U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
CARDSTAKES.COM
(Exact name of registrant as specified in its charter)
NEVADA 91-1963840
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1288 Alberni Street, Suite 806, Vancouver, British Columbia, Canada V6E 4N5
(Address of registrant's principal executive offices) (Zip Code)
604.664.0484
(Registrant's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which
to be so Registered: Each Class is to be Registered:
- -------------------- -------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $.0001
- ------------------------------
(Title of Class)
Copies to:
Thomas E. Stepp, Jr.
Stepp & Beauchamp, LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile: 949.660.9010
Page 1 of 19
Exhibit Index is specified on Page 18
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CardStakes.com,
a Nevada corporation
Index to Amendment No. 1 to Registration Statement on Form 10-SB
Item Number and Caption Page
1. Description of Business 3
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
3. Description of Property 12
4. Security Ownership of Certain Beneficial Owners and
Management 12
5. Directors, Executive Officers, Promoters and Control
Persons 13
6. Executive Compensation - Remuneration of Directors and
Officers 14
7. Certain Relationships and Related Transactions 14
8. Description of Securities 14
PART II
1. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters 15
2. Legal Proceedings 15
3. Changes in and Disagreements with Accountants 15
4. Recent Sales of Unregistered Securities 16
5. Indemnification of Directors and Officers 16
PART F/S
Financial Statements F-1 through F-9
PART III
1(a). Index to Exhibits 18
1(b). Exhibits E-1 through E-19
Signatures 19
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Item 1. Description of Business.
CardStakes.com (the "Company") was incorporated as Power Direct Tech.com in the
State of Nevada on February 19, 1999 and is a subsidiary of Power Direct, Inc.,
a Delaware corporation ("Power Direct"). On or about February 23, 1999, the
Company changed its name to PDTech.com. On or about June 8, 1999, the Company
changed its name to CardStakes.com. The Company maintains its principal
executive offices at 1288 Alberni Street, Suite 806, Vancouver, BC V6E 4N5. The
Company's offices in the United States are located at 4291 Meridian Street,
Suite 48, Bellingham, Washington 98226. The telephone number of the Company in
Vancouver, British Columbia is 604.664.0484.
Business of Power Direct, Inc. Power Direct was incorporated in the State of
Delaware on September 13, 1993, and maintains its principal executive offices at
1288 Alberni Street, Suite 806, Vancouver, British Columbia V6E 4N5. Power
Direct's offices in the United States are located at 4291 Meridian Street, Suite
29, Bellingham, WA 98226. The Company is currently listed on the
Over-the-Counter Bulletin Board Quotation Service under the symbol PWDR.
Power Direct was inactive from January 1, 1996, through November 1, 1998. In
November 1998 Power Direct began the process of identifying available interests
in oil and natural gas producing properties. On January 15, 1999, Power Direct
entered into a letter of intent with Rising Phoenix Development Group Ltd., a
Canadian corporation, located in Vancouver, British Columbia, Canada ("Rising
Phoenix"), to acquire all the assets of Rising Phoenix, including that
corporation's interest in the oil and natural gas rights on 6,360 acres located
in the Powder River Basin of eastern Wyoming (the "Wyoming Property"). That
letter of intent specifies that Power Direct must, among other things, pay
Rising Phoenix seventy-five thousand dollars (US$75,000) and, further, issue
3,800,000 shares of its common stock to Rising Phoenix to complete the
acquisition of the assets of Rising Phoenix. The letter of intent also provides
that Power Direct will appoint no more than three directors from Rising
Phoenix's board of directors to Power Direct's board of directors. Power Direct
paid Rising Phoenix a prepayment advance of Twenty-Five Thousand Dollars
(US$25,000) on January 27, 1999. On or about February 24, 1999, Power Direct
made a second prepayment advance to Rising Phoenix of Ten Thousand Dollars
(US$10,000). On or about March 29, 1999, Power Direct made the third repayment
advance of Ten Thousand Dollars (US$10,000). On or about April 7, 1999, the
fourth prepayment advance of Ten Thousand Dollars (US$10,000) was made by Power
Direct. Power Direct made the fifth payment of Ten Thousand Dollars (US$10,000)
and the final payment of Ten Thousand Dollars (US$10,000) on or about April 26,
1999, and on or about May 26, 1999, respectively. Power Direct has not
transferred any of its common stock to Rising Phoenix to complete this
transaction. According to the letter of intent, Power Direct is to assume all of
Rising Phoenix's financial obligations pertaining to the Wyoming Property as of
January 31, 1999. In return, Rising Phoenix agreed to deliver the Wyoming
Property in good title and assign to Power Direct its joint venture agreement
with Derek Resources Corporation ("Derek Resources"). Pursuant to that joint
venture agreement, Derek Resources agreed to provide up to a maximum of Three
Million Five Hundred Thousand Dollars (US$3,500,000) of improvements on or
before December 31, 2000, on the Wyoming Property in exchange for a 75% working
interest in the Wyoming Property. Power Direct anticipates that the site
construction will commence sometime early in the year 2000. Negotiations have
begun with Bateman Engineering, Inc. and its associate company, Silvertip
Project Partners, Inc., to provide development, financing and construction of a
pilot production facility. If Derek Resources successfully meets its obligations
under the joint venture agreement, Power Direct will own a 25% working interest
in the Wyoming Property. If Derek Resources fails to meet its obligations under
the joint venture agreement, Power Direct will obtain a 100% working interest in
the Wyoming Property, including all of the improvements financed by Derek
Resources. There are no proven oil or gas reserves on the Wyoming Property.
On February 15, 1999, Power Direct signed a letter of intent to acquire and own
up to a 51% ownership interest in LANSource Technologies, Inc., a Canadian
company ("LANSource"). LANSource is a developer of fax and data communications
software. LANSource's primary products are WINport, a modem-sharing application
and FAXport, a group of software products which allows users to send and receive
faxes from their desktop computer or through their e-mail system. WINport,
FAXport, and other LANSource products are distributed through Tech Data US, Tech
Data Canada, Ingram Micro Canada, Ingram USA, Ingram UK, Ingram Italy, EMJ Date
Systems Canada, EMJ USA, Merisel US and Micro Central. WINport is currently
available in 12 languages and is distributed worldwide. In order to purchase the
first 12.5% ownership interest in LANSource, Power Direct was required to make,
on or before March 1, 1999, a total non-refundable deposit of three hundred
thousand dollars (CDN$300,000), which payment was timely
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made to LANSource by Power Direct. The letter of intent contemplated that, on or
before March 31, 1999, Power Direct and LANSource would enter into a formal
Purchase and Sale Agreement. Upon the execution of that agreement, Power Direct
would be required to make an additional non-refundable deposit of two hundred
thousand dollars (CDN$200,000). The letter of intent also stated that in the
event that the parties, for whatever reason, were unable to finalize the
Purchase and Sale Agreement by March 31, 1999, than the whole transaction
between Power Direct and LANSource would be considered null and void and
LANSource would be entitled to retain all deposits. Because of delays by
LANSource in preparing the formal Purchase and Sale Agreement, as of April 8,
1999, Power Direct and LANSource had not finalized a formal agreement. Power
Direct is taking appropriate action to resolve this dispute with LANSource. In
the event this dispute is resolved, and a formal Purchase and Sale Agreement is
finalized, then Power Direct plans to meet its obligation to make additional
deposits of Five Hundred Thousand Dollars (CDN$500,000) and One Million Dollars
(CDN$1,000,000). There is no assurance that the Company can meet those financial
obligations. Should Power Direct meet the aforementioned financial obligations,
Power Direct will have the option to purchase an additional 12.5% interest in
LANSource for Three Million Dollars (CDN$3,000,000) by delivering such funds to
LANSource on or before September 30, 1999. Should Power Direct successfully
acquire 25% of LANSource, it will then have the option to purchase an additional
26% ownership interest by delivering Twenty Million Dollars (CDN$20,000,000) to
LANSource on or before September 30, 2000. Moreover, the letter of intent
provided that Power Direct would issue 1,200,000 restricted shares of common
stock to Marc Bisnaire, the President of LANSource, on the signing of the letter
of intent. Those shares have not yet been issued. In addition, Power Direct is
required to deliver to Mr. Bisnaire an additional 1,200,000 restricted shares of
its common stock should it elect to purchase the additional 12.5% interest in
LANSource. Power Direct's ownership interest in LANSource is contingent upon
Power Direct making payments to LANSource in specific installments, and there is
presently a dispute between Power Direct and LANSource regarding Power Direct's
acquisition of that ownership interest. Power Direct's ownership interest in
LANSource is also contingent upon the issuance, by Power Direct, of certain
shares of its common stock to Marc Bisnaire, President of LANSource, which
shares have not been issued. Power Direct is taking and will continue to take,
the action it believes is appropriate to resolve its dispute with LANSource.
On January 26, 1999, Power Direct signed a letter of agreement with I.T.A.
Enterprises, Inc. ("I.T.A."), a Canadian company, to acquire and own a 42%
working interest in a natural gas project in west central Alberta (the"Alberta
Property"). This letter of agreement requires Power Direct to provide 42% of the
costs for the three-phase project, which are estimated in the letter of
agreement to be Two Hundred Thousand Dollars (CDN$200,000). As of June 10, 1999,
Power Direct had advanced I.T.A. a total of Twenty Thousand Three Hundred Ninety
Three Dollars (US$20,393) toward the Alberta Property project. The working
interest acquired will be subject to a 10% gross overriding royalty (that is,
4.2% of the 42% working interest shall be payable directly to Nicholas Baiton,
the royalty holder). To date, Power Direct has paid a deposit of eight thousand
four hundred dollars (CDN$8,400) to I.T.A. pursuant to the terms of the
agreement. It was agreed between I.T.A. and Power Direct that the $8,400 deposit
would be used for prospect fees and that Power Direct will receive a refund of
any unused portion of that deposit. Within ten (10) days of I.T.A. providing
Power Direct with an "Authority for Expenditures" and a cash call for Phases I
and II of the development of the Alberta Property, Power Direct will be required
to advance seventy five thousand six hundred dollars (CDN$75,600) to I.T.A.,
representing the balance of Power Direct's 42% of the estimated costs. There can
be no assurance that Power Direct will have sufficient funds available to meet
this obligation in the time frame required by the letter of agreement. There are
no proven oil or gas reserves on the Alberta Property.
On or about April 28, 1999, Power Direct entered into a licensing agreement
("Compte Agreement") with Compte De Sierge Accomodative Corp., a corporation
incorporated in Panama City, Panama ("Compte De Sierge"). Compte De Sierge
worked in association with a group of programmers doing business as E-Card. The
Comte Agreement specifies, among other things, that Power Direct will have the
worldwide right to utilize and commercially exploit certain software systems and
related proprietary technology relating to the operation of the Greeting Card
Lotto, hereinafter referred to as "CardStakes.com". The CardStakes.com
technology was developed and designed by Mr. Conrado Beckerman, a director of
Compte De Sierge, and a team of programmers hired by the Company. CardStakes.com
has not produced any historical revenue upon which an estimate of potential
revenue can be determined.
The Compte Agreement also provides for three equal cash payments of CDN$100,000
to Compte De Sierge by Power Direct as partial consideration pursuant to the
Compte Agreement. The first such payment was due upon execution of
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the Compte Agreement; the second payment is due upon completion of the first
phase of testing; and the third payment is due upon completion of the second
phase of testing. The Compte Agreement also provides that Power Direct shall
issue 6,000,000 shares of its $.0001 par value common stock in two separate
issuance transactions, each of 3,000,000 shares. All such shares shall be
"restricted shares" subject to the limitations and restrictions regarding resale
and distribution specified by Rule 144. The first issuance was to occur upon
execution of the Compte Agreement, and the second issuance shall occur upon the
commencement of operations of CardStakes.com, as specified in the Compte
Agreement. As of May 13, 1999, Power Direct had paid CDN$100,000 and issued
3,000,000 shares of Power Direct's $.0001 par value common stock as per the
Compte Agreement. On July 6, 1999, with the completion of the first phase of
testing, Power Direct made the second payment of CDN$100,000 pursuant to the
Compte Agreement. As of September 15, 1999, the second phase of testing had not
been completed. As such, Power Direct had not yet paid Compte the third
CDN$100,000 installment or issued the final 3,000,000 shares. On or about August
16, 1999, with the completion of the second phase of testing, Power Direct
requested that Compte De Sierge provide Power Direct with duplicate copies of
all Compact Discs and files necessary for the operation of CardStakes.com.
E-Card had custody and control of those items requested by Power Direct. On or
about August 23, 1999, Compte De Sierge denied Power Direct's request stating
that a conflict among its programmers and E-Card prevented delivery of such
items. This denial by Compte De Sierge effectively negated any and all
contractual obligations Power Direct had to Compte De Sierge. On or about August
30, 1999, a meeting between the principals of Compte De Sierge and Power Direct
was held, whereby Compte De Sierge agreed to discontinue any further association
or involvement with E-Card and its programmers. Compte De Sierge also agreed to
revise and amend the April 28, 1999 agreement to reflect the above change.
Compte De Sierge also agreed to retain new programmers. Compte De Sierge and
Power Direct agreed to change the title of the agreement to the "Proprietary
Technology Usage -- License Agreement". As of November 1, 1999, Power Direct has
met all of its financial obligations pursuant to the Compte Agreement. Except
for the contractual relationship between Power Direct and Compte De Sierge
memorialized in the Compte Agreement, and the consulting services provided to
the Company by Mr. Beckerman, there are no other affiliations or relationships
between either the Company and Compte De Sierge or Power Direct and Compte De
Sierge.
On or about May 5, 1999, Power Direct agreed to enter into an Asset Purchase
Agreement ("On-line Agreement") with On-line Asset Courtesy Inc., a corporation
incorporated in Panama City, Panama ("On-line"). Pursuant to the On-line
Agreement, Power Direct agreed to purchase from On-Line, and On-line agreed to
sell, an Universal Resource Locator (URL) registered as "GREETINGCARDLOTTO.COM",
as well as associated URLs registered as "E-CARDLOTTO.COM" and "CARDLOTTO.COM".
An URL is the address of a page on the World Wide Web. Every web page has an URL
that identifies it uniquely, and which provides enough information for any
computer connected to the Internet to locate it. In exchange for the three (3)
URL's, Power Direct agreed to issue to On-line 2,000,000 warrants to purchase
Power Direct's $.0001 par value common stock at a purchase price of US$0.25 per
share. The warrants were to be exercisable for a period of two (2) years from
the date of issuance and all common stock purchased pursuant to those warrants
will be "restricted securities" subject to the limitations and restrictions
regarding resale and distribution specified by Rule 144. However, the On-line
Agreement was never executed by all parties, the 2,000,000 warrants were never
issued, and On-Line never delivered the rights to the 3 URL's. Power Direct and
On-line have since mutually agreed to terminate their business relationship.
Except for the proposed contractual relationship between Power Direct and
On-Line, there are no other relationships or affiliations between either Power
Direct and On-Line or the Company and On-Line.
On or about June 18, 1999, Power Direct entered into an Asset Purchase Agreement
("J&S Agreement") with J&S Overseas Holdings, of Grand Cayman, Cayman Islands
("J&S Overseas"). Pursuant to the J&S Agreement, Power Direct agreed to purchase
from J&S Overseas, and J&S Overseas agreed to sell, an URL registered as
"CardStakes.com". In exchange for the URL, Power Direct agreed to pay US$240,000
and grant to J&S Overseas the rights to purchase 1,000,000 shares of Power
Direct's $.0001 par value common stock. These rights are exercisable at a
purchase price of US$0.25 per share, and all shares purchased will be
"restricted securities" subject to the limitations and restrictions regarding
resale and distribution specified by Rule 144. As of September 15, 1999, Power
Direct had met all of its financial obligations under the J&S Agreement.
On or about September 1, 1999, Power Direct entered into an Asset Purchase
Agreement ("Holm Agreement") with Holm Investment Ltd., a Canadian corporation
("Holm"). Pursuant to the Holm Agreement, Power Direct agreed to
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purchase from Holm, and Holm agreed to sell to Power Direct, three (3) Universal
Resource Locators ("URL's") registered as "GREETINGCARDLOTTO.NET",
"E-CARDLOTTO.NET" and "CARDLOTTO.NET". In exchange for the 3 URL's, Power Direct
agreed to issue Holm 1,000,000 warrants to purchase the Company's $.0001 par
value common stock at a purchase price of US$0.25 per share. The warrants are
exercisable for a period of two (2) years from the date of issuance and all
common stock purchased pursuant to those warrants will be "restricted
securities" subject to the limitations and restrictions regarding resale and
distribution specified by Rule 144. The warrants have not yet been issued. Power
Direct anticipates that the sale will close in or around November of 1999.
The Company's Business. The Compte Agreement provides that Power Direct may
grant sublicenses to third parties on terms agreeable to Compte De Sierge with
respect to the proprietary technology. On or about June 15, 1999 the Company
became such a third party licensee. On or about that date, the Company and Power
Direct entered into a licensing agreement whereby the Company acquired 51% of
Power Direct's rights, title and interest under the Compte Agreement. The result
is that the Company has the right to utilize and commercially exploit certain
software and related proprietary technology allowing for the marketing and sale
of greeting cards over the Internet. The technology licensed from Compte De
Sierge also allows the Company to conduct a scratch and win whereby the winners
are awarded cash prizes and coupons. In exchange for the rights in the Compte
Agreement, the Company issued to Power Direct 9,106,123 shares of the Company's
$.0001 par value common stock. The Company valued those assets transferred under
the Compte Agreement at $1,470,000 based on Power Direct's historical cost
basis. Any and all assets acquired by the Company from Power Direct will be
recorded in the Company's financial statements at Power Direct's historical cost
basis. On or about August 16, 1999, Power Direct distributed 2,199,779 shares of
the Company's $.0001 par value common stock to Power Direct shareholders as
dividends.
The URL, Cardstakes.com (http://www.cardstakes.com), is a website featuring
electronic greeting cards and retail merchandise links. The electronic Greeting
Card is sent to the recipient via e-mail enabling the recipient to play a
"Scratch and Win" ticket for cash, prizes and coupons. The retail merchandise
links allow the sender to purchase a gift if the sender so desires.
Material Steps to Commence Activities. The Company has determined that the
following specific steps must be taken before the Company can begin to realize
positive revenue from its greeting card activities. First, the Company has
determined that it must complete credit processing facilities in order to
process transactions occurring on its website. As of August 31, 1999, the
Company had completed the setup of the credit card processing facilities.
Second, the Company has determined that it must integrate its credit card
processing systems into the CardStakes.com software. The Company is currently in
the process of effectuating this integration. Third, the Company has determined
that it must upgrade the CardStakes.com software to include translations to
Spanish and Chinese. The Company anticipates that it will effectuate this
upgrade in the near future. The Company has determined that the next step will
be to develop a marketing strategy. The Company has, through its association
with Conrado Beckerman, begun formulating a marketing strategy. The fifth step
of the Company's revenue producing plan is to establish a North American-based
Internet server. The Company anticipates that this step will be completed in or
around November, 1999. The sixth step involves the establishment of a
China-based Internet server. The Company anticipates that it will implement such
a server in or around the first quarter of the year 2000. The seventh step
involves the hiring of staff for website maintenance and general office
assistance. The Company believes that it has the necessary staff in place. The
eighth and final step will involve the final testing of the CardStakes.com
website. The Company anticipates this final testing will occur in or around
October, 1999. As of November 15, 1999, the Company's website is fully
operational.
The material risks associated with the start-up of the Company's activities
include, but are not necessarily limited to, (i) business interruption due to
technical difficulties; (ii) insufficient funding to meet operational costs;
(iii) insufficient users of the Company's website; (iv) decline in overall use
of the Internet; (v) the Company's activities may not gain acceptance in the
marketplace; and (vi) government regulation of the Internet.
The Greeting Card Industry. The Company believes that the sale of greeting cards
over the Internet represents a world-wide market of over US$15 Billion per year.
Cardstakes.com will be the leader in this industry by being the first Internet
site to combine a greeting card and a scratch and win entry. The Company's cards
will feature special effects, animation, music, and custom design abilities.
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The Company believes that the traditional greeting card industry is a large and
thriving business. According to the Greeting Card Association ("GCA"), an
organization representing card publishers and allied members of the greeting
card industry organized to provide a forum to educate, communicate and share
ideas among greeting card publishers and suppliers, in 1998, the purchase of
over 7 billion greeting cards by American consumers generated a total of $7.5
billion in U.S. retail sales. Of the total greeting cards purchased annually,
roughly half are seasonal and the remaining half are everyday cards. The Company
believes that sales of alternative cards, especially non-occasion cards, are
also on the increase.
Based on statistics published by the GCA, the Company believes that the most
popular card-sending holidays are, in order, Christmas, Valentine's Day,
Mother's Day, Easter and Father's Day. Consumers that exchange greeting cards
are demographically diverse. GCA statistics show that women purchase more than
80 percent of all greeting cards, and the average card purchaser is a woman in
her middle years, although this historically steady demographic picture may be
changing. Generally, greeting cards range in price from $0.38 to $10.00, with
the average card retailing for around $2.00. Cards featuring special techniques
and new technologies are at the top of this price scale. In addition to
traditional holiday and special occasion cards, the Company will also offer an
assortment of non-occasional cards.
According to the GCA, the average person receives 24 cards per year, seven of
which are birthday cards. Estimates indicate that there are more than 1,800
greeting card publishers in America ranging from major corporations to small
family organizations. The GCA claims that a typical family sends out 125
greeting cards per annum. The following chart represents, according to the GCA,
the annual sales of greeting cards broken down by occasion:
Season Units
--------------------------------------------------------------
Birthdays 2.7 billion
Christmas 2.6 billion
Valentine's Day 900 million
Mother's Day 150 million
Easter 120 million
Father's Day 95 million
Graduation 60 million
Thanksgiving 30 million
Halloween 25 million
St. Patrick's Day 15 million
Jewish New Year 10 million
Chanukah 10 million
New Year's 8 million
National Grandparent's Day 3 million
Sweetest Day 1.5 million
Passover 1.5 million
Professional Secretary's Day 1 million
National Boss' Day 1 million
April Fool's Day 500,000
Nurses' Day 500,000
The following chart represents, according to the GCA, the annual U.S. retail
sales of greeting cards:
1998 $7.5 billion 1988 $3.9 billion
1997 $7.3 billion 1987 $3.8 billion
1996 $6.8 billion 1986 $3.7 billion
1995 $6.3 billion 1985 $3.5 billion
1994 $5.9 billion 1984 $3.2 billion
1993 $5.6 billion 1983 $2.7 billion
1992 $5.3 billion 1982 $2.5 billion
1991 $5.0 billion 1981 $2.35 billion
1990 $4.6 billion 1980 $2.1 billion
1989 $4.2 billion
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The Internet. According to the Computer Industry Almanac, there were more than
147 million Internet users in the world at the end of 1998. This source further
projects that there will be 320 million Internet users worldwide at the end of
the year 2000, and more than 720 million users worldwide at the end of 2005. The
Company anticipates that the U.S. Internet population will grow to more than 207
million Internet users in 2005, which will represent approximately 29 percent of
the world's total.
Marketing Strategy. The Company and Power Direct hope to capture a significant
percentage of the greeting card market by utilizing Internet Direct Marketing.
The Company believes that the most effective style of marketing is "word of
mouth" marketing. With the advent of the Internet, "word of mouth" includes
e-mail. The Company anticipates that its initial marketing plan will be to
e-mail out to millions of Internet users, a free greeting card with an imbedded
scratch and win ticket with the potential to win $5,000.00 (or more). In the
Instant Win Portion of the scratch and win ticket, each recipient will win a
gift certificate good for 10 free promotional Company greeting cards. The
recipient will be permitted to send a greeting card out to 10 recipients of his
or her choice. Each card sent out by the initial recipient will be of the same
nature as the one he or she originally received from the Company.
Based upon this scenario, the Company hopes to generate significant interest in
a very short period of time - as one person sends to 10 people, and those 10
send to 100 people, and those 100 send to 1,000 people and so on. The numbers
could build at an extremely rapid pace.
Additional marketing plans include the regular e-mailing of free coupons,
invitations, and other marketing links to other complimentary sites and
affiliations as well as links to charities.
The Company's Card. Instead of spending $3 to $6 on a card that ends up at a
land fill in a week, customers of the Company can send animated, singing,
speaking, personally customized, virtual cards over the Internet for just $3.00.
The price is subject to change if a full e-commerce division is implemented. The
card contains a scratch and win ticket that offers instant winnings of up to
$1,000 and other prizes. All winners will be contacted through e-mail or their
mailing address. The prize money will be deposited in an offshore bankers trust
account until fund transfer instructions are received by the Company. Should the
recipient want to review the cards in the future, the card will remain in the
recipient's mailbox until deleted.
The Company's cards not only provide a high-quality, sophisticated greeting
card, but they also allow the sender a high level of interaction in the
designing and viewing process. These ready to send stock cards (from art deco,
vogue, classic, Victorian, and cartoons to 3D animation), thousands of available
clip art and pictures available to customize the greeting card, and speak as you
type audio capabilities allowing the sender to include his or her own voice with
the card. For example, the card will say "Hi! John, thank you for a wonderful
time, love, Susan White."
On or about May 20, 1999, Power Direct commissioned the firm of Hall, Dickler,
Kent, Freidman & Wood of New York, New York, to provide a legal opinion
regarding the operation of the Internet greeting card scratch and win by the
Company. The opinion provided by Hall, Dickler, Kent, Freidman & Wood provided
that the scratch and win activities proposed by the Company fall under the
sweepstakes and promotions laws of the United States allowing residents of the
United States to freely participate in sending and receiving the Company's
electronic greeting card, while also enabling the recipient to play a Scratch
and Win ticket for cash, prizes and coupons. Hall, Dickler, Kent, Freidman &
Wood concluded that the promotion conducted by the Company could be permissibly
conducted in all United States targeted jurisdictions.
Competition. Competition in the Internet greeting card industry is significant.
Certain of the Company's competitors have more experience, management, name
recognition, marketing capabilities and financial resources than the Company.
The Company may also encounter increasing competition from the new as well as
the existing Internet greeting card operations. The Company may also encounter
indirect competition from companies selling greeting cards
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in the traditional storefront form. It is possible that increased competition
could have a material adverse effect on the Company. Many of these competitors
have greater financial and other resources, and more experience in the greeting
card industry than the Company. There can be no assurance that competitors have
not or will not succeed in developing technologies that are more effective than
any which that have been or are being developed by the Company or which would
render the greeting card operations of the Company obsolete and non-competitive.
The Company anticipates it will face significant competition from other
companies including, but not limited to, (i) Cybercard, a company domiciled in
Cambridge, United Kingdom, that offers the consumer an opportunity to design his
or her greeting card and either send the recipient a card through the mail or
have his or her card posted on the Cybercard Internet site; (ii) Based in India,
an Internet company that offers animated electronic greeting cards that the
sender can deliver to the recipient via e-mail; (iii) 1001 Post Cards, a company
that offers the sender the opportunity to customize a postcard which is sent to
the recipient via e-mail; (iv) My Sentiments Greeting Cards, an Internet company
that allows the sender to customize a greeting card and send it via e-mail; and
(v) Hallmark, a company that offers the sender the option of sending an
electronic greeting card. The Company, however, believes that it can meet this
competition with its unique coupling of the online greeting card with the
scratch and win entry.
Possible Need for Additional Financing. The Company anticipates funding product
development and the expansion of sales and marketing activities from existing
cash reserves and cash from operations. In the event that cash from operations
and other available funds are insufficient to fund the Company's presently
anticipated operations, the Company may be required to seek additional
financing. There can be no assurance that, if additional financing is required,
it will be available on acceptable terms, or at all. Additional financing may
involve substantial dilution to the interests of the Company's then current
shareholders.
Business Interruption; Reliance on Computer and Telecommunications
Infrastructure. The Company's success will be dependent in large part on its
continued investment in sophisticated telecommunications and computer systems
and computer software. The Company anticipates making significant investments in
the acquisition, development, and maintenance of such technologies in an effort
to remain competitive and anticipates that such expenditures will be necessary
on an on-going basis. Moreover, computer and telecommunication technologies are
evolving rapidly and are characterized by short product lifecycles, which
requires the Company to anticipate technological developments. There can be no
assurance that the Company will be successful in anticipating, managing or
adopting such technological changes on a timely basis or that the Company will
have the financial resources available to invest in new technologies. In
addition, the Company's business is highly dependent on its computer and
telecommunications equipment and software systems, the temporary or permanent
loss of which, through physical damage or operating malfunction, could have a
material adverse effect on the Company's business. Although the Company does not
anticipate any problems with its computer software relating to the year 2000,
operating malfunctions in the software systems of financial institutions and
other parties might have an adverse affect on the operations of the Company. The
Company's business is materially dependent on service provided by various local
and long distance telephone companies. A significant increase in the cost of
telephone services that is not recoverable through an increase in the price of
the Company's services, or any significant interruption in telephone services,
could have a material adverse effect on the Company.
Management of Growth; Dependence on Key Personnel. The Company's success in the
future is dependent upon its ability to grow rapidly and effectively manage
growth. Such growth, if any, will require increased managerial, technical,
Internet marketing, and other personnel, expanded information systems and
additional financial and administrative control procedures. Expansion of the
Company's indirect and direct marketing resources will require significant
financial and managerial commitments by the Company. There can be no assurance
that the Company will be able to manage such growth effectively, if at all. The
Company's failure to do so would have a material adverse effect on its business,
operating results, and financial condition. Competition for qualified technical,
marketing, and other qualified personnel is significant, and there can be no
assurance that the Company will be able to attract or retain highly qualified
employees in the future. The Company's future success also depends in part upon
the continued service of its key technical, marketing and senior management
personnel. The loss of the services of one or more of these key employees could
have a material adverse effect on the Company's business, operating results, and
financial condition.
<PAGE>
Employees. The Company currently has 2 part-time employees and 2 full-time
employees. None of the Company's employees are subject to any collective
bargaining agreements. Each employee of the Company will be required, as a
condition of employment, to execute an agreement not to disclose the Company's
trade secrets or other confidential information.
Consultants. The Company has enlisted the services of Mr. Conrado Beckerman to
provide consulting services to the Company with regard to the Company's Internet
activities. Mr. Conrado Beckerman's experience includes developing international
communications' markets and fostering international relations. He also has a
cultural background in social protocol and economic issues, as well as
negotiation and sales experience. Mr. Beckerman has consulted for wireless cable
operators in Nepal, Pakistan, Indonesia, South Africa and Latin America. From
1982 through 1986, Mr. Beckerman worked for Radio Canada International, in
Vancouver, British Columbia, as a reporter/broadcaster reporting Canadian
economic news to Latin America. From 1985 to 1988, Mr. Beckerman was the
international sales manager for Nexus Engineering Corp, a company located in
Vancouver, British Columbia. At Nexus Engineering Corp., Mr. Beckerman was in
charge of market development and sales in both Latin America and Europe. From
1988 to 1989, Mr. Beckerman worked for Norsat International in Surrey, British
Columbia, where Mr. Beckerman was the international sales manager in charge of
developing markets for consumer and commercial satellite systems in Southeast
Asia, Latin America, the Middle East, Europe and Africa.
From 1991 to 1996, Mr. Beckerman was the President of CB&A in Vancouver, British
Columbia, a company that was a worldwide distributor of satellite-related
equipment. With CB&A, Mr. Beckerman designed and installed a cable television
network in Brazil. Mr. Beckerman also negotiated and finalized various joint
venture agreements and represented various television transmitter manufacturers
in securing international bids. From 1996 through 1998, Mr. Beckerman went back
to work for Norsat International as the marketing director for Latin America.
With Norsat International, Mr. Beckerman designed market strategies for cable
television encoding/set-top systems and worked on joint venture agreements with
Brazilian companies.
From 1993 to 1998, Mr. Beckerman was honorary counsel for Uruguay. In his
capacity as honorary counsel, Mr. Beckerman achieved the highest position
available as a foreign dignitary for the provinces of British Columbia and
Alberta. He promoted cultural and economic exchanges between Uruguay and the
western provinces of Canada and was the speaker in various forums related to
Mercosur. Mercosur, known as The Southern Common Market, was created by the
Treaty of Asuncion signed by Argentina, Brazil, Paraguay and Uruguay in the
Paraguayan capital on March 6, 1991. Chile and Bolivia became associate members
in 1996 and 1997, respectively. With a population of 27 million and a gross
domestic product of US$1.3 trillion in 1997, Mercosur is the fastest trading
block in the world. It experienced a trade growth of 400% in the period of 1990
to 1997. From 1998 to the present, Mr. Beckerman has acted as the strategic
planning director of Southern Cone Vitacom Corporation, in Mountain View,
California. At Southern Cone Vitacom Corporation, Mr. Beckerman is in charge of
the development and marketing of Very Small Aperture Terminals(a satellite
communications systems that serves home and business users and handles data,
voice and video signals) equipment in the Southern Cone of South America. He has
also marketed Internet Service Provider equipment and Internet voice-over
satellite equipment in South America. He has also appeared as the guest speaker
at various seminars and conferences relating to the business of Southern Cone
Vitacom International.
There can be no assurance that the Company will benefit either directly or
indirectly, from Mr. Beckerman's business experience.
Reports to Security Holders. The Company is filing this Registration Statement
on Form 10-SB on a voluntary basis under the Securities and Exchange Act of
1934. The Company intends to cause its stock to be listed on the
Over-the-Counter Bulletin Board Quotation Service ("OTCBB") maintained by the
National Association of Securities Dealers, Inc. Once the Company's stock is
listed on the OTCBB, the Company intends to provide an annual report to its
security holders, which will include audited financial statements. The Company
will become a reporting company when this registration statement becomes
effective with the Securities and Exchange Commission ("SEC"). After the Company
becomes a reporting company with the SEC, the public may read and copy any
materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth
Street NW, Washington, D.C. 20549. The public may also obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains
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<PAGE>
an Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC. The
address of that site is http://www.sec.gov.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This report includes a number of forward-looking statements which indicate the
Company's current expectations with respect to future events and financial
performance. Forward looking statements can be identified by the use of
forward-looking terminology such as "believes", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or the negative thereof or
other variations thereon or comparable terminology. Such statements are subject
to certain risks, uncertainties and assumptions. No assurances can be given that
the future results anticipated by those forward looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Other factors could also cause actual results to vary materially from the future
results anticipated in such forward-looking statements. Undue reliance should
not be placed on those forward-looking statements, are based on facts existing
as of the date of this Registration Statement.
Liquidity and Capital Resources. The Company had cash resources of $189,599 at
April 30, 1999. At September 30, 1999, the Company had cash resources of $77.00.
The diminution in cash reserves was primarily due to costs and expenses
associated with (i) selling, general and administrative; (ii) consulting
services; and (iii) legal services. On September 30, 1999, the Company had total
current assets of $77.00. On September 30, 1999, the Company had total current
liabilities of $80,495.00. At September 30, 1999, total current liabilities
exceeded total current assets by $80,418. The net loss from operations from
February 19, 1999 (inception) to September 30, 1999, was $149,218.00. The loss
was primarily the result of expenditures for selling, general and
administrative; consulting services and legal services. The Company also
allocated $106,606.00 towards amortization of intangible assets. The Company's
only external source of liquidity is the sale of its capital stock. The only
material commitment of capital expenditures the Company anticipates within the
next 12-month period is the cash prizes it will award to the winners of the
scratch and win. The Company does not anticipate any significant research and
development will occur over the next 12-months. The Company does not anticipate
it will either lease or purchase any significant equipment over the next
12-months.
Results of Operations. As of September 30, 1999, the Company had not yet
realized any revenue from operations. The Company has been in the development
stage since its inception on February 19, 1999. With the Company's purchase of
Power Direct's rights in the Compte Agreement, the Company now holds significant
assets, realization of those assets is dependent upon the Company's ability to
complete the material steps discussed in Item 1. The Company's success is also
materially dependent upon its ability to satisfy additional financing
requirements. The Company, being a developmental stage enterprise, is currently
developing technology which, when in place, if successful, may mitigate the net
loss experienced by the Company. The Company is also reviewing its options to
raise substantial equity capital. The Company anticipates that it will begin to
realize positive revenue in or around the end of November, 1999. In order to
satisfy its requisite budget, management has held and continues to conduct
negotiations with various investors. The Company anticipates that these
negotiations will result in additional investment income for the Company. To
achieve and maintain the competitiveness of its website, the Company may be
required to raise substantial funds in addition to funds already raised through
the issuance of the Company's shares. The Company's forecast for the period for
which its financial resources will be adequate to support its operations that
involves risks and uncertainties and actual results could fail as a result of a
number of factors. The Company anticipates that it will need to raise additional
capital to develop, promote and conduct its operations. Such additional capital
may be raised through additional public or private financings as well as
borrowing and other sources.
There can be no assurance that additional funding will be available under
favorable terms, if at all. If adequate funds are not available, the Company may
be required to curtail operations significantly or to obtain funds through
entering into arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain products and services that
the Company would not otherwise relinquish. For example, if the Company is not
able to secure adequate funding to continue its operations, it may license its
software rights to other companies.
11
<PAGE>
However, the Company believes it is poised to maintain both its short-term and
its long-term liquidity. The Company believes that within a short period of
time, it can begin to produce the positive revenue through its Internet
activities. Coupled with the further issuance of common stock of the Company,
the Company believes it can significantly improve its long-term liquidity. The
Company will continue to satisfy its legal and accounting costs with its current
cash resources.
Impact of the Year 2000. The Company anticipates that the year 2000 (commonly
referred to as "Y2K") could impact the business of the Company. Many business
software applications use only the last two digits to indicate the applicable
year. Unless these programs are modified, computers running time-sensitive
software may be unable to distinguish between the year 1900 and the year 2000,
which would result in computer system failures, miscalculations, and general
disruption of operations, including, among other things, a temporary inability
to process transactions or to engage in other normal business activities. Many
Y2K problems might not be readily apparent when they first occur, but instead
could imperceptibly degrade technology systems and corrupt information stored in
computerized databases, in some cases before January 1, 2000.
The Company has completed a preliminary assessment of each of its operations and
its Y2K readiness and had determined that the appropriate actions are being
taken. The Company does not believe the Y2K issue will result in any significant
problem for the Company's computer systems. The Company recognizes, however,
that the Y2K issue could have a material impact on the operations of the
Company. There is no guarantee that the computer systems of other companies on
which the Company's systems rely will be timely readied for the Year 2000.
Moreover, there can be no guarantee that the Company's suppliers, customers, or
other parties with whom the Company does business will not experience
significant Y2K problems, which might result in an adverse effect on the
Company's operations.
Item 3. Description of Property.
Property held by the Company. As of the dates specified in the following table,
the Company held the following property:
==========================================================================
Property April 30, 1999 September 30, 1999
- -------------------------- -----------------------------------------------
Cash and equivalents $ 189,599.00 $77.00
==========================================================================
The Company defines cash equivalents as all highly liquid investments with a
maturity of 3 months or less when purchased. The Company does not presently own
any interests in real estate. The Company does not presently own any inventory
or equipment.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners. The following represents
the beneficial owners of 5% or more of the Company's issued and outstanding
common stock, other than officers and directors.
Name and Address of Amount of
Title of Class Beneficial Owner Beneficial Owner Percent of Class
- -------------- ---------------- ---------------- ----------------
Common Stock Power Direct, Inc. 6,926,752 59.0%
1288 Alberni Street
Suite 806
Vancouver, B.C. V6E 4N5
(b) Security Ownership by Management. As of September 30, 1999, the directors
and principal executive officers of the Company beneficially owned in the
aggregate 7,426,752 shares of the Company's common stock, or approximately
63.26% of the issued and outstanding shares, as set forth in the following
table:
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<PAGE>
Name and Address of Amount of
Title of Class Beneficial Owner Beneficial Owner Percent of Class
- -------------- ---------------- ---------------- ----------------
Common Stock Power Direct, Inc. 6,926,752 59.0%
1288 Alberni Street
Suite 806
Vancouver, B.C. V6E 4N5
Common Stock Jack Sha 500,000 4.26%
5550 Cambie Street
Suite 306
Vancouver, B.C. V5Z 3A2
President and a Director
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403 of Regulation S-B.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and principal executive officers of the Company are specified on
the following table:
<TABLE>
<CAPTION>
===============================================================================================================
Name and Address Age Position Term as Director
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jack Sha
5550 Cambie Street, Suite 306 48 President and Director February 19, 1999 (inception)
Vancouver, B.C. V5Z 3A2 to present
- ---------------------------------------------------------------------------------------------------------------
Robert Klein
1273 West 20th Street 51 Secretary, Treasurer and Director February 19, 1999
North Vancouver, B.C. V7P 2B8 (inception) to present
===============================================================================================================
</TABLE>
Jack Sha is the President and a Director of the Company. Mr. Sha was the
president of Tokyo Trading Ltd. From 1990 through 1994, during which time he was
involved in the decision making process for various investment opportunities,
including golf course developments to mining properties. In 1991, Mr. Sha
acquired, on behalf of the Tokyo Trading Ltd., the rights to develop and market
a unique essence for skin care products. In 1994, Mr. Sha underwent major
surgery and was inactive until 1998.
Robert Klein is the Secretary, Treasurer and a Director of the Company. He also
the President of Rising Phoenix Development Group, Ltd., and recently resigned
from Power Direct, Inc.'s Board of Directors. It is anticipated that Mr. Klein
may again become a member of Power Direct, Inc.'s Board of Directors. Mr.
Klein's experience includes an active twenty-year career in the securities,
handling a wide range of duties including management roles and institutional
trading. For the past fifteen years, a major emphasis has been placed on
packaging complex transactions on behalf of corporate clients, resulting in the
creation and sale of marketable securities. The past five years have been spent
on public and private companies involved in resource management and light
manufacturing. He has a degree in Applied Mathematics from the University of
Waterloo. Mr. Klein has an FCSI designation from the Canadian Securities
Institute. Mr. Klein has been responsible for strategic planning and securing
funding for a number of start-up ventures, both in Canada and the United States.
None of the above specified individuals share any familial relationship. Other
than the individuals specified above, there are no significant employees
expected by the Company to make a significant contribution to the business of
the Company. All directors of the Company serve until the next annual meeting of
stockholders. The Company's executive officers are appointed by the Company's
Board of Directors and serve at the discretion of the Company's Board of
Directors.
13
<PAGE>
There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining Mr. Sha or Mr. Klein from engaging in or continuing any conduct,
practice or employment in connection with the purchase or sale of securities, or
convicting such person of any felony or misdemeanor involving a security, or any
aspect of the securities business or of theft, nor is Mr. Sha or Mr. Klein the
officers or directors of any corporation or entity so enjoined.
Item 6. Executive Compensation - Remuneration of Directors and Officers.
The officers and directors of the Company received no direct compensation from
the Company during the Company's most recent fiscal year. However, beginning in
or about August, 1999, Jack Sha, in his capacity as President of the Company
began earning US$2,000 a month. Mr. Sha has agreed to defer portions of his
compensation until the Company has the requisite funds to pay his salary. As of
September 15, 1999, Mr. Sha had been paid US$1,000 with an additional US$1,000
earned but unpaid. The officers and directors of the Company are reimbursed for
expenses incurred on behalf of the Company.
Item 7. Certain Relationships and Related Transactions.
Ownership of the Company's Common Stock by Power Direct. Power Direct, pursuant
to the June 15, 1999 licensing agreement between the Company and Power Direct
(more particularly described in Item 1 of this Amendment No. 1 to the Company's
Registration Statement on Form 10-SB), currently owns 6,926,752 shares of the
Company's $.0001 par value common stock. The Company's President and director,
Jack Sha, is also the President and a director of Power Direct. On or about
August 16, 1999, Power Direct distributed 2,199,779 shares of the Company's
$.0001 par value common stock as a dividend to Power Direct's shareholders.
Office Services. Office services are provided without charge to the Company by
Jack Sha, President and a director of the Company.
Operating Expense Advances. As of September 30, 1999, Power Direct had advanced
the Company a total of $80,495 to pay for operating expenses. The Company and
Power Direct have not yet negotiated any repayment terms. The Company
anticipates that it will reimburse Power Direct when, and if, funds become
available. The outstanding amount owed bears no interest.
Anti-Dilution Provision. On or about March 9, 1999, the Company amended its
Articles of Incorporation to add an Anti-Dilution Provision ("Provision")
providing for the continuous and nondilutable 51% ownership of the Company by
Power Direct. In or around September, 1999, the Company and Power Direct agreed
that the Provision would be removed from the Company's Articles of
Incorporation. As consideration for removal of the Provision, the Company agreed
to issue Power Direct 2,000,000 shares of its $.0001 par value common stock. On
or about September 10, 1999, the Company's President and Secretary executed a
Certificate of Amendment to the Company's Articles of Incorporation removing the
Provision.
Transactions with Promoters. The services of no promoters were used.
Item 8. Description of Securities.
The Company is authorized to issue 100,000,000 shares of common stock, $.0001
par value, each share of common stock having equal rights and preferences,
including voting privileges. As of September 30, 1999, 11,726,531 shares of the
Company's $.0001 par value common stock were issued and outstanding.
The shares of $.0001 par value common stock of the Company constitute equity
interests in the Company entitling each shareholder to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
the Company's common stock are entitled to one vote for each share of record
regarding all matters to be voted on by the Company's shareholders. The holders
of the Company's common stock are entitled to receive dividends when, as
14
<PAGE>
and if declared by the Company's Board of Directors from funds legally available
therefor; provided, however, that cash dividends are at the sole discretion of
the Company's Board of Directors. In the event of liquidation, dissolution or
winding up of the Company, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities of the Company and after provision has been made for each class
of stock, if any, having preference in relation to the Company's $.0001 par
value common stock. Holders of the shares of Company's $.0001 par value common
stock have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to the Company's $.0001 par value common
stock. All of the outstanding shares of Company's common stock are duly
authorized, validly issued, fully paid and non-assessable.
Penny Stock Regulation. The Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the Commission, which (i) contained a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading; (ii) contained a description of the
broker's or dealer's duties to the customer and of the rights and remedies
available to the customer with respect to violation to such duties or other
requirements of Securities' laws; (iii) contained a brief, clear, narrative
description of a dealer market, including "bid" and "ask" prices for penny
stocks and significance of the spread between the "bid" and "ask" price; (iv)
contains a toll-free telephone number for inquiries on disciplinary actions; (v)
defines significant terms in the disclosure document or in the conduct of
trading in penny stocks; and (vi) contains such other information and is in such
form (including language, type, size and format), as the Commission shall
require by rule or regulation. The broker-dealer also must provide, prior to
effecting any transaction in penny stock, the customer (i) with bid and offer
quotations for the penny stock; (ii) the compensation of the broker-dealer and
its salesperson in the transaction; (iii) the number of shares to which such bid
and ask prices apply, or other comparable information relating to the depth and
liquidity of the market for such stock; and (iv) month account statements
showing the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgement of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
If any of the Company's securities become subject to the penny stock rules,
holders of those securities may have difficulty selling those securities.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
The Company anticipates that it will apply for participation in the OTC Bulletin
Board, an electronic quotation sustain for securities not traded on a securities
exchange. As of September 30, 1999, there were no warrants outstanding to
purchase shares of the Company's $.0001 par value common stock, nor any options
to purchase common stock. The Company has never paid cash dividends and does not
anticipate paying cash dividends in the foreseeable future. The Company
anticipates that it will retain earnings, if any, for future growth and
expansion of its business.
Item 2. Legal Proceedings.
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
Item 3. Changes in and Disagreements with Accountants.
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
15
<PAGE>
Item 4. Recent Sales of Unregistered Securities.
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
On or about March 1, 1999, the Company commenced an offering of shares of its
common stock in reliance on an exemption from registration and prospectus
delivery requirements of the Securities Act of 1933, as amended ("Act"), which
exemption is specified by the provisions of Section 3(b) of the Act and Rule 504
of Regulation D promulgated by the Securities and Exchange Commission pursuant
to that Section 3(b). As of March 31, 1999, the Company had sold a total of
2,100,000 shares of its common stock pursuant to that offering. Gross proceeds
from the offering are $210,000. The offering price for the Company's shares of
$.0001 par value common stock was arbitrarily determined by the Company and had
no relationship to assets, book value, revenues or other established criteria of
value. Proceeds from the offering described in the preceding paragraph were used
for, among other purposes, working capital, including legal fees; office
equipment and office expenses.
On or about June 15, 1999, the Company entered into a licensing agreement with
Power Direct whereby the Company acquired 49% of Power Direct's rights, title
and interest in the Compte Agreement (more particularly described in Item 1 of
this Amendment No. 1 to the Company's Registration Statement on Form 10-SB).
Pursuant to that licensing agreement, the Company issued to Power Direct a total
of 9,106,123 shares of its $.0001 par value common stock on the following dates
in the following amounts:
============================== ========================
Date Amount
------------------------------ ------------------------
June 15, 1999 2,185,716 shares
------------------------------ ------------------------
June 17, 1999 4,420,407 shares
------------------------------ ------------------------
July 7, 1999 520,408 shares
------------------------------ ------------------------
September 12, 1999 2,000,000 shares(1)
============================== ========================
(1) These shares were issued to Power Direct as consideration for Power Direct's
consent to the removal of the Anti-Dilution Provision from the Company's
Articles of Incorporation (more particularly described in Item 7 of this
Amendment No. 1 to the Company's Registration Statement on Form 10-SB).
The shares were issued in reliance upon the exemption from the registration
requirements of the Securities Act of 1933 ("Act") specified by the provisions
of Section 4(2) of the Act and Rule 506 of Regulation D promulgated by the
Securities and Exchange Commission pursuant to that Section 4(2). The Company
valued the assets purchased from Power Direct at $1,470,000 based on Power
Direct's historical cost basis. There were no commissions paid on this
transaction.
On or about July 7, 1999, the Company issued 500,000 shares of its $.0001 par
value common stock for services rendered. The Company valued those services
rendered at US$5,000.00. Those shares were issued in reliance upon an exemption
from the registration requirements of the Securities Act of 1933 ("Act")
specified by the provisions of Regulation S of the Act promulgated by the
Securities and Exchange Commission. Specifically, the issuance was made to a
"non - U.S. person outside the United States of America" as that is defined
under applicable state and federal securities laws.
Item 5. Indemnification of Directors and Officers.
Article Twelve of the Company's Articles of Incorporation provides that no
officer or director of the Company shall be personally liable to the Company or
its stockholders for damages for breach of fiduciary duty as an officer or
director, except that Article Twelve does not eliminate or limit the liability
of an officer or director for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or for the payment of dividends
in violation of the Nevada General Corporation law.
The Company contemplates that it may enter into indemnification agreements with
each of its executive officers and directors pursuant to which the Company
agrees to indemnify each such person for all expenses and liabilities, including
criminal monetary judgments, penalties and fines, incurred by such person in
connection with any criminal or civil action brought or threatened against such
person by reason of such person being or having been an officer or employee of
the Company. In order to be entitled to indemnification by the Company, such
person must have acted in
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<PAGE>
good faith and in a manner such person believed to be in the best interests of
the Company and, with respect to criminal actions, such person must have had no
reasonable cause to believe his or her conduct was unlawful.
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO PUBLIC
POLICY AND, THEREFORE, UNENFORCEABLE.
PART F/S
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Amendment No. 1 to Registration Statement on Form 10-SB.
(a) Index to Financial Statements. Page
1 Independent Auditors' Report F-1
2 Audited Balance Sheet as at April 30, 1999 F-2
3 Audited Statement of Operations for Period
From February 19, 1999 (inception) to
April 30, 1999 F-3
4 Audited Statement of Changes in Stockholders'
Equity For Period From February 19, 1999 (inception)
to April 30, 1999 F-4
5 Audited Statement of Cash Flow For Period From
February 19, 1999 (inception) to April 30, 1999 F-5
6 Notes to Audited Financial Statements F-6 through F-7
7 Independent Auditor's Report F-8
8 Audited Balance Sheets
as at September 30, 1999 F-9 through F-10
9 Audited Consolidated Statement of Operations
for Period from February 19, 1999 (inception)
to September 30, 1999 F-11
10 Audited Statement of Changes in Stockholders'
Equity for Period From February 19, 1999 (inception)
to September 30, 1999 F-12
11 Audited Statement of Cash Flows
for Period From February 19, 1999 (inception)
to September 30, 1999 F-13
12 Notes to Audited Financial Statements F-14 through F-16
17
<PAGE>
PART III
Item 1. Index to Exhibits
Copies of the following documents are filed with this Amendment No. 1 to
Registration Statement, Form S-B, as exhibits:
1 Greeting Card Lotto Proprietary Technology
Usage License Agreement Between
the Company and Compte De Sierge E-1 through E-19
<PAGE>
SIGNATURES
In accordance with the provisions of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this Amendment No. 1 to Registration
Statement on Form 10-SB to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Vancouver, British Columbia, Canada, on December
__, 1999.
CardStakes.com,
a Nevada corporation
By: /s/________________________
Jack Sha
Its: President
18
<PAGE>
James E. Slayton, CPA
- --------------------------------------------------------------------------------
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
INDEPENDENT AUDITORS' REPORT
Board of Directors May 14, 1999
PDTech.com (The Company)
Las Vegas, Nevada 89102
I have audited the Balance Sheet of PDTech.com (A Development Stage
Company), as of April 30, 1999, and the related Statements of Operations,
Stockholders' Equity and Cash Flows for the period February 19, 1999 (Date of
Inception) to April 30, 1999. These financial statements are the responsibility
of the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statement presentation. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PDTech.com, (A Development
State Company), at April 30, 1999, and the results of its operations and cash
flows for the period February 19, 1999 (Date of Inception) to April 30, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements. The Company has had limited operations and has not
established a long term source of revenue. This raises substantial doubt about
its ability to continue as a going concern. Management's plan in regard to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ James E. Slayton
James E. Slayton, CPA
Ohio License ID# 04-1-15582
F-1
<PAGE>
PDTech.com
(A Development Stage Company)
BALANCE SHEET
AS AT
April 30, 1999
ASSETS
CURRENT ASSETS
Cash $189,599.00
Other Current Assets 0.00
-----------
Total Current Assets 189,599.00
OTHER ASSETS
Other Assets 0.00
-----------
Total Other Assets 0.00
-----------
TOTAL ASSETS $189,599.00
===========
LIABILITIES & EQUITY
CURRENT LIABILITIES
Due to Shareholder $2,551 .00
-----------
Total Current Liabilities 2,551.00
EQUITY
Capital Stock 210.00
Additional Paid In Capital 209,790.00
Retained Earnings or (Deficit) (22,952.00)
-----------
Total Stockholders' Equity 187,048.00
TOTAL LIABILITIES & OWNER'S EQUITY $189,599.00
===========
See accompany notes to financial statements & audit report
-2-
F-2
<PAGE>
PDTech.com
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR PERIOD
February 19, 1999 (Date of Inception) to April 30, 1999
REVENUE
Services 0.00
Interest Income in the course of business 284.00
COSTS AND EXPENSES
Selling, General and Administrative 23,236.00
------------
Total Costs and Expenses 23,236.00
------------
Net Ordinary Income or (Loss) (22,952.00)
============
Weighted average
number of common
shares outstanding 2,100,000
Net Loss
Per Share -0.01
See accompany notes to financial statements & audit report
-3-
F-3
<PAGE>
PDTech.corn
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD
February 19, 1999 (Date of Inception), to April 30, 1999
Deficit
accumulated
Additional during
Common Stock paid-in development
Shares Amount capital stage
----------------------------------------------------------
April 9, 1999
Issued for cash 2,100,000 210.00 209,790.00
Net loss
February 19. 1999
(inception) to
April 30, 1999 (22,952.00)
--------------------------------------------------------
Balance
April 6, 1999 2,100,000 $210.00 $ 209,790.00 ($ 22,952.00)
========================================================
See accompany notes to financial statements & audit report
-4-
F-4
<PAGE>
PDTech.com
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR PERIOD
February 19, 1999 (Date of Inception), to April 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 0.00
Interest Income in the course of business 284.00
----------
Net Cash provided by Operating Activities 284.00
Cash disbursed for Operating Activities 21,685.00
----------
Net cash flow used by operating activities (21,401.00)
CASH FLOWS FROM INVESTING ACTIVITIES 0.00
----------
Net cash used by investing activities 0.00
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 210,000.00
Advance from shareholders 1,000.00
----------
Net cash provided by financing activities 211,000.00
Net increase (decrease) in cash 189,599.00
April 30, 1999 189,599.00
See accompany notes to financial statements & audit report
-5-
F-5
<PAGE>
PDTech.com
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
April 30, 1999
NOTE 1- HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized February 19, 1999 (Date of Inception) under the
laws of the State of Nevada, as PDTech.com (The Company) has no operations and
in accordance with SFAS #7, the Company is considered a development stage
company.
On April 9, 1999, the Company completed a public offering that was exempt
from federal registration pursuant to Regulation D, Rule 504 of the Securities
Act of 1933 as amended. The Company sold 2,100,000 shares of Common Stock at a
price of $.10 per share for a total amount raised of $210,000.00. The Company
received cash in the amount of $210,000.
NOTE 2 ACCOUNTING POLICIES AND PROCEDURES
Accounting polices and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. The cost of organization, $1,590.00, was expensed when incurred.
3. Earnings per share is computed using the weighted average number of
shares of common stock outstanding.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
5. The cost of equipment is depreciated over the estimated useful life of
the equipment utilizing the straight line method of deprecation.
6. The Company will review its need for a provision for federal income tax
on a quarterly basis and as Statements of Operations are issued.
7. The Company's fiscal year end is December 31.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no revenue from its planned principal
operations. This raises substantial doubt about its ability to continue as a
going concern. It is management's plan to seek additional capital through a
registered public offering of securities. There is no guarantee that management
will be able to raise additional capital through a registered public offering.
-6-
F-6
<PAGE>
PDTech.com
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
April 30, 1999
NOTE 4- RELATED PARTY TRANSACTION
The Company neither owns or leases any real or personal property. Office
services are provided without charge by a director. Such costs are immaterial to
the financial statements and, accordingly, have not been reflected therein. The
officers and directors of the Company are involved in other business activities
and may, in the future, become involved in other business opportunities. If a
specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such conflicts.
NOTE 5- WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock,
F-7
<PAGE>
James E. Slayton, CPA
- --------------------------------------------------------------------------------
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
1-330-864-3553
INDEPENDENT AUDITORS' REPORT
Board of Directors November 5, 1999
Cardstakes.com (The Company)
Las Vegas, Nevada 89109
I have audited the Balance Sheet of Cardstakes.com (A Development Stage
Company) formerly known as Power Direct Tech.com as of September 30, 1999, and
the related Statements of Operations, Stockholders' Equity and Cash Flows for
the period February 19, 1999 (Date of Inception) to September 30, 1999. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statement presentation. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cardstakes.com, (A
Development Stage Company), as of September 30, 1999, and the results of its
operations and cash flows for the period February 19, 1999 (Date of Inception)
to September 30, 1999, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has had limited operations and has not
generated significant revenues from planned principal operations. This raises
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters is also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ James E. Slayton
James E. Slayton, CPA
Ohio License ID# 04-1-15582
F-8
<PAGE>
Cardstakes.com
(A Development Stage Company)
BALANCE SHEET
AS AT
September 30, 1999
ASSETS
ASSETS
CURRENT ASSETS
Cash 77.00
-------------
Total Current Assets 77.00
PROPERTY AND EQUIPMENT
Property and Equipment (net of depreciation) 0.00
-------------
Total Property and Equipment 0.00
OTHER ASSETS
Software 2,287.00
Domain Name 387.00
URL Purchase 229,276.00
Licensing Agreement 851,809.00
-------------
Total Other Assets 1,083,759.00
-------------
TOTAL ASSETS $1,083,836.00
=============
See accompanying notes to financial statements
-2-
F-9
<PAGE>
Cardstakes.com
(A Development Stage Company)
BALANCE SHEET
AS AT
September 30, 1999
LIABILITIES & EQUITY
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES
Accounts Payable $ 80,495.00
---------------
Total Current LIabIlitIes 80,495.00
OTHER LIABILITIES
Other Liabilities 0.00
---------------
Total Other Liabilities 0.00
---------------
Total Liabilities 80,495.00
EQUITY
Common Stock, $0.001 par value, shares; authorized, 11,727.00
20,000,000 shares, issued and outstanding at September 30,
1999, 11,726,531
Additional Paid In Capital 1,115,926.00
Preferred stock, 50.001 par value, shares authorized, 5,000,000,
none Issued
Donated Capital 0.00
Retained Earnings (Deficit accumulated during development
stage) (124,312.00)
---------------
Total Stockholders' Equity 1,003,341.00
---------------
TOTAL LIABILITIES & OWNER'S EQUITY $ 1,083,836.00
===============
</TABLE>
See accompanying notes to financial statements
-3-
F-1O
<PAGE>
Cardstakes.com
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR PERIOD
February 19, 1999 (Date of Inception) to September 30, 1999
REVENUE
Services 0.00
COSTS AND EXPENSES
Selling, General and Administrative 11,706.00
Consulting Services 21,000.00
Legal Services 9,698.00
Depreciation Expense 208.00
Amortization of Intangible Assets 81,700.00
------------
Total Costs and Expenses 124,312.00
------------
Net Ordinary Income or (Loss) (124,312.00)
============
Weighted average
number of
common
shares outstanding 6,035,715
-0.02
Net Loss Per Share
See accompanying notes to financial statements
-4-
F-11
<PAGE>
Cardstakes.com
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD
February 19, 1999 (Date of Inception) to September 30, 1999
<TABLE>
<CAPTION>
Deficit
accumulated
Common Additional during Total
Stock paid-in Donated development Stockholder's
Shares Amount capital Capital stage Equity
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
April 9, 1999
Issued for cash 2,100,000 2,100.00 207,900.00 0.00 210,000.00
June 15, 1999
Issued as part of June
151 1999 purchase
agreement 2,185,716 2,185.72 216,385.88 218,571.60
June 17, 1999
Issued as part of June
15,1999 purchase
agreement 4,420,407 4,420.41 437,620.29 442,040.70
July 7, 1999 500,000 500.00 4,500.00 5,000.00
Issued for services rendered
July 7, 1999 520,408 520.41 51,520.39 52,040,80
issues as part of June 15, 1999
purchase agreement
September 12, 1999 2,000,000 2,000.00 198,000.00 200,000.00
Issued as part of
June 15, 1999 purchase agreement
Net loss
February 19, 1999
(Inception) to
September 30, 1999 (124,312.00) (124,312.00)
----------------------------------------------------------------------------------------
Balances as at September 30,1999 11,726,531 $11,726.53 $1,673,273.47 $0.00 ($124,312.00) $1,003,341.00
========================================================================================
</TABLE>
See accompanying notes to financial statements
-5-
F-12
<PAGE>
Cardstakes.com
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR PERIOD
February 19, 1999 (Date of Inception) to September 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) from operations ($124,312.00)
Adjustments to reconcile net income to net cash provided
Depreciation Expense 208.00
Amortization of Intangible Assets 81,700.00
Services rendered in exchange for stock 5,000.00
-----------
Net Cash provided by
Operating Activities (37,404.00)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of software 2,495.00
Purchase of domaine name 400.00
Purchase of URL 250,119.00
-----------
Net cash used by investing activities (253,014.00)
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of Capital Stock 210,000.00
Advances from parent company 80,495.00
-----------
Net cash provided by financing activities 290,495.00
Net increase (decrease) in cash 77.00
Balance as at end of period 77.00
See accompanying notes to financial statements
-6-
F-13
<PAGE>
Cardstakes.com
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 5, 1999
NOTE 1- HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized February 19, 1999 (Date of Inception) under the
laws of the State of Nevada, as PDTech.com (The Company) has no operations and
in accordance with SFAS #7, the Company is considered a development stage
company. On or about June 8, 1999, the Company changed its name to
Cardstakes.com.
On April 9,1999, the Company completed a public offering that was exempt
from federal registration pursuant to Regulation D, Rule 504 of the Securities
Act of 1933 as amended. The Company sold 2,100,000 shares of Common Stock at a
price of $.10 per share for a total amount raised of $210,000.00. The Company
received cash in the amount of $210,000.
On or about June 15, 1999, the Company entered into a licensing agreement
with Power Direct, Inc. Cardstakes.com valued these rights at $912,653.00 based
on $.10 per share received in April 9, 1999 offering. The Company issued
9,126,531 shares of common stock to Power Direct, Inc. from June 15, 1999 to
September 12, 1999 as a result of the agreement. The final issue of 2,000,000
shares on September 12, 1999 was a result of renegotiating the agreement to
remove an anti-dilution clause There will be no more stock distributed to Power
Direct, Inc. as part of the licensing agreement.
On July 7, 1999, the Company issued 500,000 shares for services rendered in
the amount of $5,000.00
There have been no other issuances of equity or Common Stock.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1 The Company uses the accrual method of accounting.
2. The cost of organization was expensed when incurred in February of 1999.
3. Basic earnings per share is computed using the weighted average number
of shares of common stock outstanding.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
-7-
F-14
<PAGE>
Cardstakes.com
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 5, 1999
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES - CONTINUED
5. The cost of equipment is depreciated over the estimated useful life of
the equipment utilizing the straight line method of depreciation. The amount of
depreciation recorded during this period was $208.00.
6. The Company experienced losses for its first operating period February
19, 1999 (Date of inception) to September 30, 1999. The Company will review its
need for a provision for federal income tax after each operating quarter and
each period for which a statement of operations is issued.
7. The Company has adopted December 31 as its fiscal year end.
8. The Company records its inventory at cost.
9. The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions which affect the reported amounts of assets and liabilities as at
the date of the financial statements and revenues and expenses for the period
reported. Actual results may differ from these estimates.
10. The Company's Statement of Cash Flows is reported utilizing cash
(currency on hand and demand deposits) and cash equivalents( short-term, highly
liquid investments). The Company's Statement of Cash Flows is reported utilizing
the indirect method of reporting cash flows.
11. The Company's other assets which are identifiable intangible assets are
amortized on a straight line basis for a period of 60 months, the estimated
economic life of the licensing rights. The amount of amortization of intangible
assets recorded during this period was $81,700.00.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has not generated significant revenues from its
planned principal operations. Without realization of additional capital, it
would be unlikely for the Company to continue as a going concern.
-8-
F-15
<PAGE>
Cardstakes.com
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 5, 1999
NOTE 4 - RELATED PARTY TRANSACTION
Office services are provided without charge by a director. Such costs are
immaterial to the financial statements and, accordingly, have not been reflected
therein. The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
Power Direct Inc. has advanced $80,495.00 to Cardstakes.com to pay
operating expenses of Cardstakes.com. This is being carried as accounts payable
as it is considered a trade payable.
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
NOTE 6 - YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in systems
which use certain dates in 1999 to represent something other than a date. The
effects of the Year 2000 issue may be experienced before on, or after January
1,2000 and if not addressed, the impact on operations and financial reporting
may range from minor errors to significant systems failure which could affect an
entity's ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the entity, including
those related to the efforts of customers, suppliers, or other third parties
will be fully resolved.
NOTE 7 - LONG TERM COMMITMENTS
The Company neither owns or leases any real or personal property.
-9-
F-16
GREETING CARD LOTTO(TM)
PROPRIETARY TECHNOLOGY USAGE
LICENSE AGREEMENT
PREAMBLE
This Agreement made effective the 28th day of April, 1999, is made and entered
into by and between POWER DIRECT, INC., a corporation incorporated in the State
of Delaware, USA, having an office at 4291 Meridian Street, Bellingham, WA 98226
("Power") and COMPTE DE SIERGE ACCOMODATIVE CORP, doing business as E-CARD
GAMING SYSTEMS, INC., a corporation incorporated in Panama City, Panama
("E-Card") whereby E-Card at the direction of its directors shall license Power
to utilize certain Proprietary Technology in connection with a Greeting Card
Lotto(TM).
ARTICLE 1 TITLE
This Proprietary Technology Usage License Agreement for providing the Greeting
Card Lotto(TM) operated by Power may hereinafter be referred to as the "License
Agreement" or "Agreement".
ARTICLE 2 RECITALS
A. WHEREAS, Power (Power Direct, Inc.) is a public company participating on
the OTC Bulletin Board with its primary business in investment and joint
ventures; and,
B. WHEREAS, E-Card (E-Card gaming Systems) Inc.) is a private company
specializing in designing gaming software systems for the Greeting Card
Lotto(TM) to be operated on the Internet; and,
C. WHEREAS, Power will have a worldwide exclusive license in perpetuity to
operate the said Greeting Card Lotto(TM). however with no legal right to
any sub license, unless with consent of E-Card and on similar terms and
conditions to the terms and conditions contained in this agreement, and;
D. WHEREAS, E-Card is ready, willing and able to license the Greeting Card
Lotto(TM) to Power, upon the basis that E-Card will be providing the
Proprietary Technology to operate the Greeting Card Lotto(TM); and,
E. WHEREAS Power has had the opportunity to evaluate the potential of the
methods and apparatus for a Greeting Card Lotto(TM), along with having had
the opportunity to evaluate the potential for meeting the profit objectives
of the Greeting Card Lotto(TM), desires a
E-1
<PAGE>
Greeting Card Lotto(TM) License Agreement - Page 2 of 19
- --------------------------------------------------------------------------------
license be granted by E-card
NOW THEREFORE, in consideration of the premises, other good and valuable
consideration, the receipt and sufficiency is hereby acknowledged by the
parties, and the mutual covenants and agreements recited hereinafter, the
parties hereto agree as follows:
Section 2.1 Definitions
In this Agreement, the Preamble, Recitals, this Section and the Schedules
hereto, unless the context otherwise requires:
1. "Agreement" means this License Agreement and all Schedules attached hereto;
2. "Power" means Power Direct Inc., a publicly traded corporation formed in
the State of Delaware, USA, their successors and assigns;
3. "E-card" means COMPTE DE SIERGE ACCOMODATIVE CORP doing business as E-Card
Gaming Systems Inc., a corporation formed in Panama City, Panama;
4. "Business Day" means a day other than a Saturday, Sunday, statutory holiday
or day that is declared by any governmental authority to be a civic holiday
in the jurisdiction in which an event contemplated hereby is to take place;
5. "Greeting Card Lotto(TM)" means the proprietary software and systems owned
and operated by E-Card;
6. "License Fee" means the portion of gross sale revenue, defined as five
percent (5%) of the gross revenue of the lotto paid to E-Card by Power as
licensee of the said Greeting Card Lotto(TM).
7. "External Audit" means the annual audit to be conducted by an independent
Certified Public Accountant firm selected by Power at its expense;
8. "Lotto" means Greeting Card Lotto(TM), including, without limitation, the
following:
(a) production and communication of the Greeting Card Lotto(TM) utilizing
all or any portion of the Proprietary Technology;
(b) organization of secure accounting of virtual lottery tickets,
processing of lottery winners;
(c) the development, planning and operation of one or more lotteries to
be, operated and such other business opportunities as may arise
pursuant to
E-2
<PAGE>
Greeting Card Lotto(TM) License Agreement - Page 3 of 19
- --------------------------------------------------------------------------------
the Proprietary Technology in accordance with this Agreement;
(d) all other permitted lottery activities pursuant to applicable law and
permits and licenses derived thereunder for each jurisdiction;
9. "Country of Domicile" means Panama including all geographical territory
under the control of the Sovereignty of the country of Panama or any other
suitable alternatives.
10. "Lottery Parameters" shall refer to Lotto design and procedures which
establish and define the prize structure, lottery rules and other
parameters for the Lotto;
11. "Gross Revenue" shall mean any and all gross revenue from the Lotto due
and/or paid, from whatever source derived, to E-Card without duplication,
which can be attributed in any manner to some portion of the Proprietary
Technology; i.e., the Proprietary Technology forms at least a part of the
consideration, whether expressly recited or not, for the revenue paid.
Specific examples of Gross Revenue, without intending to limit the scope of
its definition, include the gross ticket (Lotto) dollar volume, etc.
12. "Internal Audit" means the quarterly audit to be conducted by a auditor
appointed by E-Card at its expense;
13. "Startup Budget" means the approved startup budget with respect to the
Lotto as Attached in Schedule "A" hereunder,
14. "Person" means any individual, partnership, limited partnership, syndicate,
sole proprietorship, company or corporation with or without share capital,
unincorporated association, trust, trustee, executor, administrator or
other legal personal representative, regulatory body or agency, government
or governmental agency, authority or entity however designated or
constituted.
15. "Proprietary System(s)" shall by definition, and by agreement of the
parties hereto, also include:
1. the Greeting Card Lotto(TM) Software as described in this Agreement
dated effective the 28th day of April, 1999, between power and E-Card;
2. any device, system, system component, method or process that may be
used for purchasing Greeting Card Lotto(TM).
16. "Proprietary Technology" means all technology and confidential information
considered by Power/E-Card to be proprietary technology (including without
limitation, Proprietary Systems) and all other information and/or know how
of any kind whatsoever, however
E-3
<PAGE>
Greeting Card Lotto(TM) License Agreement - Page 4 of 19
- --------------------------------------------------------------------------------
developed, acquired or used by Power, and/or the E-Card used to operate the
Lotto excluding any information already known to the public and in the
public domain.
17. "Greeting Card Lotto(TM)" is the U.S. trademark in application to be
granted to E-Card in reference to the Proprietary Technology;
18. "Operation Center' means the Lottery command and control center located in
the appropriate location to be determined;
19. "$" means currency of the United States of America.
Section 2.2 Capitalized Terms.
Subsequent capitalized terms not defined heretofore are defined in the
specific sections in which they are referenced.
Section 2.3 Interpretation.
The captions and the emphasis of the defined terms have been inserted for
convenience and do not define the scope of any provision.
Section 2.4 Compliance with Laws.
The parties shall conduct their affairs in strict accordance with all
applicable laws and regulations, and that such policies will govern their
conduct with respect to the transaction contemplated by this Agreement in all
respects.
Section 2.5 Time of the Essence of the Agreement.
Unless otherwise specifically provided in this Agreement, time will be of
the essence of this Agreement and of the transactions contemplated by this
Agreement.
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES AND GRANT OF
LICENSE FOR GREETING CARD LOTTO AND GRANT OF RIGHT OF FIRST REFUSAL:
Section 3.1 Representations and Warranties of POWER
POWER warrants and represents to E-Card, and acknowledges that in reliance
thereon Power may warrant and represent to E-card and/or their Related Entities
the following:
1. POWER is a corporation in good standing under the laws of USA;
2. POWER has full authority and capacity to execute this Agreement;
3. POWER is authorized to enter into this Agreement and carry out its
terms to the full extent required.
Section 3.2 Representations and Warranties of E-Card.
E-Card warrants and represents to Power as follows;
1. E-Card has the power and capacity to provide the Proprietary Technology for
the Greeting Card Lotto(TM) as contemplated herein;
2. E-Card is authorized to enter into and execute this Agreement on behalf of
itself;
3. E-Card is authorized to carry out the terms of this Agreement to the full
extent in respect to the granting of license rights herein;
4. Neither the execution and delivery of this Agreement, nor granting of
exclusive license rights contemplated herein will violate any of the terms
and provisions of the memorandum or bylaws or articles of incorporation of
E-Card, or its Related Entities, or any order, decree, statute, by-law,
regulation, covenant, and agreement;
5. E-Card and its employees shall at all times conduct Greeting Card Lotto(TM)
development in accordance with all applicable laws worldwide.
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Section 3.3 GRANT OF LICENSE FOR GREETING CARD LOTTO(TM)
Section 3.4 Grant of Exclusive Licenses.
Subject to the terms and conditions of this Agreement, E-Card grants an
exclusive use only license, in perpetuity, worldwide, to Power to the extent
necessary to conduct the Greeting Card Lotto(TM).
Section 3.5 Grant of Exclusive Sub-Licenses.
Subject to the terms and conditions of this Agreement, Power may with the
consent of E-Card grants sub license to third parties with new terms agreeable
to E-card in respect to the Proprietary Technology, to the extent necessary to
conduct a Greeting Card Lotto(TM) in accordance with the Lotto Parameters,
Section 3.6 Proprietary Technology.
Save and except for the technology associated with Greeting Card Lotto(TM)
that is and shall remain proprietary to E-Card, to the extent that E-Card, will
expend time, effort, money to make enhancements to the Proprietary Technology,
that involve the use or enhancement of the Proprietary Technology resulting in
new technology, the parties hereby acknowledge that such new technology shall
not extinguish or derogate from the original Proprietary Technology of E-card
and that all proprietary right, title and interest in and to the new technology
and enhanced Proprietary Technology shall be the properties of E-card.
Section 3.7 Preservation of Data.
All data complied in connection with the Proprietary Technology will be
copied or otherwise preserved and archived on storable media by E-Card to ensure
that all Proprietary Technology in the form of data is backed up in the case of
any loss or damage to the original data for the benefit of the parties and
delivered from time to time upon written request by any party.
Section 3.8 Grant of Right of First Refusal to Acquire Proprietary Technology.
E-Card shall not sell, assign, transfer, convey, encumber or other
hypothecate the Proprietary Technology to any Person except as specified in this
Section 3.8. In the event E-Card desires to sell, assign, transfer, convey,
encumber or otherwise hypothecate the Proprietary Technology, or any portion
thereof, to any Person, E-Card shall give first to Power notice (hereinafter
described) of E-Card's desire to sell, assign, transfer, convey, encumber or
otherwise hypothecate the Proprietary Technology, or any part thereof, and Power
shall have the right to purchase such Proprietary Technology, on the terms and
subject to the conditions specified in this Section 3.8.
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1. Notice shall be given by E-Card to Power and shall consist of an offer
to sell to Power the Proprietary Technology, or portion thereof, that
E-Card then desires to sell, assign, transfer, convey, encumber or
otherwise hypothecate, to which shall be attached a statement of
intention to sell, assign, transfer, convey, encumber or otherwise
hypothecate, as the case may be; the name and address of any
prospective purchaser, assignee, transferee, or mortgagee, as the case
may be; and the terms and conditions of such sale, assignment,
transfer, conveyance, encumbrance, or other hypothecation ("Notice").
2. Power shall have the option for sixty (60) days after receipt of the
Notice to purchase all or any portion of the Proprietary Technology
that E-Card then desires to sell, assign, transfer, convey, encumber
or other hypothecate, at the price and on the terms and subject to the
conditions specified in the Notice. Within twenty (20) business days
after receipt of Notice, Power shall deliver to E-Card a written
election to purchase such Proprietary Technology.
3. The purchase price of the Proprietary Technology that E-Card desires
to sell, assign, transfer, convey, encumber or otherwise hypothecate
shall be the lesser of (I) that purchase price specified in the Notice
or (ii) the purchase price as specified in Paragraph (6) of this
section 3.8.
4. In the event the Proprietary Technology which E-Card desires to sell,
assign, transfer, convey, encumber or otherwise hypothecate is not
purchased by Power pursuant to the option specified in Paragraph (2)
of this Section 3.8, E-Card shall have no obligation to sell any of
the Proprietary Technology to Power; but, rather E-Card of such
Proprietary Technology in any lawful manner on the same terms and
conditions as specified in the Notice; provided, however, E-Card shall
not sell, assign, transfer, convey, encumber or otherwise hypothecate
any Proprietary Technology to any other person or on terms and
conditions different than those specified in the Notice without first
giving Power the option for that period specified in Paragraph (2) of
this Section 31.8 to purchase the Proprietary Technology, on the terms
and conditions specified in this Section 3.8.
5. The closing of any purchase and sale of the Proprietary Technology
pursuant to the provisions of this Section 3.8 shall take place at the
principal office of Power at such date designated by Power, which date
shall not be later than the last day of the sixty (60) day option
period described in Paragraph (2) of this Section 3.8.
6. Purchase Price.
(a) The purchase price for the Proprietary Technology sold pursuant
to this Agreement shall be it "fair market value" as determined
pursuant to this Paragraph (6) as of the date of the event
causing the purchase and sale.
(b) The "fair market value" of the Proprietary Technology shall be
determined
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by an independent appraiser selected jointly by the parties. The
determination of fair market value by that appraiser shall
obligate, and be conclusive for, all parties to this Agreement.
(c) If the parties are unable to agree on the selection of an
appraiser within thirty (30) days after the event causing
purchase and sale, each party shall select an independent
appraiser within twenty (20) days after expiration of that thirty
(30) day period. The two (2) appraisers so selected shall each
independently appraise the Proprietary Technology and, if the
difference in those two (2) appraisals does not exceed five
percent (5%) of the lower of those two (2) appraisals, the fair
market value shall be conclusively deemed to equal the average of
those (2) appraisals. If either party fails to select an
independent appraiser within the time required by this Paragraph
(6), the fair market value of the Proprietary Technology shall be
conclusively deemed to equal the appraisal of the appraiser
timely selected by the other party.
(d) If the difference between the two (2) appraisals referred to
above exceeds five percent (5%) of the lower of those two (2)
appraisals, the two (2) appraisers selected shall select a third
(3rd) appraiser who shall also independently appraise the
Proprietary Technology and whose appraisal shall be conclusively
deemed to be the fair market value of the Proprietary Technology.
(e) The parties shall share and pay equally the fees and expenses of
any appraiser named jointly, but each party shall be responsible
for the fees and expenses of any appraiser named solely by that
party. Each party shall bear and pay that party's expenses in
presenting evidence to the appraisers.
(f) In determining that purchase price, the appraisers appointed
pursuant to this Agreement shall consider all opinions and
relevant evidence submitted to them by the parties, or otherwise
obtained by them, and shall specify their determination in
writing together with their opinions and the considerations on
which the opinions are based, with a signed counterpart to each
party, within sixty (60) days after commencing appraisal.
Section 3.9 Bankruptcy or Insolvency of E-Card.
In the event E-Card files for bankruptcy or similar protection pursuant to
the bankruptcy laws of the United States of America or any other
jurisdiction, not withstanding the provisions of Paragraph 7.1 of this
Agreement, such event shall be considered conclusively by all parties as
the deliver by E-Card to Power of the Notice, and in which event Power
shall have the right to purchase the Proprietary Technology on the terms
and subjection to the conditions specified by the provisions of Section
3.8.
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ARTICLE 4 REVENUE STREAM
Section 4.1 Revenue Stream.
The parties agree that in partial consideration for the forgoing licenses
Power shall agree that a non-refundable running License Fee shall be payable by
E-Card directly to Power on the basis of a Revenue Stream from the Greeting Card
Lotto(TM) Operations.
An amount of five percent (5%) Gross Revenue shall be paid to E-Card,
including, without limitation, revenue derived from any and all things of
value (paid directly or indirectly), for the right to support, sponsor or
play the Lotto, and for the right to use in any way Proprietary Systems or
any other portion of the Proprietary Technology.
Section 4.2 Payment Terms.
The parties agree that the applicable amount payable shall be tendered to
E-Card in successive weekly payments by close of business within the next five
(5) Business Days (excluding any statutory holiday) of each and every week in
which payment is being calculated and received in the Power bank account, and
remitted to such bank designated by E-Card in accordance with E-Card's
instructions and in U.S. Dollars at the bank information to be specified by
written notice.
Section 4.3 Statement of Ticket Sales.
Each remittance shall be accompanied by a weekly statement of Gross Revenue
and Gross Receipts for each Lottery, which shall be subject to verification by
Power's designated accountants and, which statement shall disclose the total
Gross Revenue and total Net Revenue, the method used to calculate the ticket
sales, other non-gaming revenue and payment, and the amount due Power. All such
statements shall be in a form determined in accordance with generally accepted
accounting principles and acceptable to E-Card (See also Comprehensive Audit and
Accounting Procedures in Article 11 below).
ARTICLE 5 NO ABATEMENT
Section 5.1 No Abatement.
The parties hereto agree that there shall be no abatement or reduction of
the monies due from the Power from E-Card for any reason.
Section 5.2 Access to Business and Records.
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At all times during the subsistence of this Agreement the duly authorized
representatives of Power shall, at their sole risk and expense and at reasonable
intervals and times, have access to Power and to all records and other data and
information relating to the Lotto which is in the possession of the Power.
Section 5.3 Notice of Disputes.
Either party shall provide the other parry with written notice of any
material dispute or matter as between Power or E-Card.
Section 5.4 Non-disclosure Except as Required by Law.
All information and data concerning or derived from the Operation of the
Lotto shall be kept confidential and, except to the extent required by law or by
regulation or policy of any securities commission, stock exchange or other
regulatory body, shall not be disclosed to any person in strict confidence
without the prior consent of both parties, which consent shall not unreasonably
be withheld.
ARTICLE 6 ACQUISITION OF REVENUE STREAM
Section 6.1 Cash Payments
1. A cash payment in total Canadian Currency of $300,000.00 is to be paid
to E-Card by Power as partial payment for the purchase of a license.
2. These payments are to be made in three equal installments with the
timing as shown herein:
First Payment Upon Signing this document.
Second Payment Upon completion of Alpha Testing.
Third Payment Upon completion of Beta Testing.
Section 6.2 Stock Payments
A stock payment of 6,000,000 Shares (Six Million Shares) of Power common
restricted stock with a one year hold period in two equal installments with
3,000,000 shares to be paid upon signing of this agreement, and the remaining
3,000,000 shares to be paid upon commencing operations.
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ARTICLE 7 TERMINATION AND RELATED MATTERS
Section 7.1 Termination for Insolvency.
Any entry by Power into an agreement and/or general assignment for the
benefit of creditors, voluntary or involuntary, or, in the event Power does not
exercise its option to purchase the Proprietary Technology granted by the
provisions of Section 18 of this Agreement, any petition by E-Card for
reorganization or other relief under the bankruptcy laws of the United States of
America, or any other jurisdiction, shall result in an immediate termination of
all rights granted, licensed or assigned hereunder, from E-Card to Power,
without cost to or further consideration from Power.
Section 7.2 Termination for Material Default.
Subject to Section 13.1 (FORCE MAJEUR), a non-defaulting party may
terminate this Agreement upon the occurrence of any material default or breach
by the defaulting party of any as follows:
1. the non-defaulting party will notify the defaulting party in writing of the
occurrence of a material default of this Agreement;
2. the defaulting party will have a period of ten (10) days from delivery of
the written notice in which to either:
(a) correct or remedy the material default of this Agreement in a manner
satisfactory to the non-defaulting party acting reasonably;
(b) provide to the non-defaulting party a plan in writing to remedy or
correct the default of this Agreement which is acceptable to the
non-defaulting party acting reasonably;
Section 7.3 Right to Cure Material Default
Subject to Article 18 (Arbitration) below, if the defaulting party fails to
correct or remedy the material default of this Agreement or provide the
non-defaulting party with an acceptable plan for the remedy or the correction of
the material default of this Agreement, the non-defaulting party may terminate
this Agreement upon ten (10) days written notice to the defaulting party.
Section 7.4 Surrender in Case of Termination.
Should a termination take effect, Power shall within Twenty (20) Business
Days promptly return to E-Card all documents and other material containing or in
any way relating to
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Proprietary Technology.
Section 7.5 Survival or Obligations.
In the event of any termination, all obligations of the parties existing
prior to termination and all obligations, whether known or unknown at the time
of termination, stemming from the act or omissions of a given party while this
Agreement was in force and effect, shall remain an obligation of the given party
until discharged.
ARTICLE 8 SUBLICENSING/ASSIGNMENT/LIENS/ENCUMBRANCES
Section 8.1 No Charge or Encumbrance.
Power agrees not to, or not to purport to, assign, pledge, cause any lien,
encumbrance or more generally any cloud of title whatsoever to affect all or any
part of the Proprietary Technology. The parties hereto agree and understand that
the purpose of this clause is to insure that in case of any termination of
rights licensed hereunder, as provided herein, title to the licensed rights
respecting the Proprietary Technology will be free and clear of any cloud on
title.
ARTICLE 9 REPORTING/ACCOUNTING/AUDIT/PAYMENTS
Section 9.1 Monthly Reporting.
Power shall make daily online and monthly written reports, as provided
herein, available to E-Card stating as to each period including but not limited
to the amount of Gross Revenue, and the amount due to E-Card for the License Fee
under the terms of this Agreement,
Section 9.2 Audit and Records.
Power and shall keep true and accurate records and books of account, in
sufficient detail to enable the fees payable to Power hereunder to be
determined, showing the annual audited summary of Gross Revenue including a
summary of amounts paid pursuant to Article 4 hereof during the course of this
Agreement, which records and books of account shall be open for inspection and
independent audit by the other parties, or a duly appointed agent of a party
upon reasonable advance notice and during Power's usual business hours. In the
event a parry has such independent audit performed and it reveals that Power has
underpaid E-Card by at least $10,000 (Ten Thousand Dollars), then Power shall
reimburse the party that undertook such for the reasonable costs of such audit.
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Section 9.3 Certification of Reports.
Each monthly report contemplated herein shall be accompanied by a written
certification from an authorized officer of Power as to the accuracy of the
report.
Section 9.4 Nil Report.
Should no sums be due, a report shall nevertheless be rendered to document
the facts and circumstances surrounding the no sums due situation.
Section 9.5 Report Due Date.
All monthly reports due hereunder shall be filed within 20 days after the
close of each month.
ARTICLE 10 TERM
Section 10.1 Term.
Unless earlier terminated according to the provisions herein, this
agreement shall continue in force and effect in perpetuity.
ARTICLE II CONFIDENTIALITY
Section 11.1 Non-disclosure.
All information disclosed or furnished by one party to the other, whether
orally or in writing, in connection with the transaction contemplated hereunder
shall be deemed to be proprietary and confidential information of the disclosing
party, save and except to the extent that such confidential information must be
disclosed by law. The receiving party agrees that for the term of this Agreement
plus a period of seven (7) years after the date of earlier termination of this
Agreement, it shall not disclose any proprietary and confidential information to
any third party nor use the information for any purpose other than acting in the
best interest of and to protect the interest of each party hereto.
Section 11.2 Permitted disclosure.
The provisions of Section 12.1 notwithstanding, the receiving party may
disclose any such information without the prior written consent of the
other party, if such disclosure is required lawfully by any governmental
agency, court of competent jurisdiction or is otherwise required to be
disclosed by law, but only to the extent of such requirement; provided,
however, that before making any such disclosure, such party will provide to
the other party prior written notice of such
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contemplated disclosure and an adequate opportunity to interpose objections
to such disclosure or to take such other action as is necessary to assure
the confidential nature of such information.
ARTICLE 12 ARBITRATION/CONSTRUCTION/APPLICABLE LAW
Section 12.1 AAA
Any controversy or claim arising out of or relating to this Agreement, or
breach thereof, shall be settled by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association, in
Seattle, Washington, or such other jurisdiction neutral to both parties within
the United States that the parties shall in writing agree, and judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
Section 12.2 Attornment.
By the execution of this Agreement each of the parties irrevocably and
unconditionally, with respect to any matter or thing arising out of or
pertaining to this Agreement, hereby attorns and submits to the jurisdiction of
the arbitration hearing to be conducted under the International Arbitration
Rules of the American Arbitration Association, in Seattle, Washington, by this
reference thereto.
Section 12.3 Selection of Arbitrators.
The arbitration shall be before three neutral arbitrators all of whom shall
be of the State Bar of Washington, actively engaged in the practice of law for
at least ten (10) years to be selected in accordance with the International
Arbitration Rules of the American Arbitration Association and shall proceed
under the expedited procedures of the said Rules, irrespective of the amount in
dispute.
Section 12.4 Choice of Law and Attornment.
The parties further agree to be bound by the laws of the State of
Washington, but are hereby deemed to have submitted to the said jurisdiction of
the American Arbitration Association in Seattle, Washington by this reference
thereto, which shall apply the laws of the State of Washington in the
interpretation of this Agreement.
Section 12.5 Remedies.
3. Authority.
The arbitrators shall have the authority to award any remedy or relief that
a court
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of the State of Washington could order or grant, including, without
limitation, specific performance of any obligation created under the
Agreement, the awarding of punitive damages, the issuance of an injunction,
or the imposition of sanctions for abuse or frustration of the arbitration
process.
4. Damages Inadequate.
Each of the parties confirm that damages at law may be an inadequate remedy
for a breach or threatened breach of this Agreement and agrees that in the
event of a breach or threatened breach of any provision the respective
rights and obligations hereunder shall be enforceable by specific
performance, injunction pending an arbitration hearing, or other equitable
remedy that may be granted pending an arbitration hearing to maintain the
status quo.
5. Escrow
Pending the outcome of the arbitration, the parties shall place in escrow
with the American Arbitration Association as escrow agent the monies or
subject matter in dispute. The escrow agent shall be entitled to release
such monies or subject matter in dispute as directed by the arbitrators in
the award, unless the parties agree otherwise in writing.
ARTICLE 13 FORCE MAJEURE
Section 13.1 Force Majeure
Each party shall be excused from any breach or default with respect to this
Agreement to the extent that the party was prevented from performance by reason
of anything beyond the party's control and not reasonably avoidable such as a
strike or other labor disturbance, act of any governmental authority or agency,
fire, flood, wind, storm or any act of God, or the act or omission of any party
not controlled by that party. No party shall be liable to the other party for
any delay in or failure of performance under this Agreement due to a Force
Majeure. Any such delay in or failure of performance shall not constitute
default or give rise to any liability for damages. The existence of such causes
of delay or failure shall extend the period of performance to such extent as is
mutually determined by the parties to be necessary to enable complete
performance by a party if reasonable diligence is exercised after the causes or
delay or failure have been removed.
ARTICLE 14 NOTICES
Section 14.1 Notice Requirements.
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6. All notices for the purpose of this Agreement shall be deemed to be
properly served when in writing and sent by tele-copier or facsimile, to
the other party at the address set forth in the opening paragraph of this
Agreement, or to such substitute address as such party may from time to
time designate in writing to the other.
7. Each party shall cause all notices which may in any way affect the
obligations and responsibilities of the other party to be directed or
forwarded to that other party as the case may be and agrees to forward all
notices effecting the Proprietary Technology that may be received from
third parties to the other party.
8. An accidental omission in the giving of, or failure to give, a notice
required by this Agreement will not invalidate or affect in any way the
legality of any meeting or other proceeding in respect of which such notice
was or was intended to be given.
9. A party may change its address by giving written notice of such change to
the other.
10. A document sent by telex or facsimile will be deemed to be received on the
first Business Day after valid transmission.
ARTICLE 15 INDEMNITY FOR MATERIAL BREACH
Section 15.1 Mutual Indemnities.
Each party shall indemnify, defend and hold the other harmless from and
against all claims, demands, losses) costs, expenses, obligations, liabilities,
damages, recoveries and deficiencies, including interest, penalties and
reasonable attorney's fees, that the other may incur as a result of any material
breach by the other of any terms, representations or warranties hereof.
ARTICLE 16 NON-WAIVER
Section 16.1 No Waiver.
The failure by either party to enforce at any time any of the provisions of
this Agreement, or any rights in respect thereto, or to exercise any election
herein provided, shall in no way be considered to be a waiver of such
provisions, rights or elections, or in any way to affect the validity of this
Agreement. The exercise by a party of any of its rights herein or any of its
elections under the terms of covenants herein shall not preclude or prejudice
that party from exercising the same or any other right it may have under this
Agreement or law, irrespective of any previous action or proceeding taken by
that party hereunder.
ARTICLE 17 INVALIDITY/ILLEGALITY OF PART AGREEMENT
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Section 17.1 Entire Agreement/Written Modification.
This Agreement sets forth the entire intent of and understanding between
the parties hereto with respect to the subject matter hereof, supersedes all
prior discussions, negotiations and Agreements between them, and may be amended
only by a written agreement signed by all parties.
Section 17.2 Partial Invalidity/Severability.
If any provision of this Agreement or any part of any provision (in this
section called the "Offending Provision") is declared or becomes unenforceable,
invalid or illegal for any reason whatsoever including, without limiting the
generality of the foregoing, a decision by any competent courts, legislation,
statutes, bylaws or regulations or any other requirements having the force of
law, then the remainder of this Agreement will remain in full force and effect
as if this Agency Agreement has been executed without the Offending Provision,
but amended so as to be capable of being interpreted in a manner that is most
consistent with the original intention of the parties as stated herein.
ARTICLE 18 FURTHER ASSURANCES
Section 18.1 Further Assurances.
The parties hereby covenant and agree to do the things, to attend the
meetings and to execute the further documents, Agreements, and assurances that
may be deemed necessary or advisable from time to time in order to carry out the
terms and conditions of this accordance with their true intent.
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ARTICLE 19 INTERPRETATION
Section 19.1 Interpretation of Agreement.
For all purposes of this Agreement, except as otherwise expressly provided
or as the context otherwise requires:
1. the headings will be considered as provided for convenience only and as not
forming a part of this Agreement, and will not be used to interpret, define
or limit the scope, extent or intent of this Agreement or any of its
provisions;
2. the word "including", when following any general term or statement, is not
to be construed as limiting the general term or statement to the specific
items or matters set forth or to similar items or matters, but rather as
referring to all other items or matters that could reasonably fall within
the broadest possible scope of the general term or statement;
3. accounting terms not otherwise defined have the meanings assigned to them
in accordance with generally accepted U.S. GAAP;
4. a reference to a statute includes every regulation made pursuant thereto,
all amendments to the statute or to any such regulation in force from time
to time, and any statute or regulation which supplements or supersedes such
statutes or any such regulation;
5. a reference to an entity includes any entity that is a successor to such
entity;
6. words importing the masculine gender include the feminine or neuter, words
in the singular include the plural, and for greater certainty, End Users
includes all its Related Entities formed at the relevant time, and vice
versa.
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ARTICLE 20 EXECUTION
Section 20.1 Counterparts.
This Agreement may be executed in one or more counterparts and/or via one
document exchanged between the parties and/or their attorneys, Federal Express
or facsimile machine. Each part or facsimile shall for all purposes be deemed an
original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
at Bermuda, British Columbia and California effective as of the date first
written above.
COMPTE DE SIERGE ACCOMODATIVE CORP
doing business as E-CARD GAMING SYSTEMS, INC.
By /s/ Conrado Beckerman
----------------------------------
Conrado Beckerman, Director
POWER DIRECT, INC.
By /s/ Jack Sha
--------------------------
Jack Sha, President
By /s/ Michael Wright
--------------------------
Michael Wright, Chairman
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