SCHEDULE 14C
(RULE 14C-101)
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
Check the appropriate box:
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<S> <C>
[X] Preliminary Information Statement
[ ] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
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SILVER KING RESOURCES, INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which the transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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SILVER KING RESOURCES, INC.
20 Corporate Park, Suite 110, Irvine, California 92606
PRELIMINARY INFORMATION STATEMENT
PURSUANT TO SECTION 14
OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE NOT REQUESTED TO SEND US A PROXY
INTRODUCTION
This information statement has been mailed on June , 2000 to the
stockholders of record on May , 2000 (the "Record Date") of Silver King
Resources, Inc., a Delaware corporation (the "Company") in connection with
certain actions to be taken by the Company pursuant to the written consent by
the majority stockholders of the Company, dated May , 2000. The action to be
taken pursuant to the written consent shall be taken on June [20 days after
mailing], 2000. The principal executive offices of the Company are located at 20
Corporate Park, Suite 110, Irvine, California 92606, and its telephone number is
(949) 756-8181.
THIS IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO STOCKHOLDER
MEETING WILL BE HELD TO CONSIDER ANY MATTER WHICH WILL BE DESCRIBED HEREIN.
Larry A. Mayle,
Secretary
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NOTICE OF ACTION TO BE TAKEN PURSUANT THE WRITTEN CONSENT OF MAJORITY
STOCKHOLDERS IN LIEU OF A SPECIAL MEETING OF THE STOCKHOLDERS
DATED MAY 25, 2000
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the following actions will be taken
pursuant to the written consent of a majority of stockholders in lieu of a
special meeting of the stockholders on or about June , 2000:
1. The adoption of an amendment to the Certificate of Incorporation of the
Company to change the name of the Company to eNexi Holdings, Inc.;
2. The adoption of an amendment to the Certificate of Incorporation of the
Company to effect a reverse-split of the Company's common stock on a one-for-25
basis; and
3. To approve the Company's 2000 Employee Stock Option Plan and to reserve
up to 1,500,000 shares of Common Stock for issuance thereunder
The Board of Directors has fixed the close of business on May , 2000, as
the Record Date for determining the stockholders entitled to notice of the
foregoing.
By order of the
Board of Directors,
Larry A. Mayle,
Secretary
June , 2000
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OUTSTANDING SHARES AND VOTING RIGHTS
As of the Record Date, the Company's authorized capitalization consists
of 50,000,000 shares of Common Stock, par value $.0001 per share and 15,000,000
shares of Preferred Stock, par value $.0001 per share, which may be issued in
one or more series at the discretion of the Board of Directors. As of the Record
Date hereof, there were 43,075,000 shares of Common Stock, 6,000,000 shares of
Series A Preferred Stock and 3,000,000 shares of Series B Preferred Stock issued
and outstanding, all of which were fully paid and non-assessable. Holders of
Common Stock of the Company have no preemptive rights to acquire or subscribe to
any of the additional shares of Common Stock. Each share of Series A and Series
B Preferred Stock is convertible into 25 shares of Common Stock. The conversion
of the Preferred Stock shall occur on the effective date of the reverse stock
split described herein.
Each share of Common Stock entitles its holder to one vote on each
matter submitted to the stockholders. Each share of Series A and Series B
Preferred Stock entitles its holder to 25 votes on each matter submitted to the
stockholders. However, because stockholders holding at least a majority of the
voting rights of all outstanding shares of capital stock as at the Record Date
have voted in favor of the following proposals by resolution dated May 25, 2000;
and having sufficient voting power to approve such proposals through their
ownership of capital stock, no other stockholder consents will be solicited in
connection with this Information Statement.
Pursuant to Rule 14c-2 under the Exchange Act, the proposals will not
be adopted until a date at least 20 days after the date on which this
Information Statement has been mailed to the stockholders. The Company
anticipates that the actions contemplated herein will be effected on or about
the close of business on June , 2000.
The Company has asked brokers and other custodians, nominees and
fiduciaries to forward this Information Statement to the beneficial owners of
the Common Stock, the Series A Preferred Stock and the Series B Preferred Stock
held of record by such persons and will reimburse such persons for out-of-pocket
expenses incurred in forwarding such material.
This Information Statement will serve as written notice to stockholders
pursuant to Section 228 of the Delaware General Corporation Law.
OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the Record Date (as
adjusted to reflect the conversion rights of the Series A and Series B Preferred
Stock, by (i) each person who, to the knowledge of the Company, beneficially
owns more than 5% of the Company's Common Stock; (ii) each director and
executive officer of the Company; and (iii) all executive officers and directors
of the Company following the Merger as a group:
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Amount of Percentage of
Name and Address of Beneficial Beneficial
Beneficial Owner Ownership(1)(2) Ownership
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Larry Mayle 68,942,663(3) 25.7%
c/o eNexi Inc.
20 Corporate Park, Suite 110
Irvine, CA 92606
Dr. Roger LeRoy Miller 47,014,271 17.5%
c/o eNexi Inc.
20 Corporate Park, Suite 110
Irvine, CA 92606
Michael Ames 300,897 *
c/o eNexi Inc.
20 Corporate Park, Suite 110
Irvine, CA 92606
Haywood Securities, Inc. 25,000,000(4) 9.3%
400 Burrard Street
Vancouver, BC
Canada V6C 3A6
Millworth Investments, Inc. 22,000,000 8.2%
4960 South Virginia Street
Suite 300
Reno, NV 89502
All Directors and Executive Officers as a 112,655,614 42.1%
Group (3 persons)
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o Less than 1%.
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in
the rules and regulations promulgated under the Securities Exchange Act
of 1934, as amended, and accordingly, may include securities owned by
and for, among others, the spouse and/or minor children of an
individual and any other relative who has the same home as such
individual, as well as other securities as to which the individual has
or shares voting or investment power or which such person has the right
to acquire within 60 days after the Record Date pursuant to the
conversion of convertible equity, exercise of options, or otherwise.
Beneficial ownership may be disclaimed as to certain of the securities.
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(2) Based upon 268,075,000 shares of Common Stock outstanding as of the
Record Date, assuming no other changes in the beneficial ownership of
the Company's securities except the Conversion of Series A and Series B
Preferred Stock and the issuance of 25,000,000 shares of Common Stock
pursuant to the exercise of outstanding warrants.
(3) Includes 601,795 shares owned by Mr. Mayle's wife. Mr. Mayle disclaims
beneficial ownership of such shares.
(4) Issuable upon exercise of presently exercisable options.
APPROVAL REQUIRED
The approval of a majority of the outstanding stock entitled to vote is
necessary to approve the following proposals. However, as discussed above, the
Company's Board of Directors has obtained the necessary approval for these
proposals from stockholders with voting authority for stock constituting in
excess of 50% of the total voting power of outstanding shares of the Company's
Common Stock, Series A and Series B Preferred Stock entitled to vote. As such,
the Board of Directors does not intend to solicit any proxies or consents from
any other stockholders in connection with these actions.
BACKGROUND AND RECENT DEVELOPMENTS
From inception through 1998, the Company was inactive, having been
formed to identify private business opportunities that would capitalize on the
Company's status as a public corporation. Commencing in early 1999, the Company
began operations as an exploration-stage mineral resource holding company
operating through its Mexican subsidiary, International Capri Resources, S.A. de
C.V., a joint venture in which the Company owns a 60% interest ("ICRM"). During
1999, ICRM conducted initial stage exploration of silver-producing properties in
Mexico. Since recent geologic results indicated concentration of potential
mineral deposits less than the amounts expected by management, the Company has
elected to discontinue all such operations in full and will divest its interest
in ICRM through a sale or liquidation event.
The Company agreed to acquire eNexi Inc., a development stage company
that provides internet-related services ("eNexi"). Through its newly-created,
wholly-owned subsidiary, Silver King Acquisition, Inc., a Delaware corporation
("Sub"), the Company acquired eNexi, effective as of May 19, 2000, pursuant to
the terms of an Agreement and Plan of Merger dated as of March 21, 2000 (the
"Merger Agreement").
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Pursuant to the terms of the Merger Agreement, Sub was merged with and
into eNexi (the "Merger") in consideration for a purchase price consisting of
6,000,000 newly-issued shares of the Company's Series A Preferred Stock, which
is presently convertible into 150,000,000 shares of the Company's Common Stock.
Just prior to the Merger, as a condition thereof, the Company completed a
private sale of 2,000,000 shares of Series B Preferred Stock for an aggregate of
$5,000,000. The shares of Series B Preferred Stock are convertible into
50,000,000 shares of Common Stock. Upon the closing of the Merger, the Company's
sole director and two executive officers resigned from office. Larry Mayle and
Dr. Roger LeRoy Miller, the principal stockholders, co-founders and executive
managers of eNexi will serve as officers and directors of the Company.
eNexi was incorporated in Delaware in May 1999. It is a development
stage Internet service provider ("ISP") and intermediary for online advertising
and marketing. eNexi provides free email accounts through its Web-based email
system, www.dollars4mail.com. In order to become a subscriber to the system,
each applicant must provide detailed information about his or her demographics
and interest. eNexi expects to make this aggregated data available to online
advertisers in the future to enable them to target specific groups within the
dollars4mail subscriber base depending on demographics, interests or both. The
advertisers pay eNexi based on the number of times the advertisements appear on
the users' screens or the number of times users click on the advertisement to
view an advertiser's web site. In turn, eNexi shares its advertising revenue
with its dollars4mail subscribers, who receive cash compensation for referrals
to the dollars4mail system and for visits they and their referrals make to the
websites of advertisers on the system. Through its VirtuallyFreeInternet.com
division, eNexi provides analog Internet access to its subscribers for a monthly
fee. Subscribers to VirtuallyFreeInternet.com can earn cash compensation for
referrals to the Internet access service. VirtuallyFreeInternet.com and
dollars4mail.com are supported by eNexi's patent-pending proprietary software
that permits fully automated online sign-up, authentication of subscribers,
automated credit card billing and processing of multi-tiered referral
compensation.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY
Background
On May 25, 2000, the Company's Board of Directors unanimously
authorized an amendment to the Company's Certificate of Incorporation to (i)
reverse split the number of outstanding shares of Common Stock on a 1-for-25
basis; and (ii) change the name of the Company to "eNexi Holdings, Inc." The
amendment was approved by a majority of the stockholders of the Company on May
25, 2000.
Each of these proposed amendments is discussed in greater detail below.
Additionally, a proposed form of Certificate of Amendment of the Certificate of
Incorporation of the Company is included as Exhibit A to this Information
Statement. A Certificate in substantially the form of Exhibit A will be filed
with the Delaware Secretary of State on or about June , 2000.
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The Board of Directors has determined that the adoption of the proposed
amendments are in the best interests of the Company.
Reasons for the Authorized Actions
Item No. 1 to approve an Amendment to the Certificate of Incorporation to
Effect a One-for-25 Reverse Stock Split.
The Company believes that the reverse stock split is likely to cause the
stock price of the Common Stock to trade at higher levels and will cause the
number of shares of Common Stock outstanding to be more attractive to the
financial community and lower trading costs for the investing public.
Many institutional and other investors look upon stock trading at low
prices as unduly speculative in nature and, as a matter of policy, avoid
investment in such stocks. Accordingly, we believe that the current per share
price of the Common Stock may reduce the effective marketability of the shares
because of the reluctance of many brokerage firms to recommend low priced stock
to their clients. Further, various brokerage house policies and practices tend
to discourage individual brokers from dealing in low priced stocks. Some of
those policies and practices pertain to the payment of brokers' commissions and
to time-consuming procedures that function to make the handling of low priced
stocks unattractive to brokers from an economic standpoint. Additionally, the
structure of trading commissions also tends to have an adverse impact upon
holders of low priced stock because the brokerage commission on a sale of low
priced stock generally represents a higher percentage of the sales price than
the commission on higher priced issues.
The Company believes that the shares of Common Stock will, as a result of
the reverse stock split, trade at higher prices than those that have prevailed
recently. There can be no assurance, however, that such increase in the market
value will occur or, if such an increase occurs, that it will equal or exceed
the direct arithmetical result of the reverse stock split since there are
numerous factors and contingencies that would affect such value including the
status of the market for the shares of Common Stock at the time, the Company's
reported results of operations in future fiscal periods and general stock market
conditions.
Stockholders have no rights of dissent under Delaware law in connection
with the reverse stock split amendment.
Effects of the Amendment
For each 25 shares of Common Stock held, the holder will receive one new
share of Common Stock. The reverse stock split will result in some stockholders
owning "odd lots" of less than 100 shares of Common Stock. Brokerage commissions
and other costs of transactions in odd lots may be higher, particularly on a
per-share basis, than the cost of transactions in even multiples of 100 shares.
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The Company is authorized to issue 50,000,000 shares of Common Stock, of
which 43,075,000 shares were issued and outstanding at the close of business on
the Record Date. The Company is also authorized to issue 6,000,000 shares of
Series A Preferred Stock and 3,000,000 shares of Series B Preferred Stock, of
which 6,000,000 shares and 2,000,000 shares were outstanding on the Record Date,
respectively.
The principal effect of the reverse stock split will be to decrease the
number of outstanding shares of common stock from 43,075,000 shares to
approximately 1,723,000 shares, based on share information as of the Record
Date. The reverse stock split will not affect the number of authorized shares of
Common Stock. After the reverse stock split, the Company estimates that it will
have approximately the same number of stockholders. Except for the receipt of
cash in lieu of fractional interests, the amendment will not affect any
stockholder's proportionate equity interest in the Company or the relative
rights, preferences or priorities of any stockholder. After the reverse stock
split, the Series A and Series B Preferred Stock will be convertible into shares
of Common Stock on a one-for-one basis.
As a result of the reverse stock split, the Company will have a greater
number of authorized but unissued shares of Common Stock. The increase in the
authorized but unissued shares of Common Stock could make a change in control of
the Company more difficult to achieve. Under certain circumstances, such shares
of Common Stock could be used to create voting impediments to frustrate persons
seeking to effect a takeover or otherwise gain control of the Company . Such
shares could be sold privately to purchasers who might side with the Board of
Directors in opposing a takeover bid that the Board determines is not in the
best interests of the Company and its stockholders.
The number of shares subject to warrants, stock options granted to
officers, directors and employees of the Company under stock option plans and
the strike price for such options will be proportionately adjusted for the
reverse stock split. The number of shares of Common Stock authorized for the
stock option plans will also be proportionately adjusted.
Exchange of Stock Certificates
The exchange of shares of Common Stock will occur on a date to be
determined by the Board of Directors of the Company (the "Effective Date")
without any action on the part of the Company's stockholders and without regard
to the date or dates certificates formerly representing shares of Common Stock
are physically surrendered for certificates representing the number of shares of
Common Stock such stockholders are entitled to receive as a result of the
reverse stock split. The Company's transfer agent, Interwest Transfer Company,
will effectuate the exchange of certificates.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of certificates representing shares of Common
Stock to be used in forwarding their certificates for surrender and exchange for
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certificates representing the number of shares of Common Stock such stockholders
are entitled to receive as a result of the reverse stock split. After receipt of
such transmittal form, each such holder will surrender the certificates formerly
representing shares of Common Stock of the Company and such holder will receive
in exchange therefor certificates representing the number of shares of Common
Stock to which such holder is entitled. These transmittal forms will be
accompanied by instructions specifying other details of the exchange.
STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A
TRANSMITTAL FORM.
So that the Company may avoid the expense and inconvenience of issuing and
transferring fractional shares of Common Stock, stockholders who would otherwise
be entitled to receive a fractional share of Common Stock will receive, without
charge, additional fractional shares of Common Stock to round their shares to
the next whole number.
Federal Income Tax Consequences
The following description of the material federal income tax consequences
of the reverse stock split is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the final, temporary and proposed Treasury Regulations
promulgated thereunder, judicial authority and current administrative rulings
and pronouncements as in effect on the date of this Information Statement.
General Rules
The Company has not sought, and will not seek, a ruling from the Internal
Revenue Service or an opinion of counsel regarding the federal income tax
consequences of the reverse stock split. However the Company believes that the
reverse stock split will constitute a recapitalization, and hence a
reorganization, within the meaning of Section 368(a)(1)(E) of the Code.
Generally, the holders of Common Stock will not recognize gain or loss for
federal income tax purposes as a result of the reverse stock split, except that
a holder of Common Stock who receives cash in lieu of fractional shares pursuant
to the reverse stock split may recognize gain or loss as provided in "--Cash in
Lieu of Fractional Shares" below. No gain or loss will be recognized by the
Company as a result of the reverse stock split. Following the reverse stock
split, a holder of Common Stock received in the reverse stock split will have an
adjusted basis in such Common Stock (including any fractional share deemed
received) equal to the adjusted basis of the Common Stock held by that holder
immediately prior to the reverse stock split. In addition, a holder of Common
Stock will have a holding period for the Common Stock received in the reverse
stock split that includes the holding period of the Common Stock exchanged
therefor, provided that such Common Stock is a capital asset in the hands of
such holder at the time of the reverse stock split.
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STOCKHOLDERS OF THE COMPANY ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO
THEM OF THE REVERSE STOCK SPLIT.
The Company will file an amendment to its Certificate of Incorporation
in the form of Exhibit A hereto to effect the reverse stock split.
Item No. 2 to approve an Amendment to the Certificate of Incorporation to
Effect a Change of the Company's Name to eNexi Holdings, Inc.
The Company's Board of Directors believes that it is in the best
interests of the Company to change the name of the Company to "eNexi Holdings,
Inc." to reflect the new business direction of the Company upon the completion
of the Merger.
Item No. 3 to approve the Company's 2000 Employee Stock Option Plan and to
Reserve up to 1,500,000 shares of Common Stock for Issuance Thereunder
The Company's Board of Directors adopted the 2000 Employee Stock Option
Plan (the "2000 Option Plan") and authorized 1,500,000 shares of Common Stock
for issuance thereunder. The following is a summary of principal features of the
2000 Option Plan. The summary, however, does not purport to be a complete
description of all the provisions of the 2000 Option Plan, a copy of which is
attached hereto.
General
Under the 2000 Option Plan, options may be granted which are intended
to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal
Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to
qualify as Incentive Stock Options thereunder.
The 2000 Option Plan and the right of participants to make purchases
thereunder are intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
2000 Option Plan is not a qualified deferred compensation plan under Section
401(a) of the Internal Revenue Code and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
Purpose
The primary purpose of the 2000 Option Plan is to attract and retain
the best available personnel for the Company in order to promote the success of
the Company's business and to facilitate the ownership of the Company's stock by
employees. In the event that the 2000 Option Plan were not adopted, the Company
might have had considerable difficulty in attracting and retaining qualified
personnel, officers, directors and consultants.
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Administration
The 2000 Option Plan, will be administered by the Company's Board of
Directors, as the Board of Directors may be composed from time to time. All
questions of interpretation of the 2000 Option Plan are determined by the Board,
and its decisions are final and binding upon all participants. Any determination
by a majority of the members of the Board of Directors at any meeting, or by
written consent in lieu of a meeting, shall be deemed to have been made by the
whole Board of Directors.
Notwithstanding the foregoing, the Board of Directors may at any time,
or from time to time, appoint a committee (the "Committee") of at least two
members of the Board of Directors, and delegate to the Committee the authority
of the Board of Directors to administer the Plan. Upon such appointment and
delegation, the Committee shall have all the powers, privileges and duties of
the Board of Directors, and shall be substituted for the Board of Directors, in
the administration of the Plan, subject to certain limitations.
Members of the Board of Directors who are eligible employees are
permitted to participate in the 2000 Option Plan, provided that any such
eligible member may not vote on any matter affecting the administration of the
2000 Option Plan or the grant of any option pursuant to it, or serve on a
committee appointed to administer the 2000 Option Plan. In the event that any
member of the Board of Directors is at any time not a "disinterested person", as
defined in Rule 16b-3(c)(3)(i) promulgated pursuant to the Securities Exchange
Act of 1934, the Plan shall not be administered by the Board of Directors, and
may only by administered by a Committee, all the members of which are
disinterested persons, as so defined.
Eligibility
Under the 2000 Option Plan, options may be granted to key employees,
officers, directors or consultants of the Company, as provided in the 2000
Option Plan.
Terms of Options
The term of each Option granted under the 2000 Option Plan shall be
contained in a stock option agreement between the Optionee and the Company and
such terms shall be determined by the Board of Directors consistent with the
provisions of the 2000 Option Plan, including the following:
(a) Purchase Price. The purchase price of the Common Stock subject to each
ISO shall not be less than the fair market value (as set forth in the
2000 Option Plan), or in the case of the grant of an ISO to a principal
stockholder, not less that 110% of fair market value of such Common
Stock at the time such Option is granted. The purchase price of the
Common Stock subject to each Non-ISO shall be determined at the time
such Option is granted, but in no case less than 85% of the fair market
value of such Common Shares at the time such Option is granted. The
purchase price of the Common Stock subject to each Non-ISO.
<PAGE>
(b) Vesting. The dates on which each Option (or portion thereof) shall be
exercisable and the conditions precedent to such exercise, if any,
shall be fixed by the Board of Directors, in its discretion, at the
time such Option is granted.
(c) Expiration. The expiration of each Option shall be fixed by the Board
of Directors, in its discretion, at the time such Option is granted;
however, unless otherwise determined by the Board of Directors at the
time such Option is granted, an Option shall be exercisable for ten
(10) years after the date on which it was granted (the "Grant Date").
Each Option shall be subject to earlier termination as expressly
provided in the 2000 Option Plan or as determined by the Board of
Directors, in its discretion, at the time such Option is granted.
(d) Transferability. No Option shall be transferable, except by will or the
laws of descent and distribution, and any Option may be exercised
during the lifetime of the Optionee only by him. No Option granted
under the Plan shall be subject to execution, attachment or other
process.
(e) Option Adjustments. The aggregate number and class of shares as to
which Options may be granted under the Plan, the number and class
shares covered by each outstanding Option and the exercise price per
share thereof (but not the total price), and all such Options, shall
each be proportionately adjusted for any increase decrease in the
number of issued Common Stock resulting from split-up spin-off or
consolidation of shares or any like capital adjustment or the payment
of any stock dividend.
Except as otherwise provided in the 2000 Option Plan, any Option
granted hereunder shall terminate in the event of a merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation of the Company. However, the Optionee
shall have the right immediately prior to any such transaction to
exercise his Option in whole or in part notwithstanding any otherwise
applicable vesting requirements.
(f) Termination, Modification and Amendment. The 2000 Option Plan (but not
Options previously granted under the 2000 Option Plan) shall terminate
ten (10) years from the earlier of the date of its adoption by the
Board of Directors or the date on which the 2000 Option Plan is
approved by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Company entitled to vote
thereon, and no Option shall be granted after termination of the 2000
Option Plan. Subject to certain restrictions, the Plan may at any time
be terminated and from time to time be modified or amended by the
affirmative vote of the holders of a majority of the outstanding shares
of the capital stock of the Company present, or represented, and
entitled to vote at a meeting duly held in accordance with the
applicable laws of the State of Delaware.
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Federal Income Tax Aspects of the 2000 Option Plan
THE FOLLOWING IS A BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE PURCHASE OF
SHARES UNDER THE 2000 OPTION PLAN. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE
AND DOES NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO TAXPAYERS WITH
SPECIAL TAX STATUS. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE PROVISIONS OF
THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
PARTICIPANT MAY RESIDE, AND DOES NOT DISCUSS ESTATE, GIFT OR OTHER TAX
CONSEQUENCES OTHER THAN INCOME TAX CONSEQUENCES. THE COMPANY ADVISES EACH
PARTICIPANT TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES
OF PARTICIPATION IN THE 2000 OPTION PLAN AND FOR REFERENCE TO APPLICABLE
PROVISIONS OF THE CODE.
The 2000 Option Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Sections 421, 422 and
423 of the Code. Under these provisions, no income will be recognized by a
participant prior to disposition of shares acquired under the 2000 Option Plan.
If the shares are sold or otherwise disposed of (including by way of
gift) more than two years after the first day of the offering period during
which shares were purchased (the "Offering Date"), a participant will recognize
as ordinary income at the time of such disposition the lesser of (a) the excess
of the fair market value of the shares at the time of such disposition over the
purchase price of the shares or (b) 15% of the fair market value of the shares
on the first day of the offering period. Any further gain or loss upon such
disposition will be treated as long-term capital gain or loss. If the shares are
sold for a sale price less than the purchase price, there is no ordinary income
and the participant has a capital loss for the difference.
If the shares are sold or otherwise disposed of (including by way of
gift) before the expiration of the two-year holding period described above, the
excess of the fair market value of the shares on the purchase date over the
purchase price will be treated as ordinary income to the participant. This
excess will constitute ordinary income in the year of sale or other disposition
even if no gain is realized on the sale or a gift of the shares is made. The
balance of any gain or loss will be treated as capital gain or loss and will be
treated as long-term capital gain or loss if the shares have been held more than
one year.
In the case of a participant who is subject to Section 16(b) of the
Exchange Act, the purchase date for purposes of calculating such participant's
compensation income and beginning of the capital gain holding period may be
deferred for up to six months under certain circumstances. Such individuals
should consult with their personal tax advisors prior to buying or selling
shares under the 2000 Option Plan.
<PAGE>
The ordinary income reported under the rules described above, added to
the actual purchase price of the shares, determines the tax basis of the shares
for the purpose of determining capital gain or loss on a sale or exchange of the
shares.
The Company is entitled to a deduction for amounts taxed as ordinary
income to a participant only to the extent that ordinary income must be reported
upon disposition of shares by the participant before the expiration of the
two-year holding period described above.
Restrictions on Resale
Certain officers and directors of the Company may be deemed to be
"affiliates" of the Company as that term is defined under the Securities Act.
The Common Stock acquired under the 2000 Option Plan by an affiliate may be
reoffered or resold only pursuant to an effective registration statement or
pursuant to Rule 144 under the Securities Act or another exemption from the
registration requirements of the Securities Act.
ADDITIONAL INFORMATION
The Company's annual report on Form 10-KSB for the fiscal year ended
December 31, 1999 and quarterly report on Form 10-QSB for the quarter ended
March 31, 2000 and the exhibits filed therewith are hereby incorporated by
reference. The Company will furnish a copy of the Form 10-KSB, Form 10-QSB or
any exhibit thereto upon request by a stockholder to Michael Ames, Silver King
Resources, Inc., 20 Corporate Park, Suite 110, Irvine, California 92606. The
financial statements of eNexi, Inc. for the year ended December 31, 1999 and the
three months ended March 31, 2000 are annexed hereto as Exhibit D.
By Order of the Board of Directors,
SILVER KING RESOURCES, INC.
Larry A. Mayle, Secretary
Irvine, California
June __, 2000
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
SILVER KING RESOURCES, INC.
The undersigned, being the President and Secretary of SILVER KING
RESOURCES, INC., a corporation existing under the laws of the State of Delaware,
does hereby certify under the seal of the said corporation as follows:
1. The name of the Corporation (hereinafter referred to as the
"Corporation") is Silver King Resources, Inc. The name and
address of its agent for the service of process in the State
of Delaware is The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801, County of New Castle.
2. The certificate of incorporation of the Corporation is hereby
amended as follows:
i) Section 1 shall read in its entirety as follows: The name of
the Corporation is eNexi Holdings, Inc.
ii) Section 4 of the Certificate of Incorporation shall be
amended to include the following section:
c) As of the date of the filing of this Certificate of
Amendment, each 25 shares of outstanding common stock, par value
$.0001 ("Common Stock") of the Company shall be reverse split to
represent one share of Common Stock such that the presently
issued and outstanding 43,075,000 shares of Common Stock of the
Corporation shall now constitute 1,723,000 shares of Common Stock
. All fractional shares shall be rounded up to the next whole
number of shares. The capital of the Corporation will not be
reduced under or by reason of the foregoing provision.
3. The amendment of the certificate of incorporation herein
certified has been duly adopted by the unanimous written
consent of the Corporation's Board of Directors and a majority
of the Corporation's stockholders in accordance with the
provisions of Sections 141(f), 228 and 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of the Corporation's Certificate of Incorporation to be signed by
Roger LeRoy Miller, its President and Larry Mayle, its Secretary, this ____ day
of June, 2000.
SILVER KING RESOURCES, INC.
By:_______________________________
Roger LeRoy Miller,
President
By:_______________________________
Larry Mayle,
Secretary
<PAGE>
EXHIBIT B
ENEXI HOLDINGS, INC.
2000 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of this plan is to provide incentives to attract retain
and motivate eligible persons whose present and potential contributions are
important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future performance
through awards of Options and Restricted Stock. Capitalized terms not defined in
the text are defined in Section 22 hereof. This Plan is intended to be a written
compensatory benefit plan within the meaning of Rule 701 promulgated under the
Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of shares Available. Subject to Sections 2.2 and 17hereof,
the total number of Shares reserved and available for grant and
issuance pursuant to this Plan will be 1,500,000 Shares. Subject to
Sections 2.2, 5.10 and 17 hereof, Shares subject to Awards previously
granted will again be available for grant and issuance in connection
with future Awards under this Plan to the extent such Shares: (i) cease
to be subject to issuance upon exercise of an Option, other than due to
exercise of such Option; (ii) are subject to an Award granted hereunder
but the Shares subject to such Award are forfeited or repurchased by
the Company at the original issue price; or (iii) are subject to an
Award that otherwise terminates without Shares being issued. At all
times the Company will reserve and keep available a sufficient number
of Shares as will be required to satisfy the requirements of all Awards
granted and outstanding under this Plan.
2.2 Adjustment of Shares. In the event that the number of outstanding
shares of the Company's Common Stock is changed by a stock dividend,
re-capitalization, stock split, reverse stock split, subdivision,
combination, reclassification or similar change in the capital
structure of the Company without consideration, then (i) the number of
Shares reserved for issuance under this Plan, (ii) the Exercise Prices
of and number of Shares subject to outstanding Options and (iii) the
Purchase Prices of and number of Shares subject to other outstanding
Awards will be proportionately adjusted, subject to any required action
by the Board or the shareholders of the Company and compliance with
applicable securities laws; provided, however, that fractions of a
Share will not be issued but will either be paid in cash at the Fair
Market Value of such fraction of a Share or will be rounded down to the
nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted only to
employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in
Section 5 hereof) and Restricted Stock Awards may be granted to employees,
officers, directors and consultants of the Company or any Parent or Subsidiary
of the Company; provided such consultants render bona fide services not in
connection with the offer and sale of securities in a capital raising
transaction. A person may be granted more than one Award under this plan.
<PAGE>
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board, if no Committee is created by the Board. Subject to
the general purposes, terms and conditions of this Plan, and to the direction of
the Board, the Committee will have full power to implement and carry out this
plan without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any other
agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to this
Plan;
(c) approve persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination with,
in tandem with, in replacement of, or as alternatives to, other Awards under
this plan or awards under any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;
(g) grant waivers of any conditions of this plan or any Award;
(h) determine the terms of vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any inconsistency
in this Plan, any Award, any Award Agreement, any Exercise Agreement or any
Restricted Stock Purchase Agreement;
( j ) determine whether an Award has been earned;
(k) make all other determinations necessary or advisable for the
administration of this Plan; and
(1) extend the vesting period beyond a Participant's Termination Date.
<PAGE>
4.2 Committee Discretion. Unless in contravention of any express terms
of this plan or Award, any determination made by the Committee with respect to
any Award will be made in its sole discretion either (i) at the time of grant of
the Award, or (ii) subject to Section 5.9 hereof, at any later time. Any such
determination will be final and binding on the Company and on all persons having
an interest in any Award under this Plan. The Committee may delegate to one or
more officers of the Company the authority to grant an Award under this Plan,
provided such officer or officers are members of the Board.
5. OPTIONS. The Committee may grant Options to eligible persons described in
Section 3 hereof and will determine whether such Options will be Incentive Stock
Options within the meaning of the Code ("ISOs") or Nonqualified Stock Options
("NQSOs"), the number of Shares subject to the Option, the Exercise Price of the
Option, the period during which the Option may be exercised, and all other terms
and conditions of the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this plan wil lbe
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO ("Stock Option Agreement") , and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, unless a later
date is otherwise specified by the Committee. The Stock Option Agreement and a
copy of this plan will be delivered to the Participant within a reasonable time
after the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately but subject
to repurchase pursuant to Section 11 hereof or may be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company ("Ten Percent Shareholder") will be exercisable after the expiration
of five (5) years from the date the ISO is granted. The Committee also may
provide for Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number of Shares or percentage of Shares as
the Committee determines. Subject to earlier termination of the Option as
provided herein, each Participant who is not an officer, director or consultant
of the Company or of a Parent or Subsidiary of the Company shall have the right
to exercise an Option granted hereunder at the rate of no less than twenty
percent (20%) per year over five (5) years from the date such Option is granted.
5.4 Exercise Price. The Exercise Price of an Option will be determined
by the Committee when the Option is granted and may not be less than eighty-five
percent (85%) of the Fair Market Value of the Shares on the date of grant;
provided that (i) the Exercise Price of an ISO will not be less than one hundred
<PAGE>
percent (100%) of the Fair Market Value of the Shares on the date of grant and
(ii) the Exercise Price of any Option granted to a Ten Percent Shareholder will
not be less than one hundred ten percent (110%) of the Fair Market Value of the
Shares on the date of grant. Payment for the Shares purchased must be made in
accordance with Section 7 hereof.
5.5 Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant) . The Exercise Agreement will state (i) the number of Shares
being purchased, (ii) the restrictions imposed on the Shares purchased under
such Exercise Agreement, if any, and (iii) such representations and agreements
regarding Participant's investment intent and access to information and other
matters, if any, as may be required or desirable by the Company to comply with
applicable securities laws. Participant shall execute and deliver to the Company
the Exercise Agreement together with payment in full of the Exercise Price, and
any applicable taxes, for the number of Shares being purchased.
5.6 Termination. Subject to earlier termination pursuant to Sections17
and 18 hereof and notwithstanding the exercise periods set forth in the Stock
Option Agreement, exercise of an Option will always be subject to the following:
(a) If the Participant is terminated for any reason other than death,
Disability or for Cause, then the Participant may exercise such Participant's
Options only to the extent that such Options are exercisable upon the
Termination Date or as otherwise determined by the Committee. Such Options must
be exercised by the Participant, if at all, as to all or some of the Vested
Shares calculated as of the Termination Date or such other date determined by
the Committee, within three (3) months after the Termination Date (or within
such shorter time period, not less than thirty (30) days, or within such longer
time period, not exceeding five (5) years, after the Termination Date as may be
determined by the Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO) but in any event, no later than the
expiration date of the Options.
(b) if the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after a Termination
other than for Cause), then Participant's Options may be exercised only to the
extent that such Options are exercisable by Participant on the Termination Date
or as otherwise determined by the Committee. Such options must be exercised by
Participant (or Participant's legal representative or authorized assignee), if
at all, as to all or some of the Vested Shares calculated as of the Termination
Date or such other date determined by the Committee, within twelve (12) months
after the Termination Date (or within such shorter time period, not less than
six (6) months, or within such longer time period, not exceeding five (5) years,
after the Termination Date as may be determined by the Committee, with any
exercise beyond (i) three (3) months after the Termination Date when the
Termination is for any reason other than the Participant's death or disability,
within the meaning of Section 22(e) (3) of the Code, or (ii) twelve (12) months
after the Termination Date when the Termination is for Participant's disability,
within the meaning of Section 22(e) (3) of the Code, deemed to be an NQSO) but
in any event no later than the expiration date of the Options.
<PAGE>
(c) If the Participant is terminated for Cause, then Participant's Options
shall expire on such Participant's Termination Date, or at such later time and
on such conditions as are determined by the Committee.
5. 7 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5. 8 Limitations on ISOs. The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company or any Parent or
Subsidiary of the Company) will not exceed One Hundred Thousand Dollars
($100,000). If the Fair Market Value of Shares on the date of grant with respect
to which ISOs are exercisable for the first time by a Participant during any
calendar year exceeds One Hundred Thousand Dollars ($100,000), then the Options
for the first One Hundred Thousand Dollars ($100,000) worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of One Hundred Thousand Dollars ($100,000) that become exercisable in
that calendar year will be NQSOs. In the event that the Code or the regulations
promulgated there under are amended after the Effective Date (as defined in
Section 18 hereof) to provide for a different limit on the Fair Market Value of
Shares permitted to be subject to ISOs, then such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5. 9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefore, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. Subject to Section 5.10 hereof, the Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants by a
written notice to them; provided, however, that the Exercise Price may not be
reduced below the minimum Exercise Price that would be permitted under Section
5.4 hereof for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant, to disqualify any Participant's ISO
under Section 422 of the Code.
<PAGE>
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell
to an eligible person Shares that are subject to certain specified restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the Purchase Price, the restrictions to which the
Shares will be subject, and all other terms and conditions of the Restricted
Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The Restricted Stock Award will be accepted by the Participant's execution
and delivery of the Restricted Stock Purchase Agreement and full payment for the
Shares to the Company within thirty (30) days from the date the Restricted Stock
Purchase Agreement is delivered to the person. If such person does not execute
and deliver the Restricted Stock Purchase Agreement along with full payment for
the Shares to the Company within such thirty (30) days, then the offer will
terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee and will be at least
eighty five percent (85%) of the Fair Market Value of the Shares on the date the
Restricted Stock Award is granted or at the time the purchase is consummated,
except in the case of a sale to a Ten Percent Shareholder, in which case the
Purchase Price will be one hundred percent (100%) of the Fair Market Value on
the date the Restricted Stock Award is granted or at the time the purchase is
consummated. Payment of the Purchase Price must be made in accordance with
Section 7 hereof.
6.3 Restrictions. Restricted Stock Awards may be subject to the
restrictions set forth in Section 11 hereof .
7. PAYMENT FOR SHARE PURCHASES.
7.1 Payment for Shares purchased pursuant to this plan may be made in
cash (by check) or, where expressly approved for the Participant by the
Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company owed to the Participant;
(b) by surrender of shares that: (i) either (A) have been owned by
Participant for more than six (6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid with respect to such
shares) or (B) were obtained by Participant in the public market and (ii) are
clear of all liens, claims, encumbrances or security interests;
(c) by tender of a full recourse promissory note having such terms as may
be approved by the Committee and bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of the Code; provided, however,
that Participants who are not employees or directors of the Company will not be
entitled to purchase Shares with a promissory note unless the note is adequately
secured by collateral other than the Shares;
<PAGE>
(d) by waiver of compensation due or accrued to the Participant from the
Company for services rendered;
(e) with respect only to purchases upon exercise of an Option, and provided
that a public market for the Company's stock exists:
(i) through a "same day sale" commitment from the Participant and a
broker dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares so purchased
sufficient to pay the total Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the total
Exercise Price directly to the Company; or (ii) through a "margin"
commitment from the Participant and an NASD Dealer whereby the Participant
irrevocably elects to exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the total Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to forward
the total Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may, in its sole discretion, elect
to assist the Participant in paying for Shares purchased under this plan by
authorizing a guarantee by the Company of a third party loan to the Participant.
8. WITHHOLDING TAXES.
8.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash by the Company, such payment
will be net of an amount sufficient to satisfy federal, state, and local
withholding tax requirements.
8.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may in its sole
discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.
<PAGE>
9. PRIVILEGES OF STOCK OWNERSHIP.
9.1 Voting and Dividends. No Participant will have any of the rights of
a shareholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a shareholder and have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock. The Participant will have no right to retain such stock
dividends or stock distributions with respect to Unvested Shares that are
repurchased pursuant to Section 11 hereof.
9.2 Financial Statements. The Company will provide financial statements
to each Participant annually during the period such Participant has Awards
outstanding. Notwithstanding the foregoing, the Company will not be required to
provide such financial statements to Participants when issuance is limited to
key employees whose services in connection with the Company assure them access
to equivalent information.
10. TRANSFERABILITY. Awards granted under this Plan, and any interest therein,
will not be transferable or assignable by Participant, other than by will or by
the laws of descent and distribution, and may not be made subject to execution,
attachment or similar process. During the lifetime of the Participant an Award
will be exercisable only by the Participant or Participant's legal
representative and any elections with respect to an Award may be made only by
the Participant or Participant's legal representative.
11. [Intentionally omitted]
12. CERTIFICATES. All certificates for Shares or other securities delivered
under this Plan will be subject to such stock transfer orders, legends and other
restrictions as the Committee may deem necessary or advisable, including
restrictions under any applicable federal, state or foreign securities law, or
any rules, regulations and other requirements of the SEC or any stock exchange
or automated quotation system upon which the Shares may be listed or quoted.
13. [Intentionally omitted]
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time
to time, authorize the Company, with the consent of the respective Participants,
to issue new Awards in exchange for the surrender and cancellation of any or all
outstanding Awards. The Committee may at any time buy from a Participant an
Award previously granted with payment in cash, shares of Common Stock of the
Company (including Restricted Stock) or other consideration, based on such terms
and conditions as the Committee and the Participant may agree.
<PAGE>
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this plan prior to (i) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (ii) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under
this plan will confer or be deemed to confer on any Participant any right to
continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.
17.CORPORATE TRANSACTIONS.
17.1 Assumption or Replacement of Awards by Successor or Acquiring
Corporation. In the event of (i) a dissolution or liquidation of the Company,
(ii) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company or their relative stock holdings and the Awards granted under this
Plan are assumed, converted or replaced by the successor or acquiring
corporation, which assumption, conversion or replacement will be binding on all
Participants) , (iii) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other than any shareholder which merges with the Company in such merger, or
which owns or controls another corporation which merges with the Company in such
merger) cease to own their shares or other equity interests in the Company, or
(iv) the sale of all or substantially all of the assets of the Company, any or
all outstanding Awards may be assumed, converted or replaced by the successor or
acquiring corporation (if any) , which assumption, conversion or replacement
will be binding on all Participants. In the alternative, the successor or
acquiring corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to shareholders (after
taking into account the existing provisions of the Awards). The successor or
acquiring corporation may also substitute by issuing, in place of outstanding
Shares of the Company held by the Participant, substantially similar shares or
other property subject to repurchase restrictions and other provisions no less
favorable to the Participant than those which applied to such outstanding Shares
immediately prior to such transaction described in this Section 17.1. In the
event such successor or acquiring corporation (if any) refuses to assume or
substitute Awards, as provided above, pursuant to a transaction described in
this Section
<PAGE>
17.1, then notwithstanding any other provision in this plan to the
contrary, such Awards will expire on such transaction at such time and on such
conditions as the Board will determine.
17.2 Other Treatment of Awards. Subject to any greater rights granted
to Participants under the foregoing provisions of this Section 17, in the event
of the occurrence of any transaction described in Section 17.1 hereof, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation or sale of assets.
17.3 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (i) granting an Award under this plan in substitution of
such other company's award or (ii) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective on the
date that it is adopted by the Board (the "Effective Date"). This plan will be
approved by the shareholders of the Company (excluding Shares issued pursuant to
this Plan), consistent with applicable laws, within twelve (12) months before or
after the Effective Date. Upon the Effective Date, the Board may grant Awards
pursuant to this Plan; provided, however, that: (i) no Option may be exercised
prior to initial shareholder approval of this Plan; (ii) no Option granted
pursuant to an increase in the number of Shares approved by the Board shall be
exercised prior to the time such increase has been approved by the shareholders
of the Company; (iii) in the event that initial shareholder approval is not
obtained within the time period provided herein, all Awards granted hereunder
shall be canceled, any Shares issued pursuant to any Award shall be canceled and
any purchase of Shares issued hereunder shall be rescinded; and (iv) Awards
granted pursuant to an increase in the number of Shares approved by the Board
which increase is not timely approved by shareholders shall be canceled, any
Shares issued pursuant to any such Awards shall be canceled, and any purchase of
Shares subject to any such Award shall be rescinded.
19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein,
this Plan will terminate ten (10) years from the Effective Date or, if earlier,
the date of shareholder approval. This plan and all agreements hereunder shall
be governed by and construed in accordance with the laws of the State of
Delaware.
<PAGE>
20.AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof, the Board
may at any time terminate or amend this Plan in any respect, including without
limitation amendment of any form of Award Agreement or instrument to be executed
pursuant to this Plan.
21.NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this plan by the Board,
the submission of this plan to the shareholders of the Company for approval, nor
any provision of this plan will be construed as creating any limitations on the
power of the Board to adopt such additional compensation arrangements as it may
deem desirable, including, without limitation, the granting of stock options and
other equity awards otherwise than under this Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
22.DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"Award" means any award under this Plan, including any Option or
Restricted Stock Award.
"Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award, including the Stock Option Agreement and Restricted
Stock Agreement.
"Board" means the Board of Directors of the Company.
"Cause" means Termination because of (i) any willful, material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, or any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any material breach by
the Participant of any provision of any agreement or understanding between the
Company or any Parent or Subsidiary of the Company and the Participant regarding
the terms of the Participant's service as an employee, officer, director or
consultant to the Company or a Parent or Subsidiary of the Company, including
without limitation, the willful and continued failure or refusal of the
Participant to perform the material duties required of such Participant as an
employee, officer, director or consultant of the Company or a Parent or
Subsidiary of the Company, other than as a result of having a Disability, or a
breach of any applicable invention assignment and confidentiality agreement or
similar agreement between the Company or a Parent or Subsidiary of the Company
and the Participant, (iv) Participant's disregard of the policies of the Company
or any Parent or Subsidiary of the Company so as to cause loss, damage or injury
to the property, reputation or employees of the Company or a Parent or
Subsidiary of the Company, or (v) any other misconduct by the Participant which
is materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or a Parent or Subsidiary of
the Company.
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" administer this Plan, means the committee created and
appointed by the Board to or if no committee is created and appointed, the
Board.
"Company" means ENEXI HOLDINGS, INC., or any successor corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, Company's Common
Stock determined as follows: the value of a share of the
(a) if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on which the
Common Stock is listed or admitted to trading as reported in The Wall
Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the
date of determination as reported by The Wall Street Journal (or, if not so
reported, as otherwise reported by any newspaper or other source as the
Board may determine); or
(d) if none of the foregoing is applicable, by the Committee in good
faith.
"Option" means an award of an option to purchase Shares pursuant to
Section 5 hereof.
"Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock representing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"Participant" means a person who receives an Award under this plan.
"Plan" means this ENEXI HOLDINGS, INC., 2000 Equity Incentive Plan, as
amended from time to time.
<PAGE>
"Purchase Price" means the price at which a Participant may purchase
Restricted Stock.
"Restricted Stock" means Shares purchased pursuant to a Restricted
Stock Award.
"Restricted Stock Award" means an award of Shares pursuant to Section 6
hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof, and
any successor security.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
representing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of this plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. A Participant will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the Committee, provided
that such leave is for a period of not more than ninety (90) days (a) unless
reinstatement (or, in the case of an employee with an ISO, reemployment) upon
the expiration of such leave is guaranteed by contract or statute, or (b) unless
provided otherwise pursuant to formal policy adopted from time to time by the
Company's Board and issued and promulgated in writing. In the case of any
Participant on (i) sick leave, (ii) military leave or (iii) an approved leave of
absence, the Committee may make such provisions respecting suspension of vesting
of the Award while on leave from the Company or a Parent or Subsidiary of the
Company as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Stock Option
Agreement. The Committee will have sole discretion to determine whether a
Participant has ceased to provide services and the effective date on which the
Participant ceased to provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the
Award Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award Agreement.
<PAGE>
EXHIBIT C
eNexi, INC.
INDEPENDENT AUDITORS' REPORT
AND FINANCIAL STATEMENTS
FROM INCEPTION (MAY 14, 1999)
THROUGH DECEMBER 31, 1999
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Independent Auditors' Report......................................................................................1
Balance Sheet.....................................................................................................2
Statement of Income and Expense...................................................................................3
Statement of Stockholders' Equity.................................................................................4
Statement of Cash Flows...........................................................................................5
Notes to the Financial Statements.................................................................................6
</TABLE>
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of eNexi, Inc.
We have audited the accompanying balance sheet of eNexi Inc. (Formerly known as
Virtually Free Internet.com Inc.) (a Delaware corporation) as of December 31,
1999, and the related statements of income and expense, stockholders' equity,
and cash flows from inception (May 14, 1999) through December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of eNexi, Inc. as of December 31,
1999, and the results of its operations and its cash flows for the period from
inception through December 31, 1999 in conformity with generally accepted
accounting principles.
Mendoza Berger & Company, LLP
Laguna Hills, California
March 16, 2000
<PAGE>
eNexi, INC.
(FORMERLY KNOWN AS VIRTUALLY FREE INTERNET.COM INC.)
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents ................................... $ 1,196,675
Accounts receivable ......................................... 1,336
Other current assets ........................................ 10,267
-----------
Total Current assets 1,208,278
-----------
Property and equipment - net (notes 2 and 3) 181,029
-----------
Other Assets
Deposits 52,527
-----------
Total assets .......................................... $ 1,441,834
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................ $ 88,994
Notes payable (Note 4) ...................................... 402,863
-----------
Total Current liabilities 491,857
-----------
Commitments and contingency (Note 6) ........................... --
Stockholders' equity: (Note 5)
Common stock, $.01 par value, 1,200,000 shares
authorized, 1,048,868 shares issued and outstanding .... 10,489
Additional paid-in capital .................................. 2,435,031
Net loss .................................................... (1,495,543)
-----------
Total stockholders' equity ............................ 949,977
-----------
Total liabilities and stockholders' equity ............ $ 1,441,834
===========
</TABLE>
<PAGE>
eNexi INC.
(FORMERLY KNOWN AS VIRTUALLY FREE INTERNET.COM INC.)
STATEMENT OF INCOME AND EXPENSE
FROM INCEPTION (MAY 14, 1999) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Net revenues ........................................... $ 27,192
-----------
Operating costs and expense:
Cost of recurring revenues .......................... 98,626
Sales and marketing ................................. 310,480
General and administrative .......................... 1,098,927
Depreciation ........................................ 22,846
-----------
Total operating costs and expenses 1,530,879
-----------
Loss from operations (1,503,687)
Other income (expense)
Interest expense (9,141)
Interest income 17,285
-----------
Loss before provision for income taxes $(1,495,543)
-----------
Provision for income taxes (Note 7) --
-----------
Net loss ...................................... $(1,495,543)
===========
</TABLE>
<PAGE>
eNexi INC.
(FORMERLY KNOWN AS VIRTUALLY FREE INTERNET.COM INC.)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (MAY 14, 1999) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common Stock
Additional Retained Total
Number of $0.01 Par Paid-in Earnings Stockholders'
Shares Value Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, May 14, 1999 ...... -- $ -- $ -- $ -- $ --
Issuance of stock for cash . 10,052 101 100,419 -- 100,520
Stock dividend (Note 5) .... 834,316 8,343 (8,343) -- --
Conversion of debt to equity
(Note 5) ................ -- -- 300,000 -- 300,000
Issuance of stock for cash . 204,500 2,045 2,042,955 -- 2,045,000
Net loss ................... -- -- -- (1,495,543) (1,495,543)
--------- -------- --------- ----------- -----------
Balance, December 31, 1999 . 1,048,868 $ 10,489 $ 2,435,031 $(1,495,543) $ 949,977
========= ======== ========= ========== ===========
</TABLE>
<PAGE>
eNexi INC.
(FORMERLY KNOWN AS VIRTUALLY FREE INTERNET.COM INC.)
STATEMENT OF CASH FLOWS
FROM INCEPTION (MAY 14, 1999) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Cash flows provided by operating activities:
<S> <C>
Net loss $ (1,495,543)
---------------
Adjustment to reconcile net loss to net cash used by operations:
Depreciation 22,846
Changes in assets and liabilities:
Accounts receivable (1,336)
Other current assets (10,267)
Deposits (52,527)
Accounts payable 88,994
---------------
Total Adjustments 47,710
---------------
Net cash used by operations (1,447,833)
Cash flows used by investing activities:
Purchase of property and equipment $ (203,875)
---------------
Net cash used by investing activities (203,875)
Cash flows provided by financing activities:
Proceeds from notes payable 402,863
Issuance of common stock 2,445,520
---------------
Net cash provided by financing activities 2,848,383
---------------
Net increase in cash and cash equivalents 1,196,675
Cash and cash equivalents, beginning of year -
---------------
Cash and cash equivalents, end of year $ 1,196,675
===============
</TABLE>
<PAGE>
1. NATURE OF BUSINESS
eNexi Inc. (formerly known as Virtually Free Internet.com Inc.)
(the Company) formed May 14, 1999, is an Internet service provider
which provides Internet access to it's members through it's portal
www.VirtuallyFreeInternet.com for a monthly fee. The "Bring Three, Get
Free?" program offers members an opportunity for free Internet service
by bringing three referrals and a chance to earn commissions each
month from active and extended referrals.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenues consist of monthly fees charged to members for Internet access
and are recognized as services are provided. The Company offers a 30
day fee trial period to use its Internet services and recognizes the
monthly revenues once the 30-day period has expired.
Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments which
are readily convertible into cash within ninety (90) days of purchase.
Accounts Receivable
The Company bills customers' credit cards for Internet service in
advance and funds not received are included in accounts receivable. No
material amounts of accounts receivable were outstanding at December
31, 1999.
Property and Equipment
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets,
which is generally five years. The Company has no equipment under
capital leases and has no leasehold improvements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash deposits in
excess of $100,000. The Company places its cash deposits with
high-credit quality financial institutions. At times, balances in the
Company's
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk (Continued)
cash accounts may exceed the Federal Deposit Insurance Corporation's
(FDIC) limit of $100,000. The Company's cash investment policies limit
investments to short-term, investment grade investments.
The Company is heavily dependent upon a number of other third parties
for credit card processing, dial-up connectivity, and for the hosting
of its system infrastructure and database servers. If the services of
any of these third parties is interrupted, it could have a material
adverse impact on the Company's operations.
Advertising
The cost of advertising is expensed as incurred. The Company incurred
advertising expense of $277,000 for the period ended December 31, 1999.
Income Taxes
The Company recognizes deferred tax assets and liabilities based on
differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that are expected to
be in effect when the differences are expected to be recovered. A
valuation allowance has been provided for deferred tax assets when it
is more likely than not that all or some portion of the deferred tax
asset will not be realized. The Company has established a full
valuation allowance on the aforementioned deferred tax assets due to
the uncertainty of realization.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts of assets and
liabilities and the disclosures of contingent assets and liabilities at
the date of the financial statements as well as the reported amounts of
revenues and expenses during the reporting period. Accordingly, actual
results could differ from those estimates.
<PAGE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1999:
Equipment .................... $ 203,875
Less: accumulated depreciation (22,846)
---------
$ 181,029
=========
Depreciation expense for the period ended December 31, 1999 was
$22,846.
4. NOTES PAYABLE
<TABLE>
<CAPTION>
The following is a summary of notes payable at December 31, 1999.
<S> <C>
6% note payable, due upon demand to Rally Automotive Group.
Larry A Mayle, President of Rally Automotive Group is also Co-chairman and
Chief Executive Officer of eNexi Inc. $ 224,885
6% note payable, due upon demand to Unicor, Inc. Dr. Roger
L. Miller, President of Unicor, Inc. is also Co-chairman and President of
eNexi Inc. 130,586
6% note payable, due upon demand to Larry A. Mayle, Co-
chairman and Chief Executive Officer of eNexi Inc. 19,220
6% note payable due upon demand to Dr. Roger L. Miller, Co-
chairman and President of eNexi, Inc. 28,172
-------------------------
$ 402,863
=========================
</TABLE>
5. CAPITAL STOCK
Stock Dividend
On September 1, 1999, the Company distributed 834,316 shares of common
stock in connection with a 8400% stock dividend. As a result of the
stock dividend, common stock was increased and additional paid in
capital was decreased by $8,343, respectively. All references in the
accompanying financial statements to the number of common shares and
per-share amounts have been restated to reflect the stock dividend.
<PAGE>
5. CAPITAL STOCK (Continued)
-------------
Conversion of Debt to Equity
On September 1, 1999, the Company converted a $180,000 and a $120,000
promissory note due to the Chairman/CEO and President, respectively,
into capital. This was done as part of the original capitalization of
the Company and no additional shares were issued in conjunction with
this transaction.
Warrants
In December, 1999, the Company agreed to issue 1,000.3 warrants, for
every 1,000 shares of any type of stock issued. The warrants enable the
holders to purchase one share of the Company's common stock and are
exercisable within five years at a strike price equal to the stock's
market value at the time any additional shares are issued.
6. COMMITMENTS AND CONTINGENCY
Operating Leases and Agreements
The Company leases office and storage space under non-cancelable
operating leases which expire June and August, 2000, respectively and
requires monthly lease payments totaling $13,868. The amount of rent
expense recorded for the period ended December 31, 1999 totaled
$75,456.
The Company leases computer and office furniture under operating leases
which expire through August 2001 and require monthly lease payments
totaling $11,499. The amount of rent expense recorded for the period
ended December 31, 1999 totaled $63,612.
The Company has entered into an agreement with Apex Global Internet
Services (AGIS) to provide Internet ports. The term of the agreement is
12 months starting June 7, 1999 and requires a monthly payment of
$1,620, which will be increased as more ports are provided. The amount
of expense recorded for the period ended December 31, 1999 was
$108,700. See related contingency note below.
The Company has entered into two agreements to provide Internet ports
which expire March and August, 2002, respectively and require monthly
payments totaling $22,600, which will be increased as more ports are
provided. The amount of expense recorded for the period ended December
31, 1999 totaled $45,315.
<PAGE>
6. COMMITMENTS AND CONTINGENCY (Continued)
---------------------------
Operating Leases (Continued)
----------------
Future minimum lease and agreement payments are as follows as of
December 31, 1999:
<TABLE>
<CAPTION>
Furniture and
Office Equipment Services Total
<S> <C> <C> <C> <C> <C>
2000 $ 105,987 $ 121,902 $ 287,440 $ 515,329
2001 - 63,168 290,640 353,808
2002 - - 158,300 158,300
-------------- --------------------- --------------- ----------------
$ 105,987 $ 185,070 $ 736,380 $ 1,027,437
============== ===================== =============== ================
</TABLE>
Employment and Consulting Agreements
The Company has entered into agreements with its Co-Chairman and Chief
Executive Office and Co-Chairman and President. The agreements call for
monthly payments of $15,000 and $10,000, respectively. The monthly
payments are to begin once the Company receives its second round of
outside financing and will continue for a period of one year,
thereafter.
Contingency
AGIS, one of the vendors used by the Company to provide dial-up ports
to its customers, declared bankruptcy by filing for Chapter 11 in
February 2000. The Company has added an additional vendor that will
cover the potential loss of the ports provided by AGIS.
Additionally, the Company is in the process of clarifying the terms of
its agreement with AGIS based upon what management believes is
contradictory language in the contract. The agreement entered into in
June 1999, states that the Company will pay a monthly charge of $81,000
for the deployment of 1,000 ports, totaling $567,000 for the period
ended December 31, 1999. The Company asserts that it should be billed
only for ports used, which amounts to $1,620 per month. See operating
leases and agreements disclosure above. AGIS has not disputed the
Company's assertion, however, it has calculated the monthly billing
amount at $2,500. The Company has initially made a payment of $108,700,
which the Company asserts will be applied against any future
resolution. AGIS has been in contact with Company management,
attempting to resolve this issue. The Company has not sought the
services of outside counsel.
<PAGE>
7. INCOME TAXES
The Company incurred taxable losses for federal and state purposes for
the period ended December 31, 1999. Accordingly, the Company did not
incur any federal income tax expense for those periods other than the
minimum required taxes for state purposes.
Prior to September 7, 1999, the Company was taxed as an S Corporation.
All tax benefits arising from operating losses as an S Corporation were
passed to the individual stockholders.
At December 31, 1999, the Company had net operating loss carryforwards
of approximately $772,000 related to federal and state income taxes
which can be used to offset future federal and state taxable income
from operations. These carryforwards will begin to expire in 2007 and
substantially all will expire in 2019.
Significant components of the Company's deferred tax asset at December
31, 1999, are as follows:
Net operating loss carryforwards $ 307,000
=========
Gross deferred tax assets 307,000
Valuation allowance ............ (307,000)
---------
Net deferred tax assets .. $ --
=========
Under the Tax Reform Act of 1986, the benefits from net operating
losses carried forward may be impaired or limited in certain
circumstances. Events which may cause limitations in the amount of net
operating losses that the Company may utilize in any one year include,
but are not limited to, a cumulative ownership change of more than 50%
over a three year period. The impact of any limitations that may be
imposed for future issuances of equity securities, including issuances
with respect to acquisitions, have not been determined.
8. PROFIT SHARING PLAN
The Company has a profit sharing plan that covers all non-stockholder
employees. Contributions to the plan are at the discretion of
management. Management did not make a contribution to the plan for the
period ended December 31, 1999.
9. SUBSEQUENT EVENTS
The Company changed its corporate name from VirtuallyFreeInternet.com
Inc. to eNexi Inc. on January 27, 2000.
<PAGE>
eNexi, INC.
FINANCIAL STATEMENTS
FROM JANUARY 1, 2000
THROUGH MARCH 31, 2000
(UNAUDITED)
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Balance Sheet.....................................................................................................2
Statement of Income and Expense...................................................................................3
Statement of Stockholders' Equity.................................................................................4
Statement of Cash Flows...........................................................................................5
</TABLE>
<PAGE>
eNexi INC.
BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents $ 630,475
Accounts receivable 36,913
Other current assets 28,570
-----------
Total current assets 695,958
-----------
Property and equipment - net 174,185
-----------
Other Assets
Deposits 39,129
-----------
Total assets .......................................... $ 907,272
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................ $ 146,060
Notes payable (Note 4) ...................................... 10,372
Notes payable 408,936
-----------
Total current liabilities 565,368
-----------
Stockholders' equity: (Note 5)
Common stock, $.01 par value, 1,200,000 shares
authorized, 1,048,868 shares issued and outstanding .... 10,469
Additional paid-in capital .................................. 2,435,031
Retained Earnings (accumulated deficit) (1,495,543)
Net loss .................................................... (588,073)
-----------
Total stockholders' equity ............................ 341,904
-----------
Total liabilities and stockholders' equity ............ $ 907,272
===========
</TABLE>
<PAGE>
eNexi INC.
STATEMENT OF INCOME AND EXPENSE
FROM JANUARY 1, 2000 THROUGH MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Net revenues $ 99,373
----------
Operating costs and expense:
Cost of recurring revenues 48,367
Sales and marketing 242,913
General and administrative 388,158
Depreciation 10,238
----------
Total operating costs and expenses 689,676
----------
Loss from operations (593,304)
Other income (expense)
Interest expense (6,073)
Other expense (1,678)
Interest income 12,981
----------
Loss before provision for income taxes (588,073)
----------
Provision for income taxes -
----------
Net loss $ (588,073)
==========
</TABLE>
<PAGE>
eNexi INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FROM JANUARY 1, 2000 THROUGH MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
Additional Retained Total
Number of $0.01 Par Paid-in Earnings Stockholders'
Shares Value Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 2000 1,046,868 $ 10,469 $ 2,415,031 $ (1,495,542) $ 949,978
Purchase of stock for cash (2,000) $ (20) $ (19,980) $ -- $ (20,000)
Net Loss -- $ -- $ -- $ (588,073) $ (1,495,543)
------------- --------------- -------------- ---------------- ----------------
Balance, March 31, 2000 1,046,868 $ 10,469 $ 2,415,051 $ (2,083,616) $ 341,904
============= =============== ============== ================ ================
</TABLE>
<PAGE>
eNexi INC.
STATEMENT OF CASH FLOWS
FROM JANUARY 1, 2000 THROUGH MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Cash flows provided by operating activities:
<S> <C>
Net loss $ (588,073)
------------
Adjustment to reconcile net loss to net cash used by operations:
Depreciation 10,238
Changes in assets and liabilities:
Accounts receivable (35,577)
Other current assets (18,303)
Other assets 15,400
Accounts payable 57,065
Other current liabilities 10,371
------------
Total adjustments 39,193
------------
Net cash used by operations (548,880)
Cash flows used by investing activities:
Purchase of property and equipment (net) $ (3,394)
------------
Net cash used by investing activities (3,394)
Cash flows provided by financing activities:
Proceeds from notes payable 6,073
Purchase of common stock (20,000)
------------
Net cash provided by financing activities (13,927)
------------
Net increase in cash and cash equivalents (566,200)
Cash and cash equivalents, beginning of year 1,196,675
------------
Cash and cash equivalents, end of year $ 630,475
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