AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1999
Registration No. 333-86347
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
NEWAGECITIES.COM, INC.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C> <C>
Idaho 7373 91-0927532
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Number) (Identification No.)
</TABLE>
1181 South Rogers Circle, Suite 5
Boca Raton, FL 33487
(561) 989-0808
(Address and Telephone Number of Principal Executive Offices)
-------------------------------------------------------------
Joseph Ardito, Jr., Chief Executive Officer
1181 South Rogers Circle, Suite 5
Boca Raton, FL 33487
(561) 989-0808
(Name, Address and Telephone Number of Agent For Service)
---------------------------------------------------------
Copies of all communications to:
James M. Schneider, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Facsimile No. (954) 766-7800
Approximate Date of Proposed Sale to the Public: As soon as practicable
after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
CALCULATION OF REGISTRATION FEE
-------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Title of Each Maximum Maximum
Class of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered Per Security Offering Price Registration Fee
- ---------------- ---------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
Common stock 3,200,000 $2.50 $8,000,000 $2,224
Common stock
issuable upon
exercise of warrants 1,850,000 $2.50/$2.13 $4,606,500 $1,281
--------- ----------- ----------- ------
Total 5,050,000 $12,606,500 $3,505
========= =========== ======
</TABLE>
Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of 1933
based on the average of the high and low sale price for our common stock as
reported on the OTC Bulletin Board on August 27, 1999 for 5,000,000 shares and
on November 12, 1999 for 50,000 shares of common stock.
Under Rule 416, there are also being registered additional shares of
common stock as may be issuable as a result of to the anti-dilution provisions
of the warrants.
Newagecities.com, inc. amends this registration statement on the date
or dates as may be necessary to delay its effective date until newagecities.com,
inc. files a further amendment which specifically states that this registration
statement shall become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement becomes
effective on the date as the Securities and Exchange Commission, acting under
Section 8(a), may determine.
Information contained in this document is subject to completion or
amendment. A registration statement covering these securities has been filed
with the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus does not represent an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which the offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of a state.
<PAGE>
Subject to completion dated November 17, 1999
PROSPECTUS
NEWAGECITIES.COM, INC.
5,050,000 shares of common stock
This prospectus covers the 5,050,000 shares of common stock of
newagecities.com, inc. being offered by certain selling security holders. The
shares being offered include 1,850,000 shares reserved for issuance upon
exercise of warrants which we have granted to selling security holders.
We will not receive any proceeds from the sale of the shares by the
selling security holders. We may however receive up to $3,625,000 if all of the
warrants held by the selling security holders are exercised.
Our common stock trades on the OTC Bulletin Board under the trading
symbol "NACT". On November 15, 1999, the closing bid price for our common stock
was $2.63.
This investment involves a high degree of risk. You should purchase
shares only if you can afford a complete loss of your investment. See "RISK
FACTORS" beginning on page __.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _________,1999
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TABLE OF CONTENTS
Page
Available Information.......................................................
Prospectus Summary..........................................................
^Risk Factors...............................................................
Forward Looking Statements..................................................
Capitalization..............................................................
Use of Proceeds.............................................................
Price Range of Common Stock,
Dividend Policy and Number of
Records Holders.....................................................
Plan of Operation ..........................................................
Our Business................................................................
management..................................................................
Principal Stockholders......................................................
Certain Transactions........................................................
Description of Securities...................................................
Selling Security Holders....................................................
Shares Eligible for Future Sale.............................................
Legal Matters...............................................................
Experts
Additional Information......................................................
Index to Financial Statements ..............................................
You should rely only on the information contained in this document or
to which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information contained in this document may only be
accurate on the date of this document.
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PROSPECTUS SUMMARY
The following prospectus summary only highlights more detailed
information appearing elsewhere in this prospectus. To more fully understand
newagecities.com and this offering, you should read the prospectus, including
the consolidated financial statements and related notes, in their entirety. The
information in this prospectus gives effect to a 1:80 reverse stock split of our
common stock which took place on April 6, 1999.
The company
Newagecities.com, inc. is a development stage company attempting to
design and operate a World Wide Web portal focused on the New Age concept. The
New Age concept consists of a set of beliefs and practices that originated in
past centuries including aromatherapy, astrology, crystal energy, eastern
philosophy, holistic remedies, UFOs and related topics. Newagecities.com intends
to offer New Age products and interactive services through its web portal which
is currently being designed. Newagecities.com, inc. has recently completed an
acquisition agreement with Member Net, Inc., and has acquired an existing Web
site geared to New Age consumers known as "www.mindbodysoul.com".
The offering
common stock offered by
selling security holders...................... 5,050,000 shares (1)
common stock outstanding:
prior to the offering.............. 3,649,749
after the offering................. 7,949,749 (2)
- --------------------
(1) The selling security holders are offering up to 5,050,000 shares of
common stock, including 1,850,000 shares of our common stock that are issuable
to them upon the exercise of warrants that they own. The shares will be sold in
brokerage transactions that may be made by them from time-to-time. We have not
arranged for any underwriter to sell the shares on behalf of the selling
security holders.
(2) Assumes the acquisition of Member Net is completed and the warrants
held by the selling security holders are exercised.
Summary financial information
The following summary financial information as of September 30, 1999,
and the period beginning January 29, 1999, the date of our inception, and ending
September 30, 1999, are derived from our audited consolidated financial
statements and notes included elsewhere in this prospectus. The pro forma
information gives effect to the acquisition of Member Net, Inc. This information
is included under "Consolidated Financial Statements" and "Pro Forma Financial
Data."
Statements of Operations Data:
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From January 29, 1999
(Inception) to September 30,
----------------------------
1999
----
Actual Pro Forma
------ ---------
Revenues $ 748 $ 14,555
Gross profit $ 36 $ (14,798)
Net loss $ (998,933) $(2,001,076)
Net loss per common share - basic $ (0.28) $ (0.33)
Weighted average common shares
outstanding 3,599,749 6,099,749
Balance Sheet Data:
As of September 30, 1999
------------------------
Actual Pro Forma
------ ---------
Current assets $253,524 $ 253,989
Working capital $227,792 $ 227,657
Total assets $915,749 $5,166,349
Total liabilities $ 25,732 $ 26,332
Stockholders' equity $890,017 $5,140,017
The pro forma financial information reflects the acquisition of Member
Net, Inc., as if this transaction had occurred as at January 29, 1999 with
respect to the Statement of Operations Data and at September 30, 1999 with
respect to the Balance Sheet Data. The various adjustments are more fully
described in the pro forma financial data included with the consolidated
financial statements in this prospectus.
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RISK FACTORS
An investment in the shares of our common stock being offered by the
selling security holders is speculative in nature and involves a high degree of
risk. In addition to the other information contained in this prospectus, the
following factors should be considered carefully in evaluating newagecities.com
and its business before purchasing the shares being offered by the selling
security holders.
This prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from the results discussed in the forward-looking
statements. Factors that might cause or contribute to these differences include
those discussed below and elsewhere in this prospectus.
Because we have been in business for a short period of time, there is limited
information upon which investors can evaluate our business.
We only began operations in April 1999. At September 30, 1999, we had
limited cash of $158,599 and an accumulated deficit of $998,933. Although we
have began to receive limited revenues during August 1999, we will continue to
incur significant start-up costs as we build up our business. As a result, we
expect to continue to incur losses until we are able to significantly increase
our client base and revenues. Our potential for future profitability will depend
on our ability to increase our client base and our revenues while controlling
costs. If we do not begin receiving revenue when expected or we are not able to
control our start-up costs, your entire investment in us may be lost.
Because we are still an early stage business, you have a very limited base to
evaluate us and determine our prospects for achieving our intended business
objectives.
We are prone to all of the risks involved in setting up any new
business venture. You could consider the chances of our future success to be
highly speculative in view of our limited operating history, as well as the
limited resources, problems, expenses, risks, and complications frequently
confronted by similar companies in the early stages of development. This is
particularly so for companies in the new and rapidly changing Internet market.
To address these risks, we must, among other things:
o Introduce and successfully execute our business and marketing
strategy;
o Continually update and improve our product and service
offerings;
o Continue to develop and upgrade our technology;
o Increase our customer base;
o Respond to competitive developments; and
o Attract, retain and motivate qualified personnel.
5
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We may not be successful in dealing with these risks, and our failure
in this regard could have a material adverse impact on our business, prospects,
financial condition and results of operations.
We may need additional capital which may not be available
Either this year, we received net proceeds from the sale of shares of
our common stock of approximately $1,000,000. We believe these funds will
satisfy our cash requirements for our program for approximately 6 months. Over
the next 12 months, we will likely need at least $1,500,000 to expand our
personnel and operating needs. Our operations are capital intensive and our
growth through acquisition strategy will consume a substantial portion of our
available working capital. Depending upon the timing and rate at which we are
able to produce revenues from operations, we may require additional capital to
fund our operations. We cannot predict whether additional financing, if
required, will be available to us on acceptable terms.
We may have difficulty expanding our network infrastructure and managing
potential growth
Further expansion of our operations will be required to address
potential growth of our customer base and market opportunities. Expansion, such
as our acquisition of Member Net, will place a significant strain on our
management, operational and financial resources. Currently, we have only a
limited number of employees and we will need to improve existing and implement
new transaction processing, operational and financial systems, procedures and
controls, and to expand, train and manage our employee base in order to consider
expanding. We will also be required to expand our finance, administrative and
operations staff. Further, we will need to enter into relationships with various
strategic partners, Web sites, product manufacturers and distributors, and other
online service providers. Our failure to expand our computer and network
infrastructures and manage growth effectively could have a damaging effect on
our business, results of operations and financial condition.
Failure of our internal systems may also damage our operations
We use internally developed systems to provide our online services and
for transaction processing, including billing and collections processing. We
must continually improve these systems in order to meet the level of use.
Furthermore, in the future, we may add additional features and functionality to
our services that likely will require us to develop or license additional
technologies. While our current systems are capable of meeting anticipated level
of use, if we grow substantially, we will need to meet increased traffic which
will mean we will constantly need to improve our transaction processing systems.
Since we only have limited resources both financially and personnel wise, we
could experience major system disruptions, slower response times, reduction in
levels of customer service, or disappointed user experiences. Our inability to
meet these needs would have a negative effect on our business.
Intense competition is a feature of online commerce and we are a very small
factor
The market for online commerce over the Internet is new, rapidly
evolving and intensely competitive. Competition will likely increase in the
future. Barriers to entry are relatively low, and current and new competitors
can launch new sites at a relatively low cost using commercially
6
<PAGE>
available software. As a company with limited resources, we expect to have
significant problems in competing.
We currently or potentially compete with a number of other companies,
most of which have considerable advantages over us. We face competition from a
number of large online communities and services that have expertise in
developing online commerce and online person-to-person interaction. Certain of
these potential competitors including Amazon.com, America Online, Inc. and
Microsoft Corporation, currently offer a variety of business-to-consumer trading
services and classified ad services.
Other large companies with strong brand recognition and experience in
online commerce, such as Cendant Corporation, QVC and large newspaper or media
companies, may also compete in the online e-commerce market. Competitive
pressures created by any one of these companies, or by our other competitors,
could have a damaging effect on our business, results of operations and
financial condition.
Brand development is critical and we may not develop a marketing strategy that
will produce sufficient recognition
We believe that establishing recognition of our brand name and service
is critical to gaining widespread acceptance of newagecities.com. Promoting and
positioning our brand so that customers will recognize and use our services will
depend largely on the success of our marketing efforts and our ability to
provide high quality services.
In order to promote our brand, we will need to financially support our
marketing program and increase our financial commitment to creating and
maintaining brand loyalty among users. Further, we cannot say that any new users
attracted to newagecities.com will conduct transactions on a regular basis. If
we are not successful in achieving recognition of the newagecities brand, we
will have difficulty maintaining our operations.
Because of our limited operations and resources, we run the risk of not being
able to keep up with rapid technological changes in the Internet industry
The market in which we compete faces rapidly changing technology,
evolving industry standards, frequent new service and product introductions and
changing customer demands. Because of our limited operations and resources, we
are at a disadvantage in keeping up with technological developments.
Accordingly, our future success will depend on our ability and having sufficient
resources to adapt to rapidly changing technologies. We will also need to adapt
our services to evolving industry standards and to continually improve the
performance, features and reliability of our service in response to competition
and the evolving demands of the marketplace. Meeting these requirements will
require substantial expenditures to modify or adapt our services or
infrastructure and to hire the needed personnel and management talent familiar
with these upgrades. Because of our limited resources, we expect to have greater
limitations keeping pace with technological developments than others.
There are risks related to consumer trends and the New Age market which can
change rapidly and negatively affect our operations
7
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The success of newagecities.com will be based on the continued interest
of consumers in the New Age industry. Future revenues will depend upon continued
demand for the types of goods and psychic services that are listed on
newagecities.com 's web sites. The popularity of certain categories of items
among consumers may vary over time due to scarcity, value, and social and
consumer trends in general.
A decline in the popularity of psychic services or other items could
reduce the overall volume of transactions resulting in reduced revenues. In
addition, consumer interest in psychic phenomena may temporarily inflate the
volume of certain types of items and services listed on the newagecities.com web
sites, placing a strain on our infrastructure and transaction capacity. These
trends may also cause major fluctuations in our operating results from one
quarter to the next.
Any decline in demand for our goods offered through the
newagecities.com web sites due to changes in consumer trends could have a
harmful effect on our business, results of operations and financial condition.
Risks associated with activities on newagecities.com's service could expose us
to liability
The law relating to the liability of providers of online services for
activities on the service is currently developing. We know that goods, such as
alcohol, tobacco, firearms, adult material and other goods may be regulated by
local, state or federal authorities. It is also possible that certain of our
products and services, ranging from candles and sharp edged objects to psychic
services, if used improperly or misunderstood, could result in claims against
us.
Because we are small and have limited resources, we may be unable to
prevent the unlawful exchange of goods on our service or avoid civil or criminal
liability for unlawful activities carried out by users through our service. Once
again, we may not be able to hire the personnel, introduce appropriate
technology or keep sufficient track of legal developments to deal with this
risks because of our limited resources and experience. Introducing appropriate
systems and safeguards may require us to spend substantial resources or to
discontinue various service and product offerings. Costs incurred as a result of
these matters could have a negative effect on our business, results of
operations and financial condition.
Online commerce security risks could prove a burden to us
Secure transmission of confidential information over public networks is
a significant barrier to online commerce and communications. Technological
developments could compromise or breach the technology we use to protect
customer transaction data.
Since our activities involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
damage our reputation and expose us to a risk of loss or litigation and possible
liability. We may have to spend significant capital and other resources to
protect against security breaches or to deal with problems caused by these
breaches. We cannot be sure that our security measures will prevent security
breaches or our failure to prevent security breaches will not have a harmful
effect on our business, results of operations and financial condition. Given our
limited resources and personnel, we may not have the revenues or capital to
develop or acquire the appropriate systems to give sufficient confidence to our
customer base.
8
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Governmental regulation of the Internet and other legal uncertainties could
affect our business and we may not have the resources to respond
We and other Internet related companies are not currently subject to
direct federal, state or local regulation and laws applicable to commerce on the
Internet, other than regulations applicable to businesses generally. However,
due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
governing the Internet covering issues such as taxation, freedom of expression,
pricing, content and quality of products and services, advertising, intellectual
property rights, libel, obscenity and personal privacy. As a result of our lack
of experience and limited resources, any regulations could have a more damaging
effect on our business, results of operations and financial condition.
We may become subject to liability for taxes in connection with our Internet
sales which could be burdensome.
We currently are not required to collect sales or other taxes on
Internet sales of products, except in those states where we have a physical
presence. Our business could be harmed if additional sales or similar taxes are
imposed on us or if jurisdictions in which purchasers of our products require
that we collect sales or similar taxes when selling over the Internet.
Significant tax requirements could increase our costs associated with Internet
sales. Additionally, increased costs associated with taxes passed on to
consumers may discourage consumers from making purchases from us.
We are dependent on certain key executive officers
We are depending greatly on Joseph Ardito and Dr. Kenneth Shenkman, who
are our key executives. Mr. Ardito is familiar with New Age market and Dr.
Shenkman is knowledgeable on e-commerce and related Internet matters. While we
have entered into contractual agreements with them, the loss of either of their
services would be highly damaging to us. At this point, we do not have key-man
insurance on either of their lives.
Securities and Exchange Commission rules on "penny stocks" could greatly affect
the market for our common stock by reducing liquidity and the ability to sell
our stock
The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price of less than $5.00 per share, subject to certain exceptions. Depending on
market fluctuations, our common stock could be considered to be a "penny stock"
and be subject to rules that impose additional sales practice requirements on
broker/dealers who sell these securities to persons other than established
customers and accredited investors, unless the common stock is listed on The
Nasdaq SmallCap Market. For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchase of
such securities. In addition he must receive the purchaser's written consent to
the transaction prior to the purchase. He must also provide certain written
disclosure to the purchaser. Consequently, the "penny stock" rules may restrict
the ability of broker/dealers to sell our securities, and may adversely affect
the ability of holders of shares of our common stock to resell them. While we
intend at some future date to list our common stock on the Nasdaq SmallCap
Market when we satisfy their various criteria, we cannot predict whether we will
ever be able to qualify.
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The exercise of our options and warrants will have a dilutive effect.
As of September 30, 1999, we had outstanding warrants to purchase a
total of 1,850,000 shares of our common stock at prices ranging between $1.50
and $2.25 per share, including 120,000 warrants issued to directors and
executive officers. At November 15, 1999, the closing price of our common stock
was $2.63 per share. The existence of these warrants may negatively affect the
terms under which we are able to attract additional equity capital. In addition,
the exercise of these warrants may have a material negative effect on the market
price of our common stock.
Year 2000 problem of our service providers may result in decreased sales.
While we believe that our limited systems and those of our primary
service providers and vendors are Year 2000 compliant, we are developing
contingency plans to identify alternate vendors, suppliers and service providers
in the event that our current vendors, suppliers or service providers suffer
significant disruption as a result of Year 2000 compliance failures. If third
parties with whom we deal with have Year 2000 problems that are not resolved,
the following problems could result:
o our sources of supply from vendors and suppliers could be
disrupted;
o our third-party service providers could receive, process and
transmit inaccurate or out-of-date data, lose customer orders, invoices, billing
and payment information or be unable to perform fulfilment services;
o our ability to access our bank accounts could be disrupted,
potentially resulting in liquidity stress;
o our customers could be unable to place orders with us and complete
payment transactions
o failure of third-party equipment, software, or content to operate
properly with regard to the Year 2000 and subsequently could require us to incur
unanticipated expenses to remedy any problems, which could have a material
negative effect on our business, results of operations, and financial condition.
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
1999 as well as our pro forma capitalization as of that date giving effect to
the completion of the acquisition of Member Net. The table does not reflect the
exercise of any of the warrants. The table should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in
this prospectus. The information in this table gives effect to a 1:80 reverse
stock split of our outstanding common stock we completed on April 6, 1999.
10
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September 30, 1999
------------------
Actual Pro Forma
------ ---------
Stockholders' equity:
Common stock, $.02 par value,
45,000,000 shares authorized,
3,599,749 shares issued
and outstanding (actual),
6,099,749 shares issued and
outstanding (pro forma) $71,995 $121,995
Additional paid-in capital 1,817,255 6,017,255
Stock subscription receivable (300) (300)
Accumulated deficit ( 998,933) ( 998,933)
--------- ----------
Total stockholders' equity $ 890,017 $5,140,017
========= ==========
USE OF PROCEEDS
We will not receive any proceeds upon the sale of shares by the selling
security holders. However, this prospectus relates to the sale of up to
1,800,000 shares that may be issued in the event of exercise of the warrants
held by selling security holders. In the event all the warrants are exercised,
we will receive proceeds of $3,625,000. These proceeds, if received, will be
used for working capital purposes.
PRICE RANGE OF COMMON STOCK, DIVIDEND POLICY
AND NUMBER OF RECORD HOLDERS
Our common stock is traded over-the-counter and quoted on the OTC
Electronic Bulletin Board under the symbol "NACT". The reported high and low bid
prices for the common stock are shown below for the period from April 14, 1998,
the date our common stock began trading on the OTC Electronic Bulletin Board,
through September 30, 1999. The prices do not always represent actual
transactions. The following information gives effect to a 1:80 reverse stock
split of our outstanding common stock completed on April 6, 1999. As of
September 30, 1999, we had 1,063 stockholders of record.
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Period High Low
- ------ ---- ---
Quarter ended June 30, 1998 $3.20 $ .80
Quarter ended September 30, 1998 $2.48 $ .80
Quarter ended December 31, 1998 $4.80 $ 1.60
Quarter ended March 31, 1999 $5.60 $ 1.60
Quarter ended June 30, 1999 $8.00 $ 2.50
Quarter ended September 30, 1999 $3.75 $ 1.37
On November 15, 1999, the closing price of our common stock was $2.63.
We have never paid cash dividends on our common stock. We intend to
keep future earnings, if any, to finance the expansion of our business. We do
not anticipate that any cash dividends will be paid in the foreseeable future.
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PLAN OF OPERATION
During the 12-month period immediately following the date of this
Prospectus, our goal is to design and begin to operate a Web portal focused on
providing services and selling goods related to the New Age concept. The term
"New Age" refers to a set of beliefs and practices that originated in past time
and includes aromatherapy, astrology, crystal energy, eastern philosophy,
natural health, psychics, UFOs and a host of other topics. The Internet has
emerged as one of the fastest growing sectors of the economy and is becoming a
major part of the lives of a greater number of people which includes a large
number of online shoppers. Newagecities.com is creating a Web site that serves
as a doorway or portal to a range of information, products and services
specifically designed with the New Age community in mind. In order to accomplish
our goal, we must create, with the assistance of various consultants, a complex
computer network and e-commerce based system which will allow our clients to
receive our services and purchase New Age related products from their personal
computers. We are developing our computer systems and network so that they can
evolve into a fully operating system which will allow newagecities.com to
provide services and market its products on a larger scale.
Our goal is to build newagecities.com into a leading online destination
for members of the New Age community. We believe the execution of this strategy
will help newagecities.com to realize revenue growth through expanded e-commerce
offerings as well as advertising and marketing opportunities. The key to
implementing this strategy requires increasing our membership, building brand
recognition, enhancing the online features of our Web portal, maintaining fresh
content and integrating new technology.
In order to implement our business plan, newagecities.com will need to
build strategic alliances with companies that provide products and services that
are important for us to achieve our goals. To this end, newagecities.com has
completed licensing arrangements for e-commerce software and entered into an
agreement which has provided us with a Web page incorporating a "New Age Look".
To further advance our strategic plan, on July 30, 1999, newagecities.com
entered into an agreement for the acquisition of Member Net, Inc. which has an
existing Web site geared towards New Age consumers. Along with this content, the
acquisition provides newagecities.com with access to an existing membership base
of over 60,000 people as well as approximately 500,000 individual web page views
per month. The membership base offers us a targeted market to approach for sales
of our products and services. The additional page views gives us the opportunity
to sell advertising to others seeking access to our target market.
Newagecities.com commenced active operations in April 1999. We began
receiving limited revenues beginning in August 1999, apart from any revenues
derived from the acquisition of Member Net, which has limited revenues, and
which is expected to be completed in the near future. For the period January 29,
1999 (inception) through September 30, 1999, newagecities.com had revenues of
$748 from sales of music CDs and operating expenses totaling $1,005,687,
representing essentially all of our net loss which totaled $998,933 for that
period. Operating expenses consisted of research and development charges of
$258,750, general and administrative expenses of $387,723 and non-cash charges
associated with compensation of $359,749. We funded these research and
development expenses through issuance of 150,000 shares of our common stock and
warrants to purchase 75,000 shares. Our general and administrative expenses
consisted primarily of payroll and professional fees.
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For the year ended December 31, 1998, Member Net had revenues of
$26,768, income before pro forma income taxes of $14,556 and pro forma net
income of $8,734. For the nine months ended September 30, 1999, Member Net had
revenues of $13,807, a loss before pro forma income taxes of $14,834 and pro
forma net loss of $135. The loss for this period reflects a substantial increase
in the cost of sales of $28,641 due to increased business activities and sales
efforts. Member Net's revenues were generated from the sale of e-mail psychic
readings, dream profiles and astrological charts as well as commissions earned
via banner ads.
At September 30, 1999, newagecities.com had current assets of $253,524
and working capital of $227,792, which amount will not be affected by the
acquisition of Member Net. Substantially all of the working capital was obtained
as a result of a private offering conducted between March and April 1999 which
resulted in the receipt of net proceeds of approximately $600,000 and the
issuance by newagecities.com of 300,000 shares at $2.00 per share. At September
30, 1999, the Company had a cash balance of $158,599. Our current financial
resources will not be sufficient for us to accomplish our goal. Over the next 12
months, our management estimates that we will need to raise approximately $1.5
million and hopefully up to $3 million primarily to further develop our computer
network infrastructure ($170,000), acquire products for sale to our New Age
customers ($480,000), advertising ($500,000), marketing ($200,000) and for
expanding our staff ($150,000). These funds will need to be raised through a
private placement of our securities, strategic investments or public financing.
Revenues from operations are expected to provide only limited resources during
this 12-month period.
We cannot assure you that we will be able to raise any amount of
financing. If, for example, we were to receive proceeds of only $750,000, we
would reduce our advertising and marketing budgets by 25-40%. This would cause
our sales figures to be lower than our current expectations, lessening the need
for additional personnel. In addition, we would order substantially less product
in advance and only place orders as needed, reducing the amount of capital
required up front.
In November 1999, newagecities.com received a loan of $50,000 from an
existing stockholder and issued a secured promissory note collateralized by
equipment and inventory to the noteholder. Newagecities.com also issued a
warrant to purchase up to 50,000 shares of its common stock to this noteholder
exercisable at $1.50 per share on or prior to June 30, 2005.
Impact of Year 2000
We are aware of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. The year 2000 issue
relates to whether computer systems will properly recognize and process
information relating to dates in and after the Year 2000. These systems could
fail or produce erroneous results if they cannot adequately process dates beyond
the Year 1999 and are not corrected. Significant uncertainty exists in the
software industry concerning the potential consequences that may result from the
failure of software to adequately address the Year 2000 issue. While we have
only limited hardware and software in use, we have reviewed all software and
hardware used internally by us in all support systems to determine whether they
are Year 2000 compliant. All of our software has already been upgraded by the
manufacturer or was recently purchased and is Year 2000 compliant. We expect to
have our remaining Year 2000 compliant systems in place by the conclusion of
1999, and most of our systems will be purchased after January 1, 2000.
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We do not believe that the aggregate cost for the year 2000 issue will
be material. We, however, cannot predict the effect of the Year 2000 issue on
companies with which we transact business. Therefore, we cannot assure you that
the effect of the Year 2000 issue on these companies will not have a material
negative effect on our business, financial condition or results of operations.
We will be putting together a contingency plan with the entities with which we
do business. In addition, we use third-party equipment, software and content,
including non- information technology systems, such as our security system,
building equipment and non-capital IT systems with embedded microcontrollers
that may not be Year 2000 compliant. We are in the process of developing a plan
to assess whether these third parties are adequately addressing the Year 2000
issue and whether any of our non-IT systems have material Year 2000 compliance
problems. If this third-party equipment, software, or content does not operate
properly as to Year 2000 thereafter, we could incur unanticipated expenses to
remedy any problems, and this could have a material adverse effect on our
business results of operation and financial condition.
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<PAGE>
OUR BUSINESS
Newagecities.com, Inc. is a development stage company whose goal is to
become a leading provider of Internet Community-building and electronic commerce
services for the New Age population and to create a demographically targeted Web
site on the Internet focused on the New Age community. The New Age population
consists of many millions of people interested in a variety of different areas,
including aromatherapy (mood changing aromas), astrology, crystal energy,
eastern philosophy, natural health, psychics, and a host of other topics.
Newagecities.com is creating a Web site that serves as a doorway, or portal, to
a range of information, products and services specifically designed with the New
Age community in mind.
Newagecities.com will feature a broad set of easy-to-use tools designed
to create an online community of members. Members represent the core audience of
newagecities.com and its most valuable users. The site also features extensive
e-commerce capabilities. We offer a large selection of New Age related products
as well as the chance for other retailers and users to sell products as well.
Newagecities.com will also offer high quality audio and video psychic readings
online.
Our background
Psychicnet.com, inc. was formed on January 29, 1999 to provide "New
Age" services and products on the Internet. On April 6, 1999, Psychicnet was
acquired by Virginia City Gold Mines, Inc., an Idaho corporation, for 2,700,000
shares of common stock. The exchange was completed through an Agreement and Plan
of Reorganization between Psychicnet and Virginia City. Virginia City had no
operations at the time of the acquisition. The exchange was accounted for as a
reverse acquisition under the purchase method for business combinations.
Subsequent to the exchange, Virginia City changed its name to newagecities.com,
Inc., its present corporate name. We expect to reincorporate into the State of
Florida in the near future.
Industry background and growth of Internet
The Internet has emerged as one of the fastest growing sectors of the
economy. As computer and Internet access prices decrease, the number of online
shoppers increases. In a recent study of online shoppers, Ernst & Young found
that 10% of the households they surveyed had purchased goods online in 1998 (The
Second Annual Ernst & Young Internet Shopping Survey; Ernst & Young, 1999), with
that number expected to increase substantially in the coming years.
Additionally, more and more retailers are preparing to enter the world of online
shopping, recognizing the additional sales potentials and larger customer access
base.
The Internet has opened the door to new worlds for many and offers the
opportunity to reach millions of people with a product, service or idea. It
enables people to interact in ways that were not possible before with
traditional communication media. It also offers new and effective methods for
online retailers to connect with their customers and for advertisers to reach
highly targeted markets.
The New Age population and market
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<PAGE>
The term "New Age" is typically used to refer to a set of beliefs and
practices that originated in centuries past. These include aromatherapy,
astrology, crystal energy, eastern philosophy, natural health, psychics, UFOs
and a host of other topics. Although each of these areas is distinct from the
others, they are all considered within the umbrella concept of "New Age."
Although the term "New Age" has come in and out of vogue over the
years, the ideas that it represents have shown a steady growth in public
interest. Often items that fall into the New Age genre are classified within a
more mainstream category. The book sensation, The Celestine Prophecy, by James
Redfield, is a prime example. The book has sold over 7 million copies to date
and is clearly a "New Age" title, although it is commonly classified as fiction.
Other best-selling book examples include Conversations with God, by Neale
Donald Walsch, as well as the myriad of best-sellers by Deepak Chopra. These and
other New Age books are found on the shelves (and Web sites) of all major book
retailers in various sections of the store, including psychology, religion,
self-help, philosophy, UFOs, etc. Overall, it is clear that the market for New
Age products can be quite substantial. In fact, preliminary results of a
forthcoming study (New Editions New Age Consumer Survey, Sophia Tarla, Ph.D.,
New Editions Retailers) reveal the following encouraging facts about New Age
consumers:
o The average age is 44, with a majority between the ages of 30
and 59.
o Two-thirds have college degrees and 41% have completed
post-graduate work.
o The average New Age consumer spends over $1,000 annually on
New Age items.
o The New Age consumer base is estimated at over 38 million.
o New Age industry sales average over $44 billion dollars
annually.
These statistics represent values for the United States only. We have
no information on the potential international market.
The average New Age consumer is also very close to the average Internet
consumer. Ernst & Young recently released a survey of online shopping (The
Second Annual Ernst & Young Internet Shopping Survey; Ernst & Young, 1999) which
highlighted the following facts about online shoppers:
o 68% are over 40 years old
o 94% have had some college background
o 46% generate $50,000 plus in annual income
The need for a New Age online destination
The New Age population is a large and under served market segment that
desires interaction, communication, a sense of community and an environment that
caters to their particular needs. New Age consumers build their own communities
off-line. We believe they are interested in extending these communities onto the
Internet because of the opportunity for interaction on a larger scale.
For many in the New Age community there is also a need for access to
products and services that are not commonly available. Most New Age products are
purchased at small retail stores that specialize in this industry. However, in
many areas where these stores are not present,
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<PAGE>
New Age consumers are somewhat limited to those products available in more
mainstream outlets. Even those that have New Age stores in their vicinity are
often disappointed because these stores can only stock a small amount of
products.
We believe that creating an online destination specifically designed
for New Age consumers is crucial to marketing to this population. The rapid
growth in the number of New Age consumers has created a marketplace for products
and services that outside advertisers should attempt to reach. Newagecities.com
offers a means for these advertisers to reach this market in a manner not
possible in more traditional advertising media.
The Newagecities.com solution
We believe our company can serve as the conduit between the New Age
community and the Internet. The site will be a Web portal where members of this
community can interact, be entertained and shop in an environment that caters
specifically to their needs and desires. Newagecities.com integrates community
and commerce through a network of different Web sites and features focused
primarily on the New Age devotee and by offering updated content and a forum for
community interaction.
Newagecities.com will enable site visitors to create their own place
within our Web site. We will offer users the ability to join and become involved
in what we hope will be an important site for the New Age community. They will
be provided with free disk storage space and publishing tools to quickly and
easily create their own pages within any of the site's topically organized
categories. Members will be encouraged to keep their areas current and
interactive through the use of chat and bulletin board services to be provided
by us.
Newagecities.com is designing a broad range of e-commerce capabilities
to offer products to New Age consumers. There will be six company stores within
the site, each to be focused on a different New Age area. In addition, we will
offer people the opportunity to open mini-shops, where they can market their own
wares as well as selected products from our database of products. Mini-shops
will be easy for a user to set up and provide a marketplace for Web users to buy
and sell online to other users and visitors in an easy to navigate environment
with newagecities.com deriving a percentage of all sales.
We will also allow people who do not own Web stores to offer products
that our stores or any of the other mini-stores offers via an affiliate program.
An affiliate program will allow anyone with a Web page to list an item for sale
on their existing page. The product can then be purchased through
newagecities.com, with the Web page owner receiving a commission.
An additional unique feature of newagecities.com will be our "See and
Hear" psychics. Using the latest in "streaming" technology, users can receive an
online psychic reading complete with audio and video. The users will both see
and hear the psychic during the reading, creating a bond and ensuring a more
intimate and emotional experience during a reading. The sophistication of this
technology will set newagecities.com apart from any competition and assure
repeat business and recommendations to other clients. Following their readings,
clients will have the option to download a full audio/video copy of their
reading to their computers for free. By allowing people to share the experience
with friends, newagecities.com expects to build a strong word-of-mouth
advertising campaign.
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<PAGE>
Newagecities.com has launched an Internet-only radio station at the Web
site address "newagesound.com." The station offers continuous (24 hours a day)
New Age music and programming. Newagesound.com is available to anyone with
Internet access. We are using advanced streaming technology to provide high
quality and accessibility for all users. We have available a full audio studio
as well as the ability to broadcast large amounts of data directly through one
of our direct high-speed connections to the Internet.
Newagesound.com will generate revenues through product and advertising
sales. Advertising will be sold for both "on-air" commercials and on the Web
site. Web site advertising takes the form of banners or other graphics with
links back to the advertisers' sites. Product sales consist of New Age CDs and
cassettes.
Strategy
Our goal is to build newagecities.com into a leading online destination
for members of the New Age community. We believe that successful execution of
this strategy will help newagecities.com realize revenue growth through expanded
e-commerce offerings as well as advertising and marketing opportunities. We
believe the key elements to our success are as follows:
o Increasing Membership - One of the most valuable assets of any Web
site is its members. Typically members account for a large percentage of all
product purchases. Members also offer a target demographic category of users for
us as well as other advertisers and marketers. Membership is free and simply
requires that the user list some basic information, such as name and e-mail
address. Membership benefits include access to areas reserved for members,
special members-only services and discounts on selected products. It is our
intention to increase membership by actively marketing and promoting the site,
as well as constantly refreshing and updating the content and other features.
o Building Brand Recognition - The key to attracting increased numbers
of users to our site is to build brand recognition. Our strategy for enhancing
brand recognition consists of maximizing our exposure to the New Age population
through both on and offline advertising and marketing opportunities.
o Enhancing Online Features - In order to encourage more visits and
increased lengths of stay, we will constantly be updating our content, products
list and service offerings. We are continually seeking new features to bring in
user traffic and keep their attention.
o Fresh Content - To encourage return visits, much of the content
available on newagecities.com is updated on a regular basis. Items such as daily
horoscopes, new item reviews and updated articles keep people coming back,
offering additional opportunities for advertising and product sales.
o New Features - New Internet technologies and interactive Web software
will be introduced all the time. To the extent that any of these new
developments complement our existing features and meet our strategic goals, they
will be implemented on the site.
Strategic alliances
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We believe that one of the keys to our possible success will be
building strategic alliances with companies that provide products and services
that are important for us to reach our goals. To that end, we have already
entered into agreements with QSound Labs, Inc. and Virtacon Corporation as well
as an agreement for the acquisition of Member Net, Inc.
Our alliance with QSound Labs provides us with licenses for Internet
Store and AffiliateDirect. Internet Store is the e-commerce software that will
serve as the backbone for all of our online shopping activities. Our online
stores are created using this software. In addition, Internet Store allows us to
offer other merchants the chance to open their own online stores.
AffiliateDirect is the software that allows Web page owners to sell any of our
products on their pages and earn a commission. We believe that Internet Store
and AffiliateDirect are already two of the most complete and easy-to-use
packages of their kind available. In addition, QSound has agreed to customize
the software to our specifications. QSound Labs will receive 3% of Web site
revenues generated from product sales using their software. In addition, they
received 400,000 shares of common stock and options to purchase 125,000 shares
of our common stock exercisable at $2.25 per share over a five year term, which
has been valued at $671,250.
Virtacon Corporation, formerly Virtual Financial Corp., is an Internet
development and public relations firm. Virtacon's designers and programmers are
creating our Web pages and applications. They have created a "New Age look"
specifically for us, and embedded it into an easy-to-use format. In our initial
stages of operations, all of our Web content will be housed at Virtacon.
Virtacon is also working closely with QSound to integrate our e-commerce
software into our format. Virtacon received 150,000 shares of common stock and
options to purchase 75,000 shares of common stock exercisable at $2.25 per share
over a five-year term for their services and work product, which has been valued
at $258,750.
We also have entered into an Agreement and Plan of Reorganization to
acquire Member Net, Inc. of Chatsworth, California. The merger is expected to be
completed by the end of November 1999. Upon completion of the merger, Member Net
will bring with it an existing Web site geared toward New Age consumers,
"www.mindbodysoul.com." Mindbodysoul.com contains a great deal of content that
complements that of newagecities.com and would be incorporated into our site.
Along with the additional content, mindbodysoul.com has an existing membership
base of over 60,000 people as well as approximately 500,000 page views per
month. The additional members and page views should increase our revenues by
allowing us to sell product to more people and offer more page views for
advertiser and sponsor purchases. Upon completion of the merger, which is
expected to be finalized in the near future, the stockholders of Member Net will
receive 2,5000,00 shares of common stock and warrants to purchase 1,000,000
shares of common stock exercisable at $1.75 per share, which has been
preliminarily valued at $4,250,000.
Mindbodysoul.com would also bring with it licenses for software that
will help us to bring in new visitors and keep the ones we have staying longer.
One of these licenses is for an Internet search engine, which we would cater
specifically to the New Age community. The search engine would contain a catalog
of New Age destinations on the Internet, allowing users to search by keyword or
category. Because the search engine will focus exclusively on New Age resources,
it will be easier for members of the New Age community to find relevant Web
sites and information. A second piece of software we would seek to license is
browser-based e-mail. With this software, users would be able to sign up for
their own newagecities.com e-mail address
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for free (i.e. [email protected]). Users will be able to check their
e-mail from any place in the world with Internet access, using standard Web
browser software such as Microsoft's Internet Explorer(Registered) or Netscape's
Navigator(Registered). Each time they check their newagecities.com e-mail, they
need to return to the site. These two pieces of software could ensure a constant
flow of site traffic and opportunities to present advertising banners for us and
other paid sponsors.
The newagecities.com network
Newagecities.com will consist of a number of individual sections, each
with its own theme, content and product line. Each section will include its own
set of chat rooms and discussion boards, as well as the opportunity to purchase
products directly related to the section theme. These sections include the
following.
o Crystal Warehouse - devoted to people interested in Crystals. This
section includes information about specific crystals, their geological
properties and metaphysical uses as well as the opportunity to purchase
Crystals.
o New Age World - dedicated to the modern devotee of the New Age.
Information and products from a variety of areas including aromatherapy,
healing, meditation, yoga and other metaphysical disciplines.
o Present Alternative - created to supply information and products for
those interested in metaphysics and practices of other cultures including Far
Eastern, Tibetan, Egyptian, South American, Australian and Indonesian.
o AMOS - a comprehensive Alternative, Magic and Occult Superstore of
New Age related books and music.
o Shaman's Gate - a haven for those interested in Native American and
other indigenous peoples' practices, beliefs and ceremonial items which may be
purchased.
o Psychic Internetwork - home of our "See and Hear" Psychics. People
will prepay for blocks of time with a psychic that they can see and hear over
the Internet using streaming technology.
Newagecities expects to generate revenues from a variety of sources. We
expect about 40% of our Year 2000 revenues to be realized directly through the
sale of products listed on our stores. Almost 50% of sales is expected to be
generated by psychics and other services. We also expect no more than 10% of our
revenues to be generated via commissions on sales through the "mini-shops" owned
by others. Finally, we expect that a nominal percentage of our revenues will be
generated from the sale of advertising and sponsorships throughout our content
areas.
Advertisers and sponsors
Newagecities.com expects to be able to market to either the entire New
Age niche, or to specific sectors within that market. As a result, we are
exploring relationships with marketers who wish targeted access to these people.
Advertisers will have access to this population via standard online marketing
vehicles such as banner advertisements on Web pages. In addition, we
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are seeking sponsorship relationships with advertisers that wish to increase
advertising effectiveness and brand recognition. Sponsorship arrangements are
typically for longer lengths of time and involve higher dollar values. They also
usually involve more than simple banner advertising and integration of the
sponsors brand industry into a Web site section. We are currently assembling a
sales and marketing team, one of whose tasks will be to better understand the
needs of our customers and to help market towards these needs.
Marketing and promotions
Like most Internet companies, our marketing plan calls for both on and
off-line marketing. Off-line marketing will cover a full range of media
including television, radio, print, and event sponsorships. We are currently
seeking alliances with industry specific magazines that will provide us
increased exposure to a wide audience and a cost-effective means of advertising
to our target market. Similar ventures with other media companies are also being
explored. We will also be working with mini-shop owners who own (physical)
retail stores to assist them in marketing their online stores and, by
association, newagecities.com to their existing customer base.
Online marketing includes ad placement in major search engines, keyword
based advertising in search engines as well as advertising purchases on other
relevant and popular online destinations such as America On Line, the GO Network
and the Microsoft Network. We are currently negotiating bulk discounts on
advertising rates because of the anticipated volume of our advertising needs
along with those of our strategic partners. Additionally, we hope to be able to
benefit from the marketing of individual Web pages and "mini-shops" that the
site's users house with newagecities.com. An affiliate program will offer a
unique opportunity to market our products and brand our name through other sites
on the Web.
International markets
We expect that some portion of our traffic and revenue generation will
result from markets outside of the United States. Many New Age ideas originated
outside the U.S., and now the Internet makes it easier for cultures and ideas to
spread globally. Additionally, many markets outside of the U.S. have no access
to the range of products and services offered at newagecities.com.
Technology
Our office contains a Windows NT network made up of computers purchased
through Dell. All of our Web content is being housed on Dell computers at
Virtacon. All of our machines are Dell certified Year 2000 compliant. Our Web
servers are connected directly to an OC-12, one of the fastest possible
connections to the Internet. All of our computers and our Internet connections
have redundant systems in place to ensure reliability.
Product fulfillment
To accommodate our users' demand for products, newagecities.com has
negotiated distribution arrangements with most of our vendors. As product
distributors, we will benefit from better pricing, allowing us to offer
discounted prices to clients on the site as well as the ability to
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wholesale to other retailers, both on and offline. Products will be shipped from
our warehouse facility in Boca Raton, Florida. In the future we expect to
arrange with our major suppliers to ship directly from their facilities to our
customers.
Competition
We have found no Web sites devoted to the New Age community that
contain the breadth and depth of information, interaction, entertainment and
merchandise available at newagecities.com. Several content areas of
newagecities.com are currently available at other sites, however, we believe
they lack the completeness of our site. The ability to offer high quality "See &
Hear" psychics appears to be unique to newagecities.com. Other sites offering
psychic readings either do so via phone, email or video with text chat.
The market for members, visitors, Internet advertising and online
product is rapidly evolving and competition is sure to increase. With the rapid
expansion of the New Age community and the limited number of barriers to entry,
we expect additional competition to arrive over time. Some of our potential
competitors may be larger, better funded and more technically capable than us.
Increased competition may lead to pricing pressures on our advertising and
product rates which could have adverse material effects on us.
Employees
Newagecities.com currently has ten full-time employees. Four persons
are in management and provide services in the areas of marketing and business
development, one person is in administration, four persons are employed in
operations and technology, and one person is in warehousing. No employee of
newagecities.com is covered by a collective bargaining agreement nor is
represented by a labor union. Newagecities.com considers its employee relations
to be good.
Facilities
Newagecities.com currently leases facilities consisting of
approximately 2,500 square feet of office and warehouse space in Boca Raton,
Florida. The rental for 1999 is $11,339, for 2000 is $15,991, for 2001 is
$17,154 and for 2002 $4,361, plus newagecities.com's proportion share of taxes
and insurance on the building. Our lease terminates on April 1, 2002.
Newagecities recently signed a lease agreement for a new facility with
the same lessor consisting of 5,145 square feet of office and warehouse space in
Boca Raton, Florida. The lease will take effect upon completion of the facility
build-out, which is currently scheduled for December 15, 1999. The lease is for
a five-year period. The first year's rent is $43,732.50, the second is $45,919
and third, fourth and fifth are $48,215, $50,626, and $53,157, respectively,
plus newagecities's proportionate share of taxes, insurance and operating
expenses on the building. Simultaneous with commencement of this new lease, the
lease on our existing space will be terminated. The termination of the prior
lease was without liability to newagecities.
Litigation
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Newagecities.com is not a party to any litigation nor is it aware of
any threatened litigation.
MANAGEMENT
Our executives officers and directors are as follows:
Name Age Positions
- ---- --- ---------
Joseph Ardito, Jr. 41 Chairman and Chief Executive Officer
Dr. Kenneth Shenkman 34 President and Director
Stanley Siegel 66 Chief Financial Officer, Secretary,
Treasurer and Director
Cory W. Smith 28 Chief Technology Officer
Mr. Ardito has served as a director, Chairman of the Board of Directors
and Chief Executive Officer of newagecities.com since March 1999. Mr. Ardito
previously worked in the following positions:
<TABLE>
<CAPTION>
DATES AND POSITION BUSINESS OR ACTIVITY
- ------------------ --------------------
<S> <C>
Between 1990 and 1998-Owner Present Alternative, Boca Raton, Florida.
This retail store sold New Age products and
psychic readings
.
1986 to 1991 - Vice President and Partner Professional Accounting Services Corp.
New York, New York. This is an
accounting firm where Mr. Ardito headed
the marketing and client relations
departments, oversaw bookkeeping and
income tax departments and led the
computer integration division
</TABLE>
Dr. Shenkman has served as a director and President of newagecities.com since
March 1999. Dr. Shenkman previously worked in the following positions:
<TABLE>
<S> <C>
September 1997 - April 1999-Consultant As independent consultant, Dr. Shenkman
has been an independent computer and
Internet consultant and trainer.
</TABLE>
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<TABLE>
<S> <C>
January 1999 - March 1999-Director of Arc Communications, Inc., Tinton Falls,
Internet Marketing New Jersey. This company is engaged in
designing Web sites.
July 1995 - September 1998-Vice President Computer Coach, Inc., Boca Raton, Florida.
Operations This company engages in computer training
and Internet web design
</TABLE>
Stanley Siegel is the father-in law of Mr. Ardito. Mr. Siegel has served as a
director, Chief Financial Officer, Secretary and Treasurer of newagecities.com
since March 1999. Mr. Siegel previously worked in the following positions:
<TABLE>
<S> <C>
1955 - 1996 Director of Human Resources, Head of
Special Accountings Department and
Accountant. United Merchants and
Manufacturers, Inc.
</TABLE>
Mr. Smith was appointed Chief Technology Officer in October, 1999. Mr. Smith
previously worked in the following positions:
<TABLE>
<S> <C>
Between May 1999 to September, 1999 - Bidnow.com, inc., Boca Raton, Florida
Interim Director of Technology This is a start-up Internet auction company
August 19, 1998 to May 1999 - Web Enabled Equifax Corporation, St. Petersburg, Florida
Technologies Manager
December 1996 to August 1998 - Senior Miami Herald Online, Miami, Florida
Online Designed and Project Manager
May 1996 to December 1999 - Director of Alton Entertainment Corp. (Internet Division
Technology Miami Beach, Florida
September 1995 to May 1996 - Creative Internet Communication of America, Inc.
Director Miami, Florida
</TABLE>
Our directors are elected at each annual meeting of stockholders. Our
directors hold office until the next annual meeting of stockholders. Executive
officers are elected by and serve at the discretion of the Board of Directors.
Member Net has the right to designate for nomination the names of three
prospective directors. We have not received the name of designees at this time.
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Board Committees
We plan to establish an audit committee, which will be responsible for
making recommendations concerning the engagement of independent public
accountants, reviewing the plans and results of the audit engagement with the
independent public accountants, approving professional services provided by the
independent public accountants and reviewing the adequacy of our internal
accounting controls. The Audit Committee will be comprised of designees of
Member Net, who will not be management employees, and Mr. Siegel. We will
organize an independent compensation committee which will evaluate compensation
programs for management and other employees as well as individual salary
arrangement with our executive officers.
Employment Agreements
We entered into two-year employment agreements with Messrs. Ardito,
Shenkman and Siegel. No employment agreement has been prepared for Mr. Smith at
this time. The terms of the agreements are as follows:
JOSEPH ARDITO: Mr. Ardito is to receive an annual salary of $85,000
beginning April 1, 1999 and ending March 31, 2000 and $106,000 annual salary for
the period April 1, 2000 and ending March 31, 2001. Mr. Ardito is entitled to a
bonus of up to 25% of his annual salary each year, at the discretion of the
compensation committee of the Board of Directors. On April 1, 1999, Mr. Ardito
was granted options to purchase a total of 40,000 shares of common stock at an
exercise price of $2.00 per share. These options expire on March 31, 2003, and
may be exercised for up to 20,000 shares beginning March 31, 2000 and as to the
remaining 20,000 shares beginning March 31, 2001.
KENNETH SHENKMAN: Dr. Shenkman is to receive an annual salary of
$60,000 beginning April 1, 1999 and ending March 31, 2000 and $75,000 annual
salary for the period April 1, 2000 and ending March 31, 2001. Dr. Shenkman is
entitled to a bonus of up to 25% of his annual salary each year, at the
discretion of the compensation committee of the Board of Directors. On April 1,
1999, Dr. Shenkman was granted options to purchase a total of 40,000 shares of
common stock at an exercise price of $2.00 per share. These options expire on
March 31, 2003, and may be exercised for up to 20,000 shares beginning March 31,
2000 and as to the remaining 20,000 shares beginning March 31, 2001.
STANLEY SIEGEL: Mr. Siegel is to receive an annual salary of $50,000
beginning April 1, 1999 and ending March 31, 2000 and $62,500 annual salary for
the period April 1, 2000 and ending March 31, 2001. Mr. Siegel is entitled to a
bonus of up to 25% of his annual salary each year, at the discretion of the
compensation committee of the Board of Directors. On April 1, 1999, Mr. Siegel
was granted options to purchase a total of 40,000 shares of common stock at an
exercise price of $2.00 per share. These options expire on March 31, 2003, and
may be exercised for up to 20,000 shares beginning March 31, 2000 and as to the
remaining 20,000 shares beginning March 31, 2001.
Each of the employment agreements terminates on April 2001. The
officers are to devote full time and efforts to our business. Their agreements
also have non-disclosure covenants during
26
<PAGE>
the term of employment and for a period of two years after the term of their
employment. We may terminate each employment agreement for cause.
Key-man life insurance
We do not have key-man life insurance on our officers or directors.
Limitation on liability and indemnification matters
The Idaho Business Corporation Act allows us to indemnify our officers
and directors from liability incurred in furtherance of their duties under
certain circumstances. In criminal proceedings, Idaho law states that we may
indemnify an officer or director if he or she acted in good faith and reasonably
believed that his or her conduct was in the best interests of the corporation if
he or she had no reasonable cause to believe his or her conduct was unlawful. In
addition, Idaho law requires us to indemnify directors, who succeed on the
merits of any defense proceeding or in any defense proceeding to which he or she
was party because he or she was a director of the corporation for reasonable
expenses incurred in connection with the proceeding. If we chose to indemnify
our officers and directors in accordance with the provisions of the Idaho
Business Corporation Act, our financial resources may be significantly affected.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, may be permitted to our directors, officers and controlling persons
pursuant to the above, we are aware that in the opinion of the Securities and
Exchange Commission, this indemnification is against public policy as expressed
in the securities laws, and is, therefore unenforceable.
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us relating to the
beneficial ownership of shares of our common stock by:
o Each person who is known by us to be the beneficial owner of more than
five percent of the outstanding shares of common stock
o Each director
o All executive officers and directors as a group.
Unless otherwise indicated, the address of each beneficial owner in the
table set forth below is care of newagecities.com, inc., 1181 South Rogers
Circle, Suite 5, Boca Raton, Florida 33487.
All persons named in the table have sole voting and investment power
with respect to all shares of common stock beneficially owned by them.
Under the securities laws, a person is considered to be the beneficial
owner of securities that can be acquired by him within 60 days from the date of
this prospectus upon the exercise of options, warrants or convertible
securities. We determine beneficial owner's percentage ownership by assuming
that options, warrants or convertible securities that are held by him, but
27
<PAGE>
not those held by any other person and which are exercisable within 60 days of
the date of this prospectus, have been exercise or converted.
<TABLE>
<CAPTION>
Names and Address of Number of shares Percentage of shares
Beneficial Owner Beneficially Owned (1) Beneficially Owned
- ---------------- ---------------------- ------------------
<S> <C> <C>
Joseph Ardito 1,220,000 (2) 33.9%
Kenneth Shenkman 369,500 (3) 10.3%
Stanley Siegel 90,000 (4) 2.5%
Q-Sound Labs 425,000 (5) 11.8%
All executive officers and
directors as a group (3 persons) 1,679,500 46.7%
</TABLE>
- -----------------
(1) As of October 31, 1999, there were 3,599,749 shares of our common stock
issued and outstanding. This does not include the 1,850,000 shares of
our common stock issuable to the selling security holders upon the
exercise of the warrants or 2,500,000 shares issued to the stockholders
of Member Net upon completion of that acquisition. We do not include in
this table shares and warrants that would be issued to Member Net
shareholders if that acquisition is completed.
(2) The number of shares owned by Joseph Ardito also includes 20,000 shares
held by his wife directly and 22,000 shares held by his wife as
custodian for two minor children. Mr. Ardito does disclaim beneficial
ownership of these other shares. They do not include 40,000 shares
under options that may be exercised beginning March 31, 2000.
(3) Does not include 26,000 shares of our common stock beneficially owned
by Mr. Shenkman's parents and 6,750 shares of our common stock issuable
upon the exercise of warrants owned by Mr. Shenkman's parents. They do
not include 40,000 shares under options that may be exercised beginning
March 31, 2000.
(4) The number of shares beneficially owned by Stanley Siegel also includes
20,000 shares owned by his wife. They do not include 40,000 shares
under options that may be exercised beginning March 31, 2000.
(5) Does not include warrants to purchase 15,000 shares of our common stock
issued to David Gallagher, President of Q-Sound Labs.
CERTAIN TRANSACTIONS
In connection with the organization of Psychicnet.com, Inc., Messrs.
Ardito, Shenkman and Siegel received shares of common stock in connection with
the formation of Psychicnet.com. On March 8, 1999, we acquired Psychicnet.com,
Inc., and as result of this transaction, 1,900,000 shares, 400,000 shares and
100,000 shares of our common stock were exchanged with Joseph Ardito, Kenneth
Shenkman and Stanley Siegel, respectively. Thereafter, Messrs. Ardito, Shenkman
and Siegel transferred an aggregate of 180,000, 35,000 and 30,000 shares of
common stock respectively to various family members and friends without
consideration and solely in appreciation of their relationships. Mr. Ardito also
transferred 400,000 shares of common stock to Q-Sound Labs in exchange for
Q-Sound agreeing to provide Internet product marketing systems and support
services to us. In addition to the 400,000 shares of our common stock Q- Sound
received from Mr. Ardito, Q-Sound also received warrants to purchase 125,000
shares of our common stock at $2.25 per share. Mr. David Gallagher, president of
Q-Sound, separately received warrants to purchase 15,000 shares of our common
stock at $2.25 per shares for agreeing to serve on our Board of Advisors if it
is constituted.
28
<PAGE>
In February 1999, the individuals serving as officers and directors of
newagecities.com at that time purchased an aggregate of 700,000 shares of common
stock from newagecities.com at $.01 per share. The proceeds were used to pay
expenses associated with the acquisition of Psychicnet.com.
During March and June 1999, we issued 6,000 shares of our common stock
and warrants to purchase 6,750 shares of our common stock at $2.25 per shares to
Mr. Shenkman's parents.
In April 1999, we made a $40,000 interest free loan to Mr. Joseph
Ardito, an officer and director. The loan was repaid by Mr. Ardito in June 1999.
Inasmuch as the transactions involving officers and directors of
newagecities.com and its predecessor, Psychicnet.com, occurred during a start-up
phase or prior to active operations, no effort was made to evaluate whether
these transactions represented arm's length transactions. We are unable to judge
whether these transactions were as favorable to newagecities.com as those that
could have been secured in arm's length transactions, but no operations would
have begun if these transactions had not occurred. We believe it is better for
you, as perspective investors, to make a judgment as to whether you consider
these transactions appropriate under the circumstances.
On July 30, 1999, the Company entered into a Merger Agreement and Plan
of Reorganization dated as of June 21, 1999 with Member Net, Inc. which will
provide for the merger of Member Net into a wholly-owned subsidiary of
newagecities.com. The five stockholders of Member Net will receive from
newagecities once the merger is completed, a total of 2,500,000 shares of common
stock and warrants to purchase 1,000,000 shares of common stock exercisable at
an exercise price of $1.75 per share on or prior to June 30, 2001. The merger is
expected to be completed within the near future. This prospectus covers their
resale of 1,500,000 shares of common stock as well as an additional 1,000,000
shares underlying the warrants.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 45,000,000 shares of common
stock, $.02 par value per share. On October 31, 1999, there were 3,599,749
shares of common stock issued and outstanding. As of the date of this
prospectus, there are no shares of preferred stock authorized or outstanding.
Also as of this date, there are warrants to purchase 1,875,000 shares of common
stock outstanding.
Common stock
Holders of common stock are entitled to one vote for each share on all
matters submitted to a shareholder vote. Holders of common stock do not have
cumulative voting rights. Therefore, holders of a majority of the shares of
common stock voting for the election of directors can elect all of the
directors. Holders of common stock are entitled to share in all dividends that
the board of directors, in its discretion, declares from legally available
funds. In any liquidation, dissolution or winding up of newagecities.com, Inc.,
each outstanding share entitles its holder to participate in all assets that
remain after payment of liabilities and after providing for each class of stock,
if any, having preference over the common stock.
29
<PAGE>
Holders of common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions for the common
stock. The rights of the holders of common stock are subject to any rights that
may be fixed for holders of preferred stock, when and if any preferred stock is
authorized and issued.
Warrants
Between March and June 1999, we issued warrants to purchase a total of
800,000 shares of our common stock. The general terms of the warrants are as
follows:
Title
- -----
Exercise Price: $2.25 per share
Expiration Date: June 30, 2001
Voting Rights: None
<TABLE>
<S> <C>
First Call or Redemption: On 30 days written notice beginning
September 1, 1999, we can redeem these
warrants at $0.25 per warrant, if the
common stock of newagecities.com has at a
closing price per share of at least $3.50
for five trading days prior to the date
of notice.
Second Call or Redemption: Beginning June 1, 2000, we can redeem the
warrants at $.001 per warrant if the common stock
has a closing price of at least $5.50 per share for
five trading days prior to the date of notice. The
effect will be that newagecities can acquire back
these warrants for a limited payment if our common
stock price is high enough. This redemption could
have the effect of shortening the term of these
warrants.
</TABLE>
The transfer agent for our common stock is American Securities Transfer
& Trust Co. and its address is 938 Quail Road, Suite 101, Lakewood, Colorado
80215-5517. They have also agreed to serve as our warrant agent.
30
<PAGE>
SELLING SECURITY HOLDERS
We have listed below:
o the name of each selling security holder.
o the number of shares of common stock that each selling
security holder beneficially owns as of the date of our
prospectus.
o we give effect to the exercise by the selling security holders
of their warrants into shares of our common stock.
o the number of shares being offered by each of them
o if the selling security holder is an entity, we have described
below the table the controlling persons or parties for that
entity
The shares of common stock being offered are being registered to permit
public secondary trading. These selling security holders may offer all or part
of their shares for resale at various times. Newagecities.com is paying for all
of the expenses of this registration.
You should note that there are 1,800,000 shares of our common stock
which are being offered by the selling security holders which are issuable upon
the exercise of warrants. We will receive no proceeds of this offering, but we
could receive up to $3,550,000 if the warrants to purchase shares of our common
stock are exercised by the selling security holders.
<TABLE>
<CAPTION>
Shares Shares Percent of Class
Beneficially Shares Available Beneficially Beneficially
Owned Prior to Pursuant to Owned after Owned
Selling Security Holders this Offering this Prospectus Offering after Offering
- ------------------------ ------------- --------------- -------- --------------
<S> <C> <C> <C> <C>
Barbara Ardito 20,000 20,000 - -
John Ardito 5,000 5,000 - -
Joseph Ardito 1,220,000 470,000 750,000 0.139
Joseph and Nicoletta Ardito 50,000 50,000 - -
Rachel Ardito 11,000 11,000 - -
Sara Ardito 11,000 11,000 - -
Carolyn Bagley 6,000 6,000 - -
Leslie Cheslow 500 500 - -
Anna Maria Cracolicci 2,500 2,500 - -
Stephen Cook 3,300 3,300 - -
Lisa Cudlipp 5,000 5,000 - -
Jill Dahne 115,000 15,000 100,000 0.019
Richard David 6,000 6,000 - -
Krissy Dove 750 750 - -
Richard Dwyer 75,000 75,000 - -
Robert Fuller 3,000 3,000 - -
David Gallagher 15,000 15,000 - -
John Gallagher 853,125 609,375 243,750 0.045
Richard Galterio 25,000 25,000 - -
Andrew Garroni 175,000 125,000 50,000 -
Linda Gelfand 10,000 10,000 - -
Austin Gleason 3,000 3,000 - -
Andrew Goldrich/Dore Perler 10,000 10,000 - -
Zachary Gomes 3,000 3,000 - -
Robert Gould 743,750 531,250 212,500 0.039
H. Eugene Graves 6,000 6,000 - -
Justin Hirsch 284,375 203,125 81,250 0.015
William Jackson 3,000 3,000 - -
Gad and Marlene Janay 3,000 3,000 - -
Marc Janis 1,500 1,500 - -
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Shares Shares Percent of Class
Beneficially Shares Available Beneficially Beneficially
Owned Prior to Pursuant to Owned after Owned
Selling Security Holders this Offering this Prospectus Offering after Offering
- ------------------------ ------------- --------------- -------- --------------
<S> <C> <C> <C> <C>
Michael Janis 1,500 1,500 - -
Joseph Kearns 6,700 6,700 - -
William Kearns 3,000 3,000 - -
Louann LaBarbara 250 250 - -
Vincent LaBarbara 25,000 25,000 - -
Dan Lee 6,000 6,000 - -
Roni Mandel 4,000 4,000 - -
Mario Marsillo 2,000 2,000 - -
Steve McLaughlin 15,000 15,000 - -
Lauren J. Merritt 5,000 5,000 - -
Ilene Mirman 51,000 51,000 - -
Johnny Mitchell 10,000 10,000 - -
Bruce Muhlfeld 437,500 312,500 125,000 0.023
Mario Novogrodzky 3,000 3,000 - -
Victor Novogrodzky 3,000 3,000 - -
Danielle Pepe 250 250 - -
Ron Piasecki 6,000 6,000 - -
Robert Prager 750 750 - -
Shane Pullham 1,000 1,000 - -
Nolan Quan 1,006,250 718,750 287,500 0.053
John Ramsey 40,000 40,000 - -
Eric Rand 25,000 25,000 - -
Nicole Rodriquez 250 250 - -
Len Schiller 3,000 3,000 - -
Phil Schiller 3,000 3,000 - -
Brian Shenkman 10,000 10,000 - -
Carole and Howard Shenkman 26,750 26,750 - -
Kenneth Shenkman 369,500 219,500 150,000 0.028
Alvin Siegel 3,000 3,000 - -
Bernice Siegel 20,000 20,000 - -
Brett Siegel 25,000 25,000 - -
Marc Siegel 130,000 130,000 - -
Stanley Siegel 70,000 70,000 - -
Zachary Siegel 25,000 25,000 - -
George Smith 3,000 3,000 - -
Ted Stern 6,000 6,000 - -
Joel Stone 6,000 6,000 - -
Michael Volpe 500 500 - -
Jodi Wanderman 1,000 1,000 - -
James Warner 25,000 25,000 - -
David Yaeger 3,000 3,000 - -
Q-Sound Labs 525,000 525,000 - -
Atlas, Pearlman, Trop & Borkson, P.A. 20,000 20,000 - -
Blue Waters Partners, Inc. 87,000 87,000 - -
Delphi Consulting Corp. 100,000 100,000 - -
First Level Capital 16,000 16,000 - -
Virtacon Corporation 200,000 200,000
River City Trading Company 50,000 50,000 - -
</TABLE>
- -----------------------
*Less than one percent.
Q-Sounds Labs is a Canadian corporation whose Chief Executive Officer
is David Gallagher.
32
<PAGE>
Atlas, Pearlman, Trop & Borkson, P.A., is securities counsel for
Newagecities.com and presently consists of 16 partners, who collectively have
voting and investment responsibilities for the securities.
Blue Waters Partners, Inc. is a partnership whose two partners are
Scott Eskew and Sean Eskew.
Delphi Consulting Corp. is a corporation whose principal shareholder
and chief executive officer is Gary Galbraith.
First Level Capital, Inc. is a corporation whose principal executive
officers are Richard Galterio, Vincent Labarbara, Mario Marsillo, Al Mirman,
Eric Rand and Marc Siegel.
Virtacon Corporation is a corporation whose principal executive
officers and equity owners are Tom Payne, John Ramsey, Michael Simmons and James
Warner.
River City Trading Company is a corporation whose principal shareholder
and chief executive officer is Gary Galbraith.
Plan of distribution
o The sale of the common stock by the selling security holders may occur
at various times in varying transactions.
o These may include block transactions by a selling security holders.
o Alternatively, the selling security holders may offer these securities
through dealers or
agents.
o The securities may be distributed by the selling security holders in
one or more transactions that may take place on the over-the-counter
market.
o These include ordinary broker's transactions, privately-negotiated
transactions or through sales to one or more broker-dealers for resale
of these shares as principals.
o These transactions may occur at market prices existing at the time of
sale, at prices related to existing market prices or at negotiated
prices.
o Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the selling security holders in connection
with sales of securities. In making sales, brokers or dealers used by
the selling security holders may arrange for other brokers or dealers
to participate.
The selling security holders and others through whom such securities
are sold may be "underwriters" within the meaning of the Securities Act for the
securities offered. Any profits realized or commissions received may be
considered underwriting compensation.
33
<PAGE>
At the time a particular offer of the securities is made by or on
behalf of a selling security holder, to the extent required, a prospectus is to
be distributed. The prospectus will include the number of shares of common stock
being offered. It will also include the terms of the offering, including the
name or names of any underwriters, dealers or agents, the purchase price paid by
any underwriter for the shares of common stock purchased from the selling
security holder. It will also disclose any discounts, commissions or concessions
allowed or reallowed or paid to dealers, as well as the proposed selling price
to the public.
We have told the selling security holders that the anti-manipulative
rules under the Exchange Act, including Regulation M, may apply to their sales
in the market. We will provide each of the selling security holders with a copy
of these rules. We have also told the selling security holders of the need for
delivery of copies of this prospectus in connection with any sale of securities
that are registered by this prospectus.
Sales of securities by us and the selling security holders or even the
potential of these sales may have a negative effect on the market price of our
shares of common stock.
SHARES ELIGIBLE FOR FUTURE SALE
At the date of this prospectus, we have 3,599,749 shares of common
stock issued and outstanding. Of these, 899,749 shares are freely tradeable
without restriction or further registration under the Securities Act. The
outstanding shares do not include 1,850,000 shares that will be received upon
exercise of warrants described in the prospectus. It also does include the
2,500,000 shares of common stock to be issued to the stockholders of Member Net
upon completion of the merger. They may be resold by their holders as long as
they are covered by a current registration statement.
All of the remaining 2,700,000 shares of common stock currently
outstanding are restricted securities. Of these restricted shares, 1,800,000
shares are included in this prospectus. The remaining restricted shares will
become eligible for sale commencing in March 2000.
We cannot predict the effect, if any, that market sales of common stock
or the availability of these shares for sale will have on the market price of
our shares. Nevertheless, the possibility that substantial amounts of common
stock may be sold in the public market could negatively damage market prices for
our common stock. It could also damage our ability to raise capital through the
sale of our equity securities.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be
reviewed for us by Atlas, Pearlman, Trop & Borkson, P.A., 200 East Las Olas
Boulevard, Suite 1900, Fort Lauderdale, Florida 33301. The law firm owns
warrants to purchase a total of 20,000 shares of common stock.
EXPERTS
34
<PAGE>
The consolidated financial statements of newagecities.com, Inc. and
subsidiary and Member Net, Inc. as of September 30, 1999 and December 31, 1998,
respectively, have been included in this prospectus and in the registration
statement in reliance upon the report of Feldman Sherb Horowitz & Co., P.C., who
are independent certified public accountants, and upon the authority of this
firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act for the common
stock offered by this prospectus. This prospectus, which is a part of the
registration statement, does not contain all of the information in the
registration statement and the exhibits filed with it. Portions have been
omitted as permitted by Securities and Exchange Commission rules and
regulations. For further information on newagecities.com, Inc. and the
securities offered by this prospectus, we refer you to the registration
statement and to the exhibits filed with it.
Statements contained in our prospectus as to the content of any
contract or other document may not be complete. In each instance, we refer you
to the copy of the contracts and/or other documents filed as exhibits to the
registration statement, and these statements are qualified in their entirety by
reference to the contract or document.
The registration statement, including all exhibits, may be inspected
without charge at the Securities and Exchange Commission's Public Reference Room
at 450 Fifth Street, N.W. Washington, D.C. 20549. They can also be reviewed at
the Securities and Exchange Commission's regional offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials
may also be obtained from the Securities and Exchange Commission's Public
Reference at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549. However,
you will have to pay the required fees. You may obtain information on the
operation of the Public Reference Room by calling the Securities and Exchange
Commission at 1-800- SEC-0330. In addition, registration statements and other
filings made with the Securities and Exchange Commission through its so-called
EDGAR system are publicly available through the Securities and Exchange
Commission's site on the World Wide Web located at www.sec.gov. The registration
statement, including all exhibits and schedules and amendments, has been filed
with the Securities and Exchange Commission through the EDGAR system.
We will become subject to the reporting requirements of the Securities
Exchange Act of 1934. In accordance with these requirements, we will file
reports, and other information with the Securities and Exchange Commission. We
also intend to furnish our stockholders with annual reports containing audited
financial statements and other periodic reports as we think appropriate or as
may be required by law.
35
<PAGE>
<TABLE>
<CAPTION>
NEWAGECITIES.COM, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
newagecities.com, Inc.:
<S> <C>
Independent Auditors' Report..................................................................................F-2
Consolidated Balance Sheet....................................................................................F-3
Consolidated Statement of Operations..........................................................................F-4
Consolidated Statement of Stockholders' Equity................................................................F-5
Consolidated Statement of Cash Flows..........................................................................F-6
Notes to Consolidated Financial Statements.............................................................F-7 - F-12
Member Net, Inc.:
Independent Auditors' Report.................................................................................F-13
Balance Sheet................................................................................................F-14
Statements of Operations.....................................................................................F-15
Statement of Changes in Stockholders' Equity.................................................................F-16
Statement of Cash Flows......................................................................................F-17
Notes to Financial Statements...........................................................................F-18-F-19
Pro Forma Financial Data:
Introduction.................................................................................................F-20
Unaudited Pro Forma Consolidated Balance Sheet...............................................................F-21
Unaudited Pro Forma Consolidated Statements of Operations....................................................F-22
Notes to Unaudited Pro Forma Consolidated Financial Statements...............................................F-23
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
newagecities.com, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheet of
newagecities.com, Inc. (A Development Stage Enterprise) as of September 30,
1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period January 29, 1999 (Inception) through
September 30, 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 amount 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
newagecities.com, Inc. (A Development Stage Enterprise) as of September 30,
1999, and the results of its operations and its cash flows for the period
January 29, 1999 (Inception) through September 30, 1999, in conformity with
generally accepted accounting principles.
/s/ Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
October 14, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
NEWAGECITIES.COM, INC.
----------------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
SEPTEMBER 30, 1999
------------------
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash $ 158,599
Inventories 93,440
Other current assets 1,485
-----------
TOTAL CURRENT ASSETS 253,524
FURNITURE AND EQUIPMENT, net 52,417
LICENSING AGREEMENT 596,667
DEPOSITS AND OTHER ASSETS 13,141
-----------
$ 915,749
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accrued expenses $ 25,732
-----------
TOTAL CURRENT LIABILITIES 25,732
-----------
STOCKHOLDERS' EQUITY:
Common stock, $.02 par value, 45,000,000 shares
authorized; 3,599,749 shares issued and outstanding 71,995
Additional paid-in capital 1,817,255
Stock subscription receivable (300)
Accumulated deficit (998,933)
-----------
TOTAL STOCKHOLDERS' EQUITY 890,017
-----------
$ 915,749
===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
NEWAGECITIES.COM, INC.
----------------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
FROM JANUARY 29,1999 (INCEPTION) TO SEPTEMBER 30, 1999
------------------------------------------------------
<S> <C>
SALES $ 748
COST OF SALES 712
------------
36
OPERATING EXPENSES:
Research and development 258,750
General and administrative 387,723
Noncash compensation expense 359,250
------------
1,005,723
------------
OPERATING LOSS (1,005,687)
INTEREST INCOME 6,754
------------
NET LOSS $ (998,933)
============
BASIC LOSS PER SHARE OF COMMON STOCK $ (0.28)
============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,599,749
============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
NEWAGECITIES.COM, INC.
----------------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
Common Stock
---------------------------- Additional Stock Total
Number of Paid-in Subscriptions Accumulated Stockholders'
Shares Amount Capital Receivable Deficit Equity
------------- ----------- ----------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 29, 1999 (Inception) 399,749 $ 7,995 $ (7,995) $ -- $ -- $ --
Issuance of common stock pursuant
to share exchange agreement 2,200,000 44,000 (44,000) -- -- --
Issuance of shares and warrants for
licensing agreement 400,000 8,000 663,250 -- -- 671,250
Sale of common stock 300,000 6,000 594,000 (300) -- 599,700
Common stock and warrants issued for
services 300,000 6,000 612,000 -- -- 618,000
Net loss -- -- -- -- (998,933) (998,933)
----------- ----------- ----------- ----------- ----------- -------------
Balance, September 30, 1999 3,599,749 $ 71,995 $ 1,817,255 $ (300) $ (998,933) $ 890,017
=========== =========== =========== =========== =========== =============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
NEWAGECITIES.COM, INC.
----------------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FROM JANUARY 29,1999 (INCEPTION) TO SEPTEMBER 30, 1999
------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(998,933)
---------
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization 79,819
Common stock issued for services 618,000
Changes in assets and liabilities:
Increase in inventories (93,440)
Increase in other current assets (1,485)
Increase in other assets (13,741)
Increase in accrued expenses 25,732
---------
Total adjustments 614,885
---------
NET CASH USED IN OPERATING ACTIVITIES (384,048)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (57,053)
---------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (57,053)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of capital stock 599,700
---------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 599,700
---------
NET INCREASE IN CASH 158,599
CASH - beginning of period --
---------
CASH - end of period $ 158,599
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Noncash investing and financing activities:
Common stock and warrants issued for licensing agreement $ 671,250
=========
Common stock and warrants issued for services $ 618,000
=========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
NEWAGECITIES.COM, INC.
----------------------
(A Development Stage Enterprise)
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
FOR THE PERIOD JANUARY 29, 1999 (Inception) THROUGH SEPTEMBER 30, 1999
----------------------------------------------------------------------
Pyschicnet.Com, Inc. ("Psychic") was formed on January 29, 1999 to provide "New
Age" services and products on the internet.
On April 6, 1999, Psychic was acquired by Virginia City Gold Mines, Inc.
("VCGM"), an Idaho corporation, for 2,200,000 shares of VCGM stock (the
"Exchange"). The Exchange was completed pursuant to the Agreement and Plan of
Reorganization between Psychic and VCGM. The Exchange has been accounted for as
a reverse acquisition under the purchase method for business combinations.
Accordingly, the combination of the two companies is recorded as a
recapitalization of Psychic, pursuant to which Psychic is treated as the
continuing entity. Subsequent to the Exchange, with the approval of the Board of
Directors, VCGM changed its name to newagecities.com, Inc. (the "Company").
The Company plans on adopting a December 31 year end.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
A. Principles of consolidation - The financial statements include
the accounts of the Company and its wholly-owned subsidiary.
All material intercompany transactions have been eliminated.
B. Furniture and Equipment - Furniture and equipment are carried
at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the various assets.
C. Inventories - Inventories consisting of "New Age" related
products are stated at the lower of average cost or market.
D. Income Taxes - Income taxes are accounted for under Statement
of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which is an asset and liability approach that
requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial
statements or tax returns.
E. Fair Value of Financial Instruments - The carrying amounts
reported in the balance sheet for cash and accrued expenses
approximate their fair market value based on the short-term
maturity of these instruments.
F. Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could
differ from those estimates.
F-7
<PAGE>
G. Impairment of long-lived assets - The Company reviews
long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the
carrying amounts may not be recovered. At September 30, 1999,
the Company believes that there has been no impairment of its
long-lived assets.
H. Comprehensive Income/Loss - The Company has adopted Statement
of Financial Accounting Standards No. 130 ("SFAS 130)
"Reporting Comprehensive Income". Comprehensive income is
comprised of net loss and all changes to the statements of
stockholders' equity, except those due to investments by
stockholders, changes in paid-in capital and distribution to
stockholders. Comprehensive income/loss and net loss for the
period ended September 30, 1999 were the same.
I. Research and Development - Research and development costs are
expensed as incurred. These costs primarily consists of fees
paid for the development of the Company's software. Research
and development costs for the period ended September 30, 1999
were $258,750.
J. Stock Based Compensation - The Company accounts for stock
transactions in accordance with APB No. 25, "Accounting for
Stock Issued to Employees." In accordance with Statement of
Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," the Company adopted
the pro forma disclosure requirements of SFAS 123.
K. New Accounting Pronouncements - The Company will adopt
Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") for the period September 30, 1999.
SFAS 131 requires the Company to report selected information
about operating segments in its financial statements. It also
establishes standards for related disclosures about products
and services, geographic areas, and major customers. The
application of the new pronouncement is not expected to have a
material impact on the Company's disclosures.
The Company will adopt Statement of Financial
Accounting Standards No. 132 ("SFAS 132"), "Employers'
Disclosures about Pensions and Other Postretirement Benefits"
for the period ended September 30, 1999. SFAS 132 revises
employers' disclosures about pension and other postretirement
benefit plans. The application of the new pronouncement is not
expected to have a material impact on the financial
statements.
L. Licensing Agreements - Licensing agreements are stated at
cost, less accumulated amortization. Amortization is computed
using the straight-line method over an estimated life of three
years based upon management's expectations relating to the
life of the technology and current competitive market
conditions. The estimated life is reevaluated each year based
upon changes in these factors.
M. Earnings Per Share - The Company has adopted the provisions of
Financial Accounting Standards No. 128, "Earnings Per Share".
Basic net loss per share is based on the weighted average
number of shares outstanding. Potential common shares included
in the computation are not presented in the financial
statements as their effect would be anti-dilutive.
F-8
<PAGE>
2. FURNITURE AND EQUIPMENT
-----------------------
Furniture and equipment are as follows:
<TABLE>
<CAPTION>
Estimated
Life
-------------------
<S> <C> <C>
Office furniture 7 Years $ 11,387
Computer equipment 5 Years 33,501
Retail equipment 5 Years 9,510
Leasehold improvements 3 Years 2,655
-------------------
57,053
Less: Accumulated depreciation 4,636
-------------------
$ 52,417
===================
</TABLE>
3. LICENSING AGREEMENT
-------------------
The Company acquired a licensing agreement from a software development
company for the use of its e-commerce software. The license was
acquired for 400,000 shares of the Company's common stock. Such shares
of common stock were valued at the fair market value of $1.60 (based on
the Reg D 504 offering during April 1999 of $2.00 per share less a 20%
discount for restrictions on the resale of such shares). The Company
also issued warrants to purchase 125,000 shares of the Company's common
stock exercisable at $2.25 per share over a five year period. The
warrants have been valued at $31,250 which has been included in the
value of licenses. In addition the software development company will
receive 3% of Web site revenues generated from product sales using
their software.
4. COMMITMENTS
The Company leases certain office and warehouse space under operating
leases commencing April 1999. The leases expires April 2002.
Minimum rental commitments are as follows:
1999 $ 5,492
2000 $ 15,991
2001 $ 17,154
2002 $ 4,361
The Company has entered into three employment agreements with its
officers in April 1999. All three of the agreements are for two years
and expire in March 2001. The agreement with its Chief Executive
Officer, provides for an annual salary of $85,000 and $106,000 in years
F-9
<PAGE>
ended 2000 and 2001, respectively. The agreement with the President of
the Company, provides for an annual salary of $60,000 and $75,000,
respectively. The agreement with the Company's Chief Financial Officer,
calls for an annual salary of $50,000 and $62,500, respectively. All of
the above contracts provide for a bonus of up to 25% of the prior years
annual salary at the discretion of management. Additionally, the above
officers will receive 20,000 options to purchase shares of the
Company's common stock at $2.00 per share at the end of each contract
year.
5. INCOME TAXES
------------
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 requires the recognition of deferred tax assets and
liabilities for both the expected impact of differences between the
financial statements and tax basis of assets and liabilities, and for
the expected future tax benefit to be derived from tax loss and tax
credit carryforwards. SFAS 109 additionally requires the establishment
of a valuation allowance to reflect the likelihood of realization of
deferred tax assets.
The provision (benefit) for income taxes differs from the amounts
computed by applying the statutory federal income tax rate to income
(loss) before provision for income taxes, the reconciliation is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Taxes benefit computed at statutory rate $ (346,000)
Effect of permanent differences 210,000
Income tax benefit not utilized 136,000
---------------
Net income tax benefit $ --
===============
</TABLE>
The Company has a net operating loss carryforward for tax purposes
totaling approximately $380,000 at September 30, 1999 expiring in the
year 2014.
Listed below are the tax effects of the items related to the Company's
net tax liability:
<TABLE>
<CAPTION>
<S> <C>
Tax benefit of net operating loss carryforward $ 136,000
Valuation Allowance (136,000)
---------------
Net deferred tax asset recorded $ --
===============
</TABLE>
6. STOCKHOLDERS' EQUITY
--------------------
On April 6, 1999 the Company declared a 1 for 80 reverse stock split.
The financial statements for all periods presented have been
retroactively adjusted for the stock split.
F-10
<PAGE>
The Company has completed a private placement of 500,000 shares of its
common stock at $2.00 per share. The Company issued 300,000 of these
shares for gross proceeds of $599,700 and issued 200,000 shares (see
below) for services rendered to the Company.
In April 1999, the Company issued 150,000 shares of common stock to a
consultant which provides both website development and public relations
services. These shares were valued at the fair market value of $1.60
(based on Reg D 504 offering during April 1999 of $2.00 per share less
a 20% discount for restrictions on the resale of such shares). The
Company also issued to the consultant warrants to purchase 75,000
shares of common stock exercisable at $2.25 per share. Such warrants
have been valued at $18,750. The Company has expensed the total amount
of $258,750 as research and development.
In April 1999, the Company issued 50,000 shares of common stock to a
broker dealer for consulting services rendered on behalf of the
Company. These shares were also valued at the fair market value of
$1.60 (based on Reg D 504 offering during April 1999 of $2.00 per share
less a 20% discount for restrictions on the resale of such shares). The
Company has charged the total amount of $80,000 to Additional Paid in
Capital.
Additionally, in April 1999, the Company issued 100,000 shares to a
consultant for services rendered. These shares were valued at the fair
market value of $1.60 (based on Reg D 504 offering during April 1999 of
$2.00 per share less a 20% discount for restrictions on the resale of
such shares). Such issuance was recorded as non-cash compensation
expense.
In March through May 1999, the Company granted warrants to various
consultants and employees to purchase an aggregate of 563,000 shares of
common stock at a price of $2.25 per share. Such warrants were valued
at $140,000 and recorded as non-cash compensation expense.
In June 1999, the Company granted warrants to various consultants to
purchase an aggregate of 237,000 shares of common stock at a price of
$2.25 per share. Such warrants were valued at $59,250 and recorded as
non-cash compensation expense.
F-11
<PAGE>
7. STOCK WARRANTS
--------------
A summary of outstanding warrants at September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Shares
Underlying Exercise
Warrants Price
---------------- -----------
<S> <C>
Outstanding at beginning of period -- $ --
Granted 1,000,000 2.25
Exercised -- --
---------------- -----------
Outstanding at September 30, 1999 1,000,000 $ 2.25
================ ===========
</TABLE>
8. ACQUISITION
-----------
In October 1999 the Company signed a contract to acquire Member Net,
Inc. For 2.5 million shares of its common stock and warrants to
purchase 1 million shares of common stock.
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Member Net, Inc.
Boca Raton, Florida
We have audited the accompanying balance sheet of Member Net, Inc. as
of December 31, 1998 and the statements of operations, stockholders' equity and
cash flows for the year then ended. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement 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 statement is free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amount and disclosures in the financial statement. 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 statement referred to above presents
fairly, in all material respects, the financial position of Member Net, Inc. as
of December 31, 1998, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
August 9, 1999
F-13
<PAGE>
<TABLE>
<CAPTION>
MEMBER NET, INC.
----------------
BALANCE SHEET
-------------
September 30, December 31,
1999 1998
------------------ ------------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 465 $ --
OTHER ASSETS 900 --
------------------ ------------------
$ 1,365 $
================== ==================
LIABILITIES AND STOCKHOLERS' EQUITY
-----------------------------------
CURRENT LIABILITIES:
Loans payable $ 600 $ --
STOCKHOLDERS' EQUITY:
Common stock, $.09 par value, 10,000 shares
authorized, issued and outstanding 900 --
Accumulated deficit (135) --
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 765 --
------------------ ------------------
$ 1,365 $ --
================== ==================
</TABLE>
See the notes to the financial statements.
F-14
<PAGE>
<TABLE>
<CAPTION>
MEMBER NET, INC.
----------------
STATEMENT OF OPERATIONS
-----------------------
Nine Months Year
Ended Ended
September 30, December 31,
1999 1998
-------------------- ------------------
(Unaudited)
<S> <C> <C>
REVENUE $ 13,807 $ 26,768
COST OF SALES 28,641 12,212
-------------------- ------------------
INCOME BEFORE OTHER INCOME (14,834) 14,556
OTHER INCOME (EXPENSE) 14,699 (14,556)
-------------------- ------------------
NET INCOME (LOSS) $ (135) $ --
==================== ==================
</TABLE>
See the notes to the financial statements.
F-15
<PAGE>
<TABLE>
<CAPTION>
MEMBER NET, INC.
----------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
JANUARY 1, 1998 THROUGH SEPTEMBER 30, 1999
------------------------------------------
Common Stock
----------------------------------- Total
Number of Accumulated Stockholders'
shares Amount Deficit Equity
---------------- ---------------- ------------------ -------------------
<S> <C> <C> <C>
Balance - January 1, 1998 -- $ -- $ -- $ --
---------------- ---------------- ------------------ -------------------
Balance - December 31, 1998 -- -- -- --
Sale of common stock (unaudited) 10,000 900 -- 900
Net loss (unaudited) -- -- (135) (135)
---------------- ---------------- ------------------ -------------------
Balance - September 30, 1999 10,000 $ 900 $ (135) $ 765
================ ================ ================== ===================
</TABLE>
See the notes to the financial statements.
F-16
<PAGE>
<TABLE>
<CAPTION>
MEMBER NET, INC.
----------------
STATEMENT OF CASH FLOWS
-----------------------
Nine Months Year
ended ended
September 30, December 31,
1999 1998
-------------------- --------------------
(Unaudited)
<S> <C> <C>
Net income $ (135) $ --
Changes in assets and liabilities:
Increase in other assets (900) --
------------------- --------------------
NET CASH FLOWS FROM OPERATIONS (1,035) --
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 900 --
Increase in loans payable 600 --
------------------- --------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,500 --
------------------- --------------------
NET INCREASE IN CASH 465 --
CASH - Beginning of period - --
------------------- --------------------
CASH - End of period $ 465 $ --
=================== ====================
</TABLE>
See the notes to the financial statements.
F-17
<PAGE>
MEMBER NET, INC.
----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
----------------------------------------
JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999
------------------------------------------
Member Net, Inc. ("Member Net" or the "Company") was formed on October 28, 1998
to provide an internet website for the "New Age" community.
On January 26, 1999, the Company acquired The Mind, Body & Soul Network
("MBSN"), a World Wide Web Internet Site and a division (the "Division") of
Alchemy Communications, Inc. ("Alchemy"), from Alchemy, a related company.
Member Net was assigned all copyrights, trademarks and licensing agreements of
MBSN. This acquisition is being treated as a reorganization of companies under
common control and has been accounted for as an "As If" pooling of interests.
Accordingly, the financial statements have been restated for all periods prior
to the acquisition to include the operations of the Division. The acquisition
was consummated pursuant to the Transfer of Ownership Agreement (the
"Agreement") between the Company and Alchemy. In addition, Alchemy will receive
as compensation all revenues generated by MBSN and pay all expenses incurred by
MBSN until such date that Alchemy no longer hosts the MBSN website.
In August 1999, the Company signed a contract to be acquired by
newagecities.com, Inc. ("newage"), an Idaho corporation, for 2,500,000 shares of
newage stock and 1,000,000 warrants to purchase shares of newage common stock
(the "Exchange"). The Exchange will be completed pursuant to the Merger
Agreements and Plan of Reorganization between the Company and newage.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
A. INCOME TAXES - Income taxes have been provided on a pro forma basis
for the period January 1, 1998 to January 26, 1999 as if the Company
filed a separate tax return from that of its affiliate.
For the period January 26, 1999 through September 30, 1999 income taxes
have been accounted for under Statement of financial Accounting
Standards No. 109, "Accounting for Income Taxes", which is an asset and
liability approach that requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns.
B. REVENUES - The Company's revenues are generated by
advertisements placed on the MBSN website. Revenues are
recognized at the time advertisements are displayed on the
MBSN website.
C. RESEARCH AND DEVELOPMENT - Research and development costs are
being expensed as incurred and represent the continuous
development of the MSBN website. Development expenses are
being classified as cost of sales.
F-18
<PAGE>
2. RELATED PARTY TRANSACTION
-------------------------
Pursuant to the Agreement between the Company and Alchemy, for the
period from January 26, 1999 through September 30, 1999 Alchemy was
responsible for net expenses of MBSN of $14,699. Such amount has been
recorded as other income.
For the period January 1, 1999 through January 26, 1999 and for the
year ended December 31, 1998, the Agreement was reflected retroactively
to January 1, 1998 so that the financial statements for all periods
presented would be comparable.
3. LICENSE AGREEMENT
-----------------
The Company has entered into a license agreement for the use of its
internet software. Under the terms of the Agreement the licensor is
entitled to 50% of all advertising revenue generated form the use of
the software.
4. CONSULTING AGREEMENT
--------------------
The Company has entered into three one year consulting agreements
commencing on the consummation of the Exchange for a total of $30,000.
F-19
<PAGE>
PRO FORMA FINANCIAL DATA
Introduction
The following financial data is based upon the historical
financial statements of newagecities.com and has been prepared to
illustrate the effects on such historical data of the Member Net, Inc.
acquisition. The unaudited pro forma consolidated statements of
operations for the periods ended September 30, 1999 and December 31,
1998 give effect to the Member Net, Inc. acquisition as if it had been
completed as of January 1, 1998. The unaudited pro forma combined
balance sheet as of September 30, 1999 gives effect to the Member Net,
Inc. acquisition as if such transactions had been completed on
September 30, 1999. The Member Net, Inc. acquisition is reflected using
the purchase method of accounting for business combinations.
The pro forma financial data is provided for comparative
purposes only and does not purport to represent the actual financial
position or results of operations of the Company that actually would
have been obtained if the Member Net, Inc. acquisition had been
consummated on the dates specified, nor is it necessarily indicative of
the results of operations that may be achieved in the future.
The pro forma financial data are based on certain assumptions
and adjustments described in the notes thereto and should be read in
conjunction therewith. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operations" and the financial
statements, including the notes thereto, appearing elsewhere herein.
F-20
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
Historical Pro Forma
---------------------------------------- ---------------------------------
newagecities.com Member Net, Inc. Adjustments (A) As Adjusted
----------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash $ 158,599 $ 465 $ -- $ 159,064
Inventories 93,440 -- -- 93,440
Other current assets 1,485 -- -- 1,485
----------- ----------- ----------- -----------
Total current assets 253,524 465 253,989
Furniture and equipment, net 52,417 -- -- 52,417
Licensing agreement 596,667 -- -- 596,667
Goodwill -- -- 3,949,235 3,949,235
Deposits and other assets 13,141 900 300,000 314,041
----------- ----------- ----------- -----------
Total assets $ 915,749 $ 1,365 $ 4,249,235 $ 5,166,349
=========== =========== =========== ===========
Current liabilities:
Accrued expenses $ 25,732 $ 600 $ -- $ 26,332
----------- ----------- ----------- -----------
Total current liabilities 25,732 600 -- 26,332
----------- ----------- ----------- -----------
Stockholders' equity:
Common stock, $.02 par value; 45,000,000
shares authorized; 3,599,749 shares issued
and outstanding (historical), 6,099,749 shares
issued and outstanding (as adjusted) 71,995 900 49,100 121,995
Additional paid-in capital 1,817,255 -- 4,200,000 6,017,255
Stock subscription receivable (300) -- -- (300)
Accumulated deficit (998,933) (135) 135 (998,933)
----------- ----------- ----------- -----------
Total stockholders' equity 890,017 765 4,249,235 5,140,017
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 915,749 $ 1,365 4,249,235 $ 5,166,349
=========== =========== =========== ===========
</TABLE>
See notes to unaudited pro forma consolidated financial statements
F-21
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1999 TO SEPTEMBER 30, 1999
----------------------------------------------------
Historical Pro Forma
------------------------------------ -------------------------------------
Combined
newagecities.com Member Net, Inc. Adjustments (B) as Adjusted
---------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
Total revenue $ 748 $ 13,807 $ -- 14,555
Cost of sales 712 28,641 -- 29,353
----------- ----------- ----------- ------------
Gross profit 36 (14,834) -- (14,798)
General and administrative expenses 1,005,723 -- (1) 987,309 1,993,032
Other income -- 14,699 (2) (14,699) --
Interest Income 6,754 -- -- 6,754
----------- ----------- ----------- ------------
Pro forma net loss $ (998,933) $ (135) $(1,002,008) $(2,001,076)
=========== =========== =========== ============
Net loss per common share
Basic $ (0.28) $ (0.33)
=========== ============
Weighted average common share
Basic 3,599,749 2,500,000 6,099,749
=========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------
Historical Pro Forma
-------------------------------------- -------------------------------
Combined
newagecities.com Member Net, Inc. Adjustments as Adjusted
---------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Total revenue $ -- $ 26,768 $ -- $ 26,768
Cost of sales -- 12,212 -- 12,212
----------- ----------- ----------- -----------
Gross profit -- 14,556 -- 14,556
General and administrative expenses -- -- (1) 1,316,412 1,316,412
Other expense -- 14,556 (2) (14,556) --
----------- ----------- ----------- -----------
Pro forma net loss $ -- $ -- $ 1,301,856 $(1,301,856)
=========== =========== =========== ===========
Net loss per common share
Basic $ -- $ (0.52)
=========== ===========
Weighted average common share
Basic -- 2,500,000 2,500,000
=========== =========== =========== ===========
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
F-22
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
A. The following unaudited pro forma adjustments are included in the
unaudited pro forma balance sheet at September 30, 1999:
To record the acquisition of all of the outstanding shares of
common stock of Member Net, Inc. for 2.5 million shares of the
Company's common stock and one million warrants to purchase
shares of the Company's common stock, with the acquisition
being accounted for as a purchase business combination. These
shares were valued at the fair market value of $1.60 (based on
Reg D 504 offering during April 1999 of $2.00 per share less a
20% discount for restrictions on the resale of such shares). A
final allocation of the purchase price is dependent upon
valuations and other studies that are not yet complete.
Accordingly the purchase price allocation is preliminary and
goodwill at this time totals $3,949,235. The computation is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Assets acquired $ 301,365
Liabilities assumed 600
---------------------
Net book value 300,765
---------------------
Purchase price:
Common stock 4,000,000
Warrants 250,000
---------------------
Total purchase price 4,250,000
---------------------
Goodwill $ 3,949,235
=====================
</TABLE>
B. The following pro forma adjustment is included in the accompanying pro
forma consolidated statements of operations for the nine months ended
September 30, 1999 and the year ended December 31, 1998:
(1) To amortize intangibles and goodwill over 3 years.
(2) To eliminate other income/(expense) from/(to) affiliate
(see Footnote 4 to financial statements).
F-23
<PAGE>
PART TWO
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Idaho Business Corporation Act allows us to indemnify our officers
and directors from liability incurred in furtherance of their duties under
certain circumstances. In criminal proceedings, Idaho law states that we may
indemnify an officer or director if he or she acted in good faith and reasonably
believed that his or her conduct was in the best interests of the corporation if
he or she had no reasonable cause to believe his or her conduct was unlawful. In
addition, Idaho law requires us to indemnify directors, who succeed on the
merits of any defense proceeding or in any defense proceeding to which he or she
was party because he or she was a director of the corporation for reasonable
expenses incurred in connection with the proceeding. If we chose to indemnify
our officers and directors in accordance with the provisions of the Idaho
Business Corporation Act, our financial resources may be significantly affected.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission, this
indemnification is against public policy as expressed in the securities laws,
and is, therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Company in connection with the
distribution of the securities being registered are as follows:
SEC Registration and Filing Fee............................... $3,505.00
Legal Fees and Expenses*...................................... 30,000.00
Accounting Fees and Expenses*................................. 20,000.00
Financial Printing*........................................... 15,000.00
Transfer Agent Fees*.......................................... 1,000.00
Blue Sky Fees and Expenses*................................... 1,000.00
Miscellaneous*................................................ 1,495.00
----------
TOTAL......................................................... $72,000.00
==========
*Estimated
None of the foregoing expenses are being paid by the selling security
holders.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In February 1999, Psychicnet.com issued an aggregate of 10,000 shares
of common stock at the par value of the shares for a total of $10.00 to three
individuals, all of whom were officers and directors of Psychicnet.com, and for
entities as founders of Psychicnet.com. The 10,000 shares were later exchanged
for 2,700,000 shares of common stock of newagecities.com.
II-1
<PAGE>
Because the individuals and entities had access to all information pertaining to
Psychicnet.com, the issuance was exempt from the registration requirements of
the Securities Act of 1933, pursuant to Section 4(2) of that act.
In September 1997, Virginia Cities granted an option, exercisable at
$.0005 per share, to purchase up to 6,500,000 shares of common stock to a
consultant in consideration for bookkeeping services rendered by the consultant
to newagecities.com. The consultant exercised the option as to all 6,500,000
shares in September 1998, for a total exercise price of $3,250. The consultant
had access to financial and other information concerning newagecities.com and
had the opportunity to ask questions concerning newagecities.com and its
operations. Accordingly, the issuance of the shares was exempt from the
registration requirements of the Securities Act of 1933 pursuant to Section 4(2)
of that act.
In December 1998, Virginia Cities granted its previous attorney an
option to purchase 1,000,000 shares of common stock exercised at $.001 per
share. The attorney had access to financial and other information concerning
newagecities.com and had the opportunity to ask questions concerning
newagecities.com and its operations. Accordingly, the issuance of the shares was
exempt from the registration requirements of the Securities Act of 1933 pursuant
to Section 4(2) of that act.
In December 1998, Virginia Cities issued an aggregate of 220,822 shares
of common stock to its former President as repayment for debts of
newagecities.com paid personally by the President and in consideration for
services rendered. Because the President had access to all information
pertaining to newagecities.com, the issuance was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
In December 1998, Virginia Cities issued an aggregate of 1,207,906
shares of common stock to the officers and directors of newagecities.com as
compensation for executive services rendered. Because the officers and directors
had access to all information pertaining to newagecities.com, the issuance was
exempt from the registration requirements of the Act pursuant to Section 4(2) of
the Act.
In February 1999, Virginia Cities issued an aggregate of 700,000 shares
of common stock to its then officers and directors at a price of $.01 per share
for which newagecities.com received net proceeds of $7,000. The $7,000 was used
by newagecities.com to pay expenses associated with the transaction with
Psychicnet.com. Because the officers and directors had access to all information
pertaining to newagecities.com, the issuance was exempt from the registration
requirements of the Securities Act of 1933 pursuant to Section 4(2) of that act.
In March 1999, Virginia Cities issued 2,700,000 shares to the seven
stockholders of Psychicnet.com and in exchange acquired 100% of the issued and
outstanding common stock of Psychicnet.com. The stockholders had access to
financial and other information concerning newagecities.com and had the
opportunity to ask questions concerning newagecities.com and its operations.
Accordingly, the issuance of the shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Securities Act of 1933.
In March 1999, Virginia Cities commenced a private offering of 500,000
shares of common stock at $2.00 per share. The offering was conducted in
accordance with Rule 504 of
II-2
<PAGE>
Regulation D promulgated under the Securities Act of 1933, as amended.
Newagecities.com issued 300,000 shares in the offering and received cash
proceeds of approximately $600,000 from the offering and issued the remaining
200,000 in consideration for services rendered valued at $1.60 per share.
In March 1999, newagecities.com granted warrants to purchase an
aggregate of 193,000 shares of common stock at $2.25 per share to a financial
and business consultant and certain employees of the consultant. The consultant
and employees had access to financial and other information concerning
newagecities.com and had the opportunity to ask questions concerning
newagecities.com and its operations. Accordingly, the issuance of the shares was
exempt from the registration requirements of the Securities Act of 1933 pursuant
to Section 4(2) of that act.
In April 1999, newagecities.com granted warrants to purchase an
aggregate of 295,000 shares of common stock at $2.25 per share to 5 consultants
in consideration for financial advisory, industry consulting, legal services,
software development consulting, introduction referral fees and other business
related consulting services rendered to newagecities.com. The consultants had
access to financial and other information concerning newagecities.com and had
the opportunity to ask questions concerning newagecities.com and its operations.
Accordingly, the issuance of the shares was exempt from the registration
requirements of the Securities Act of 1933 pursuant to Section 4(2) of that act.
In April 1999, newagecities.com also issued 100,000 shares of common
stock valued at $1.60 per share to a consultant in consideration for her
agreeing to serve as a spokesperson for newagecities. The consultant had access
to financial and other information concerning newagecities.com and had the
opportunity to ask questions concerning newagecities.com and its operations. The
consultant had experience in financial transactions and was familiar with
newagecities operations and the industry in general. Accordingly, the issuance
of these shares was exempt from the registration requirements of the Security
requirements of the Securities Act of 1933 under Section 4(2) of that act.
In May 1999, newagecities.com granted warrants to purchase an aggregate
of 75,000 shares of common stock at $2.25 per share to the 5 individuals who
agreed to serve on newagecities.com's board of advisors at such time as
newagecities.com constitutes this board. The 5 individuals had access to
financial and other information concerning newagecities.com and had the
opportunity to ask questions concerning newagecities.com and its operations.
Accordingly, the issuance of the shares was exempt from the registration
requirements of the Securities Act of 1933 pursuant to Section 4(2) of that act.
In June 1999, newagecities.com granted warrants to purchase an
aggregate of 237,000 shares of common stock at $2.25 per share to 8 individuals
and entities in consideration for services performed including development and
implementation of a computer network infrastructure, administrative services and
for commercial spokesperson services. The individuals had access to financial
and other information concerning newagecities.com and had the opportunity to ask
questions concerning newagecities.com and its operations. Accordingly, the
issuance of the shares was exempt from the registration requirements of the
Securities Act of 1933 pursuant to Section 4(2) of that Act.
II-3
<PAGE>
In November 1999, newagecities.com received a loan of $50,000 from an
existing stockholder and issued a secured promissory note collateralized by
equipment and inventory to the noteholder. Newagecities.com also issued a
warrant to purchase up to 50,000 shares of its common stock to this noteholder
exercisable at $1.50 per share on or prior to June 30, 2005. The noteholder had
a pre-existing relationship with newagecities.com, had access to financial and
other information relative to newagecities.com and had the opportunity to ask
questions concerning the company and its operations. Accordingly, the issuance
of the securities was exempt from the registration requirements of the
Securities Act of 1933 pursuant to Section 4(2) of that act.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
2 Agreement and Plan of Reorganization between Virginia City Gold Mines, Inc.
and Psychicnet.com, Inc. dated March 8, 1999
3.1 Articles of Incorporation
3.2 Articles of Amendment to the Articles of Incorporation
3.3 Articles of Amendment to the Articles of Incorporation
3.4 Bylaws
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A.*
10.1 Employment Agreement between newagecities.com, Inc. and Joseph Ardito
10.2 Employment Agreement between newagecities.com, Inc. and Kenneth Shenkman
10.3 Employment Agreement between newagecities.com, Inc. and Stanley Siegel
10.4 Lease Agreement between newagecities.com, Inc. and R. A. La Pointe
10.5 Internet Consulting/Marketing Agreement between Psychicnet.com, Inc. and
Virtual Financial Corp.
10.6 License Agreement between newagecities, Inc. and Q Sound Labs, Inc.
10.7 Merger Agreement and Plan of Reorganization
10.8 Lease Agreement between newagecities.com, Inc. and R.A. La Pointe*
10.9 Note, Security Agreement and Warrant between newagecities.com, Inc. and Marc
Siegel.*
23.1 Consent of Feldman Sherb Ehrlich & Co. Certified Public Accountants*
23.2 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (contained in such firm's
opinion filed as Exhibit 5.1)
27 Financial Data Schedule*
</TABLE>
* Filed with this Amendment.
ITEM 28. UNDERTAKINGS.
The undersigned Registrant undertakes
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
II-4
<PAGE>
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or preceding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant also undertakes that it will for determining
any liability under the Securities Act, treat each post-effective amendment that
contains a form of prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of the securities at
that time as the initial bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Boca Raton, Florida on November 16, 1999.
NEWAGECITIES.COM, INC.
By: /s/ Joseph Ardito, Jr.
----------------------------------------
Joseph Ardito, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Form SB-2 registration statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOSEPH ARDITO, JR. Chairman of the Board, Chief November 18, 1999
- ---------------------- Executive Officer and Director
Joseph Ardito, Jr. (Principal Executive Officer)
/s/ KENNETH SHENKMAN President and Director November 18, 1999
- ----------------------
Kenneth Shenkman
/s/ STANLEY SIEGEL Chief Financial Officer, November 18, 1999
- ---------------------- Secretary and Treasurer
Stanley Siegel (Principal Accounting and
Financial Officer)
</TABLE>
II-6
Exhibit 5.1
==================
ATLAS PEARLMAN
TROP & BORKSON
============P.A.==
A T T O R N E Y S A T L A W
Jan Douglas Atlas Joel D. Mayersohn Of Counsel
Michael W. Baker Matthew W. Miller Jon A. Sale
Alan H. Baseman William Nortman Benedict P. Kuehne
Stephen W. Bazinsky Brian A. Pearlman
Roxanne K. Beilly Charles B. Pearlman
Elliot P. Borkson Jonathan S. Robbins
Deborah Ann Byles James M. Schneider
Robin Corwin Campbell Wayne H. Schwartz Director of
Rebecca G. DiStefano Douglas Paul Solomon Marketing and Development
Michael Greenwald Samantha Nicole Tesser Scott I. Cowan*
April I. Halle Michael L. Trop
Kip O. Lassner Steven I. Weinberger
Eric Lee Kenneth P. Wurtenberger
Andrew Lockwood *not licensed to practice law
November 16, 1999
Newagecities.com, Inc.
1181 South Rogers Circle
Suite 5
Boca Raton, FL 33487
Re: Registration Statement on Form SB-2; newagecities.com, Inc.
(the "newagecities"), 5,050,000 Shares of Common Stock
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration by
newagecities of 5,050,000 shares of Common Stock, par value $.02 per share (the
"Common Stock"), to be sold by the Selling Security Holders designated in the
Registration Statement. The shares of Common Stock to be sold consist of up to
3,200,000 shares of Common Stock currently outstanding and to be issued upon
consummation of a merger with Member Net, Inc. and up to 1,800,000 shares of
Common Stock to be issued upon exercise of warrants.
In our capacity as counsel to newagecities, we have examined the
original, certified, conformed, photostat or other copies of newagecities'
Certificate of Incorporation (as Amended), By-Laws, instruments, agreements,
exhibits and corporate minutes provided to us by newagecities. In all such
examinations, we have assumed the genuineness of all signatures on original
documents, and the conformity to originals or certified documents of all copies
submitted to us as conformed, photostat or other copies. In passing upon certain
corporate records and documents of newagecities, we have necessarily assumed the
correctness and completeness of the statements made or included therein by
newagecities, and we express no opinion thereon.
Based upon and in reliance of the foregoing, we are of the opinion that
the outstanding shares of Common Stock are validly issued, fully paid and
non-assessable, and the Common Stock to be issued upon the consummation of the
merger with Member
New River Center, Suite 1900, 200 East Las Olas Boulevard,
Fort Lauderdale, Florida 33301
Telephone (954) 763-1200 / Facsimile (954) 766-7800 / E-mail
[email protected] / web site http://www.atlaslaw.com
- --------------------------------------------------------------------------------
FORT LAUDERDALE o MIAMI o BOCA RATON o NAPLES
<PAGE>
Newagecities.com, Inc. ==================
November 16, 1999 ATLAS PEARLMAN
Page 2 TROP & BORKSON
============P.A.==
Net, Inc. and/or the exercise of the warrants (assuming payment of the
respective exercise prices therefor), when issued in accordance with the terms
of the merger and the warrants, will be validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion in the Registration
Statement on Form SB-2 to be filed with the Commission.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
/s/ATLAS, PEARLMAN, TROP & BORKSON, P.A
---------------------------------------
JMS/bb
OFFICE/WAREHOUSE LEASE
ARTICLE ONE: DEFINITIONS
------------
Section 1.1. DATE OF LEASE: November 1, 1999.
------------- -----------
Section 1.2. COMMENCEMENT DATE: The date on which the term of this Lease and the
accrual of Rent begins which shall be the earlier of (i) substantial completion
of Landlord's Work which is estimated to be December 1, 1999 (the "Estimated
Commencement Date"); or (ii) the date Tenant first occupies the Premises
including, without limitation, for the purpose of installing Tenant's fixtures
and equipment or to complete any finish work to be performed by Tenant.
Section 1.2.1. LANDLORD: Penn Florida Venture IV, a Florida limited partnership.
Address of Landlord: C/O Penn-Florida Capital, Corp., 1515 North Federal
Highway, Suite 306, Boca Raton, Florida 33432.
Section 1.3. LANDLORD'S WORK. The improvements to the Premises to be completed
by Landlord as provided in the work letter attached hereto as Exhibit "A".
Section 1.4. Building. The office/warehouse improvements comprising a part of
the Project in which the Premises are located.
Section 1.5. TENANT: New Age Cities.Com, Inc. as a Florida corporation
Mailing Address of Tenant: 1141 South Rogers Circle,
Suite #7 Boca Raton, Florida
33487-27 10
Section 1.6. PROJECT. The offlce/warehouse project located at 1141 South Rogers
Circle, Boca Raton, Florida, consisting of 70,927 square feet of Rentable Area,
the legal description of which is provided on Exhibit "B" attached hereto.
Section 1.7. PREMISES: Suite #7, of the Project which Landlord and Tenant agree
contains 5,145 square feet of rentable floor area.
Section 1.8. LEASE TERM: Commencing on the Commencement Date and ending sixty
(60) full calendar months after the Commencement Date.
Section 1.9. Lease Year or Year. A twelve (12) full calendar month period
beginning on the Commencement Date and each anniversary of the Commencement
Date.
Section 1.10. LANDLORD'S BROKER: Penn-Florida Realty Corp.
Section 1.11. TENANT'S BROKER: None.
Section 1.12. OPERATING EXPENSES: All expenses of every kind incurred by
Landlord with respect to the ownership, management, operation, insuring,
improvement, replacement, promotion and maintenance of the Project including,
without limitation, insurance premiums, waste removal, lighting, drainage,
utilities and other services provided through Landlord or to the common areas of
the Project, any property taxes, assessments, governmental charges and owners
dues of any kind and nature whatsoever. All such Operating Expenses shall be
recorded on a accrual basis and in accordance with acceptable principles of
sound management and accounting practices applicable to similar projects.
Section 1.13. Security Deposit: Eleven Thousand Four Hundred Thirty-Four Dollars
and Fifty-Nine Cents ($11,434.59).
Section 1.14 BASE RENT: For the initial Lease Year Base Rent shall be
Forty-Three Thousand Seven Hundred Thirty-Two Dollars and Fifty Cents
($43,732.50), (i.e., $8.50 /R/S/F/Yr which amount shall be adjusted as provided
herein for each Lease Year after the initial Lease Year. Payment of Base Rent
shall commence on the Commencement Date.
1
<PAGE>
Section 1.15. ADDITIONAL RENT: Tenant's Proportionate Share of Operating
Expenses, sales or other taxes, taxes imposed on rents to use the Premises which
Tenant shall pay and any other amounts payable by Tenant pursuant to the terms
of this Lease.
Section 1.16. LAST MONTHS RENT: The amount of Five Thousand Seven Hundred
Seventeen Dollars and Thirty Cents ($5,717.30).
Section 1.17. DISCOUNT RATE: The percentage rate which is equal to the
equivalent yield on U.S. Treasury obligations having a maturity as near as
possible to the remaining term of this Lease as reported in the WALL STREET
JOURNAL on the date in question.
Section 1.18. RENT: Base Rent and Additional Rent.
Section 1.19. TENANT'S PROPORTIONATE SHARE: Seven and twenty-six one hundredths
percent (7.26%) the amount that is the percentage determined by dividing the
rentable area of the Premises by the rentable area of the Project.
Section 1.20. CALENDAR MONTH. The period of time beginning on the first day of
any given calendar month and continuing until the last day of such month,
partial months shall not be considered a full calendar month.
ARTICLE TWO: LEASE TERM.
Section 2.1. LEASE OF PREMISES FOR LEASE TERM: Landlord leases the Premises to
Tenant and Tenant leases the Premises from Landlord for the Lease Term. Promptly
after the Commencement Date, Landlord and Tenant shall execute a memorandum in
the form attached hereto as Exhibit "C" acknowledging the Commencement Date and
the Lease Term.
Section 2.2. DELAY IN COMMENCEMENT: Landlord shall not be liable to Tenant if
Landlord does not deliver possession of the Premises to Tenant on the Estimated
Commencement Date and such failure to deliver shall not affect this Lease or the
obligations of Tenant under this Lease. If Landlord does not deliver possession
of the Premises to Tenant within one hundred eighty days (180) days after the
Estimated Commencement Date, Tenant may elect to cancel this Lease by giving
written notice to Landlord within ten (10) days after the one hundred eighty day
(180) day period ends. If Tenant gives such notice, the Lease shall be canceled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Premises to Tenant.
Section 2.3. EARLY OCCUPANCY: If Tenant occupies the Property prior to the
Commencement Date, Tenant's occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall pay Base Rent and all other
charges specified in this Lease for the early occupancy period.
Section 2.4. HOLDING OVER: Tenant shall vacate the Premises upon the expiration
or earlier termination of this Lease. Tenant shall reimburse Landlord for and
indemnify Landlord against all damage incurred by Landlord from any delay by
Tenant in vacating the Premises. If Tenant does not vacate the Premises upon the
expiration or earlier termination of the Lease and Landlord thereafter accepts
rent from Tenant, Tenant's occupancy of the Premises shall be a tenancy at
sufferance, subject to all of the terms of this Lease, except that the Base Rent
then in effect shall be increased to be the maximum allowed by Florida law.
Section 2.5. PROJECT CONSTRUCTION. Tenant acknowledges that the Project is to be
constructed by Landlord and that prior to commencement of construction Landlord
must obtain certain governmental permits, approvals, and the necessary
construction financing. If Landlord is not successful in obtaining the foregoing
permits, approvals and financing for any reason within ten (10) days following
the date of such notice, Landlord shall notify Tenant in writing, in which case,
either Landlord or Tenant may cancel this Lease by written notice to the other.
Upon such termination, all deposits will be returned to Tenant and neither
Landlord nor Tenant shall have any further liability hereunder.
2
<PAGE>
Section 3.1. Time and Manner of Payment: Tenant agrees to pay Landlord the Base
Rent, without notice or demand, in equal monthly installments in advance, on or
before the first day of each and every successive calendar month during the
Lease Term. Rent for any period which is for less than one (1) month shall be a
prorated portion of the monthly installment provided herein based upon a thirty
(30) day month. Said rental shall be paid to Landlord, without deduction or
offset, in lawful money of the United States of America and payable at
Landlord's address or at such other place as Landlord may from time to time
designate in writing.
Section 3.2. Base Rent Adjustment; Cost of Living Index: The Base Rent shall be
increased on each anniversary date of the Commencement Date so that the Base
Rent for the ensuing Lease Year shall be equal to the Base Rent for the Lease
Year then ending multiplied by 105%.
ARTICLE FOUR: OPERATING EXPENSES; OTHER CHARGES PAYABLE BY TENANT.
Section 4.1. OPERATING EXPENSES: Tenant shall pay monthly as Additional Rent an
amount equal to one-twelfth (1/12th) of Tenant's Proportionate Share of the
estimated Operating Expenses. For the period from the Commencement Date to the
date of the first adjustment as provided below, Tenant shall pay One Thousand
Twenty-Two Dollars and Fifty-Seven Cents ($1,022. 57)per month as the estimated
Tenant's Proportionate Share of Operating Expenses. Each calendar year on or
before April 1, or as soon thereafter as is reasonably possible, Landlord shall
deliver to Tenant a statement setting forth Landlord's reasonable estimate of
the Operating Expenses for the then current calendar year and shall furnish to
Tenant a statement (the "Expense Statement") which shall set forth the actual
Operating Expenses for the prior calendar year. Tenant shall continue to pay
monthly installments in the current amount until Tenant receives notice of a
change in payment from Landlord and thereafter each monthly installment will be
increased by a prorata portion of the amount by which the payments which have
been made in the calendar year are less than the amount due at the increased
installment rate. Landlord agrees to keep true and accurate records of the
Operating Expenses of the Building in accordance with generally accepted
accounting principles. After delivery of the Expense Statement, there shall be
an adjustment between Landlord and Tenant such that after said adjustment Tenant
will have paid the Additional Rent amount due in accordance with this section.
Payment pursuant to said adjustment to Landlord or Tenant, as the case may be,
shall be made within thirty (30) days from the date of Tenant's receipt of the
Expense Statement. For any period less than a full calendar month or year,
Tenant's Additional Rent under this section shall be prorata based on actual
expenses for that calendar year or month. In the event that less than
ninety-five percent (95%) of the total square footage in the Project is occupied
by tenants at all times during any calendar year, then Operating Expenses for
such year shall include all additional costs, expenses and disbursements that
Landlord reasonably determines would have been incurred had ninety-five percent
(95%) of the total square footage in the Project been occupied at all times
during such year by tenants.
Section 4.2. PERSONAL PROPERTY TAXES.
------------------------
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall exert Tenant's best efforts to have personal property taxed
separately from the Premises.
(ii) If any of Tenant's personal property is taxed with the
Premises, Tenant shall pay Landlord the taxes for the personal property within
ten (10) days after Tenant receives a written statement from Landlord for such
personal property taxes.
Section 4.3. UTILITIES: Tenant shall pay, directly to the appropriate supplier,
the cost of all natural gas, heat, light, power, sewer service, telephone,
water, refuse disposal and other utilities and services supplied to the
Premises. However, if any services or utilities are jointly metered with other
portions of the Project, Landlord shall include such costs in Operating
Expenses. Landlord reserves the right to require Tenant to install separate
meters for any utility service supplied through joint meters which installation
cost shall be Tenant's expense.
Section 4.4. Insurance and Indemnity:
(a) LIABILITY INSURANCE. Tenant shall, at Tenant's sole cost and
expense, obtain and keep in force during the term of this Lease a policy of
Combined Single Limit, Bodily Injury and Property Damage insurance insuring
Landlord and Tenant against any liability arising out of the ownership,
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use, occupancy or maintenance of the Premises and all areas appurtenant thereto.
Such insurance shall be provided through a combined single limit policy in an
amount not less than $ 1 ,000,000 per occurrence. The policy shall insure
performance by Tenant of the indemnity provision of this Section. The limits of
said insurance shall not, however, limit the liability of Tenant hereunder.
Executed copies of such policies of insurance or certificates thereof shall be
delivered to the Landlord within thirty (30) days after the Commencement Date.
(b) PREMISES INSURANCE.
(i) Landlord shall obtain and keep in force during the term
of this Lease a policy or policies of insurance covering loss or damage to the
Project, in the amount of the full replacement value thereof, as the same may
exist from time to time, but in no event less than the total amount required by
lenders having liens on the Premises, against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief, flood
(in the event same is required by a lender having a lien on the Project), and
special extended perils ("all risk" as such term is used in the insurance
industry). Said insurance shall provide for a payment of loss thereunder to
Landlord or to the holder of mortgages or deeds of trust on the Premises. The
Tenant shall, in addition, obtain and keep in force during the term of this
Lease a policy of rental value insurance covering Rent and Operating Expenses
for a period of one year, with loss payable to Landlord. Tenant shall pay the
cost of such insurance directly and provide Landlord proof of such insurance and
payment of the premiums therefor.
(ii) Tenant shall pay for any increase in the property
insurance obtained by Landlord if said increase is caused by Tenant's acts,
omissions, use or occupancy of the Premises.
(iii) The Landlord shall not insure Tenant's fixtures,
equipment or tenant improvements.
(c) INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of not less than "A", or such
other rating as may be required by a lender having a lien on the Project, as set
forth in the most current issue of "Best Insurance Guide." No policy carried by
Tenant shall be cancelable or subject to reduction of coverage or other
modification except after thirty (30) days prior notice to Landlord. Prior to
the expiration of such policies, Tenant shall furnish Landlord with renewals or
"binders" thereof, or Landlord may order such insurance and charge the cost
thereof to Tenant, which amount shall be payable by Tenant upon demand. Tenant
shall not do or permit to be done anything which shall invalidate the insurance
policies carried by Landlord. If Tenant does or permits to be done anything
which shall increase the cost of the insurance policies referred to in this
Section, then Tenant shall forthwith upon Landlord's demand reimburse Landlord
for any additional premiums attributable to any act or omission or operation of
Tenant causing such increase in the cost of insurance.
(d) WAIVER OF SUBROGATION. Tenant and Landlord each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under this Section, which perils occur in, on or about the Premises, whether due
to the negligence of Landlord or Tenant or their agents, employees, contractors
and/or invitees. Tenant and Landlord shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Lease.
(e) INDEMNITY. Tenant shall indemnify and hold harmless Landlord and
Landlord's officers, agents, employees, partners, successors and assigns from
and against any and all claims arising from Tenant's use of the Premises, or
from the conduct of Tenant's business or from any activity, work or things done,
permitted or suffered by Tenant in or about the Premises or elsewhere and shall
further Indemnify and hold harmless Landlord from and against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from any
negligence of the Tenant, or any of Tenant's agents, contractors, or employees,
and from and against all cost, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in ease any action or proceeding be brought against Landlord by
reason of any such claim, Tenant upon notice from Landlord shall defend the same
at Tenant's expense by counsel satisfactory to
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Landlord. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damages to property or injury to persons, in, upon or about
the Premises arising from any cause and Tenant hereby waives all claims in
respect thereof against Landlord.
Section 4.5. LATE CHARGES:~ Tenant's failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Premises. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
Section 4.6. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant to
Landlord which is not paid when due shall bear interest at a rate equal to the
maximum rate allowable under applicable law (the "Default Rate") from date that
said payment was originally due. However, said interest shall not be payable on
late charges incurred by Tenant nor on any amounts upon which late charges are
paid by Tenant under this Lease. The payment of interest on such amounts shall
not excuse or cure any default by Tenant under this Lease.
ARTICLE FIVE: USE OF THE PROPERTY
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Section 5.1. PERMITTED USES: Tenant may use the Premises only for manufacturing,
production, warehousing, sales, storage, distribution, and offices for internet
products and services and for no other uses whatsoever except those approved by
Landlord in writing.
Section 5.2. MANNER OF USE: Tenant shall not cause or permit the Premises to be
used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
tenants of the Project, or which constitutes a nuisance or waste. Tenant shall
obtain and pay for all permits, including a Certificate of Occupancy, required
for Tenant's occupancy of the Premises and shall promptly take and pay for all
substantial and non-substantial actions necessary to comply with all applicable
statutes, ordinances, rules, regulations, orders and requirements regulating the
use by Tenant of the Premises, including, without limitation, the Occupational
Safety and Health Act and the Americans with Disabilities Act.
Section 5.3. USES PROHIBITED: Tenant shall not do or permit anything to be done
in or about the Premises nor bring or keep anything therein which is not within
the permitted use of the Premises which will in any way increase the existing
rate on or affect any fire or other insurance upon the Project or any of its
contents, or cause a cancellation of any insurance policy covering the Project
or any part thereof or any of its contents.
Section 5.4. SIGNS AND AUCTIONS: Tenant shall not place any signs on the
Premises without Landlord's prior written consent. Tenant shall not conduct or
permit any auctions or sheriffs sales at the Premises.
Section 5.5. LANDLORD'S ACCESS: Landlord or its agents may enter the Premises at
all reasonable times to show the Premises to potential buyers, investors or
tenants or other parties, or for any other purpose Landlord deems necessary.
Landlord shall give Tenant prior notice of such entry, except in the case of an
emergency. Landlord shall at all times have and retain a key with which to
unlock all of the standard entrances and exit doors in, upon and about the
Premises, excluding Tenant's vaults, safes and files, and Landlord shall have
the right to use any and all means which Landlord may deem proper to open said
doors in an emergency, in order to obtain entry to the Premises without
liability to Tenant except for any failure to exercise due care for Tenant's
property and any entry to the Premises obtained by Landlord by any of said
means, or otherwise, shall not under any circumstances be construed or deemed to
be a forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction of Tenant from the Premises or any portion thereof. Landlord may place
customary "For Sale" or "For Lease" signs on or about the Premises, but may not
place such signs in or in front of the Premises until one hundred eighty (180)
days prior to the end of the Lease Term or if Tenant vacates the Premises prior
to expiration of the Lease Term.
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Section 5 .6. QUIET POSSESSIONS If Tenant pays the rent and complies with all
other terms of this Lease, Tenant may occupy and enjoy quiet possession of the
Premises for the full Lease Term, subject to the provisions of this Lease.
Section 5.7. HAZARDOUS MATERIALS: For purposes of this Lease, "Hazardous
Material" means any pollutant or contaminant or hazardous, dangerous or toxic
chemicals, materials, or substances within the meaning of any applicable
federal, state, or local law, regulation, ordinance, or requirement (including
consent decrees and administrative orders) relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste
substance or material, all as amended or hereafter amended. Hazardous Material
shall also include, without limitation, crude oil or any fraction thereof, any
radioactive material, asbestos in any form or condition, radon, polychlorinated
biphenyls ("PCBs") or substances or compounds containing PCBs, medical waste and
noxious chemicals used in any construction on the Premises.
Tenant agrees not to keep in or on the Premises any inflammable,
combustible or explosive substance nor any substance which would create or tend
to create a dangerous or combustible condition (other than cleaning products and
other substances of the sort and in quantities customarily kept in similar
operations provided same are kept and used in accordance with applicable laws).
Tenant agrees not to cause or allow the presence, storage, use, maintenance or
removal of Hazardous Materials in or about the Premises without Landlord's prior
written consent. If Tenant's business requires use or possession of Hazardous
Materials, Tenant must advise Landlord and obtain Landlord's written consent
before bringing any Hazardous Materials onto or creating such condition on or
within the Premises. If Tenant uses or maintains Hazardous Materials on or in
the Premises, Tenant agrees to handle, store, transport and dispose of all
Hazardous Materials at Tenant's sole cost and expense in accordance with all
then-existing local, state and federal rules and laws. Provided it is lawful to
do so, Tenant agrees to enter into a contracts) with a company certified to
handle the Hazardous Materials for the transport and disposal of all Hazardous
Materials from the Premises. A copy of all such contracts and all renewals must
be provided to Landlord.
Landlord may, at Landlord's sole option, now or in the future, obtain
a report from an environmental consultant of Landlord's choice as to whether
Tenant has been or is currently using any part of the Premises for the improper
use, handling, storage, transportation or disposal of Hazardous Materials. If
any such report indicates such improper use, handling, storage, transportation
or disposal of Hazardous Materials, Tenant agrees to immediately reimburse
Landlord for the cost of obtaining the environmental report, and, in addition,
Landlord may require that all violations of the law with respect to the
Hazardous Materials be corrected and/or that Tenant obtains all necessary
environmental permits and approvals. If Tenant fails to correct any such
violations) of law and/or fails to obtain such necessary permits within a
reasonable time after demand from Landlord, then Landlord may declare this Lease
in default and/or may cause the Premises and any surrounding areas to be freed
from the Hazardous Materials at Tenant's sole cost and expense which Tenant
agrees to pay on demand from Landlord as additional rent.
Tenant hereby agrees to indemnify, defend, save and keep Landlord, and
Landlord's officers, employees, partners, successors and assigns, harmless from
any and all liabilities, obligations, charges, losses, damages, penalties,
claims, actions and expenses, including without limitation, engineers' and
professional fees, soil tests and chemical analysis, court costs and legal fees
and expenses through all trial, appellate and administrative levels, imposed on,
incurred by or asserted against Landlord, in any way relating to, arising out
of, or in connection with the use, handling, storage, transportation or disposal
of the Hazardous Materials on the Premises and/or the Project. The foregoing
indemnification shall survive any assignment or termination of this Lease.
Section 5.8. COMMON AREAS AND PARKING FACILITIES: All automobile parking
facilities, driveways, entrances and exits thereto, and other facilities in the
Project furnished by Landlord, including, but not limited to, parking
facilities, truckway or ways, loading areas, pedestrian walkways and ramps,
landscaped areas, stairways, corridors, and other areas and improvements
provided by Landlord for the general use, in common, of tenants, their officers,
agents, employees, servants, invitees, licensees, visitors, patrons and
customers (the "Common Areas"), shall be subject to the exclusive control and
management of Landlord subject to the Rules and Regulations set forth on Exhibit
"D" attached hereto (the "Rules"), and Landlord shall have the right from time
to time to modify and enforce the Rules; to police the same; from time to time
to change the area, level and location and
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arrangement of the Common Areas, and other facilities herein above referred to;
to restrict parking by and enforce parking charges (by operation of meters or
otherwise) to tenants, their officers, agents, invitees, employees, servants,
licensees, visitors, patrons and customers; to close all or any portion of the
Common Areas to such extent as Landlord may desire or as may in the opinion of
Landlord's counsel be legally sufficient to prevent a dedication thereof or the
accrual of any rights to any person or the public therein; to close temporarily
all or any portion of any public areas or Common Areas; to discourage non-tenant
parking; to charge a fee for visitor and/or customer parking; and to do and
perform such other acts in and to said areas and improvements as, in the sole
judgment of Landlord, Landlord shall determine to be advisable. Tenant, its
employees, customers and invitees shall have the non-exclusive right to use the
Common Areas in common with other tenants for the purposes for which constructed
subject to the Rules. Landlord will operate and maintain the Common Areas, and
other areas referred to above in such manner as Landlord shall determine from
time to time. Without limiting the scope of such discretion, Landlord shall have
the full right and authority to designate a manager of the Common Areas and
other areas who shall have full authority to make and enforce rules and
regulations regarding the use of the same or to employ all personnel and to make
and enforce all rules and regulations pertaining to and necessary for the proper
operation and maintenance of the Common Areas and other areas. Reference in this
paragraph to parking facilities shall be construed as giving Tenant, its
employees, invitees and customers hereunder rights and/or privileges to the use
of not more than 2.3 parking spaces per 1,000 square feet of rentable area in
the Premises. Tenant, its employees, invitees and customers shall not use more
than the number of parking spaces set forth above.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE. REPAIRS AND
-----------------------------------------------
ALTERATIONS.
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Section 6.1. EXISTING CONDITIONS/LANDLORD'S WORK: Subject to the completion of
Landlord's Work, Tenant accepts the Premises in its condition as of the
execution of the Lease, subject to all recorded matters, laws, ordinances, and
governmental regulations and orders. Tenant acknowledges that neither Landlord
nor any agent of Landlord has made any representation as to the condition of the
Premises or the suitability of the Premises for Tenant's intended use. Landlord
agrees to complete Landlord's Work with diligence, subject to delays due to
causes beyond its reasonable control. The Premises shall be deemed substantially
completed and possession delivered when Landlord has substantially completed the
Landlord's Work, subject only to the completion of items on Landlord's punch
list. The taking of possession of the Premises by Tenant shall be deemed
conclusively to establish that the Landlord's Work and the Premises have been
completed and are in good and satisfactory condition as of the date possession
is so taken except for items on Landlord's punchlist which may be completed at a
later date. In the event of any dispute as to when and whether the work
performed or required to be performed by Landlord has been substantially
completed, the certificate of occupancy or equivalent document issued by the
local governmental authority shall be conclusive evidence of such completion,
effective on the date of issuance of any such certificate or equivalent
document.
Section 6.2. EXEMPTION OF LANDLORD FROM LIABILITY: Landlord shall not be liable
for any damage or injury to the person, business (or any loss of income
therefrom), goods wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Premises,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) condition arising in or about the
Premises or upon other portions of any building of which the Premises is a part,
or from other sources or places; or (d) any act or omission of any other tenant
of the Building. Landlord shall not be liable for any such damage or injury even
though the cause of or the means of repairing such damage or injury are not
accessible to Tenant. The provisions of this Section shall not, however, exempt
Landlord from liability for Landlord's gross negligence or willful misconduct.
Section 6.3. MAINTENANCE BY TENANT: Tenant shall at all times during the Lease
Term keep the Premises (including maintenance of exterior entrances, all glass
and show window moldings) and all partitions, doors, doorjams, door closures,
door hardware, fixtures, equipment and appurtenances thereof (including
electrical, lighting, heating and plumbing, and plumbing fixtures, and any air
conditioning systems, including leaks around ducts, pipes, vents, or other parts
of the air conditioning, heating or plumbing systems which protrude through the
roof) in good order, condition
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and repair including replacements (including reasonable periodic interior
painting as determined by Landlord). Tenant shall also repair any damages to the
structural portions of the roof and Project resulting from Tenant's negligent
acts or omissions or anyone acting or claiming under Tenant as a result of the
failure of Tenant or any one claiming under Tenant, to perform or observe the
covenants or conditions in this Lease contained or resulting from alterations,
additions or improvements to the premises made by Tenant or anyone claiming
under or acting through Tenant.
Tenant shall contract with a service company approved by Landlord for the
maintenance of the heating and air conditioning equipment and/or evaporative
coolers servicing the Premises with a copy of the service contract to be
furnished to the Landlord within thirty (30) days after the Commencement Date,
and a copy of any subsequent contracts to be furnished from time to time during
the Lease Term. If Tenant refuses or neglects to furnish a copy of a maintenance
contract for said heating and air conditioning equipment and/or evaporative
coolers Landlord may contract for such maintenance and will bill Tenant for the
cost, plus twenty percent (20%) overhead, and Tenant agrees to reimburse
Landlord for the cost within ten (10) days of Landlord's billing.
Section 6.4. MAINTENANCE BY LANDLORD: If Tenant refuses or neglects to maintain
or repair the Premises as required hereunder, and to the reasonable satisfaction
of Landlord as soon as reasonably possible after written demand, Landlord may
make such repairs without liability to the Tenant for any loss or damage that
may accrue to Tenant's merchandise, fixtures or property or to Tenant's
business thereof, and upon completion thereof, Tenant shall pay Landlord's cost
for making such repairs, plus twenty percent (20%) for overhead, upon
presentation of a bill therefore. Landlord shall maintain, repair and replace
the roof and roof membrane, the exterior walls, and the structural portions of
the Project, and shall periodically paint the exterior walls of the Building
from time to time as determined to be necessary by Landlord or its designee, and
subject to the obligations of Tenant under the provisions of this Lease,
Landlord shall repair and replace plumbing, utility and/or sewer lines and mains
which service the Premises.
Section 6.5. ALTERATIONS, ADDITIONS AND IMPROVEMENTS: Tenant shall not make any
alterations, additions, or improvements to the Premises without Landlord's prior
written consent, except for non-structural alterations which do not exceed Five
Thousand Dollars ($5,000.00) in cost cumulatively over the Lease Term and which
are not visible from the outside of the Building. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations made upon
Landlord's written request after the end of the Lease Term. All alterations,
additions, and improvements will be accomplished in a good and workmanlike
manner, in conformity with all applicable laws and regulations, and by a
contractor licensed in the State of Florida approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with "as built"
plans, copies of all construction contracts, and proof of payment for all labor
and materials.
Tenant agrees that Tenant will pay all liens of contractors,
subcontractors, mechanics, laborers, materialmen, and other items of like
character, and will indemnify Landlord against all expenses, costs and charges,
including bond premiums for release of liens and attorneys fees and costs
reasonably incurred in and about the defense of any suit in discharging the
Premises or any part thereof from any liens, judgments, or encumbrances caused
or suffered by Tenant. In the event any such lien shall be made or filed, Tenant
shall bond against or discharge the same within ten (10) days after the same has
been made or filed. It is understood and agreed between the parties to this
lease that the expenses, costs and charges above referred to shall be considered
as Rent due and shall be included in any lien for Rent.
Tenant shall not have any authority to create any liens for labor or
material on Landlord's interest in the Premises and all persons contracting with
Tenant for the destruction or removal of any facilities or other improvements or
for the erection, installation, alteration, or repair of any facilities or other
improvements on or about the Premises, and all materialmen, contractors,
mechanics, and laborers are hereby charged with notice (which notice Tenant
shall deliver in writing to each such party prior to the commencement of any
service by said party) that they must look only to Tenant and to Tenant's
interests in the Premises to secure the payment of any bill for work done or
material furnished at the request or instruction of Tenant. The provisions of
this paragraph are set forth in
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a notice which has been recorded by Landlord in the Public Records of Palm Beach
County, Florida.
Section 6.5.1. SURRENDER OF PREMISES. At the expiration or earlier termination
of the tenancy hereby created, Tenant shall surrender the Premises in the same
condition as the Premises were delivered under this Lease, reasonable wear and
tear excepted, and damage by unavoidable casualty excepted to the extent that
the same is covered by Landlord's fire insurance policy with extended coverage
endorsement, and shall surrender all keys for the Premises to Landlord at the
place then fixed for the payment of rent and shall inform Landlord of all
combinations on locks, safes, and vaults, if any, in the Premises. Tenant shall
remove all its trade fixtures, and any alterations or improvements, before
surrendering the premises as aforesaid and shall repair any damage to the
Premises caused thereby. Tenant's obligation to observe or perform this covenant
shall survive the expiration or other termination of the term of this Lease.
Prior to vacating the Premises, Tenant shall provide Landlord with a written
statement from a reputable heating, ventilation, and air conditioning (HVAC)
company that certifies that the HVAC equipment was inspected and serviced, if
necessary, within the last thirty (30) days of the Lease Term and is in good
working order. This certification is to be at Tenant's sole expense.
Section 6.6. RULES AND REGULATIONS: The Tenant agrees that in its use of the
Premises and the Project Tenant and its employees, invitees, customers and
contractors will comply with the Rules.
Landlord reserves the right from time to time to amend or supplement
the Rules, and to adopt and promulgate additional rules and regulations and
amendments and supplements thereto, copies of which shall be given to the
Tenant. Tenant agrees to promptly comply with all such rules and regulatiOns
upon notice to Tenant from Landlord.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION.
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Section 7.1. PARTIAL DAMAGE TO PREMISES: Tenant shall notify Landlord in writing
immediately upon the occurrence of any damage to the Premises. If the Premises
are only partially damaged and if the proceeds received by Landlord from the
insurance policies maintained by Landlord are sufficient to pay for the
necessary repairs, this Lease shall remain in effect and Landlord shall repair
the damage an soon as reasonably possible. Landlord shall not be required to
make repairs or replacements of any damage to fixtures, equipment, personal
property or leasehold improvements of Tenant's. If the insurance proceeds
received by Landlord are not sufficient to pay the entire cost of repair, or if
the cause or the damage is not covered by the insurance policies which Landlord
maintains, Landlord may elect either to (a) repair the damage as soon as
reasonably possible, in which case this Lease shall remain in full force and
effect, or (b) terminate this Lease as of the date the damage occurred. Landlord
shall notify Tenant within thirty (30) days after receipt of notice of the
occurrence of the damage, whether Landlord elects to repair the damage or
terminate the Lease. If Landlord elects to repair the damage, Tenant shall pay
Landlord the "deductible amount" (if any) under Landlord's insurance policies,
and, if the damage was due to an act or omission of Tenant, the difference
between the actual cost of repair and any insurance proceeds received by
Landlord. If the damage to the Premises occurs during the last six (6) months of
the Lease Term, Landlord may elect to terminate this Lease as of the date the
damage occurred, regardless of the sufficiency of any insurance proceeds. In
such event, Landlord shall not be obligated to repair or restore the Premises
and Tenant shall have no right to continue this Lease. Landlord shall notify
Tenant of its election within thirty (30) days after receipt of notice of the
occurrence of the damage.
Section 7.2. TOTAL OR SUBSTANTIAL DESTRUCTION: If the Premises are totally or
substantially destroyed by any cause whatsoever, or if the Building is
substantially destroyed (even though the Premises are not totally or
substantially destroyed), the Lease shall terminate as of the date the
destruction occurred regardless of whether Landlord receives any insurance
proceeds. However, if the Premises can be rebuilt within one hundred eighty
(180) days after the date of destruction, Landlord may elect to rebuild the
Premises at Landlord's own expense, in which case, this Lease shall remain in
full force and effect. Landlord shall notify Tenant of such election within
thirty (30) days after the occurrence of total or substantial destruction. If
the destruction was caused by an act or omission of Tenant, Tenant shall pay
Landlord the difference between the actual cost of rebuilding and any insurance
proceeds received by Landlord.
Section 7.3. TEMPORARY REDUCTION OF RENT: If the Premises are destroyed or
damaged and
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Landlord repairs or restores the Premises pursuant to the provisions of this
Lease, any Base Rent and Additional Rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Premises is impaired. However, the reduction
shall not exceed the lesser of the sum of one year's payment of Base Rent and
Additional Rent or the proceeds received by Landlord from Landlord's loss of
income insurance coverage. Except for such possible reduction in Base Rent and
Additional Rent, Tenant shall not be entitled to any compensation, reduction, or
reimbursement for Landlord as a result of any damage, destruction, repair, or
restoration of or to the Premises.
ARTICLE EIGHT: CONDEMNATION.
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If all or any portion of the Premises is taken under the power of eminent domain
or sold under the threat of that power (all of which are called "Condemnation"),
this Lease shall terminate as to the part taken or sold on the date the
condemning authority takes title or possession, whichever occurs first. If more
than twenty percent (20%) of the floor area of the Building is taken, Landlord
may terminate this Lease as of the date the condemning authority takes title or
possession by delivering written notice to the other within ten (10) days after
receipt of written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority takes possession). If
Landlord does not terminate this Lease, this Lease shall remain in effect as to
the portion of the Premises not taken, except that the Base Rent shall be
reduced in proportion to the reduction in floor area of the Premises. A
Condemnation award or payment shall be distributed in the following order: (a)
to any ground lessor, mortgagee or beneficiary under a deed of trust encumbering
the Premises, the amount of its interest in the Premises; and (b) to Landlord,
the remainder of such award, whether as compensation for reduction in the value
of the leasehold, the taking of the fee, or otherwise. if this Lease is not
terminated, Landlord shall repair any damage to. the Premises caused by the
Condemnation, except that Landlord shall not be obligated to repair any damage
for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to~ either terminate this Lease or make
such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING.
--------------------------
Section 9.1. LANDLORD'S CONSENT REQUIRED: No portion of the Premises or Tenant's
interest in this Lease may be acquired by any other person or entity, whether by
assignment, mortgage, sublease, transfer, operation of law, or act of Tenant,
without Landlord's prior written consent, except as provided below. Landlord
shall grant or withhold its consent as provided below. Any attempted transfer
without consent shall be void and shall constitute a non-curable breach of this
Lease. If Tenant is a partnership any cumulative transfer of more than
twenty-five percent (25%) of the partnership interests shall constitute an
assignment and shall require Landlord's consent. If Tenant is a corporation, any
change in a controlling interest of the voting stock of the corporation shall
constitute an assignment and shall require Landlord's consent.
Section 9.2. NO RELEASE OF TENANT: No transfer permitted under this Lease,
whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the Rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of Rent from any other person
is not a waiver of any provision of this Lease. Consent to one transfer is not a
consent to any subsequent transfer. If Tenant's transferee defaults under this
Lease, Landlord may proceed directly against Tenant without pursuing remedies
against the transferee. Landlord may consent to subsequent assignments or
modifications of this Lease by Tenant's transferee, without notifying Tenant or
obtaining its consent. Such action shall not relieve Tenant's liability under
this Lease. If Tenant transfers Tenant's interest hereunder, then Landlord shall
receive, as Additional Rent, the excess, if any, between the rent (or any other
consideration) paid in connection with such assignment or sublease and the Rent
payable by Tenant hereunder.
Section 9.3. LANDLORD'S ELECTION: Tenant's request for consent to any transfer
described above shall be accompanied by a written statement setting forth the
details of the proposed transfer, including the name, business and financial
condition of the prospective transferee, financial details of the proposed
transfer (e.g., the term of and rent and security deposit payable under any
assignment or sublease), and any other information Landlord deems relevant.
Landlord shall have the right (a) to withhold consent; (b) to grant consent; or
(e) if the transfer is a sublease of the Premises or an
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assignment of this Lease, to terminate this Lease as of the effective date of
such sublease or assignment and enter into a direct lease with the proposed
assignee or subtenant.
Section 9.4. NO MERGER: No merger shall result from Tenant's sublease of the
Premises, Tenant's surrender of this Lease or the termination of this Lease in
any other manner. In any event, Landlord may terminate any or all subtenancies
or succeed to the interest of Tenant as sublandlord thereunder.
ARTICLE TEN: DEFAULTS; REMEDIES.
-------------------
Section 10.1. COVENANTS AND CONDITIONS: Tenant's performance of each of Tenant's
obligations under this Lease is a condition as well as a covenant. Tenant's
right to continue in possession of the Premises is conditioned upon such
performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.2. EVENTS OF DEFAULT: Tenant shall be in material default under this
Lease:
If any one or more of the following events (herein sometimes called
"Events of Default") shall happen and shall not have been remedied as herein
provided:
(a) if default shall be made in the due and punctual payment of any
Rent payable under this Lease when and as the same shall become due and payable;
(b) if default shall be made in the due and punctual payment of any
other sum or charge payable under this Lease or any part thereof when and as the
same shall become due and payable, and such default shall continue for a period
often (10) days after receipt by Tenant of notice from Landlord specifying the
default; or
(e) if default shall be made by Tenant in the performance of or
compliance with any other provision of this lease, and such default shall
continue for a period of thirty (30) days after written notice thereof from
Landlord to Tenant specifying the nature of such default, or, in the case of a
default which cannot with reasonable diligence be cured within such period of
thirty (30) days, if Tenant fails to proceed with all reasonable diligence
within such period of thirty (30) days to cure the same and thereafter to
prosecute the curing of such default with all reasonable diligence (it being
intended that in connection with a default not susceptible of being cured with
reasonable diligence within thirty (30) days the time of Tenant within which to
cure the same shall be extended for such period as may be necessary to complete
the same with all reasonable diligence).
Section 10.3. REMEDIES. Upon the occurrence of an Event of Default, Landlord
shall have the following rights and remedies:
(a) The right to terminate this Lease by written notice to Tenant. In
the event of a termination of this Lease by reason of an Event of Default,
Tenant shall immediately pay the difference, discounted to present value using
the Discount Rate, between the Rent due for the residue of the Lease Term plus
any other sums which may be due Landlord and the amount Landlord demonstrates
Landlord is reasonably likely to recover from reletting the Premises for the
residue of the Lease Term hereunder and surrender possession and vacate the
Premises immediately, and deliver possession to Landlord, and hereby grants to
Landlord full and free license to enter into and upon the Premises in such event
with or without process of law and to expel or remove Tenant and any others who
may be occupying or within the Premises, and to remove any and all property
therefrom using such force as may be necessary, without being deemed in any
manner guilty of trespass, eviction or forcible entry or detainer, and without
relinquishing Landlord's right to Rent or any other right given to Landlord
hereunder or by operation of law. Tenant expressly waives the service of any
demand for payment of Rent or for possession and the service of any notice of
Landlord's election to terminate this Lease or reenter the Premises, except as
provided in this Article, and agrees that the simple breach of any covenants or
provisions of this Lease by Tenant shall, of itself, without the service of any
notice or demand whatsoever, constitute an unlawful detainer by Tenant of the
Premises within the meaning of the Statutes of the State of Florida.
(b) Landlord shall have the right to terminate Tenant's right to
possession only, without terminating the Lease by written notice to Tenant
whereupon Landlord may at Landlord's option,
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enter into the Premises, remove Tenant's signs and other evidence of tenancy,
and take and hold possession thereof without such entry and possession
terminating the Lease or releasing Tenant, in whole or in part from Tenant's
obligation to pay the Rent hereunder for the full Term, and in any such case
Tenant shall pay forthwith to Landlord, a sum equal to the entire amount of the
Rent plus any other sums then due hereunder. Upon retaking possession of the
Premises without termination of this Lease, Landlord shall list the Premises
with the broker then handling the leasing of the Project, or at Landlord's
option, any other reputable broker, and will not arbitrarily decline to accept
offers to lease at asking rentals and terms or substantially equivalent rates
and terms for qualified (i.e. in terms of credit worthiness, reputation,
experience and compatibility with other tenants of the Project) prospective
tenants. Landlord shall have no obligation to favor the Premises over any other
vacant space in the Project. Upon and after entry into possession of the
Premises without termination of the Lease, Landlord may relet the Premises or
any part thereof with or without any furniture that may be therein, as the agent
of Tenant, to any person, firm or corporation other than Tenant for such Rent,
for such time and upon such terms as Landlord in Landlord's sole discretion
shall determine; and Landlord shall not be required to accept any tenant offered
by Tenant or to observe any instructions given by Tenant about such reletting.
In any such case, Landlord may make repairs, alterations and additions in or to
the Premises and Tenant shall, upon demand, pay the cost thereof, together with
Landlord's expenses of the reletting. If the consideration collected by Landlord
upon any such reletting for Tenant's account is not sufficient to pay monthly,
the full amount of the Rent reserved in the Lease, together with the costs of
repairs, alterations, additions, redecorating and Landlord's expenses, Tenant
shall pay to Landlord the amount of each monthly deficiency upon demand; and if
the consideration so collected from any such reletting is more than sufficient
to pay the full amount of the Rent reserved herein, together with the costs and
expenses of Landlord, Landlord shall pay the surplus to Tenant.
Section 10.4. REMOVAL OF PROPERTY: Tenant hereby irrevocably appoints Landlord
as agent and attorney-in-fact of Tenant, to enter upon the Premises on the
occurrence of an Event of Default and to remove any and all furniture and
personal property whatsoever situated upon the Premises. Any and all property
which may be removed from the Premises by Landlord pursuant to the authority of
this Lease or of law, to which Tenant is or may be entitled, may be handled,
removed or stored by Landlord at the risk, cost and expense of Tenant, and
Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay to Landlord, upOn demand, all expenses
incurred in such removal and all storage charges against such property so long
as the same shall be in Landlord's possession or under Landlord's control.
Landlord may place such property in storage for the account of, and at the
expense of Tenant, and if Tenant fails to pay the cost of storing such property
after it has been stored for a period of ninety (90) days or more, Landlord may
sell any or all of such property in such manner and at such times and places as
Landlord in its sole discretion may deem proper, without notice to or demand
upon Tenant for the payment of any part of such charges or the removal of any of
such property and shall apply the proceeds thereof, first to such sale,
including reasonable attorneys' fees; second, to the payment of the costs and
charges of storing any property; third, to the payment of any other sums of
money which may then or thereafter be due to Landlord from Tenant under any of
the terms hereof, and fourth, the balance, if any, to Tenant. The removal and
storage of Tenant's property as above provided shall not constitute a waiver of
Landlord's lien thereon.
Section 10.5. CUMULATIVE REMEDIES: Landlord's exercise of any right or remedy
shall not prevent it from exercising any other right or remedy provided in this
Lease, at law or in equity.
ARTICLE ELEVEN: PROTECTION OF LENDERS.
----------------------
Section 11.1. SUBORDINATION: This Lease and Tenant's rights hereunder are and
shall be subordinate and inferior to any ground lease, deed of trust or mortgage
encumbering the Project, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. If any ground lessor, beneficiary or mortgagee elects
to have this Lease rank prior to the lien of its ground lease, deed of trust or
mortgage and gives written notice thereof to Tenant, this Lease shall be deemed
prior to such ground lease, deed of trust or mortgage whether this Lease is
dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.
Section 11.2. ATTORNMENT: If Landlord's interest in the Project is acquired by
any ground lessor,
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beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure
sale, Tenant shall attorn to the transferee of or successor to Landlord's
interest in the Project and recognizes such transferee or successor as Landlord
under this Lease. Tenant waives the protection of any statute or rule of law
which gives or purports to give Tenant any right to terminate the Lease or
surrender possession of the Premises upon the transfer of Landlord's interest.
Section 11.3. SIGNING OF DOCUMENTS: Tenant shall sign and deliver any instrument
or documents necessary or appropriate to evidence any such attornment or
subordination or agreement to do so. Such subordination and attornment documents
may contain such provisions as are customarily required by any ground lessor,
beneficiary under a deed of trust or mortgage. If Tenant fails to do so within
ten (10) days after written request, Tenant shall be in default under this Lease
and further hereby makes, constitutes and irrevocably appoints Landlord, or any
transferee or successor of Landlord, the attorney-in-fact of Tenant to execute
and deliver any such instrument or document.
Section 11.4. ESTOPPEL CERTIFICATES:
(a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
cancelled or terminated; (iii) that the last date of payment of the Base Rent
and other charges and the time period covered by such payment; (iv) that
Landlord is not in default under this Lease (or, if Landlord is claimed to be in
default, stating why); and (v) such other matters as may be reasonably required
by Landlord or the holder of a mortgage, deed of trust or lien to which the
Premises is or becomes subject. Tenant shall deliver such statement to Landlord
within ten (10) days after Landlord's request or Tenant shall be in default
under this Lease. Any such statement by Tenant may be given by Landlord to any
prospective purchaser or encumbrancer of the Premises. Such purchaser or
encumbrancer may rely conclusively upon such statement as true and correct.
Unless Landlord has received a written statement to the contrary within such ten
(10) day period, Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) unless provided otherwise, that not
more than one month's Base Rent or other charges have been paid in advance; and
(iv) that Landlord is not in default under the Lease. In such event, Tenant
shall be estopped from denying the truth of such facts.
Section 11.5. TENANT'S FINANCIAL CONDITION. Tenant shall deliver to Landlord
such financial statements as are reasonably required by Landlord to verify the
net worth of Tenant or any assignee, subtenant, or guarantor of Tenant. In
addition, Tenant shall deliver to any lender designated by Landlord any
financial statements required by such lender to facilitate the financing or
refinancing of the Premises. Tenant represents and warrants to Landlord that
each such financial statement is a true and accurate statement as of the date of
such statement. All financial statements shall be confidential and shall be used
only for the purposes set forth herein.
ARTICLE TWELVE: LEGAL COSTS.
------------
Section 12.1. LEGAL PROCEEDING: Tenant shall reimburse Landlord, upon demand,
for any costs or expenses incurred by Landlord in connection with any breach or
default of Tenant under this Lease, whether or not suit is commenced or
judgement entered. Such costs shall include legal fees and costs incurred for
the negotiation of a settlement, enforcement of rights, in appellate actions or
otherwise. Furthermore, if any action for breach of or to enforce provisions of
this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and cost.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability incurred by Landlord if Landlord becomes
or is made a party to any claim or action (a) instituted by Tenant, or by any
third party against Tenant, or by or against any person holding any interest
under or using the Premises by license of or agreement with Tenant; (b) for
foreclosure of any lien for labor or material furnished to or for Tenant or such
other person; (c) otherwise arising out of or resulting from any act or
transaction of Tenant or such other person; or (d) necessary to protect
Landlord's interest under this Lease in a bankruptcy proceeding, or other
proceeding under Title 11 of the United States Code, as
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amended. Tenant shall defend Landlord against any such claim or action at
Tenant's expense with counsel reasonably acceptable to Landlord or, at
Landlord's election, Tenant shall reimburse Landlord for any legal fees or costs
incurred by Landlord in any such claim or action.
Section 12.2. LANDLORD'S CONSENT: Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under a proposed assignment or subletting, or in connection with any
other act which Tenant proposes to do and which requires Landlord's consent. In
each instance where Landlord's consent is required under this Lease, Landlord's
consent may be given or withheld in Landlord's sole discretion unless otherwise
expressly provided in this Lease.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS.
-------------------------
Section 13.1. NON-DISCRIMINATION: Tenant promises, and it is a condition to the
continuance of this Lease, that there will be no discrimination against, or
segregation of, any person or group of persons on a basis of race, color, sex,
creed, national origin or ancestry in the leasing, subleasing, transferring,
occupancy, tenure or use of the Premises or any portion thereof.
Section 13.2. LANDLORD'S LIABILITY: CERTAIN DUTIES:
-------------------------------------
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Premises or the leasehold estate under a
ground lease of the Premises at the time in question. Each Landlord is obligated
to perform the obligations of Landlord under this Lease only during the time
such Landlord owns such interest or title. Any Landlord who transfers its title
or interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
However, each Landlord shall deliver to its transferee the Security Deposit, if
any, previously paid by Tenant if such funds have not yet been applied under the
terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord. Landlord shall not
be in default under this Lease unless Landlord fails to cure such
non-performance within thirty (30) days after receipt of Tenant's notice.
However, if such nonperformance reasonably requires more than thirty (30) days
to cure, Landlord shall not be in default if such cure is commenced within such
thirty (30) day period and thereafter diligently pursued to completion.
(c) Tenant's right to recover damages or any other amount from Landlord
by reason of the Lease or the actions or in actions of Landlord shall be
strictly limited to the Project and Tenant shall have no right to recovery out
of any assets of the Landlord or Landlord's officers, directors, partner or
principals. This provision is not intended to be a measure or liquidation of
Landlord's liability with respect to any particular breach and shall not be
utilized by any court or otherwise for the purpose of determining any liability
of Landlord hereunder except to determine the absolute maximum amount of
Landlord's liability and the assets of Landlord out of which such liability may
be satisfied.
(d) Upon execution of this Lease Tenant shall deposit with Landlord a
Security Deposit and Last Months Rent in the amounts set forth in Article 1.
Landlord may apply all or part of the Security Deposit and Last Months Rent to
any unpaid rent or other charges due from Tenant or to cure any other defaults
of Tenant. If Landlord uses any part of the Security Deposit and Last Months
Rent, Tenant shall restore the Security Deposit and Last Months Rent to its full
amount within ten (10) days after Landlord's written request. Tenant's failure
to do so shall be a material default under this Lease. No interest shall be paid
on the Security Deposit and Last Months Rent. Landlord shall not be required to
keep the Security Deposit and Last Months Rent separate from its other accounts
and no trust relationship is created with respect to the Security Deposit and
Last Months Rent. Said Security Deposit and Last Months Rent shall not be
mortgaged, assigned, transferred or encumbered by Tenant without the prior
written consent of Landlord, and any such act on the part of Tenant shall be
without force and effect and shall not be binding upon Landlord in any ease.
Landlord shall deliver any security deposits, last months rent or any other
deposits made hereunder by Tenant to any party who legally acquires any of
Landlord's rights or interest in the Premises, and
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in the event that such interest be sold or otherwise conveyed, thereupon
Landlord shall be released from any further liability with respect to such
deposits; and this provision shall also apply to any subsequent transferee of
Landlord.
Section 13.3. SEVERABILITY: A determination by a court of competent jurisdiction
that any provision of this Lease or any part thereof is illegal or unenforceable
shall not cancel or invalidate the remainder of such provision or this Lease,
which shall remain in full force and effect.
Section 13.4. INTERPRETATION: The captions of the Articles or Sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other in any provision relating to the conduct, acts or omissions of Tenant, the
term "Tenant" shall include Tenant's agents, employees, contractors, invitees,
successors, or others using the Premises with Tenant's expressed or implied
permission.
Section 13,5. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS: This Lease is
the only agreement between the parties pertaining to the letting of the Premises
to Tenant and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.6. NOTICES: All notices required or permitted under this Lease shall
be in writing and shall be personally delivered Or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Article 1, except that upon Tenant's taking
possession of the Premises, the Premises shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Article 1. All notices shall be effective upon the date of delivery or the date
delivery is attempted in accordance with this Lease. Either party may change its
notice address upon written notice to the other party.
Section 13.7. WAIVERS: All waivers must be in writing and signed by the waiving
party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check will be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such cheek without being bound to the conditions of such
statement.
Section 13.8. NO RECORDATION: Tenant shall not record this Lease without prior
written consent from Landlord. However, Landlord may require that a "Short Form"
memorandum of this Lease executed by both parties be recorded.
Section 13.9. BINDING EFFECT: CHOICE OF LAW: This Lease binds any party who
legally acquires any rights or interest in this Lease from Landlord or Tenant.
However, Landlord shall have no obligation to Tenant's successor unless the
rights or interests of Tenant's successor are acquired in accordance with the
terms of this Lease. The laws of the State of Florida shall govern this Lease.
Section 13.10. CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY: If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person signing this Lease for Tenant represents and warrants that he is a
general partner of the partnership, that he has full authority to sign for the
partnership and that this Lease binds the partnership and all general partners
of the partnership. Tenant shall give written notice to Landlord of any general
partner's withdrawal or addition. Within thirty (30) days after this Lease is
signed, Tenant. shall deliver to Landlord a copy of Tenant's partnership
agreement or certificate of incorporation or limited partnership.
Section 13.11. JOINT AND SEVERAL LIABILITY: All parties signing this Lease as
Tenant shall be jointly and severally liable for all obligations of Tenant.
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Section 13.11. JOINT AND SEVERAL LIABILITY: All parties signing this Lease as
Tenant shall bejointly and severally liable for all obligations of Tenant.
Section 13.12. FORCE MAJEURE: If Landlord cannot perform any of its obligations
due to events beyond Landlord's control, the time provided for performing such
obligation shall be extended by a period of time equal to the duration of such
events. Events beyond Landlord's control include, but are not limited to, acts
of God, war, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulations or restriction
and weather conditions.
Section 13.13. EXECUTION OF LEASE: This Lease may be executed in counterparts,
and, when all counterpart documents are executed, the counterparts shall
constitute a single binding instrument. The delivery of this Lease by Landlord
to Tenant shall not be deemed to be an offer and shall not be binding upon
either party until executed and delivered by both parties.
Section 13,14. RADON GAS: Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county health unit.
Section 13.15. RIGHT TO RELOCATE. Landlord reserves the right to relocate Tenant
during the term of this Lease or any renewal hereof, to office space of similar
quality construction standards within Penn-Florida Commerce Center. If Landlord
exercises this right to relocate Tenant, then any and all costs incident to said
relocation shall be the responsibility of the Landlord; said costs to be
determined prior to the relocation of Tenant. In the event Landlord elects to
cause Tenant to relocate and a Relocation Space is not available within the
Building, Landlord may elect, in its sole discretion, to either (i) not proceed
with the relocation allowing Tenant to remain in the Premises or, (ii) terminate
the Lease effective sixty (60) days following the Notice Date.
ARTICLE FOURTEEN: BROKERS.
--------
Section 14.1. BROKER'S FEE: When this Lease is signed and delivered to both
Landlord and Tenant, Landlord shall pay a real estate commission to Landlord's
Broker, as provided in a separate written agreement between Landlord and
Landlord's Broker. If a Tenant's Broker is named in Article I, Landlord's Broker
shall pay an appropriate portion of its commission to Tenant's Broker if so
provided in any agreement between Landlord's Broker and Tenant's Broker. Nothing
contained in this Lease shall impose any obligation on Landlord to pay a
commission or fee to any party other than Landlord's Broker.
Section 14.2. NO OTHER BROKERS: Tenant and Landlord represent and warrant to
each other that the Brokers named in Article 1 are the only agents, brokers,
finders or other parties with whom either party has dealt who are or may be
entitled to any commission or fee with respect to this Lease or the Premises.
Landlord and Tenant agree to indemnify and hold the other and the other's
officers, directors, persons, agents and representatives harmless from and
against any and all liabilities, damages, claims, costs, fees and expenses
whatsoever (including, without limitation, reasonable attorneys' fees and costs
at all trial and appellate levels) resulting from any other broker, agent or
other person claiming a commission or other form of compensation by virtue of
having dealt with the indemnifying party with regard to this leasing
transaction. The provisions of this paragraph shall survive the termination of
this Lease,
ARTICLE FIFTEEN: RIDERS EXHIBITS & ADDENDA.
--------------------------
Section 15.1. RIDER, EXHIBITS & ADDENDA: All of the riders, exhibits and addenda
listed below are attached to this lease and made a part hereof: (i) Exhibit "A"
Work Letter; (ii) Exhibit "B" - Legal Description of the Project; (iii) Exhibit
"C" Memorandum Acknowledging Commencement Date and Lease Term; and (iv) Exhibit
"D" - The Rules.
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ALL AGREEMENTS AND UNDERSTANDINGS CONTAINED HEREIN, BY SIGNING BELOW WHERE
INDICATED. TENANT AND LANDLORD ACKNOWLEDGE UNDERSTAND AND WARRANT TO EACH
OTHER. THAT OTHER THAN AS EXPRESSLY SET FORTH HEREIN IN WRITING. THERE ARE NO
AGREEMENTS, UNDERSTANDINGS, PROMISES, STATEMENTS REPRESENTATIONS OR
REPRESENTATIVES. INCLUDING WITHOUT LIMITATION REAL ESTATE BROKERS OR
SALESPERSONS. WHICH EITHER PARTY HAS RELIED UPON IN ENTERING INTO THIS LEASE AND
THAT THIS LEASE CONTAINS ALL OF THE AGREEMENTS OF THE PARTIES HERETO WITH
RESPECT TO ANY MATTER COVERED OR MENTIONED IN THIS LEASE AND NO PRIOR ORAL OR
WRITTEN AGREEMENTS OR UNDERSTANDINGS PERTAINING TO ANY SUCH MATTERS SHALL BE
EFFECTIVE FOR ANY PURPOSE.
Landlord and Tenant have signed this Lease at the place and on the date
specified adjacent to their signatures below and have initialed all Riders,
Exhibits and Addenda, which are attached to or incorporated by reference in this
Lease.
WITNESSES: TENANT: New Age Cities.Com, Inc.
/s/ [ILLEGIBLE] By: /s/ Dr. Kenneth Shenkman
- ------------------------ ------------------------
Dr. Kenneth Shenkman
/s/ [ILLEGIBLE] As: PRESIDENT
- ------------------------ --------------------------
Date: 10/18/99
------------------------
At: 1141 South Rogers Circle, Suite #7
Boca Raton, FL 33487
WITNESSES: LANDLORD: Penn-Florida Venture IV,
a Florida limited Partnership
/s/ [ILLEGIBLE] By: /s/ Mark A. Gensheimer
- ------------------------ ---------------------------
Mark A. Gensheimer, President
Penn-Florida Venture IV, Inc.,
General Partner
/s/ [ILLEGIBLE]
- ------------------------
Date: November 1, 1999
------------------------
c/o Penn-Florida Capital Corp.
1515 N. Federal Highway, Suite 306
Boca Raton, Florida 33432
THE EXECUTION AND DELIVERY OF THIS LEASE INVOLVES SIGNIFICANT LEGAL CONSEQUENCES
AND THE PARTIES HERETO SHOULD CONSULT THEIR RESPECTIVE ATTORNEY'S BEFORE
ENTERING INTO SAME. NO REPRESENTATIONS OR RECOMMENDATIONS ARE MADE BY THE
LANDLORD. ITS ACTUAL OR APPARENT AGENTS. EMPLOYEES OR REPRESENTATIVES AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION RELATING THERETO.
17
<PAGE>
EXHIBIT "A"
WORK LETTER AGREEMENT
THIS AGREEMENT (this "Work Letter") is attached to and made a part o
that certain Office/Warehouse Lease Agreement (the "Lease') dated the 1st day of
November 1, 1999, by and between Penn-Florida Venture IV ("Landlord"), and New
Age Cities.Com, Inc. ("Tenant"). The terms, definitions and other provisions of
the Lease are hereby incorporated in this Work Letter by reference. As an
inducement to Tenant to enter into the Lease, and in consideration of the mutual
covenants and conditions hereinafter set forth, Landlord and Tenant agree as
follows:
1. LEASEHOLD IMPROVEMENTS. The Leasehold Improvements shall be
completed by Landlord in accordance with the terms of this Work Letter. The full
scope of work anticipated hereunder shall be set forth on Exhibit "A-i" to this
Work Letter which leasehold improvements shall be completed in accordance with
the Building Standards as set forth in Section 8 of this Work Letter, and if
deemed necessary by Landlord such improvements shall be further specified in
greater detail in the Plans and Specifications as defined hereinafter. The
Leasehold Improvements shall consist of the Existing Improvements, Landlord's
Work and Tenant's Additional Work. "Existing Improvements" shall mean all
improvements which exist in the Premises prior to any modifications required
pursuant to this Work Letter.
2. PLANS AND SPECIFICATIONS.
-------------------------
a) Landlord may, in Landlord's sole discretion, demand that all
Leasehold Improvements, including modifications to the Existing Improvements (if
any) required pursuant to this Work Letter, as set forth on Exhibit "A-1" to
this Work Letter, be specified in a set of plans and specifications ("Plans and
Specifications") in detail sufficient to comprehensively define the construction
work to be performed hereunder and to satisfy applicable permitting regulations
which may be imposed by any governmental authority or required pursuant to
applicable building codes. The Plans and Specifications shall be prepared by an
architect designated by Landlord ("Landlord's Architect"), and Tenant shall be
available to meet with Landlord's Architect so as to assure that the Plans and
Specifications can be submitted to Landlord following approval by Tenant within
ten (10) days following Lease execution (or in the case of a modification to the
original Plans and Specifications, within ten (10). days following the date upon
which the need or request for such modification is initiated) for Landlord's
final review and approval, which approval may be granted, withheld, or given
conditionally subject to modification as determined by Landlord in Landlord's
reasonable discretion within ten (10) days thereafter. If the Plans and
Specifications are not approved by Landlord, Tenant shall have a period of ten
(10) days in which to work with Landlord's Architect to make any modifications
to the Plans and Specifications as required by Landlord and then resubmit same
to Landlord in final form. If Tenant fails to resubmit the Plans and
Specifications in such form as Landlord shall require within such ten (10) day
period, Landlord may terminate the Lease and retain all deposits and other
amounts paid by Tenant or, at Tenant's sole expense, Landlord may prepare Plans
and Specifications in accordance with Landlord's requirements, and the
construction of the Leasehold Improvements shall proceed as if the final Plans
and Specifications had been resubmitted by Tenant and approved by Landlord.
b) Once accepted by Landlord in final form, the Plans and
Specifications may be changed only with Landlord's approval, and Tenant shall be
liable for any additional costs incurred by Landlord as a result of any such
change. An original set of the Plans and Specifications and any modifications
thereto, when accepted by Landlord, shall be initialed on each page by Landlord
and Tenant and retained in Landlord's file as the conclusive evidence of the
final form of the Plans and Specifications.
e) Notwithstanding anything to the contrary contained herein, Landlord
shall have the sole right to determine architectural design and the structural,
mechanical and other standard details and specifications of the work to be
performed pursuant to this Work Letter, including, without limitation, the type
of materials and the manufacturer and supplier thereof.
3. LANDLORD'S WORK. Landlord shall complete, at its sole expense, the
items set forth on Exhibit "A-1" (and further specified in the Plans and
Specifications, if applicable) identified as "Landlord's Work". Subject to the
limitations set forth below, all costs incurred by Landlord
18
<PAGE>
associated with the completion of L.andlord's Work shall be considered
"Landlord's Contribution" under this Work Letter, including but not limited to
actual construction costs, the cost of preparation of Plans and Specifications
for Landlord's Work, and a construction management fee in the amount of five
percent (5%) of the total construction cost of Landlord's Work provided,
however, in the event Landlord's Contribution exceeds, Forty-One Thousand Two
Hundred Thirty-Eight Dollars and No Cents ($41,238.00) the amount by which the
costs associated with the completion of Landlord's Work exceed Landlord's
Contribution shall be considered a part of Tenant's Costs hereunder.
4. TENANT'S ADDITIONAL WORK.
-------------------------
a) Any modifications to the Existing Improvements and any additional
improvements specified in Exhibit "A-1" as "Tenant's Additional Work", and costs
associated with any modifications on changes required to the scope of work set
forth in Exhibit "A-1" or the Plans and Specifications following initial
approval by Landlord and Tenant shall be collectively and separately considered
Tenant's Additional Work, and shall be completed by Landlord at Tenant's
sole cost and expense. All costs associated with the completion of Tenant's
Additional Work shall be considered "Tenant's Costs" under the Lease, including
but not limited to actual construction costs of Tenant's Additional Work, the
cost of preparation of Plans and Specifications for Tenant's Additional Work,
and a construction management fee in the amount of five percent (5%) of the
total construction cost of Tenant's Additional Work. Tenant's Costs shall also
include any expenses incurred by Landlord in the completion of Landlord's Work
which exceed the limit of Landlord's Contribution as defined in Paragraph 3 of
this Work Letter.
b) In the event Tenant's Additional Work is set forth in Exhibit "A-1"
Tenant shall pay, as an item of Tenant's Cost, the cost of the preparation or
modification, as the case may be, of the Plans and Specifications by Landlord's
Architect relative to Tenant's Additional Work, and Tenant shall cooperate with
Landlord's Architect in accordance with the time frames established in Paragraph
2 of this Work Letter,
5. PAYMENT OF TENANT'S COSTS.
--------------------------
a) Tenant shall pay to Landlord prior to commencement of initial
construction of the Leasehold Improvements, or in the case of a modification to
the scope of work set forth in the initial ~ Plans and Specifications prior to
the commencement of the construction of Tenant's Additional Work, an amount
equal to fifty percent (50%) of Tenants Costs, as estimated by Landlord at such
time.
b) Prior to occupancy of the Premises, Tenant shall pay to Landlord
the unpaid balance of Tenant's Costs, as estimated by Landlord at such time.
c) As soon as the final accounting can be prepared and submitted to
Tenant, Tenant shall pay to Landlord the entire unpaid balance of Tenant's
Costs, or Landlord shall reimburse Tenant with any excess amounts paid, as the
case may be.
Tenant's Costs shall constitute additional rent due under the Lease and
shall be due at the time herein above specified. Tenant's failure to make such
payments when due shall constitute a default under the Lease, entitling Landlord
to all of its remedies thereunder, at law and in equity.
6. DELAY IN COMPLETION. Landlord shall cause the Leasehold
Improvements to be substantially completed prior to the Commencement Date set
forth in Section 1.2 of the Lease. If by such Commencement Date the Leasehold
Improvements are not substantially completed as a result of:
a) Tenant's failure to submit the Plans and Specifications (or any
necessary modifications or additions thereto) within the time periods specified
in this Work Letter; or
b) Tenant's specifications of special materials or finishes or
specific vendors, or special installations other than those provided as Building
Standard which cannot be delivered or completed within Landlord's construction
schedule; or
19
<PAGE>
c) Any change in the Plans and Specifications once approved and accepted by
Landlord; or
d) The performance of or the failure to perform any work or installation by
any person or firm employed by Tenant to do any work on the Premises; or -
e) Any other delay which is attributable to Tenant's act or omission;
then, Landlord shall have no liability for such failure to complete, the
Commencement Date shall not be postponed as a result thereof, and Tenant's
obligations under this Lease (including, without limitation, the obligation to
pay rent) shall nonetheless commence as of the Commencement Date. Any material
or item to be supplied by Tenant shall be provided on site in order not to delay
Landlord's construction.
7. CONTRACTOR'S) AND PERMITS. Landlord shall use its own contractor's) and
shall obtain all governmental permits which are necessary to complete the
Leasehold Improvements, with the exception of any improvements (whether or not
shown in the Plans and Specifications) which Landlord and Tenant agree in
writing shall be constructed or installed by Tenant. If the parties hereto agree
that Tenant shall undertake to construct or install some portion of the
improvements, then Tenant shall use contractors which have been approved by
Landlord, Tenant shall be responsible for obtaining all necessary permits and
approvals for such work, and Tenant shall comply with such other requirements as
may be imposed by Landlord. In such event, Landlord shall permit Tenant and
Tenant's contractors to enter the Premises prior to the Commencement Date to
perform such construction or installation. Landlord shall not be liable in any
way for any injury, loss, damage or delay which may be caused by or arise from
such entry by Tenant, its employees or contractors, and Tenant shall indemnify,
defend and hold Landlord harmless from any loss, damage or expense which may be
incurred in connection with such entry.
8. BUILDING STANDARD IMPROVEMENTS. For the purposes of establishing a
standard quality and quantity for materials and finishes comprising the
Leasehold Improvements, Landlord, in Landlord's sole discretion, has established
the following "Building Standard" items (also referred to as "Building
Standards"):
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
DRYWALL
Demising Partitions Typ. 1-hr. Rated wall assembly, slab to deck construction separating office area
from warehouse and from adjacent tenants.
Wall cavity to be insulated.
Restroom Partitions Typ. insulated partition 9'-O" aff.
Interior Partitions Typ. interior partitions; 3 5/8" mtl. studs with 5/8" drywall each side, wall to
be constructed from slab to underside of ceiling.
Perimeter Partitions Exterior walls to be insulated & finished, ready to receive paint.
CEILINGS
Office Space 2'-O" x 4'-O" lay-in suspended ceiling on exposed grid system, 9'-O" aff-lst
floor - 8'-6" aff 2~ floor.
PAINTING
Office Space Two (2) coats latex wail paint on all drywall surfaces (including restroom) Two
(2) coats semi-gloss enamel paint on all doors.
Warehouse Warehouse area to remain unpainted.
PLUMBING
Single Restroom Complete standard ADA accessible restroom with cold water service only. Provide
stub-in for future restroom.
H.V.A.C.
Office Space Five (5) ton package unit to accommodate office area only. Provide exhaust
fan at restroom.
Warehouse One (1) roof fan for air circulation
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ELECTRIC
Office Space 400 amp service per bay
2'-O" x 4'-O" acrylic lay-in lights (energy efficient). One (1) per 90 sf of
office area.
Warehouse Standard electric per code.
8'-O" twin fluorescent strip lights
suspended at 16"-O" aff, one (1) light per 500 s.f.
FLOORING Allowance of six (6) duplex outlets. Standard electric per code.
Office Space 24 oz. "loop" style carpet, direct glue down installation with 4"
vinyl base.
Warehouse 12" x 12" vinyl tile with 4" vinyl base at restroom.
Existing concrete slab to remain.
DOORS & HARDWARE
Office Space One (1) "C" label fire rated door & frame separating warehouse and office.
Interior doors to be 3 `-0" ~ 6"-8" hollow core wood pre-hung on wood frames
with ADA accessible hardware.
Warehouse One (1) l0'-O" w x 12'-o" h manually operated
overhead door One (1) 3'-O" X 6'-8" hollow metal man door
FIRE SECURITY & EQUIPMENT
Office Space Fire sprinkler coverage per code
Fire extinguishers per code
SPECIALTIES
Restroom Typ. accessories including grab bars, toilet paper dispensers and vanity mirror.
</TABLE>
The quantity of materials included within the Allowance Items shall,
when expressed above as a quantity per square foot, be calculated on the basis
of the net usable area within the demising walls of the Premises as determined
by Landlord. Landlord may change the Building Standards at any time without
notice. All Leasehold Improvements in the Premises shall conform with Landlord's
Building Standards then in effect unless otherwise mutually agreed to in Exhibit
"A-1" or the Plans and Specifications. In the event improvements are required
pursuant to Exhibit "A-1" or the Plans and Specifications, and the type and
quality of such items are not specified therein, such improvements shall be
completed in accordance with the Building Standards.
9. SUBSTITUTIONS AND CREDITS. With Landlord's prior written consent,
Tenant may substitute items or materials for Building Standard items or
materials; however, no credit shall be due Tenant for any cost savings resulting
from such substitution.
10. WINDOW COVERINGS. Window coverings shall not be required by
Landlord. If Tenant desires window coverings, Tenant shall request Landlord to
provide, at Tenant's sole expense, blinds specified by Landlord as the standard
window treatment for the Building ("Standard Blinds"). No window treatment other
than the Standard Blinds shall be permitted without the prior written consent of
Landlord.
ii. SUBSTANTIAL COMPLETION. The Leasehold Improvements shall be
substantially completed at such time as such improvements are sufficiently
complete so as to allow Tenant to occupy the Premises for the use and purpose
for which the Premises are intended, as evidenced by the issuance of a
certificate of occupancy by the City of Boca Raton, Florida. Landlord, its
employees, agents and contractors shall be allowed to enter upon the Premises at
any and all reasonable time following the Commencement Date as is necessary to
complete any unfinished details, and such entry shall not constitute an actual
or constructive eviction of Tenant, in whole or part, nor shall it entitle
Tenant to any abatement or diminution of rent or relieve Tenant from any of its
obligations under the Lease.
21
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter.
WITNESSES: TENANT: New Age Cities.Com, Inc.
/s/ [ILLEGIBLE] By: /s/ Dr. Kenneth Shenkman
- ------------------------ ------------------------
Dr. Kenneth Shenkman
/s/ [ILLEGIBLE] As: PRESIDENT
- ------------------------ --------------------------
Date: 10/18/99
------------------------
At: 1141 South Rogers Circle, Suite #7
Boca Raton, FL 33487
WITNESSES: LANDLORD: Penn-Florida Venture IV,
a Florida limited Partnership
/s/ [ILLEGIBLE] By: /s/ Mark A. Gensheimer
- ------------------------ ---------------------------
Mark A. Gensheimer, President
Penn-Florida Venture IV, Inc.,
General Partner
/s/ [ILLEGIBLE]
- ------------------------
Date: November 1, 1999
------------------------
c/o Penn-Florida Capital Corp.
1515 N. Federal Highway, Suite 306
Boca Raton, Florida 33432
22
<PAGE>
EXHIBIT "A-1"
LEASEHOLD IMPROVEMENTS - Page 1
[GRAPHIC OMMITTED]
MUMMAW
ASSOCIATES, INC.
ARCHITECTS
INTERIOR DESIGNERS
CUSTOM BUILDERS
2350 NW. BOCA RATON BLVD.
BOCA RATON, FLORIDA 26431
(368) 261-0875
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
EC SUITE BAY #7 - 1st Floor PENN-FLORIDA
--------------------------- REALTY CORPORATION
PENN-FLORIDA COMMERCE CENTER
1141 SOUTH ROGERS CIRCLE ATRIUM FINANCIAL CENTER
BOCA RATON, FLORIDA 1515 N. FEDERAL H/WAY
DATE: 03-04-99 SUITE 506
BOCA RATON, FLORIDA [ILLEGIBLE]
--------------------------
23
<PAGE>
EXHIBIT "A-1"
LEASEHOLD IMPROVEMENTS - Page 2
[GRAPHIC OMMITTED]
MUMMAW
ASSOCIATES, INC.
ARCHITECTS
INTERIOR DESIGNERS
CUSTOM BUILDERS
2350 NW. BOCA RATON BLVD.
BOCA RATON, FLORIDA 26431
(368) 261-0875
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
EC SUITE BAY #7 - 2st Floor PENN-FLORIDA
--------------------------- REALTY CORPORATION
PENN-FLORIDA COMMERCE CENTER
1141 SOUTH ROGERS CIRCLE ATRIUM FINANCIAL CENTER
BOCA RATON, FLORIDA 1515 N. FEDERAL H/WAY
DATE: 03-04-99 SUITE 506
BOCA RATON, FLORIDA [ILLEGIBLE]
--------------------------
24
<PAGE>
EXHIBIT "B"
LEGAL DESCRIPTION
-----------------
LOTS 17 AND 18, BLOCK 4, SOUTH CONGRESS INDUSTRIAL CENTER, PLAT BOOK 33, PAGES
45 AND 46, PALM BEACH COUNTY, FLORIDA.
25
<PAGE>
EXHIBIT "C"
MEMORANDUM ACKNOWLEDGING COMMENCEMENT DATE AND LEASE TERM
---------------------------------------------------------
This will acknowledge that Penn-Florida Venture IV, a Florida limited
partnership (Landlord) and New Age Cities.Com, Inc. a Florida corporation
(Tenant) have agreed to a commencement date of __________________ 1999 for Suite
#7 located in Penn-Florida Commerce Center.
The entire Lease will be in effect for a period of sixty (60) months and will
expire on
- ----------------------------
This date shall become binding on both Landlord and Tenant.
All other terms and conditions of the executed Lease shall govern.
TENANT: LANDLORD:
New Age Cities.Com, Inc. Penn-Florida Venture IV Ltd.,
a Florida limited partnership
By: /s/ Dr. Kenneth Shenkman
----------------------------
Dr. Kenneth Shenkman, President By: /s/ Mark A. Gensheimer
-----------------------------
Mark A. Gensheimer, President
Date: Penn-Florida Venture IV, Inc.
----------------------------- General Partner
Date:
-----------------------------
SIGN
& DATE
26
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
Tenant shall comply with the following Rules and Regulations:
1. The sidewalks, entrances, passages, courts, vestibules and stairways shall
not be obstructed or used for any purpose other that ingress or egress. The
passages, entrances, stairways, and roof are not for use of the general public,
and Landlord shall in all cases retain the right to control or prevent access
thereto by all persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation or interests of the Building
and its tenants, provided that nothing herein contained shall be construed to
prevent normal access to the Premises by persons with whom Tenant deals in the
ordinary course of its business unless such persons are engaged in illegal
activities. Neither Tenant nor any employee of Tenant or other person or persons
shall go upon the roof of the Building without the prior written consent of
Landlord and proper insurance coverage as called for in the Lease. In all cases
Tenant shall mean Tenant, its agents, employees, contractors, invitees or
assigns as defined in the Lease.
2. No awnings or other projections shall be attached to the outside walls of the
Building.
3. No sign, advertisement or notice shall be exhibited, painted or affixed by
Tenant on any part of, or so as to be seen from the outside of the Premises or
the Building without the prior written consent of Landlord, and for uniformity
all shades, drapes, blinds and other window coverings visible from outside the
Premises shall be subject to Landlord's prior written consent (and then, in each
such case, subject to such restrictions as Landlord shall impose as a condition
to such consent). In the event of the violation of any of the foregoing by
Tenant, Landlord may remove the same without any liability, and shall charge the
expense incurred in such removal to Tenant. All approved signs or lettering on
doors and walls shall be printed, affixed, and inscribed at the expense of
Tenant by a person approved by Landlord, and shall be in such location, color,
size, type style and material as selected by Landlord in its sole discretion.
4. No bicycles, vehicles, or animals of any kind (except for guide-dogs for the
blind) shall be brought into or kept in or about the Premises. No cooking shall
be done or permitted by Tenant on the Premises without the prior written consent
of Landlord (and then subject to such restrictions as Landlord shall impose as a
condition to such consent) except that the preparation of coffee, tea, hot
chocolate and similar items for Tenant shall be permitted. Tenant shall not
cause or permit any unusual or objectionable odors to escape from the Premises.
5. The Premises shall not be used for lodging or sleeping or for any immoral or
illegal purpose.
6. No curtains, draperies, shutters, bars, blinds, shades, screens or other
covering or decoration of any type may be installed by Tenant or used in
connection with any windows, doors, or walls of the Building or the Premises
without the written approval from the Landlord, in which case all such items
shall be installed inbound of Landlord's standard under covering and shall in no
way be visible from the exterior of the Premises. Installation and use of
lighting which is visible from the exterior of the Premises, except for building
standard lights, as subject to the prior written approval of Landlord.
7. Tenant shall not at any time bring or keep in the Premises any inflammable,
combustible or explosive fluid, chemical or substance, nor do or permit anything
to be done on the Premises, or bring or keep anything therein, which shall in
any way increase the rate of fire insurance on Building or on the property kept
therein, or obstruct or interfere with the rights of other tenants, or in any
way injure or annoy them, or conflict with the regulations of the Fire
Department or other governmental authority or the fire laws, or with any
Certificate of Occupancy or insurance policy upon the Building or any part
thereof, or with any rules and ordinances established by the Board of Health or
any other governmental authority.
8. Canvassing, soliciting and peddling at the Building are prohibited and Tenant
shall cooperate to prevent same.
27
<PAGE>
9. No Tenant shall alter any lock or access device or any bolt on any door of
its Premises without the prior written consent of Landlord. If Landlord shall
give its consent, Tenant shall in each case furnish Landlord with a key for any
such lock.
10. No air-conditioning unit or other similar apparatus shall be installed or
used by Tenant without the prior written consent of Landlord (and then subject
to such restrictions as Landlord may impose as a condition to such consent).
11.- If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with Landlord's instructions in
their installation. Landlord will direct electricians as to where and how
telephone, telegraph, electrical and computer wires are to be introduced. No
boring or cutting for wires or stringing of wires will be allowed without the
prior written consent of Landlord (and then subject to such restrictions as
Landlord may impose as a condition to such consent). The location of telephones,
burglar alarms, call boxes and other office equipment affixed to the Premises
shall be subject to approval of Landlord.
12. No Tenant shall lay linoleum, tile, carpet or any other floor covering so
that the same shall be affixed to the floor of its Premises in any manner except
as approved in writing by Landlord. The expense of repairing any damage
resulting from a violation of this rule or the removal of any floor covering
shall be borne by the Tenant by whom, or by whose contractors, employees or
invitees, the damage shall have been caused.
13. No Tenant shall place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to any and which is
allowed by law. No Tenant shall mark, or drive nails, screws or drill into, the
partitions, woodwork or plaster or in any way deface such Premises or any part
thereof.
14. All loading and unloading of goods shall be done only in areas, and through
the entrances designated for such purposes by Landlord.
15. The delivery or shipping of merchandise, supplies and fixtures to and from
the Premises shall be subject to such Rules and Regulations as in the judgement
of the Landlord are necessary for the proper operation of the entire Building.
16. At Tenant's sole cost and expense, Tenant shall pay for the removal of any
of Tenant's trash or rubbish from Tenant's Premises.
17. All parking ramps and areas, truck courts, pedestrian walkways, plazas and
other public areas shall be under the sole and absolute control of Landlord, who
shall have the exclusive right to regulate and control these areas. The Tenant
in use of said parking areas, agrees to comply with any such reasonable rules
and regulations as the Landlord may adopt from time to time for orderly and
proper operation of said parking areas.
18. The parking lots shall be used for the parking of personal transportation
vehicles (cars, pickups, bicycles, motorcycles, etc.) only. The parking lots and
truck courts shall not be used for any other use including, without limitation,
washing or repairing vehicles, overnight parking or other storage of vehicles,
or loading and unloading (except in such zones as Landlord may from time to time
designate for such purposes).
19. Landlord shall have no obligation to maintain any attendant at or for the
parking lots or truck courts. Landlord shall have no obligation or liability to
Tenant for any loss or damage suffered to property or persons on account of the
use or misuse of the parking lots or truck courts by persons other than
Landlord.
20. Landlord reserves the right to use the parking lots or truck courts for such
other purposes as Landlord may from time to time designate, provided any such
other purpose does not unreasonably interfere with the use of the parking lots
or truck courts by tenant for purposes of conducting Tenant's business on the
Premises.
21. Landlord reserves the right to tow, or cause to be towed, any vehicle on
account of any
28
<PAGE>
violation of these Rules and Regulations, and the costs thereof shall be borne
by Tenant, or the owner or driver of any such vehicle.
22. Tenant shall also comply with Landlord's Rules and Regulations respecting
the management, care and safety of the common areas of the Building and grounds,
including parking areas, trash bin area, landscaped areas, walkways, hallways
and other facilities provided for the common use and convenience of other
occupants.
23. Tenant's use of electric current shall not exceed the capacity of the
Building's existing electrical facilities and Tenant shall not use any computer
or other electrical equipment which in Landlord's sole judgment will overload
such facilities or interfere with the use thereof by other Building tenants.
24. Tenant shall not accumulate or store in the Premises or on the parking areas
or truck courts any waste or discarded paper, shipping pallets, shipping crates,
sweepings, rags, rubbish or other combustibles, nor bring or permit to be
brought into the Premises any inflammable, combustible or explosive fluid,
material chemical or substance.
25. Tenant shall not install or affix satellite dishes, antennas or other
communications apparatus to the Building without Landlord's prior written
consent. Landlord shall retain sole discretion to consent to specific methods of
attachment thereto. No aerial or any other item requiring a roof penetration
shall be erected on the roof or exterior walls of the Premises, or on the
grounds, without in each instance, the written consent of the Landlord. Any
aerial so installed without such written consent shall be subject to removal
without notice at any time. Tenant shall be responsible for the cost of any
removal and/or repair of any roof or Building penetration installation caused by
Tenant. Tenant shall in no way shall interfere with reception or transmission of
signals to of from the Building or other tenants.
26. No loud speakers, televisions, phonographs, radios or other devices shall be
used in a manner so as to be heard or seen outside of the Premises without the
prior written consent of the Landlord.
27. The outside areas immediately adjoining the Premises shall be kept clean and
free from dirt and rubbish by the Tenant to the satisfaction of the Landlord,
and Tenant shall not place or permit any obstructions or merchandise in such
areas.
28. The plumbing facilities shall not be used for any other purpose than that
for which they are constructed, and no foreign substance of any kind shall be
thrown therein, and the expenses of any breakage, stoppage, or damage resulting
from a violation of this provision shall be borne by Tenant, who shall, or whose
employees, agents, or invitees shall, have caused it.
29. At Tenant's sole cost and expense, Tenant shall use for pest extermination
within Tenant's Premises a pest extermination contractor as such intervals as
Landlord may require.
30. Tenant shall not burn any trash or garbage of any kind in or about the
Premises.
31. Tenant shall, at Tenant's cost, comply with all requirements, regarding the
installation and periodic maintenance of fire extinguishers or automatic dry
chemical extinguishing system, as necessary for maintenance of reasonable fire
and extended coverage insurance for the Premises and as required by applicable
code.
32. Landlord reserves the right to exclude or expel from the Building any person
who, in Landlord's judgment, is intoxicated or under the influence of liquor or
drugs or who is in violation of any of the Rules and Regulations of the
Building.
33. Without the prior written consent of Landlord, Tenant shall not use the name
of the Building in connection with or in promoting or advertising the business
of Tenant except as Tenant's address.
34. Tenant shall comply with all energy conservation, safety, fire protection
and evacuation procedures and regulations established by Landlord or any
governmental agency.
29
<PAGE>
35. The requirements of Tenants will be attended to only upon application at the
office of the Building by an authorized individual. Employees of Landlord shall
not perform any work or do anything outside of their regular duties unless upon
special instructions from Landlord, and no employees will admit any person
(Tenant or otherwise) to any office without specific instructions from Landlord.
36. All wallpaper or vinyl fabric materials which Tenant may install on painted
walls shall be applied with a strippable adhesive. The use of non-strippable
adhesives will cause damage to the walls when materials are removed, and repairs
made necessary thereby shall be made by Landlord at Tenant's expense.
37. Tenant shall provide and maintain hard surface protective mats under all
desk chairs which are equipped with casters to avoid excessive wear and tear to
carpeting. If Tenant fails to provide such mats, the cost of carpet repair or
replacement made necessary by such wear and tear shall be charged to and paid
for by Tenant.
38. Tenant will refer all contractors, contractors representatives and
installation technicians, rendering any service to Tenant, to Landlord for
Landlord's supervision, approval, and control before performance of any
contractual service. This provision shall apply to all work performed in the
Building, including installations of telephones, telegraph equipment, electrical
devices and attachments and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceilings, equipment or any other physical portion of
the Building.
39. Tenant shall familiarize each of its employees, and vendors with the
portions of this Exhibit pertinent to them.
40. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify, alter or amend, in whole or in part, the terms, covenants,
agreements and conditions of any Lease.
41. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all tenants of the Building.
42. Landlord reserves the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for safety and
security, for care and cleanliness of the Building and for the preservation of
good order therein, and any such other rules and regulations shall be binding
upon the party hereto with the same force and effect as if they had been
established at the time of lease execution.
30
<PAGE>
STATEMENT OF AGENCY DISCLOSURE
RE: PROPERTY: PENN-FLORIDA COMMERCE CENTER
LESSOR: PENN-FLORIDA VENTURE IV, a Florida limited partnership
LESSEE: NEW AGE CITIES.COM, INC.
Pursuant to Chapter 475, Florida Statutes, Rule 21V-l0033 Agency Disclosure,
Penn-Florida Realty Corporation (`PFRC") hereby notifies the undersigned that in
the transaction referenced above, PFRC represents:
(x) Seller/Lessor
( ) Buyer/Lessee
The undersigned hereby acknowledges receipt of this Statement prior to the
execution of the subject contract/lease.
LESSOR: LESSEE:
Penn Florida Venture IV Ltd,
a Florida limited partnership New Age Cites.Com, Inc.
By: /s/ Mark A. Gensheimer By: /s/ Dr. Kenneth Shenkman
-------------------------- --------------------------
Mark A. Gensheimer, President Dr. Kenneth Shenkman, President
Penn-Florida Venture IV, Inc.
General Partner Date: 10/18/99
-------------------------
Date: November 1, 1991
-------------------------
31
Exhibit 10.9
SECURED PROMISSORY NOTE
$50,000.00 Boca Raton, Florida
November 9, 1999
FOR VALUE RECEIVED, NEWAGECITIES.COM, INC., an Idaho corporation,
having an office at 1181 South Rogers Circle, Suite 5, Boca Raton, FL 33487
("Maker"), promises to pay to the order of MARC SIEGEL, at 5301 North Federal
Highway, Suite 120, Boca Raton, Florida 33487 ("Holder"), in lawful money of the
United States of America in immediately available funds, the principal sum of
FIFTY THOUSAND DOLLARS ($50,000.00), together with interest on the unpaid
principal amount hereof as provided below.
Interest on the unpaid principal amount of this Note shall be paid at
the rate of eight percent (8%) per annum. Interest shall be calculated daily,
based upon a 360-day year. Interest shall accrue and become due and payable on
the Maturity Date (as hereinafter defined). In no event shall interest exceed
the maximum amount permitted by law; any such excess shall be treated as a
payment of principal hereon, and be allocated in reverse order of maturity.
To the extent not sooner paid, the entire unpaid principal balance of
this Note, together with all accrued interest hereunder, shall be due and
payable in full no later than 5:00 p.m. local time on January 1, 2001 (the
"Maturity Date"). The foregoing notwithstanding, the principal amount of this
Note and accrued interest shall be paid prior to the Maturity Date out of the
proceeds of any public or private financing in which the Maker receives gross
proceeds of $200,000 or more. In the event this Note is not paid in full by the
Maturity Date, the principal balance due hereunder shall accrue interest
thereafter at the lesser of eighteen percent (18%) per annum or the highest rate
of interest per annum permitted by law ("Maximum Rate").
This Note may be prepaid in whole or in part at any time without
penalty.
All payments under this Note shall be made to Holder at the address
specified above or to such other place or in such other manner as may be
designated by written notice from Holder to Maker.
For the purposes of this Note, Event of Default shall mean any of the
following:
(a) failure of Maker to pay any installment of money on or prior to the
due date thereof;
(b) a default by Maker in any of Maker's other obligations in this Note
or in any other agreement of Maker with Holder, and the continuation of such
default for seven (7) days following written notice of default to Maker;
<PAGE>
(c) the filing of documentation for the voluntary, involuntary or
administrative dissolution of Maker;
(d) there is filed by or against Maker any petition or complaint with
respect to its own financial condition under any state or federal bankruptcy law
or any amendment thereto (including without limitation a petition for
reorganization, arrangement or extension of debts) or under any other similar or
insolvency laws providing for the relief of Makers and such petition or
complaint is not set aside, stayed or terminated within thirty (30) days after
filing or such other period as provided by applicable law; or
(e) a receiver, trustee, conservator or liquidator is appointed for
Maker, or for all or a substantial part of his assets; or Maker shall be
adjudicated bankrupt, insolvent or in need of any relief provided to Makers by
any court and such appointment or adjudication is not set aside, stayed or
terminated within thirty (30) days after filing or such other period as provided
by applicable law.
Upon the occurrence of an Event of Default, the entire principal sum
shall, at the option of Holder, become at once due and payable; and said
principal sum shall bear interest from such time until paid at the Maximum Rate.
Failure to exercise this option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent default.
Maker's obligations under this Note are secured by:
(i) All inventory ("Inventory") in which Maker now has any
rights, all accessions thereto and substitutions therefor, and all inventory in
which Maker hereafter acquires any rights, wherever located, whether in
possession of a seller, in transit from the seller to Maker in transit from
Maker's premises or elsewhere, all contractual rights to purchase inventory, all
shipping invoices, bills of lading, and warehouse receipts covering such
inventory and all products and proceeds of such collateral. Inventory shall
include all material and supplies used in Maker's business. Inventory as of the
date hereof includes, but is not limited to, products and supplies as well as
any such goods as are held for sale or lease in Maker's business;
(ii) All equipment ("Equipment") in which Maker has any
rights, and all accessions thereto and substitutions therefor, and all Equipment
in which Maker hereafter acquires any rights, whether in possession of a seller,
in transit from seller to Maker, on Maker's premises or elsewhere, all
contractual rights to purchase Accessions, all shipping invoices, bills of
lading, and warehouse receipt covering such Equipment, and all proceeds of such
Collateral, whether the Equipment be affixed to realty or not. It is expressly
agreed that any Equipment affixed to realty shall remain personal property.
Maker agrees not to affix any Equipment or realty or allow any Equipment to
become accessions to goods without prior written consent of secured party, and
in no event in such a way that removal would damage the realty or goods.
Equipment, as of the date hereof, includes any and all machinery, products and
supplies not considered Inventory, plus office furniture, fixtures and
furnishings; and
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<PAGE>
(iii) The term "Collateral" shall include the items set forth
in item (i) and (ii) above.
Maker agrees to execute such other and further documentation as may be
deemed necessary by Holder to enable Holder to perfect its security interest in
and to the Collateral. Such other and further documentation may include, but is
not limited to, a Security Agreement and UCC Financing Statement. Upon the
occurrence of an Event of Default, Holder may foreclose upon the Collateral to
the extent available to satisfy Maker's obligation's hereunder and/or otherwise
pursue its legal rights under this Note or under any other agreement of Maker
with Holder. Nothing in the foregoing shall preclude Holder from pursuing Maker
or any other remedies available under applicable law in order to collect all
amounts due hereunder.
Maker agrees to pay all costs, including reasonable attorneys' and
paralegals' fees and expenses, whether or not suit is brought, if, after
maturity of this Note or after the occurrence of an Event of Default hereunder,
Holder shall undertake to collect this Note or to enforce its rights hereunder.
Time is of the essence for the performance and observance of each
agreement and obligation of Maker under this Note.
Maker and all sureties, endorsers and guarantors, or other parties now
or hereafter liable for any of the obligations evidenced herein, hereby
severally waive, for themselves and their representatives, heirs, successors and
assigns, (i) presentment, demand, protest and notice, including notice of
nonpayment, of default, of intent to accelerate and of acceleration, and (ii)
the benefit of marshalling, election or remedies, valuation, appraisal and
exemption laws.
In the event any one or more of the provisions contained in this Note
shall for any reason be held to be invalid, illegal or unenforceable, such
invalid, illegal or unenforceable provisions shall not affect any other
provision of this Note, and this Note shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
This Note shall be deemed to have been made and delivered in the State
of Florida and shall be governed as to validity, interpretation, construction,
effect and in all other respects by the internal substantive laws of the State
of Florida, without giving effect to the choice of law rules thereof.
Maker and Holder each (i) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in Circuit Court, County of Palm Beach, or in the United States
District Court for the Southern District of Florida, (ii) waives any objection
which Maker or Holder may have now or hereafter to the venue of any such suit,
action or proceeding, and (iii) irrevocably consents to the in personam
jurisdiction of the Circuit Court, County of Palm Beach and the United States
District Court for the Southern District of Florida in any such suit, action or
proceeding. Maker and Holder each further agrees to accept and
3
<PAGE>
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the Circuit Court, County of Palm Beach or in the United
States District Court for the Southern District of Florida and agrees that
service of process upon Maker or Holder mailed by certified mail to their
respective addresses shall be deemed in every respect effective service of
process upon Maker or Holder, as the case may be, in any suit, action or
proceeding.
This Note may be amended only by an instrument in writing executed by
the party against which enforcement of the amendment is sought.
All notices, requests, demands and other communications required or
permitted to be given hereunder shall be sufficiently given if addressed to
Maker at 1181 South Rogers Circle, Suite 5, Boca Raton, Florida 33487 and to
Payee at the address specified above, posted in the U.S. mail by certified or
registered mail, return receipt requested. Any party may change said address by
giving the other hereto notice of such change of address. Notice given as
hereinabove prescribed shall be deemed given on the date of its deposit in the
United States mail and, unless sooner received, shall be deemed received by the
party to whom it is addressed on the fifth calendar day following the date on
which said notice is deposited in the mail.
IN WITNESS WHEREOF, Maker has executed and delivered this Note on the
date first written above.
NEWAGECITIES.COM, INC.
By: /s/Joseph Ardito
-------------------------
Name: Joseph Ardito
Title: Chief Executive Officer
4
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement"), dated as of
November 9, 1999, between NEWAGECITIES.COM, INC., an Idaho corporation (the
"Debtor"), whose principal place of business is 1181 South Rogers Circle, Suite
5, Boca Raton, Florida and MARC SIEGEL, whose principal place of business is
5301 North Federal Highway, Suite 120, Boca Raton, Florida 33487(the "Secured
Party").
In consideration of loans or advances made or to be made by the Secured
Party to the Debtor, and for other value received by the Debtor, and in further
consideration of other financial accommodations extended by the Secured Party to
the Debtor or to other persons and guaranteed by the Debtor, the Debtor hereby
grants a continuing security interest in, and assigns to the Secured Party, the
Collateral to secure payment and performance of all of the Obligations of the
Debtor to the Secured Party.
Section 1. Definitions. Definitions in the Code apply to words and
phrases in this Security Agreement and, if Code definitions conflict,
definitions in Article 9 of the Code, Chapter 679 of the Florida Statutes, shall
apply. In addition to terms defined in the Code or elsewhere in this Security
Agreement, the following terms have the meanings indicated below, which meanings
shall be equally applicable to both the singular and the plural forms of such
terms:
"Code" means the Uniform Commercial Code as in effect from time to time
in the State of Florida, Chapters 670 through 680, inclusive, of the Florida
Statutes:
"Collateral" means all property set forth on Exhibit "A".
"Obligations" shall mean the Promissory Note of the Debtor in the
principal amount of Fifty Thousand and 00/100 Dollars ($50,000.00), executed on
an even date herewith, and any and all renewals, modifications, amendments and
replacements thereof.
Section 2. Collateral. The Debtor warrants and agrees that it is the
owner of the Collateral free and clear of all liens and security interests
except the security interest granted by this Security Agreement or encumbrances
created by Secured Party (herein called "Permitted Encumbrances").
Section 3. No Other Security Interests. So long as any Obligation to
the Secured Party is outstanding, the Debtor will not, without the prior written
consent of the Secured Party, grant to any third party a security interest in
any of the Collateral or permit any lien or encumbrance to attach to any part of
the Collateral (except for taxes not yet due and payable) or suffer or permit
any levy to be made on any part of the Collateral or permit any financing
statement except that of Secured Party to be on file with respect thereto,
except with respect to Permitted Encumbrances, provided, however, that this
security interest may be subordinated to lender security interests under
conventional lines of credit which Debtor may request in the ordinary course of
business.
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<PAGE>
Such lines of credit security interests shall also be deemed Permitted
Encumbrances. The Debtor will not sell, transfer, lease or otherwise dispose of
any of the Collateral or any interest therein, or offer to do so or permit
anything to be done to impair the value of the Collateral or the security
interest, provided, however, the Debtor may sell Inventory in the ordinary
course of its business. The Secured Party shall have the right, by written
notice to the Debtor, to terminate the Debtor's authority to sell, lease,
otherwise transfer, manufacture, process or assemble, or furnish under contracts
of service, any or all of the Inventory.
Section 4. Representations, Warranties and Covenants Regarding the
Collateral. The Debtor represents, warrants and covenants that:
4.1. The Collateral shall be kept at the address specified above. The
Debtor will not permit any of the Collateral to be moved without the prior
written consent of the Secured Party, other than Collateral that may be sold as
permitted under Section 3 hereof.
4.2. The Debtor will at all times keep the Collateral insured against
loss, damage, theft, and such other risks as Secured Party may require in such
amounts and companies and under such policies and in such form, and for such
periods, as shall be satisfactory to Secured Party, and each such policy shall
provide that loss thereunder and proceeds payable thereunder shall be payable to
Secured Party as its interest may appear (and Secured Party may apply any
proceeds of such insurance which may be received by Secured Party toward payment
of the Obligations, whether or not due, in such order of application as Secured
Party may determine) and each such policy shall provide for Fifteen (15) days
written minimum cancellation notice to Secured Party; and each such policy
shall, if Secured Party so requests, be deposited with Secured Party; and
Secured Party may act as attorney for Debtor in obtaining, adjusting, settling,
and canceling such insurance and endorsing any drafts.
4.3. The Debtor will at all times keep the Collateral in good order and
repair and will not waste or destroy the Collateral or any part thereof.
4.4. The Debtor warrants that no financing statement covering any
Collateral or any proceeds thereof is on file in any public office, other than
financing statements naming the Secured Party and financing statements filed
with respect to Permitted Encumbrances. The Debtor authorizes the Secured Party
to file financing statements with respect to the Collateral signed only by the
Secured Party. The Debtor will join with the Secured Party in executing
financing statements, notices, affidavits or similar instruments in forms
satisfactory to the Secured Party and such other documents as the Secured Party
may from time to time request, and will pay the cost of filing the same in any
public office deemed advisable by the Secured Party. The Debtor will do such
other acts and things, all as the Secured Party may request, to maintain a
valid, first perfected security interest in the Collateral (free of all other
liens and claims whatsoever other than Permitted Encumbrances) to secure the
payment of the Obligations secured hereby. the Secured Party is hereby appointed
the Debtor's attorney-in-fact to do all acts and things that the Secured
2
<PAGE>
Party may deem necessary to perfect and to continue the perfection of the
security interest created hereby and to protect the Collateral.
4.5. The Debtor will not use the Collateral or permit the same to be
used in violation of any statute or ordinance. The Secured Party may examine and
inspect the Collateral at any time, wherever located. The Debtor will pay
promptly when due all taxes and assessments upon the Collateral or for its use
or operation or upon this Security Agreement or other writing evidencing the
Obligations, or any of the them.
Section 5. Defaults and Remedies. If any one of the following "Events
of Default" shall occur and shall not have been remedied within sixty (60) days
after notification of Default:
(a) Any "Event of Default" under the Obligations; or
(b) Any representation or warranty made by the Debtor herein or in
any certificate or report furnished by the Debtor hereunder
shall prove to have been incorrect in any material respect; or
(c) The Debtor shall default in the performance of any agreement,
covenant or obligation contained herein, if the default
continues for a period of 15 business days after notice of
default to the Debtor by the Secured Party,
then the Secured Party may, in addition to any other rights and remedies that it
may have, immediately and without demand exercise any and all of the rights and
remedies granted to a secured party upon default under the Code; and upon
request or demand of the Secured Party, the Debtor shall at its expense assemble
all or any part of the Collateral and make it available to the Secured Party at
a convenient place designated by the Secured Party. The Secured Party and its
agents are authorized to enter into or onto any premises where the Collateral
may be located for the purpose of taking possession of such Collateral. Any
notice of sale, disposition or other intended action by the Secured Party, sent
to the Debtor at the address specified at the beginning of this Security
Agreement or at such other address of the Debtor as may from time to time be
shown on the Secured Party's records, at least ten (10) days prior to such
action, shall constitute reasonable notice to the Debtor. Any proceeds of any
disposition of any of the Collateral may be applied by the Secured Party toward
payment of such of the Obligations and in such order of application as the
Secured Party may from time to time elect. This Agreement shall not restrict
whatever rights Secured Party has upon default of the Obligation under the
Purchase Agreement and Sales, Consulting and Non-Compete Agreement signed by the
parties on the date hereof.
Section 6. Miscellaneous.
6.1. No waiver by the Secured Party of any default shall operate as a
waiver of any other default or of the same default on a future occasion. No
delay or omission on the part of the Secured Party in exercising any right or
remedy shall operate as a waiver thereof, and no single
3
<PAGE>
or partial exercise by the Secured Party of any right or remedy shall preclude
any other or further exercise thereof or the exercise of any other right or
remedy. Time is of the essence of this Security Agreement. The provisions of
this Security Agreement are cumulative and in addition to the provisions of any
liability of the Debtor under any note, any guaranty or any other writing, and
the Secured Party shall have all the benefits, rights and remedies of a secured
party under this Security Agreement and any other document.
6.2. All rights of the Secured Party hereunder shall inure to the
benefit of its successors and assigns, and all Obligations of the Debtor shall
bind the successors and assigns of the Debtor.
6.3. This Security Agreement has been delivered in the State of Florida
and shall be construed in accordance with the laws of Florida.
6.4. At its option, the Secured Party may discharge taxes, liens or
security interests or other encumbrances at any time levied or placed on the
Collateral, may pay for insurance on the Collateral, and may pay for the
maintenance and preservation of the Collateral. The Debtor agrees to reimburse
the Secured Party on demand for any payment made, or any expense incurred, by
the Secured Party, pursuant to the foregoing authorization. Except as otherwise
expressly provided in this Security Agreement, until default the Debtor may have
possession of the Collateral and use it in any lawful manner not inconsistent
with this Security Agreement and not inconsistent with any policy of insurance
thereon.
6.5. In the event that any one or more of the provisions contained in
this Security Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Security Agreement, but this
Security Agreement shall be reformed, construed and enforced as if such invalid,
illegal or unenforceable provision had never been contained herein.
6.6. The Secured Party's rights under the Obligations are cumulative.
Without limiting the generality of the foregoing, the Secured Party may enforce
its rights hereunder in all or part of the Collateral or in any other security
in the order selected by Secured Party.
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<PAGE>
IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to be
executed as of the date hereinabove first written.
NEWAGECITIES.COM, INC.
an Idaho corporation
By: /s/Joseph Ardito
-------------------------
Name: Joseph Ardito
Its: Chief Executive Officer
5
<PAGE>
EXHIBIT A
Description of Collateral:
(i) Inventory
All inventory ("Inventory") in which Maker now has any rights,
all accessions thereto and substitutions therefor, and all inventory in which
Maker hereafter acquires any rights, wherever located, whether in possession of
a seller, in transit from the seller to Maker in transit from Maker's premises
or elsewhere, all contractual rights to purchase inventory, all shipping
invoices, bills of lading, and warehouse receipts covering such inventory and
all products and proceeds of such collateral. Inventory shall include all
material and supplies used in Maker's business. Inventory as of the date hereof
includes, but is not limited to, products and supplies as well as any such goods
as are held for sale or lease in Maker's business; and
(ii) Equipment
All equipment ("Equipment") in which Maker has any rights, and
all accessions thereto and substitutions therefor, and all Equipment in which
Maker hereafter acquires any rights, whether in possession of a seller, in
transit from seller to Maker, on Maker's premises or elsewhere, all contractual
rights to purchase Accessions, all shipping invoices, bills of lading, and
warehouse receipt covering such Equipment, and all proceeds of such Collateral,
whether the Equipment be affixed to realty or not. It is expressly agreed that
any Equipment affixed to realty shall remain personal property. Maker agrees not
to affix any Equipment or realty or allow any Equipment to become accessions to
goods without prior written consent of secured party, and in no event in such a
way that removal would damage the realty or goods. Equipment, as of the date
hereof, includes any and all machinery, products and supplies not considered
Inventory, plus office furniture, fixtures and furnishings.
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<PAGE>
WARRANT TO PURCHASE
COMMON STOCK
OF
NEWAGECITIES.COM, INC.
This is to certify that MARC SIEGEL (the "Holder") is entitled, subject
to the terms and conditions hereinafter set forth, to purchase 50,000 shares of
Common Stock, par value $.02 per share (the "Common Shares"), of
NEWAGECITIES.COM, INC., an Idaho corporation (the "Company"), from the Company
at the price per share and on the terms set forth herein and to receive a
certificate for the Common Shares so purchased on presentation and surrender to
the Company with the subscription form attached, duly executed and accompanied
by payment of the purchase price of each share purchased either in cash or by
certified or bank cashier's check or other check payable to the order of the
Company.
The purchase rights represented by this Warrant are exercisable
commencing on the date hereof through and including June 30, 2005, at a price
per Common Share of $1.50.
The purchase rights represented by this Warrant are exercisable at the
option of the registered owner hereof in whole or in part, from time to time,
within the period specified; provided, however, that such purchase rights shall
not be exercisable with respect to a fraction of a Common Share. In case of the
purchase of less than all the Common Shares purchasable under this Warrant, the
Company shall cancel this Warrant on surrender hereof and shall execute and
deliver a new Warrant of like tenor and date for the balance of the shares
purchasable hereunder.
In addition, as an alternative to payment of the aggregate exercise
price in accordance with the preceding paragraphs, but only in the event the
Common Shares are not subject to a current registration statement as described
hereafter, the Holder may elect to effect a cashless exercise by so indicating
on the exercise notice and including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms hereof
(a "Cashless Exercise"). In the event of a Cashless Exercise, the Holder shall
surrender this Warrant for that number of Common Shares determined by
multiplying the number of Common Shares for which this warrant is being exercise
by the closing price for the Common Stock on the principal market for the Common
Stock of the Company on the date preceding the date of exercise minus the
exercise price in effect at such time.
The Company agrees at all times to reserve or hold available a
sufficient number of Common Shares to cover the number of shares issuable on
exercise of this and all other Warrants of like tenor then outstanding.
<PAGE>
This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a shareholder of the Company, or to any other rights whatever
except the rights herein expressed and such as are set forth, and no dividends
shall be payable or accrue in respect of this Warrant or the interest
represented hereby or the Common Shares purchasable hereunder until or unless,
and except to the extent that, this Warrant shall be exercised.
In the event that the outstanding Common Shares hereafter are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of merger, consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock split-up or stock dividend:
(a) The aggregate number, price and kind of Common Shares
subject to this Warrant shall be adjusted appropriately;
(b) Rights under this Warrant, both as to the number of
subject Common Shares and the Warrant exercise price, shall be adjusted
appropriately; and
(c) In the event of dissolution or liquidation of the Company
or any merger or combination in which the Company is not a surviving
corporation, this Warrant shall terminate, but the registered owner of this
Warrant shall have the right, immediately prior to such dissolution,
liquidation, merger or combination, to exercise this Warrant in whole or in part
to the extent that it shall not have been exercised.
The foregoing adjustments and the manner of application of the
foregoing provisions may provide for the elimination of fractional share
interests.
The Company will provide during the term hereof both demand
registration rights and piggyback registration rights for the Common Shares
underlying this Warrant, such piggyback registration rights to be provided at
such time as the Company files a registration statement following the date
hereof under the Securities Act of 1933. Such registrations shall be at the cost
and expenses of the Company for those costs and expenses normally borne by
issuers.
The Company shall not be required to issue or deliver any certificate
for Common Shares purchased on exercise of this Warrant or any portion thereof
prior to fulfillment of all the following conditions:
(a) The completion of any required registration or other
qualification of such shares under any federal or state law or under the rulings
or regulations of the Securities and Exchange Commission or any other government
regulatory body which is necessary;
(b) The obtaining of any approval or other clearance from any
federal or state government agency which is necessary;
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(c) The obtaining from the registered owner of the Warrant, as
required in the sole judgment of the Company, a representation in writing that
the owner is acquiring such Common Shares for the owner's own account for
investment and not with a view to, or for sale in connection with, the
distribution of any part thereof, if the Warrants and the related shares have
not been registered under the Act; and
(d) The placing on the certificate, as required in the sole
judgment of the Company, of an appropriate legend and the issuance of stop
transfer instructions in connection therewith if this Warrant and the related
shares have not been registered under the Act to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS OF ANY STATE
AND HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION
PERTAINING TO SUCH SECURITIES AND PURSUANT TO A REPRESENTATION BY THE
SECURITY HOLDER NAMED HEREON THAT SAID SECURITIES HAVE BEEN ACQUIRED
FOR PURPOSES OF INVESTMENT AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION. FURTHERMORE, NO
OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS TO TAKE PLACE WITHOUT
THE PRIOR WRITTEN APPROVAL OF COUNSEL OR THE ISSUER BEING AFFIXED TO
THIS CERTIFICATE. THE TRANSFER AGENT HAS BEEN ORDERED TO EXECUTE
TRANSFERS OF THIS CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE
INSTRUCTIONS."
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by the signature of its duly authorized officer.
NEWAGECITIES.COM, INC.
By: /s/Joseph Ardito
---------------------------
Name: Joseph Ardito
Title: Chief Executive Officer
Dated: November 11, 1999
3
<PAGE>
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the
rights to purchase Common Shares evidenced by the within
Warrant.)
Newagecities.com, Inc.
1181 South Rogers Circle, Suite 5
Boca Raton, FL 33487
The undersigned hereby irrevocably subscribes for __________ Common
Shares pursuant to and in accordance with the terms and conditions of this
Warrant, and herewith makes payment of $__________ therefor, and requests that a
certificate for such Common Shares be issued in the name of the undersigned and
be delivered to the undersigned at the address stated below, and if such number
of shares shall not be all of the shares purchasable hereunder, that a new
Warrant of like tenor for the balance of the remaining Common Shares purchasable
hereunder shall be delivered to the undersigned at the address stated below.
Dated: Signed:
----------------------- -----------------------
Address:
-----------------------
-------------------------------
-------------------------------
Consent of Independent Auditors
We consent to the use in this Registration Statement on Form SB-2,
Amendment No. 1 of our report dated October 14, 1999 relating to the financial
statements of newagecities.com, Inc. for the period January 29, 1999 (Inception)
through September 30, 1999 and the reference to our firm under the caption
`Experts' in this Registration Statement.
/s/ Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
November 18, 1999
<PAGE>
Consent of Independent Auditors
We consent to the use in this Registration Statement on Form SB-2,
Amendment No.1 of our report dated August 9, 1999 relating to the statement of
operations of Member Net, Inc. for the year ended December 31, 1998 and the
reference to our firm under the caption `Experts' in this Registration
Statement.
/s/ Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
November 18, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-29-1999
<PERIOD-END> SEP-30-1999
<CASH> 1
<SECURITIES> 158,599
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 93,440
<PP&E> 253,524
<DEPRECIATION> 57,053
<TOTAL-ASSETS> 4,636
<CURRENT-LIABILITIES> 915,749
<BONDS> 25,732
0
0
<COMMON> 0
<OTHER-SE> 71,995
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 915,749
<TOTAL-REVENUES> 748
<CGS> 712
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (998,933)
<INCOME-TAX> 0
<INCOME-CONTINUING> (998,933)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (998,933)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
