock of JAG consists of
1,000 shares of Common Stock, $.001 par value, of which One Thousand (1,000)
shares are issued and outstanding. All of the issued and outstanding shares of
Common Stock of JAG are duly authorized, validly issued, fully paid and
nonassessable.
(b) There are no options, warrants, calls, rights,
commitments or agreements of any character to which JAG is a party or by which
it is bound obligating JAG to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of JAG or obligating JAG
to grant, extend or enter into any such option, warrant, call, right, commitment
or agreement.
3
<PAGE> 4
4.4 Litigation. There is no claim, action, suit or proceeding,
at law or in equity, pending against JAG, or involving any of its assets or
properties, before any court, agency, authority, arbitration panel or other
tribunal (other than those, if any, with respect to which service of process or
similar notice has not been made on JAG), and, to the knowledge of JAG, none
have been threatened. JAG is not subject to any order, writ, injunction or
decree of any court, agency, authority, arbitration panel or other tribunal, nor
is it in default with respect to any notice, order, writ, injunction or decree.
4.5 No Conflict. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby do not and will not
conflict with, or result in a breach of any term or provision of, or constitute
a default under or result in a violation of, the Articles of Incorporation or
Bylaws of JAG, any agreement, contract, lease, license or instrument to which
JAG is a party or by which it or any of its properties or assets are bound, or
any judgment, decree, order, or writ by which JAG is bound or to which it or any
of its properties or assets are subject.
4.6 Consent. No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality is required by or
with respect to JAG in connection with the execution and delivery of this
Agreement or the consummation by JAG of the transactions contemplated herein.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to JAG and the JAG
Stockholders as follows:
5.1 Authority. The Company has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated herein. The execution and delivery of this Agreement, the
consummation of the transactions contemplated herein, and the issuance of the
Company Shares in accordance with the terms hereof, have been duly authorized by
all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms.
5.2 Organization.
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada. The
Company has the corporate power and authority to carry on its business as
presently conducted, and is qualified to do business in all jurisdictions where
the failure to be so qualified would have a material adverse effect on its
business or financial condition.
(b) The copies of the Company's Articles of Incorporation and
all amendments thereto, as certified by the Secretary of State of Nevada, and
the Bylaws of the Company and all amendments thereto, as certified by the
Secretary of the Company, which have heretofore been delivered to JAG and made
available to the JAG Stockholders, are complete and correct copies of the
Articles of Incorporation and Bylaws of the Company as amended and in effect on
the date hereof.
4
<PAGE> 5
All minutes of meetings and actions in writing without a meeting of the Board of
Directors and stockholders of the Company are contained in the minute book of
the Company heretofore delivered to JAG and made available to the JAG
Stockholders, and no minutes or actions in writing without a meeting have been
included in such minute book since such delivery to JAG that have not also been
delivered to JAG and made available to the JAG Stockholders.
5.3 Capitalization.
(a) The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, $.00001 par value, of which
3,820,900 shares are issued and outstanding. All of the issued and outstanding
shares of Common Stock of the Company were issued in compliance with applicable
state and Federal securities laws, are duly authorized, validly issued, fully
paid and non-assessable, and are not subject to preemptive rights created by
statute, the Company's Articles of Incorporation or Bylaws or any agreement to
which the Company is a party or is bound.
(b) There are no options, warrants, calls, rights,
commitments or agreements of any character to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of the Company
or obligating the Company to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
(c) The Company Shares, when issued, sold and
delivered to the JAG Stockholders in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid and nonassessable.
5.4 Equity Investments. Company does not own any equity
interest in any corporation, partnership, or other form of business entity.
5.5 Financial Statements. Company has delivered to JAG and
made available to the JAG Stockholders copies of its unaudited balance sheet as
at January 31, 1998 and the related statements of operations, stockholders'
equity and cash flows for the period then ended together with appropriate notes
to such financial statements (the "Company Financial Statements"), a copy of
which is attached hereto as Schedule 5.5. The Company Financial Statements (i)
were prepared in accordance with the books and records of the Company; (ii) were
prepared in accordance with generally accepted accounting principles; and (iii)
are in all material respects accurate, complete and correct.
5.6 Absence of Liabilities. The Company does not have and as
of the date of Closing will not have any debts, liabilities or obligations of
any nature, whether accrued, absolute, contingent or otherwise, and whether due
or to become due. For purposes of this Agreement, the term "liabilities" shall
include, without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or unknown, asserted or unasserted,
choate or inchoate, liquidated or unliquidated, secured or unsecured.
5
<PAGE> 6
5.7 Books of Account. The books, records and accounts of
Company accurately and fairly reflect, in reasonable detail, all transactions
relating to the Company and all items of income and expense, assets and
liabilities and accruals relating to the Company. Company has not engaged in any
transaction, maintained any bank account or used any corporate funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the Company.
5.8 Taxes. Within the times and in the manner prescribed by
law, the Company has filed all federal, state, and local tax returns required by
law and has paid all taxes, assessments, penalties and interest (all such items
are collectively referred to as "Taxes") due to, or claimed to be due by, any
governmental authority. Company has made all deposits required by law to be made
with respect to employees' withholding and other employment taxes, including
without limitation the portion of such deposits relating to taxes imposed upon
Company.
5.9 Litigation. There is no claim, action, suit or proceeding,
at law or in equity, pending against the Company, or involving any of its assets
or properties, before any court, agency, authority, arbitration panel or other
tribunal (other than those, if any, with respect to which service of process or
similar notice has not been made on the Company), and, to the actual knowledge
of the Company, none have been threatened. The Company is not subject to any
order, writ, injunction or decree of any court, agency, authority, arbitration
panel or other tribunal, nor is it in default with respect to any notice, order,
writ, injunction or decree.
5.10 Contracts and Undertakings. The Company is not a party to
or bound by nor are any of its properties and assets subject to any contract,
instrument, lease, license, agreement, commitment or undertaking.
5.11 Employment Agreements and Benefit Plans. The Company is
not a party to or bound by any employment, consulting or retainer agreement, or
any profit-sharing, deferred compensation, bonus, savings, stock option, stock
purchase or incentive plan or agreements.
5.12 Assumption or Guarantee of Indebtedness of Others. The
Company has not assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on any debts, obligations or liabilities of any individual,
corporation, partnership, joint venture or other business enterprise or entity.
5.13 No Conflict. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby do not and will not
conflict with, or result in a breach of any term or provision of, or constitute
a default under or result in a violation of, the Articles of Incorporation or
Bylaws of the Company, any agreement, contract, lease, license, or instrument to
which the Company is a party or by which it or any of its assets are bound, or
any judgment, decree, order or writ by which the Company is bound or to which it
or any of its assets are subject.
5.14 Consent. No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality is required by or
with respect to the Company in connection with the execution and delivery of
this Agreement or the consummation by the Company of the transactions
contemplated herein.
6
<PAGE> 7
5.15 Brokers or Finders. Except as set forth on Schedule 5.15
attached hereto, the Company has not dealt with any broker or finder in
connection with the transactions contemplated by this Agreement. Except as set
forth on Schedule 5.15 attached hereto, the Company has not incurred, and shall
not incur, directly or indirectly, any liability for any brokerage or finders'
fees or agents commissions or any similar charges in connection with this
Agreement or any transaction contemplated herein.
5.16 Compliance with Securities Laws.
(a) No formal or informal investigation or
examination by the Securities and Exchange Commission ("SEC") or by the
securities administrator of any state is pending or, to the knowledge of the
Company, threatened against the Company, any present or former officer or
director of the Company or any of the Company's stockholders who own more than
10% of the Company's Common Stock.
(b) Neither the Company nor any of its present or
former officers, directors, promoters or beneficial owners of more than 10% of
its Common Stock have been convicted of any felony or misdemeanor in connection
with the purchase and sale of any security or involving the making of any false
filing with the SEC.
(c) Neither the Company nor any of its present or
former officers, directors, promoters or beneficial owners of more than 10% of
its Common Stock are subject to any order, judgement or decree of any court of
competent jurisdiction, temporarily or preliminarily restraining or enjoining,
or subject to any order, judgment or decree of any court of competent
jurisdiction, permanently restraining or enjoining, such person from engaging in
or continuing any conduct or practice in connection with the purchase or sale of
any security or involving the making of any false filing with the SEC.
(d) No individual, corporation, partnership, joint
venture or other business enterprise or entity has demand or other rights to
cause the Company to file any registration statement under the Securities Act of
1933 relating to any securities of the Company or any rights to participate in
any such registration statement.
(e) The issuance and sale of the Company Shares to
the JAG Stockholders pursuant to this Agreement is not required to be registered
under the Securities Act of 1933, as amended, or under the securities laws of
any state.
(f) The Company is not required to be registered as
an investment company under the Investment Company Act of 1940, as amended, and
neither the Company nor any of its officers or directors are required to be
registered as investment advisors under the Investment Advisor Act of 1940, as
amended.
5.17 Underlying Documents. Copies of any underlying documents
listed or described as having been disclosed to JAG and made available to the
JAG Stockholders pursuant to
7
<PAGE> 8
this Agreement, if requested by JAG or the JAG Stockholders, have been furnished
to JAG and made available to the JAG Stockholders. All such documents furnished
to JAG and made available to the JAG Stockholders are true and correct copies,
and there are no amendments or modifications thereto that have not been
disclosed to JAG and made available to the JAG Stockholders.
5.18 Full Disclosure. Any information furnished by or on
behalf of the Company in writing at any time prior to the Closing does not and
will not contain any untrue statement of a material fact and does not and will
not omit to state any material fact necessary to make any statement, in light of
the circumstances under which such statement is made, not misleading.
5.19 Stockholder List. The Company has delivered to JAG and
made available to the JAG Stockholders a complete and accurate list of the
stockholders of record of the Company as of the date of Closing which accurately
reflects the number of outstanding shares of the Company's Common Stock and the
number of such shares which bear a restrictive legend or are subject to stop
transfer orders or other restrictions on transfer.
5.20 Absence of Assets. The Company does not have and
immediately prior to the Closing will not have any assets.
6. COVENANTS RELATING TO CONDUCT OF BUSINESS OF JAG
During the period from the date of this Agreement and
continuing until the Closing, JAG and the JAG Stockholders agree (except as
expressly contemplated by this Agreement or to the extent that the Company shall
otherwise consent in writing) that:
6.1 Ordinary Course. JAG shall carry on its business in the
usual and ordinary course, in substantially the same manner as heretofore
conducted.
7. COVENANTS RELATING TO CONDUCT OF BUSINESS OF THE COMPANY
During the period from the date of this Agreement and
continuing until the Closing, the Company agrees (except as expressly
contemplated by this Agreement or to the extent that JAG shall otherwise consent
in writing) that:
7.1 Ordinary Course. The Company shall not conduct any
business or engage in any activities other than activities related to the
closing of the transactions contemplated by this Agreement.
7.2 Dividends; Changes in Stock. The Company shall not and
shall not propose to (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
capital stock of the Company, or (iii) repurchase or otherwise acquire any
shares of its capital stock or rights to acquire any shares of its capital
stock.
8
<PAGE> 9
7.3 Issuance of Securities. The Company shall not issue,
deliver or sell or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock of any class or securities convertible into, or
rights, warrants or options to acquire, any such shares or other convertible
securities.
7.4 Governing Documents. The Company shall not amend its
Articles of Incorporation or Bylaws.
7.5 No Contracts or Undertakings. The Company shall not become
a party to or become bound by or agree to become a party to or become bound by
any contract, instrument, lease, license, agreement, commitment or undertaking.
7.6 No Obligations or Liabilities. The Company shall not incur
or agree to incur any amount of long or short-term debt for money borrowed, or
indemnify or agree to indemnify others, or incur or agree to incur any debts,
obligations or liabilities whatsoever.
8. ADDITIONAL AGREEMENTS
8.1 Access to Information.
(a) JAG and the JAG Stockholders shall afford to the
Company and shall cause its independent accountants to afford to the Company,
and its accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Closing to all information
concerning JAG, as the Company may reasonably request, provided that JAG and the
JAG Stockholders shall not be required to disclose any information which either
of them is legally required to keep confidential. The Company will not use such
information for purposes other than this Agreement and will otherwise hold such
information in confidence (and the Company will cause its consultants and
advisors also to hold such information in confidence) until such time as such
information otherwise becomes publicly available, and in the event of
termination of this Agreement for any reason the Company shall promptly return,
or cause to be returned, to the disclosing party all documents obtained from JAG
and the JAG Stockholders, and any copies made of such documents, extracts and
copies thereof.
(b) The Company shall afford to JAG and the JAG
Stockholders and shall cause its independent accountants to afford to JAG and
the JAG Stockholders, and their accountants, counsel and other representatives,
reasonable access during normal business hours during the period prior to the
Closing to all of the Company's properties, books, contracts, commitments and
records and to the audit work papers and other records of the Company's
independent accountants. During such period, the Company shall use reasonable
efforts to furnish promptly to JAG and the JAG Stockholders such information
concerning the Company as JAG and the JAG Stockholders may reasonably request,
provided that the Company shall not be required to disclose any information
which it is legally required to keep confidential. JAG and the JAG Stockholders
will not use such information for purposes other than this Agreement and will
otherwise hold such information in confidence (and JAG and the JAG Stockholders
will cause their respective consultants and advisors also to hold such
information in confidence) until such time as such information otherwise becomes
publicly available, and in the event of termination of this Agreement for any
reason JAG and the JAG
9
<PAGE> 10
Stockholders shall promptly return, or cause to be returned, to the disclosing
party all documents obtained from the Company, and any copies made of such
documents, extracts and copies thereof.
8.2 Communications. Between the date hereof and the Closing
Date, neither JAG nor the Company will, without the prior written approval of
the other party, furnish any communication to the public if the subject matter
thereof relates to the other party or to the transactions contemplated by this
Agreement, except as may be necessary, in the opinion of their respective
counsel, to comply with the requirements of any law, governmental order or
regulation.
8.3 Securities Laws. The Company shall take such actions as
may be necessary to comply with the federal securities laws and the securities
laws of all states which are applicable in connection with the issuance of the
Company Shares to the JAG Stockholders pursuant to this Agreement.
8.4 Reverse Split. JAG and the JAG Stockholders agree that
they will not cause the Company to effect a reverse split of its outstanding
Common Stock for a period of one year after the Closing Date.
9. CONDITIONS PRECEDENT
9.1 Conditions to Obligations of the Company. The obligations
of the Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction on or before the date of Closing of the following
conditions, unless waived by the Company:
(a) Representations and Warranties of the JAG
Stockholders. The representations and warranties of the JAG Stockholders set
forth in this Agreement shall be true and correct in all material respects as of
the date of this Agreement and on the date of Closing.
(b) Representations and Warranties of JAG. The
representations and warranties of JAG set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and on the
date of Closing, and the Company shall have received a certificate or
certificates to such effect signed by the chief executive officer of JAG.
(c) Additional Closing Documents. The Company shall
have received the following documents and instruments:
(1) Certified resolutions of the JAG Board
of Directors authorizing the execution and delivery of this Agreement and the
performance by JAG of its obligations hereunder; and
(2) Such other documents and instruments as
are required to be delivered pursuant to the provisions of this Agreement or
otherwise reasonably requested by the Company.
10
<PAGE> 11
9.2 Conditions to Obligations of JAG and the JAG Stockholders.
The obligations of JAG and the JAG Stockholders to consummate the transactions
contemplated by this Agreement are subject to the satisfaction on or before the
date of Closing of the following conditions unless waived by JAG and the JAG
Stockholders:
(a) Representations and Warranties of the Company.
The representations and warranties of the Company set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and on the date of Closing, and JAG and the JAG Stockholders shall
have received a certificate signed by the chief executive officer of the Company
to such effect.
(b) Resignations. The Company shall have received and
accepted the written resignations of all of the Company's officers and directors
as of the date of Closing, and shall have delivered such resignations to JAG.
(c) Election of Directors and Officers. The Board of
Directors of the Company shall have elected persons designated by JAG to serve
as directors and officers of the Company effective as of the date of Closing:
(d) Change of Name. The Company's Board of Directors
and stockholders shall have duly authorized and approved in accordance with
Nevada General Corporation law an amendment to the Company's Articles of
Incorporation to change the name of the Company to JAGNOTES.com after the date
of Closing, and JAG and the JAG Stockholders shall have received a duly executed
Certificate of Amendment to the Articles of Incorporation to such effect.
(e) Additional Closing Documents. JAG and the JAG
Stockholders shall have received the following documents and instruments:
(1) Certified resolutions of the Company's
Board of Directors (a) authorizing the execution and delivery of this Agreement
and the performance by the Company of its obligations hereunder, (b) electing
the persons designated by JAG as officers and directors of the Company effective
as of the date of Closing, and (c) authorizing an amendment to the Company's
Articles of Incorporation to change the Company's name in accordance with
Section 9.2(d) above;
(2) Resolutions of the Company's
stockholders approving an amendment to the Company's Articles of Incorporation
to change the name of the Company in accordance with Section 9.2(d) above;
(3) A certificate of good standing of the
Company from the Secretary of State of Nevada dated as of the most recent
practicable date;
(4) A list of the Company's stockholders as
of the date of Closing certified by the Company's stock transfer agent;
(5) A written opinion of counsel from Conrad
C. Lysiak, Esq. on the matters set forth in Schedule 9.2(e) attached hereto;
11
<PAGE> 12
(6) A written agreement of Kaufman to assume
and pay at the Closing the amount of the finders fee set forth on Schedule 5.15
attached hereto to the Person named on such Schedule;
(7) Such other documents and instruments as
are required to be delivered pursuant to the provisions of this Agreement or
otherwise reasonably requested by JAG and the JAG Stockholders.
(f) Concurrent Closing of Stock Purchase Agreements.
The sale of an aggregate of 3,150,000 shares of the Company's Common Stock owned
by Kaufman and certain other stockholders of the Company for a total purchase
price of $308,750 in accordance with the provisions of those certain Stock
Purchase Agreements previously delivered to Kaufman and such other stockholders
of the Company shall have been consummated concurrently with the Closing.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.1 Survival of Representations and Warranties. The
representations and warranties of the Company contained herein shall survive the
Closing, but shall expire on the second anniversary date following the date of
Closing, unless a specific claim in writing with respect to these matters shall
have been made, or any action at law or in equity shall have been commenced or
filed before such anniversary date. The limitation period for the survival of
the representations and warranties of the Company contained herein shall not
apply to any fraudulent breach of any representation or warranty or to any
breach or inaccuracy in any representation or warranty known to the Company on
or before the date of Closing.
11. INDEMNIFICATION
11.1 Indemnification. Kaufman agrees to indemnify, defend and
hold harmless JAG, the JAG Stockholders and the Company from and against any and
all demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including interest, penalties and reasonable
attorneys' fees and expenses (collectively "Damages") asserted against,
resulting to, imposed upon or incurred by JAG, the JAG Stockholders or the
Company, directly or indirectly, by reason of or resulting from (i) any breach
by the Company of this Agreement, (ii) any inaccuracy in or breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement, (iii) any claim or claims made against the Company arising out of any
debts, obligations and liabilities or asserted debts, obligations and
liabilities of the Company, (iv) any claim or claims made against the Company by
any Person who was a shareholder of the Company on or prior to the date of
Closing arising out of or related to any business or activity engaged in or any
action taken by the Company prior to the date of Closing, including, without
limitation, the issuance of any shares of the Company's Common Stock prior to
the date of Closing, and (v) any claim or claims made against the Company by any
Person who was an officer, director or employee of, or a consultant to, the
Company on or prior to the date of Closing arising out of or related to any
contract, agreement, arrangement, understanding or commitment between the
Company and any such officer, director, employee or consultant prior to the date
of Closing.
12
<PAGE> 13
11.2 Limitation. The liability of Company pursuant to this
Section 11 shall be limited to claims for damages made by JAG, the JAG
Stockholders or Company in writing within two (2) years after the date of this
Agreement or, with respect to claims relative to tax liabilities for periods
ending on or prior to the date of this Agreement, within the period of any
applicable statute of limitations.
11.3 Claims. In the event that JAG, the JAG Stockholders or
Company (hereinafter collectively referred to as the "Indemnified Party") shall
reasonably believe that it has a claim for Damages ("Claim"), it shall give
prompt notice in accordance herewith to Kaufman (the "Indemnifying Party") of
the nature and extent of such Claim and the Damages incurred by it. If the
Damages are liquidated in amount, the notice shall so state, and such amount
shall be deemed the amount of such Claim of the Indemnified Party against the
Indemnifying Party. If the amount is not liquidated, the notice shall so state
and, in such event, such Claim shall be deemed asserted against the Indemnifying
Party but no payment or satisfaction shall be made on account thereof until the
amount of such claim is liquidated.
If the Indemnifying Party shall not, within thirty (30) days
after the giving of such notice by the Indemnified Party, notify the Indemnified
Party in accordance herewith that the Indemnifying Party disputes the right of
the Indemnified Party to indemnity in respect of such Claim, then any such Claim
shall be paid or satisfied as follows: (i) if said Claim is liquidated, then
payment of such Claim to the Indemnified Party shall be made by the Indemnifying
Party at the end of such period; or (ii) if the amount of such Claim is
unliquidated at the time notice is originally given to the Indemnifying Party,
the Indemnified Party shall give a second notice to the Indemnifying Party when
the liquidated amount of such Claim is known and, unless the Indemnifying Party
shall object in writing to such amount (as opposed to the Claim itself, as to
which the right to dispute had expired) within twenty (20) days after the giving
of said second notice, payment of such Claim to the Indemnified Party shall be
made by the Indemnifying Party.
If the Indemnifying Party shall not have made payment to the
Indemnified Party of any Claim when said payment is due, then the Indemnified
Party shall have the right to take any and all actions required to collect from
the Indemnifying Party the amount of such Claim.
Any portion of the amount of Damages asserted by the
Indemnified Party in connection with a Claim shall, if not objected to by the
Indemnifying Party in accordance with the procedures established herein, be
considered to be subject to satisfaction without further objection, as may be
appropriate.
If the Indemnifying Party shall notify the Indemnified Party
that he disputes any Claim or the amount thereof (which notice shall only be
given if the Indemnifying Party has a good faith belief that the Indemnified
Party is not entitled to indemnity or the full amount of indemnity as claimed)
then the parties hereto shall endeavor to settle and compromise such Claim, or
may agree to submit the same to arbitration, and, if unable to agree on any
settlement or compromise or on submission to arbitration, such claim shall be
settled by appropriate litigation, and any liability and the amount of the
Damages established by reason of such settlement, compromise, arbitration or
litigation, or incurred as a result thereof, shall be paid and satisfied as
provided herein.
13
<PAGE> 14
11.4 Conditions of Indemnification with Respect to Third Party
Claims. The Indemnified Party shall promptly give notice to the Indemnifying
Party of any claim of a third party which may reasonably be expected to result
in a Claim by the Indemnified Party. The Indemnifying Party shall have the right
to participate in and, with respect to a third party Claim as to which he is
"wholly at risk," direct the defense, compromise or settlement of such claim
with counsel selected by him, provided the Indemnifying Party gives written
notice to the Indemnified Party of his election to do so within thirty (30) days
after receipt of notice in accordance with the preceding sentence. For the
purposes of this Section 11.4, the Indemnifying Party shall be deemed to be
"wholly at risk" except as to (i) Claims as to which the Indemnified Party may
have any direct monetary risk for which it is not fully indemnified by the terms
hereof or (ii) Claims as to which the Indemnified Party in its reasonable
judgment has any risk or liability for which compensation by monetary damages
would not be adequate. If the Indemnifying Party fails to so notify the
Indemnified Party of his election to defend any such third party claim, the
Indemnified Party will (upon further notice to the Indemnifying Party) have the
right to undertake the defense, compromise or settlement of such claim on behalf
of and for the account and expense of the Indemnifying Party, subject to the
right of the Indemnifying Party to assume the defense of such claim at any time
prior to settlement, compromise or final determination thereof.
If the proceeding involves matters as to which the
Indemnifying Party is not "wholly at risk," then the defense, compromise or
settlement of the Claim shall be the responsibility of the Indemnified Party,
but such defense, compromise and settlement by the Indemnified Party shall be
for the expense and account of the Indemnifying Party. Counsel for the
Indemnifying Party shall consult and cooperate at all times with counsel for the
Indemnified Party in defending against any such third party claim.
The Indemnifying Party shall not under any circumstances,
without the written consent of the Indemnified Party, settle or compromise any
claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of such claim.
(c) The obligations to indemnify, defend and hold
harmless pursuant to this Section 11 shall survive the Closing for a period of
two (2) years after the date of Closing.
12. TERMINATION
12.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of the Company, JAG and
the JAG Stockholders;
(b) by the Company if there has been a material
breach of any representation, warranty, covenant or agreement contained in this
Agreement by JAG or the JAG Stockholders;
(c) by JAG and the JAG Stockholders if there has been
a material breach of any representation, warranty, covenant or agreement
contained in this Agreement by the Company.
14
<PAGE> 15
12.2 Effect of Termination. Termination of this Agreement in
accordance with Section 12.1 may be effected by written notice from either the
Company or JAG and the JAG Stockholders, as appropriate, specifying the reasons
for termination and shall not subject the terminating party to any liability for
any valid termination.
13. MISCELLANEOUS
13.1 Tax Treatment. The transaction contemplated herein is
intended to qualify as a so-called "tax-free" reorganization under the
provisions of Section 368 of the Internal Revenue Code of 1986, as amended. JAG,
the JAG Stockholders and the Company acknowledge, however, that they each have
been represented by their own tax advisors in connection with this transaction;
that no party hereto has made any representation or warranty to the other with
respect to the treatment of such transaction or the effect thereof under
applicable tax laws, regulations, or interpretations; and that no attorney's
opinion or private revenue ruling has been obtained with respect to the effects
thereof under the Internal Revenue Code of 1986, as amended.
13.2 Further Assurances. From time to time, at the other
party's request and without further consideration, each of the parties will
execute and deliver to the others such documents and take such action as the
other party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
13.3 Payment of Fees and Expenses. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
13.4 Parties in Interest. Except as otherwise expressly
provided herein, all the terms and provisions of this Agreement shall be binding
upon, shall inure to the benefit of and shall be enforceable by the respective
heirs, beneficiaries, personal and legal representatives, successors and assigns
of the parties hereto.
13.5 Entire Agreement; Amendments. This Agreement, including
the Schedules, Exhibits and other documents and writings referred to herein or
delivered pursuant hereto, which form a part hereof, contains the entire
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein or therein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to its
subject matter. This Agreement may be amended only by a written instrument duly
executed by the parties or their respective successors or assigns.
13.6 Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
15
<PAGE> 16
13.7 Pronouns. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person, persons, entity or entities may require.
13.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada.
13.10 Person. For purposes of this Agreement, the term
"Person" shall mean any individual, corporation, partnership, joint venture or
other business enterprise or entity and any governmental agency, federal, state
or local.
13.11 Notices. Any and all notices, demands or other
communications required or desired to be given hereunder by any party shall be
in writing and shall be validly given or made to another party if given by
personal delivery, telex, facsimile, telegram or if deposited in the United
States mail, certified or registered, postage prepaid, return receipt requested.
If such notice, demand or other communication is given by personal delivery,
telex, facsimile or telegram, service shall be conclusively deemed made at the
time of receipt. If such notice, demand or other communication is given by mail,
such notice shall be conclusively deemed given forty-eight (48) hours after the
deposit thereof in the United States mail addressed to the party to whom such
notice, demand or other communication is to be given as hereinafter set forth:
If to JAG: At the address set forth below its name
on the signature page of this Agreement.
If to the JAG Stockholders: At the addresses set forth below their
names on the signature page of this
Agreement or on Exhibit A hereto.
If to Company: At the address set forth below its name
on the signature page of this Agreement.
If to Harold Kaufman, Jr.: At the address set forth below his name
on the signature page of this Agreement.
13.12 Waiver of Claim to Retainer. JAG and the JAG
Stockholders acknowledge that the Company has paid a retainer in the amount of
$7,500 to the Company's attorney, Conrad C. Lysiak, to perform certain legal
services, and hereby agree that after the Closing, the Company shall have no
claim against Mr. Lysiak for repayment of any part of such retainer, nor shall
Mr. Lysiak have any obligation to perform any legal services for the Company.
16
<PAGE> 17
14. APPOINTMENT OF AGENT
The JAG Stockholders hereby irrevocably constitute and appoint
Gary Valinoti as their true and lawful attorney (the "Agent") with full right
and power in their names and stead to take any and all action by and on behalf
of them necessary or desirable to consummate the transactions contemplated by
this Agreement, including without limitation, the right and power to receive
certificates representing the Company Shares on behalf of each of the JAG
Stockholders, to deliver to the Company the certificates representing the JAG
Shares, to waive performance of any of the obligations of the Company or waive
compliance by the Company with any of its covenants hereunder, to deliver
investment letters of the JAG Stockholders referred to in Section 3.3 hereof,
and to amend or terminate this Agreement as herein provided. Any such action
taken by the Agent on behalf of a JAG Stockholder shall be binding upon such JAG
Stockholder. The Company shall not have any responsibility to the JAG
Stockholders or any of them for the distribution by the Agent of the
certificates representing the Company Shares to be delivered to the JAG
Stockholders, nor shall the Company be liable in any manner whatsoever to the
JAG Stockholders or any of them by or on account of any act or omission of the
Agent.
17
<PAGE> 18
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto as of the date first above written.
Professional Perceptions, Inc.,
a Nevada corporation
By: /s/ Harold Kaufman, Jr.
------------------------------------
Its: President
Address: 2810 South Madison
Spokane, WA 99203
NEW JAG, Inc.,
a New Jersey corporation
By: /s/ Gary Valinoti
------------------------------------
Its: President
Address: 2421 Atlantic Ave, Ste. 103
Manasquan, NJ 08736
/s/ Harold Kaufman, Jr.
-----------------------------------------
Harold Kaufman, Jr.
Address: 2810 South Madison
Spokane, WA 99203
[Signatures of JAG Stockholders commences on the next page]
18
<PAGE> 19
JAG STOCKHOLDERS
SIGNATURE PAGE
/s/ Gary Valinoti
- --------------------------------------
Gary Valinoti
/s/ Cathleen Valinoti
- --------------------------------------
Cathleen Valinoti
/s/ Barry Belzer
- --------------------------------------
Barry Belzer
/s/ Anthony Salandra
- --------------------------------------
Anthony Salandra
/s/ Jeffrey Goss
- --------------------------------------
Jeffrey Goss
19
<PAGE> 20
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF
NAMES AND ADDRESSES OF NUMBER OF JAG COMPANY SHARES
JAG STOCKHOLDERS SHARES OWNED TO BE RECEIVED
- ---------------------- ------------- --------------
<S> <C> <C>
Gary Valinoti 335.8 1,175,275
4 Page Drive
Red Bank, NJ 07701
Cathleen Valinoti 44.4 155,500
4 Page Drive
Red Bank, NJ 07701
Jeffrey Goss 224.4 785,275
1304 W. Chicago Blvd.
Sea Gert, NJ 08750
Anthony Salandra 224.4 785,275
Grenee, CT
Woodcliff Lake, NJ 07675
Barry Belzer 171 598,675
One Johnson Terrace
Middletown, NJ 07748
----------
Total 3,500,000
==========
</TABLE>
20
<PAGE> 21
SCHEDULE 5.15
The Company has dealt with Conrad C. Lysiak as a finder in connection with
the transactions contemplated by the Agreement. The Company has agreed that Mr.
Lysiak is entitled to receive a finders fee in the amount of $18,400 in
connection with the transactions contemplated by this Agreement, such fee to be
assumed and paid by Harold Kaufman, Jr. at the Closing.
21
<PAGE> 1
EXHIBIT 16.1
LETTER ON CHANGE IN CERTIFYING ACCOUNTANT
Stephen R. Russo, CPA
Chief Financial Officer
JagNotes.com Inc.
2421 Atlantic Ave, Suite 103
Manasquan, New Jersey 08736
- --------------------------------------------------------------------------------
July 30, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
I am the former independent certified public accountant for
JagNotes.com Inc. (the "Company"). I have reviewed and agree with the statements
made by the Company with respect to its change in accountants in its
Registration Statement on Form SB-2 filed of even date herewith.
Very Truly Yours,
/s/ Stephen R. Russo
------------------------------------------
Stephen R. Russo, CPA
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
New Jag, Inc., a New Jersey Corporation
JagNotes-Euro.com Ltd.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the reference to Stephen R. Russo, CPA under the
captions "Experts," "Summary Financial Data" and "Selected Financial Data," and
to the use of my report dated October 12,1998 with respect to the financial
statements of JagNotes.com Inc. and Subsidiary (formerly NewJag, Inc.), included
in JagNotes.com Inc's Registration Statement on Form SB-2 filed on the date
hereof and the related Prospectus.
STEPHEN R. RUSSO, CPA
Manasquan, New Jersey
July 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1998
<CASH> 7,894,886
<SECURITIES> 0
<RECEIVABLES> 57,350
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,266,466
<PP&E> 20,087
<DEPRECIATION> 17,484
<TOTAL-ASSETS> 8,299,329
<CURRENT-LIABILITIES> 938,137
<BONDS> 0
0
0
<COMMON> 105
<OTHER-SE> 7,361,192
<TOTAL-LIABILITY-AND-EQUITY> 8,299,329
<SALES> 641,963
<TOTAL-REVENUES> 641,963
<CGS> 107,881
<TOTAL-COSTS> 107,881
<OTHER-EXPENSES> 574,862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (40,780)
<INCOME-TAX> 838
<INCOME-CONTINUING> (41,618)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,618)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
