AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 4, 2000
Registration No. 333-86347
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 2
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 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.
<PAGE>
The information in this prospectus is not complete and may be changed.
Newagecities.com may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
Subject to completion dated January 4, 2000
PROSPECTUS
NEWAGECITIES.COM, INC.
2,550,000 shares of common stock
This prospectus covers the 2,550,000 shares of common stock of
newagecities.com, inc. being offered by certain selling security holders. The
shares being offered include 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 $1,875,000 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 December 30, 1999, the closing bid price for our common stock
was 2.31.
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 5.
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 _________, 2000
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary...................................................................... 3
Risk Factors............................................................................ 5
Capitalization.......................................................................... 11
Use of Proceeds......................................................................... 12
Price Range of Common Stock,
Dividend Policy and Number of
Record Holders.................................................................. 12
Plan of Operation ...................................................................... 14
Our Business............................................................................ 18
Management.............................................................................. 27
Principal Stockholders.................................................................. 31
Certain Transactions.................................................................... 32
Description of Securities............................................................... 34
Selling Security Holders................................................................ 36
Shares Eligible for Future Sale......................................................... 39
Legal Matters........................................................................... 40
Experts................................................................................. 40
Additional Information.................................................................. 40
Index to Consolidated Financial Statements ............................................. F-1
</TABLE>
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.
2
<PAGE>
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 an acquisition agreement
with Member Net, Inc. As a result of this acquisition, we will be acquiring an
existing Web site geared to New Age consumers known as "www.mindbodysoul.com".
This transaction is expected to close in the first half of January 2000.
THE OFFERING
<TABLE>
<S> <C>
common stock offered by
selling security holders.............................................. 2,550,000 shares (1)
==========
common stock outstanding:
prior to the offering...................................... 3,599,749
=========
after the offering......................................... 6,149,749 (2)
===========
</TABLE>
- --------------------
(1) The selling security holders are offering up to 2,550,000 shares of
common stock, including 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
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<PAGE>
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."
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS DATA:
From January 29, 1999
(Inception) to September 30,
----------------------------
1999
----
Actual Pro Forma
------ ---------
<S> <C> <C>
Revenues $ 748 $ 14,555
Gross profit $ 36 $ (14,798)
Net loss $(998,933) $(2,251,076)
Net loss per common share - basic $ (0.28) $ (0.37)
Weighted average common shares
outstanding 3,599,749 6,099,749
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
As of September 30, 1999
------------------------
Actual Pro Forma
------ ---------
<S> <C> <C>
Current assets $253,524 $ 253,989
Working capital $227,792 $ 227,657
Total assets $915,749 $ 6,166,349
Total liabilities $ 25,732 $ 26,332
Stockholders' equity $890,017 $ 6,140,017
</TABLE>
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.
4
<PAGE>
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.
WE HAVE A HISTORY OF LOSSES DURING OUR SHORT PERIOD OF EXISTENCE. WE MAY NEVER
ACHIEVE PROFITABILITY AND IN THAT EVENT, WE WILL NEED TO TERMINATE OUR
OPERATIONS AND YOU MAY LOSE YOUR ENTIRE INVESTMENT.
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 of these conditions, our independent public accountants have
included an explanatory paragraph in their report dated October 14, 1999
expressing doubt about newagecities.com's ability to continue as a going
concern.
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;
5
<PAGE>
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.
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
Earlier this year, we received net proceeds from the sale of shares of
our common stock of approximately $1,000,000 and recently we received another
$952,498. We believe these funds will satisfy our cash requirements for our
program for approximately 6 months since the latter amount needs to be repaid on
April 30, 2000 unless extended. 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.
6
<PAGE>
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 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.
7
<PAGE>
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.
Since the New Age concept applies to a range of products and concepts, people
need to associate the newagecities.com name as an important portal for new age
products and services. This will require extensive marketing and advertising
resources which we do not have presently. We may never have enough funds,
skilled marketing personnel or sufficient quality products or services so that
members of the new age community will look to newagecities.com as a primary
source for these products and services.
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
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.
8
<PAGE>
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.
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
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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 December 30, 1999, we had outstanding warrants to purchase a
total of 1,050,000 shares of our common stock at prices ranging between $1.50
and $2.50 per share, including 120,000 warrants issued to directors and
executive officers. In addition, we will issue warrants to purchase 1,000,000
shares exercisable at $1.75 per share to the stockholders of Member Net as soon
as that transaction is completed. At December 30, 1999, the closing price of our
common stock was $2.31 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 or convertible securities of newagecities.com.
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.
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<TABLE>
<CAPTION>
September 30, 1999
------------------
Actual Pro Forma
------ ---------
<S> <C> <C>
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 7,017,255
Stock subscription receivable (300) (300)
Accumulated deficit (998,933) (998,933)
----------- ----------
Total stockholders' equity $ 890,017 $6,140,017
</TABLE>
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 850,000
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 $1,875,000. 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 November
30, 1999, we had 1,056 stockholders of record.
12
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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 December 30, 1999, the closing price of our common stock was $2.31.
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.
13
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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. We expect
this transaction will be closed in the first half of January 2000. 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,
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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.
For the year ended December 31, 1998, Member Net had revenues of
$26,768 and income of $-0-. For the nine months ended September 30, 1999, Member
Net had revenues of $13,807 and a 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.
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.
On December 21, 1999, newagecities.com received net proceeds of
$952,498 and issued its promissory notes in the aggregate principal amount of
$1,041,300 to certain non-U.S. investors under Regulation S of the Securities
Act of 1933. The notes are due on April 30, 1999 and bear interest at the rate
of 8% per year payable at the time that principal is paid. The notes are
convertible into a total of 822,700 shares of common stock of newagecities.com.
With this funding, we will have the opportunity now to launch our
advertising program on both the Internet and in trade magazines as well increase
our inventory of products. This should produce current revenues prior to April
30, 2000. In addition, it also allows us to increase our customer base and our
industry status, which should also help us to attract further capital as well as
to further increase our potential for advertising revenue. We cannot assure you,
however, that all this will take place or that we will be able to extend the
maturity dates of the
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notes if necessary. If we are not able to raise sufficient additional capital or
extend the maturity dates for the above loans, we may be required to suspend or
terminate our operations.
IMPACT OF YEAR 2000
We are aware of the issues associated with the programming code in
existing computer systems associated with the Year 2000. 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 existing software has already been upgraded
by the manufacturer or was recently purchased and is Year 2000 compliant.
Therefore, we believe our existing systems are Year 2000 compliant. We believe
that systems purchased in the future will also be Year 2000 compliant, and we
will receive appropriate confirmation and demonstrations in connection with any
purchases.
Since we have only limited systems, hardware, software, equipment and
appliances given our phase of development, we do not believe that the total cost
for Year 2000 compliance will be material.
We cannot, however, 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 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 compliance. However, virtually all of these purchases are recent
acquisitions or we have had assurance from service providers that they are Year
2000 compliant. As a result of these factors, our contingency plan is primarily
focused on locating back-up suppliers and service providers for critical
systems. For example, while we believe our current local web hosting provider is
Year 2000 compliant since we have confirmations from them, we have arranged
back-up service from another web-hosting provider from whom we also received
compliance confirmation. In addition, in order to minimize potential adverse
Year 2000 compliance problems, we have established certain procedures.
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These procedures include designating our primary information technology officer
to identify, correct, test and implement solutions to Year 2000 problems as they
arise. In addition, we have also added additional inventory of products and
components to allow us to remain operational, if third-party vendors incur Year
2000 problems. We do not have any other contingency plans to address Year 2000
issues and we do not intend to do so.
If our software and computer systems and those of our third-party
suppliers should fail to be Year 2000 compliant, it would have a material
adverse effect on us. A significant disruption of the ability of consumers to
reliably access the Internet or portions of it or to use their credit cards
would have a material negative effect on demand for our products and services
and would have a material adverse effect on us. A reasonable worse case Year
2000 scenario could involve a major failure of our material systems or our
vendors' material systems or failure of the Internet to be Year 2000 compliant.
These could have material adverse consequences for us. These consequences would
include difficulties or interruptions in operating our website effectively,
taking customer orders, processing orders, making deliveries or conducting other
fundamental parts of our business.
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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
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methods for online retailers to connect with their customers and for advertisers
to reach highly targeted markets.
THE NEW AGE POPULATION AND MARKET
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
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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, 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
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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.
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.
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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
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.
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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 first part of January 2000. 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 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(R) or Netscape's Navigator(R). 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.
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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 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.
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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 wholesale to
other retailers, both on and offline. Products will be shipped from our
warehouse
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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 twelve full-time employees. Four persons
are in management and provide services in the areas of marketing and business
development, finance and technology, one person is in administration, six
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 29, 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.
26
<PAGE>
LITIGATION
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. 42 Chairman and Chief Executive Officer
Dr. Kenneth Shenkman 34 President and Director
Stanley Siegel 67 Chief Financial Officer, Secretary,
Treasurer and Director
Cory W. Smith 29 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:
DATES AND POSITION BUSINESS OR ACTIVITY
<TABLE>
<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:
27
<PAGE>
<TABLE>
<S> <C>
September 1997 - April 1999-Consultant As independent consultant, Dr. Shenkman
has been an independent computer and
Internet consultant and trainer.
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
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
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.
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. This committee will also be composed of
designees of Member Net or other independent directors added to our Board of
Directors.
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. 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. 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.
29
<PAGE>
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. 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 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.
Until an independent compensation committee is formally established to
administer the above bonus program, no bonus will be paid to these executives
for the initial year under their contracts unless the following objective
criteria are met. The bonus will be based as follows:
o At least 10,000 new member sign-ups by March 31, 2000;
o At least six communities (these are unique content areas or
subjects of interest) are available at our website;
o e-commerce capabilities are introduced with at least 5,000
products available for sale;
o Availability of live see and hear psychics at our website;
o At least ten merchant-owned "mini-shops" opened;
o At least three other company-owned websites are up and
running.
In the event that any of these six criteria are not met, the amount of
the bonus will be reduced by 16.7% from the maximum allowed. If for some reason
an independent compensation committee is not organized by the second year of the
employment contract, then the criteria for earning the bonus will be doubled.
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
30
<PAGE>
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 as of December 15, 1999 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 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. As of December 15,
1999, there were 3,599,749 shares of our common stock issued and outstanding.
This does not include the 850,000 shares of our common stock issuable to the
selling security holders upon the exercise of the warrants, 2,500,000 shares and
warrants to purchase 1,000,000 shares to be 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 stockholders if that acquisition
is completed.
31
<PAGE>
Names and Address of Number of shares Percentage of shares
Beneficial Owner Beneficially Owned Beneficially Owned
- ---------------- ------------------ ------------------
Joseph Ardito 1,220,000 (1) 33.9%
Kenneth Shenkman 369,500 (2) 10.3%
Stanley Siegel 90,000 (3) 2.5%
Q-Sound Labs 525,000 (4) 14.6%
James Warner 225,000 (5) 6.3%
All executive officers and
directors as a group (3 persons) 1,679,500 46.7%
- -----------------
(1) 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.
(2) 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.
(3) 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.
(4) Does not include warrants to purchase 15,000 shares of our common stock
issued to David Gallagher, President of Q-Sound Labs.
(5) Mr. Werner's address is 4910 Blue Lake Drive, Boca Raton, Florida
33431. These include 200,000 shares of Vertacon Corporation for which
he had sole voting and dispositive authority.
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. Since at
organization, Psychicnet had no value and newagecities.com had highly limited
value at the time newagecities.com acquired the stock of Psychicnet from our
current management, we believe that the share issuance was fair and reasonable
to us.
Mr. Ardito also transferred 400,000 shares of common stock to Q-Sound
Labs valued at $1.60 per share in exchange for Q-Sound software licenses. 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.
Since this
32
<PAGE>
transaction was the result of arms-length bargaining and the price per share of
$1.60 for restricted stock corresponded to our stock offering under Rule 504 of
$2.00, we believe this transaction was fair and reasonable.
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. Since our current
management was not involved with the original company (which changed its name to
newagecities.com, Inc. following the acquisition), it is difficult to evaluate
whether this transaction was fair to shareholders. However, since newagecities
had only nominal value at this time, we believe that the transaction was fair
and reasonable.
During March and June 1999, we issued 6,000 shares of our common stock
to the parents of Dr. Shenkman for $12,000 or $2.00 per share as part of our
Rule 504 offering.
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, it is difficult 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. However, given the above
circumstances, and the difficulties in developing a start-up operation facing
large hurdles, we believe these transactions were fair and reasonable to
newagecities.com.
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.
On December 21, 1999, we issued promissory notes in the principal
amount of $1,041,300 under Regulation S to non-U.S. investors and received net
proceeds of $952,498. The notes mature April 30, 2000. The notes are convertible
into 822,700 shares of our common stock. Units of the notes representing a
principal amount of $801,000 are secured by a pledge of 650,000 shares by two of
the principal officers of newagecities.com. Thomson Kernaghan & Co. Limited,
which acquired $801,000 principal amount of promissory notes for itself as well
as agents for other non-U.S. investors, received a commission of $80,100 and
also received a warrant to purchase 150,000 shares of our common stock
exercisable at $2.50 per share on or
33
<PAGE>
prior to December 21, 2002. In addition, if during this exercise period, our
common stock trades for less than $1.26 for 20 consecutive trading days, then we
must also issue an additional warrant to purchase 150,000 shares during the same
exercise period at the same exercise price. The investor for units of promissory
notes in the principal amount of $240,300 received warrants to purchase 50,000
shares of our common stock for the same term and at the same exercise price, but
without the additional warrant. We are obligated to register all of the
underlying shares by April 30, 2000. If we do not, then we are to pay a penalty
equal to 2% of the invested amount for each month after April 30.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 45,000,000 shares of common
stock, $.02 par value per share. On December 15, 1999, there were 3,599,749
shares of common stock issued and outstanding. As of December 15, 1999, there
are no shares of preferred stock authorized or outstanding. Also as of this
date, there are warrants to purchase 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.
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:
34
<PAGE>
Title
- -----
Exercise Price: $2.25 per share
Expiration Date: June 30, 2001
Voting Rights: None
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.
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.
35
<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 850,000 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 $1,875,000 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 (See Q-Sound Labs) 540,000 540,000 - -
Richard Galterio 25,000 25,000 - -
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 - -
H. Eugene Graves 6,000 6,000 - -
</TABLE>
36
<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>
William Jackson 3,000 3,000 - -
Gad and Marlene Janay 3,000 3,000 - -
Marc Janis 1,500 1,500 - -
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 67,000 67,000 - -
Johnny Mitchell 10,000 10,000 - -
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 - -
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 225,000 225,000 - -
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 - -
River City Trading Company 50,000 50,000 - -
First Level Capital 16,000 16,000 - -
Virtacon Corporation 200,000 200,000
</TABLE>
- -----------------------
*Less than one percent.
37
<PAGE>
Q-Sounds Labs is a Canadian corporation whose Chief Executive Officer
is David Gallagher. He has sole voting and dispositive authority with respect to
these shares.
Atlas, Pearlman, Trop & Borkson, P.A., is securities counsel for
Newagecities.com and presently consists of 16 partners, who collectively have
voting and dispositive responsibilities for the securities.
Blue Waters Partners, Inc. is a partnership whose two partners are
Scott Eskew and Sean Eskew who have shared voting and dispositive
responsibilities for the securities.
Delphi Consulting Corp. is a corporation whose principal shareholder
and chief executive officer is Gary Galbraith. He has sole voting and
dispositive authority with respect to these shares. River City Trading Company
is a corporation whose principal shareholder and chief executive officer is Gary
Galbraith. He has sole voting and dispositive authority with respect to these
shares.
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. Al Mirman has sole voting and dispositive authority
with respect to these shares. He is the husband of Ilene Mirman.
Virtacon Corporation is a corporation whose principal executive
officers and equity owners are Tom Payne, John Ramsey, Michael Simmons and James
Warner. James Warner has sole voting and dispositive authority with respect to
these shares.
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.
38
<PAGE>
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.
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 up to 2,050,000 shares that will be received
upon exercise of warrants described eleswhere 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 and up to 822,700 shows to be issued
upon exercise of convertible promissory notes issued on December 21, 1999. 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, 800,000
shares are included in this prospectus. The remaining restricted shares will
become eligible for sale commencing in March 2000.
39
<PAGE>
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
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.
40
<PAGE>
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.
41
<PAGE>
NEWAGECITIES.COM, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
newagecities.com, Inc.:
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-F-24
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.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 3 to
the consolidated financial statements the Company has an accumulated deficit of
approximately $1,000,000 at September 30, 1999, and has incurred significant
recurring operating losses which raise substantial doubt about its ability to
continue as a going concern without the raising of additional debt and/or equity
financing to fund operations. Management's plans in regard to these matters are
described in Note 3. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
October 14, 1999
F-2
<PAGE>
NEWAGECITIES.COM, INC.
----------------------
(A Development Stage Enterprise)
--------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
SEPTEMBER 30, 1999
------------------
ASSETS
------
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
=========
See notes to consolidated financial statements.
F-3
<PAGE>
NEWAGECITIES.COM, INC.
----------------------
(A Development Stage Enterprise)
--------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
FROM JANUARY 29,1999 (INCEPTION) TO SEPTEMBER 30, 1999
------------------------------------------------------
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
===========
See notes to consolidated financial statements.
F-4
<PAGE>
NEWAGECITIES.COM, INC.
----------------------
(A Development Stage Enterprise)
--------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
<TABLE>
<CAPTION>
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> <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>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
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-7
<PAGE>
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.
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.
F-8
<PAGE>
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.
2. FURNITURE AND EQUIPMENT
-----------------------
Furniture and equipment are as follows:
Estimated Life
--------------
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
========
3. BASIS OF PRESENTATION
---------------------
The Company has an accumulated deficit of approximately $1,000,000 at
September 30, 1999, and has incurred significant recurring operating losses
which raise substantial doubt about its ability to continue as a going
concern without the raising of additional debt and/or equity financing to
fund operations. Management is actively pursuing new debt and/or equity
financing and continually evaluating the Company's profitability, however
any results of their plans and actions cannot be assured. The consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
4. 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
F-9
<PAGE>
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.
5. COMMITMENTS
-----------
The Company leases certain office and warehouse space under operating
leases commencing December 1999. The leases expires April 2002.
Minimum rental commitments are as follows:
2000 $ 44,000
2001 $ 46,000
2002 $ 48,000
2003 $ 51,000
2004 $ 53,000
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 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. Prior to the
establishment of an independent compensation committee the bonuses are
based on certain performance criteria. After the committee is formed the
bonuses will be at the discretion of the committee.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.
6. 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:
F-10
<PAGE>
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 $ --
=============
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:
Tax benefit of net operating loss carryforward $ 136,000
Valuation Allowance (136,000)
===========
Net deferred tax asset recorded $ --
===========
7. 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.
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.
F-11
<PAGE>
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.
8. STOCK WARRANTS
--------------
A summary of outstanding warrants at September 30, 1999 are as follows:
Shares
Underlying Exercise
Warrants Price
------------- ---------
Outstanding at beginning of period -- $ -
Granted 1,000,000 2.25
Exercised -- -
============ =========
Outstanding at September 30, 1999 1,000,000 $ 2.25
============ =========
9. 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.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
August 9, 1999
F-13
<PAGE>
MEMBER NET, INC.
----------------
BALANCE SHEET
-------------
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 465 $ -
OTHER ASSETS 900 -
------- ------
$ 1,365 $
======= ======
LIABILITIES AND STOCKHOLDERS' 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>
MEMBER NET, INC.
----------------
STATEMENT OF OPERATIONS
-----------------------
<TABLE>
<CAPTION>
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>
MEMBER NET, INC.
----------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
JANUARY 1, 1998 THROUGH SEPTEMBER 30, 1999
------------------------------------------
<TABLE>
<CAPTION>
Common Stock
----------------------------------- Total
Number of Accumulated Stockholders'
shares Amount Deficit Equity
------------- ------------- ---------------- -----------
<S> <C> <C> <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>
MEMBER NET, INC.
----------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
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. Revenue Recognition - The Company's revenues from advertisements
placed on the MBSN website are recognized at the time advertisements
are displayed on the MBSN website. Revenues from the sale of products
are recorded when the goods are shipped or transmitted via E-mail.
F-18
<PAGE>
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.
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>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
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 -- -- 4,949,235 4,949,235
Deposits and other assets 13,141 900 300,000 314,041
----------- ----------- ----------- -----------
Total assets $ 915,749 $ 1,365 $ 5,249,235 $ 6,166,349
=========== =========== =========== ===========
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 -- 5,200,000 7,017,255
Stock subscription receivable (300) -- -- (300)
Accumulated deficit (998,933) (135) 135 (998,933)
----------- ----------- ----------- -----------
Total stockholders' equity 890,017 765 5,249,235 6,140,017
----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity $ 915,749 $ 1,365 5,249,235 $ 6,166,349
=========== =========== =========== ===========
</TABLE>
See notes to unaudited pro forma consolidated financial statements
F-21
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period January 1, 1999 to September 30, 1999
----------------------------------------------------
<TABLE>
<CAPTION>
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) 1,237,309 2,243,032
Other income -- 14,699 (2) (14,699) --
Interest Income 6,754 -- -- 6,754
----------- ----------- ----------- -----------
Pro forma net loss $ (998,933) $ (135) $(1,252,008) $(2,251,076)
=========== =========== =========== ===========
Net loss per common share
Basic $ (0.28) $ (0.37)
=========== ===========
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) 1,649,745 1,649,745
Other expense -- 14,556 (2) (14,556) --
----------- ----------- ------------
Pro forma net loss $ -- $ -- $ 1,635,189 $ (1,635,189)
=========== =========== =========== ============
Net loss per common share
Basic $ -- $ (0.65)
=========== ============
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 $2.00 (based on Reg D 504 offering during April 1999
of $2.00). 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 $4,949,235. The computation is as follows:
Assets acquired $ 301,365
Liabilities assumed 600
-----------
Net book value 300,765
-----------
Purchase price:
Common stock 5,000,000
Warrants 250,000
----------
Total purchase price 5,250,000
-----------
Goodwill $ 4,949,235
===========
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>
C. Member Net, Inc. has the following commitments:
Member Net, Inc. has 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.
Member Net, Inc. has entered into three one year consulting agreements
commencing on the consummation of the merger between New Age and Member Net
for a total of $30,000.
F-24
<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.
II-1
<PAGE>
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. 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 valued at approximately $2,208 to its former President as
repayment for debts of newagecities.com paid personally by the President and in
consideration for services rendered valued at approximately $10,000. 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 valued at approximately $12,079 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
II-2
<PAGE>
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 valued nominally
(since there were no assets or operations of Psychicnetic.com at that time) 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 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 shares in consideration for services rendered valued at
$400,000[?].
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 or a total of $160,000 to a consultant in
consideration for her agreeing to serve as a spokesperson for newagecities.
These services were valued at $160,000. 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.
II-3
<PAGE>
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.
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.
In December 1999, we issued promissory notes in the total principal
amount of $1,041,300 and received net proceeds of $952,498 from two, non-U.S.
investors under Regulation S of the Securities Act of 1933. The investors also
received warrants to purchase a total of 200,000 shares of our common stock with
the possible issuance of an additional warrant exercisable for an additional
150,000 shares based on the trading price of our common stock over the term of
the warrants. The placement agent for certain of the investors received a 10%
fee or $80,100 and also received a warrant to purchase 150,000 shares and the
contingent warrant described above, the investor for $240,300 of notes received
a warrant for 50,000 shares. Since all of the investors participating in the
transaction were non-U.S. investors and provided representations and covenants
(as did newagecities.com) which restricted any transfers to investors in the
U.S. and acknowledged other restrictions relevant to the Securities Act of 1933,
the transaction was effected in accordance with Regulation S under the
Securities Act of 1933.
II-4
<PAGE>
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.
10.10 Form of Subscription Agreement, Note and Registration Rights Agreement; Warrants
and Stock Pledge Agreement.*
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:
(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;
II-5
<PAGE>
(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-6
<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 January 4, 2000.
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 January 4, 2000
- ---------------------- Executive Officer and Director
Joseph Ardito, Jr. (Principal Executive Officer)
/s/ KENNETH SHENKMAN President and Director January 4, 2000
- --------------------
Kenneth Shenkman
/s/ STANLEY SIEGEL Chief Financial Officer, January 4, 2000
- ------------------ Secretary and Treasurer
Stanley Siegel (Principal Accounting and
Financial Officer)
</TABLE>
II-7
NEWAGECITIES.COM, INC., INC.
----------------------------
Subscription Procedure
----------------------
Each prospective investor for the Units will be required to complete,
execute and return to the Company the following documents:
1. SUBSCRIPTION AGREEMENT: Please complete all the open lines on page 1
and complete all open lines, date and sign on page 5.
2. PURCHASER QUESTIONNAIRE: Please complete, date and sign the
Purchaser Questionnaire attached to the Subscription Agreement. All items on
pages i-iv need to be completed.
3. The minimum investment is two (2) Units ($240,300), subject to
acceptance by the Company of subscriptions for lesser or fractional amounts of
Units.
4. Return the completed forms with payment in full by check of $120,150
per Unit subscribed for payable to "NEWAGECITIES.COM, INC."
<PAGE>
SUBSCRIPTION AGREEMENT
----------------------
NEWAGECITIES.COM, INC., INC.
1181 South Rogers Circle
Suite 5
Boca Raton, FL 33487
Gentlemen:
The undersigned is writing to advise you of the following terms and
conditions under which the undersigned hereby offers to subscribe (the "Offer")
for Units (the "Units") of Convertible Promissory Notes (the "Notes"), which are
convertible into common stock, par value $.02 per share (the "Common Stock"), of
NEWAGECITIES.COM, INC.,(the "Company"), at a price of $120,150 per Unit. Each
Unit consists of one (1) Note in the principal amount of $120,150. The minimum
investment is for two Units ($240,300), subject to the right of the Company to
accept subscriptions for a lesser or fractional amount of Units.
1. Subscription.
Subject to the terms and conditions hereinafter set forth in
this Subscription Agreement, the undersigned hereby offers to purchase ____
Unit(s) for an aggregate purchase price of $__.
If the Offer is accepted, the Unit(s) shall be paid for by the
delivery of $____ by cash, check, money order payable to the order of
"NEWAGECITIES.COM, INC.", or by wire transfer pursuant to your written wire
instructions, which is being delivered contemporaneously herewith.
2. Conditions to Offer.
The offering is made subject to the following conditions: (i)
that you shall have the right to accept or reject this Offer, in whole or in
part, for any reason whatsoever; and (ii) that the undersigned agrees to comply
with the terms of this Subscription Agreement and to execute and deliver any and
all further documents necessary to become a security holder in the Company.
The offering period for the Units is through December 24,
1999, although the Company, in its sole discretion, may extend the termination
date.
Acceptance of this Offer shall be deemed given by the
countersigning of this Subscription Agreement on behalf of the Company.
<PAGE>
3A. Representations and Warranties of the Undersigned.
The undersigned, in order to induce the Company to accept this
Offer, hereby warrants and represents as follows:
(A) The undersigned has sufficient liquid assets to sustain a
loss of the undersigned's entire investment.
(B) The undersigned represents that he (or she or it) has
assets in excess of $10,000,000 in the case of institutions, or net
worth in excess of $5,000,000 or annual income exceeding $1,000,000 in
the case of individuals.
(C) The Company has not made any representations or warranties
to the undersigned with respect to the Company except as contained
herein or included in the Company's public information filed with the
Securities and Exchange Commission.
(D) The undersigned represents that he is a highly
sophisticated investor and has substantial knowledge and experience in
financial, investment and business matters so that he is capable of
evaluating the merits and risks of the prospective investment in the
securities of the Company. The undersigned has consulted with such
independent legal counsel or other advisers as he has deemed
appropriate to assist the undersigned in evaluating his proposed
investment in the Company.
(E) The undersigned represents that he (i) has adequate means
of providing for his current financial needs and possible personal
contingencies, and has no need for liquidity of investment in the
Company; (ii) can afford (a) to hold unregistered securities for an
indefinite period of time and (b) sustain a complete loss of the entire
amount of the subscription; and (iii) has not made an overall
commitment to investments which are not readily marketable which is
disproportionate so as to cause such overall commitment to become
excessive.
(F) The undersigned has been afforded the opportunity to ask
questions of, and receive answers from the officers and/or directors of
the Company acting on its behalf concerning the terms and conditions of
this transaction and to obtain any additional information, to the
extent that the Company possesses such information or can acquire it
without unreasonable effort or expense, necessary to verify the
accuracy of the information furnished; and has availed himself of such
opportunity to the extent he considers appropriate in order to permit
him to evaluate the merits and risks of an investment in the Company.
It is understood that all documents, records and books pertaining to
this investment have been made available for inspection, and that the
books and records of the Company will be available upon reasonable
notice for inspection by investors during reasonable business hours at
its principal place of business.
2
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(G) The undersigned acknowledges that the Units and the
underlying securities have not been registered under the Securities Act
of 1933 (the "Act") in reliance on an exemption for transactions by an
issuer in an offshore transaction as defined in SEC Rule 902(h) that is
exempt from the registration requirements of Section 5 of the Act
pursuant to the safe harbor provided by SEC Regulation S. With respect
to that exemption, the Undersigned further represents and warrants to
the Company that:
(1) The Undersigned is not a U.S. Person as defined in SEC
Rule 902(k).
(2) The offer to sell the Shares to the Undersigned was not
made in the United States, and was made in Toronto, Ontario.
(3) The Undersigned's buy order for the Shares was made
outside the United States, and was made in Toronto, Ontario.
(4) The Undersigned has complied with all of the conditions
required of it by SEC Rule 903(b)(3).
(5) At no time was the undersigned presented with or solicited
by or through any leaflet, public promotional meeting, television advertising or
any other form of general solicitation or advertising, or any solicitation in
the United States.
(H) The undersigned further acknowledges that this offering
has not been passed upon or the merits thereof endorsed or approved by
any state or federal authorities.
(I) The Units and the underlying securities being subscribed
for are being acquired solely for the account of the undersigned for
personal investment and not with a view to, or for resale in connection
with, any distribution except as may be permitted by federal and state
securities laws. By such representation, the undersigned means that no
other person has a beneficial interest in the Units or underlying
securities subscribed for hereunder, and that no other person has
furnished or will furnish directly or indirectly, any part of or
guarantee the payment of any part of the consideration to be paid to
the Company in connection therewith. The undersigned does not intend to
dispose of all or any part of the Units or underlying securities except
in compliance with the provisions of the Act and applicable state
securities laws, and understands that the Units are being offered
pursuant to a specific exemption under the provisions of the Act, which
exemption(s) depends, among other things, upon the compliance with the
provisions of the Act.
(J) The undersigned further represents and agrees that the
undersigned will not sell, transfer, pledge or otherwise dispose of or
encumber the Units or the underlying securities except pursuant to the
applicable rules and regulations under the Act or applicable state
securities laws, and prior to any such sale, transfer, pledge,
disposition or encumbrance, the undersigned will, upon request, furnish
the Company and its transfer agent with an opinion of counsel
satisfactory to the Company in form and substance that registration
under the Act and any applicable state securities laws is not required.
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(K) The undersigned hereby agrees that the Company may insert
the following or similar legend on the face of the certificates
evidencing shares of Common Stock, underlying the Notes if required in
compliance with the Act or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE. THESE SECURITIES ARE BEING OFFERED
PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM
IS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT) UNLESS
THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER WILL BE
PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS
IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE
AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT."
(L) The undersigned will not engage in any hedging
transactions as precluded by Regulation S under the Act.
The undersigned certifies that each of the foregoing
representations and warranties set forth in subsections (A) through (L)
inclusive of this Section 3 are true as of the date hereof and shall
survive such date.
3B. Representations and Warranties of the Company.
The Company, in order to induce the undersigned to make this
Offer, and by accepting this Offer, hereby warrants and represents to the
undersigned as follows:
(A) Organization and Qualification
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The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Idaho, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company is not qualified as a foreign corporation to do business
in any other jurisdiction. The Company has no subsidiaries.
(B) Authorization, Enforcement, Compliance with Other
Instruments.
(1) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, and to issue the Units, the
convertible note evidencing the Units, the common stock into which that note is
convertible, the warrant that is part of the Units, the registration rights
agreement with respect to the common stock underlying that note and warrant, and
all other documents to be delivered by the Company to the undersigned in
connection with this Offering (all of the foregoing, collectively, the
"Transaction Documents").
(2) the execution and delivery of the Transaction Documents by
the Company, and the consummation by it of the transactions contemplated hereby,
have been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its stockholders;
(3) the note and other Transaction Documents to be executed
and delivered by the Company will have been duly executed and delivered by the
Company and the persons signing on behalf of the Company have full power and
authority to do so; and
(4) the Transaction Documents constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, or similar laws relating to, or affecting generally,
the enforcement of creditors' rights and remedies.
(C) No Undisclosed Events, Liabilities, Developments, or
Circumstances
No suit, claim, event, liability, development, or circumstance
has occurred or exists, or is contemplated to occur, with respect to the Company
or its businesses, properties, prospects, operations, or financial condition,
which could be material but which has not been publicly announced or disclosed
in writing to the undersigned
(D) No General Solicitation
Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the Units.
(E) No Integrated Offering
5
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Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of the Units under the Securities
Act or cause this offering of the Units to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable stockholder
approval provisions.
(F) Internal Accounting Controls
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are executed in
accordance with management's general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (c) access to assets is permitted only in
accordance with management's general or specific authorization, and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(G) No Materially Adverse Contracts, Etc.
The Company is not subject to any charter, corporate, or other
legal restriction, or any judgment, decree, order, rule, or regulation which in
the judgment of the Company's officers has, or is expected in the future to
have, a material adverse effect on the business, properties, operations,
financial condition, results of operations, or prospects of the Company. The
Company is not a party to any contract or agreement which in the judgment of the
Company's officers has, or is expected to have, a material adverse effect on the
business, properties, operations, financial condition, results of operations, or
prospects of the Company.
(H) Tax Status
The Company has made or filed all federal and state income and
all other tax returns, reports, and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes), and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports, and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports,
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(I) Certain Transactions
6
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Except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers,
and directors), including any contract, agreement, or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director, or such employee or, to the knowledge of the Company, any
corporation, partnership, trust, or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee, or partner.
(J) Regulation S Exemption
The Company understands that the undersigned is purchasing the
Units in reliance on the exemption from the registration requirements of Section
5 of the Securities Act for offshore transactions as defined in SEC Rule 902(h),
and that the undersigned is relying in part upon the truth and accuracy of, and
the Company's compliance with, the representations, warranties, agreements,
acknowledgments, and understandings of the Company set forth herein in order to
determine the availability of such exemptions and the eligibility of the Company
to issue and sell the Units to the undersigned without having complied with
those registration requirements. With respect to that exemption, the Company
further represents and warrants to the Undersigned that:
(a) The Company has not offered any of the Units to a U.S.
Person (as defined in SEC Rule 902(k)) or to a person in the United States.
(b) The offer and sale of the Units to the undersigned is
being made in an offshore transaction as defined in SEC Rule 902(h).
(c) The Company has not engaged in any directed selling
efforts, as defined in SEC Rule 902(c), with respect to the Units.
(d) The Company has complied with all of the conditions
required of it under SEC Rule 902(b)(3).
4. No Waiver.
Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the undersigned, the undersigned
does not thereby or in any manner waive any rights granted to the undersigned
under federal or state securities laws.
5. Miscellaneous.
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<PAGE>
(A) All notices or other communications given or made
hereunder shall be in writing and shall be mailed by registered or certified
mail, return receipt requested, postage prepaid, or by international delivery
services such as DHL or Federal Express, to the undersigned at its address set
forth below and to NEWAGECITIES.COM, INC., Inc., 1181 South Rogers Circle, Suite
5, Boca Raton, FL 33487.
(B) This Subscription Agreement, together with the other
Transaction Documents constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by all parties.
(C) The provisions of this Subscription Agreement shall
survive the execution thereof.
6. Certification.
The undersigned certifies that it has read this entire
Subscription Agreement and that every statement on its part made and set forth
herein is true and complete in all material respects.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on the date his signature has been subscribed and sworn to below.
By ___________________________
Name _________________________
Title ________________________
Accepted as of the ___ day of December, 1999.
NEWAGECITIES.COM, INC., INC.
By:
Joseph Ardito, Jr., Chairman and
Chief Executive Officer
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<PAGE>
THIS NOTE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE, HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO
A SAFE HARBOR FROM REGISTRATION UNDER REGULATIONS S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED
AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH
TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES
ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER WILL BE
PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING
TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH
THE ACT.
8% CONVERTIBLE PROMISSORY NOTE
------------------------------
(This 8% Convertible Promissory Note is one of
a series of promissory notes of like tenor and terms)
December __, 1999. $
---------
FOR VALUE RECEIVED, the undersigned, NEWAGECITIES.COM, INC., an Idaho
corporation ("Maker"), hereby promises to pay to the order of ("Payee") the
principal sum of ________ ($____) with interest on the unpaid principal amount
at the rate of 8% per annum and on any overdue payment of principal or interest
at the rate of 10% per month (18% per annum), and with the principal balance and
all accrued interest being due and payable on April 30, 2000, all as hereinafter
provided.
This Note is being issued pursuant to a Confidential Term Sheet (the
"Term Sheet") and a Subscription Agreement relating thereto between the Maker
and the Payee and constitutes payment in full for ___ Units offered thereby.
1. Payments of Interest and Principal.
a. Interest. Maker shall pay interest to Payee on the unpaid
outstanding principal balance owed to Payee hereunder at the rate of 8% per
annum. Interest shall be payable at the time of maturity of this Note commencing
<PAGE>
as of the date of receipt of Payee's investment with the Maker pursuant to the
Term Sheet, through maturity at April 30, 2000.
b. Principal. Maker shall have no duty or obligation to pay
any portion of the outstanding principal owed hereunder, except as hereinafter
provided, until April 30, 2000. On April 30 , 2000 all accrued interest and
outstanding principal shall be due and payable, and shall be paid, to Payee.
c. Payments. All payments made hereunder shall be applied as
made first to the payment of interest then due, and the balance of said payment
shall be applied to the payment of the principal sum.
2. Place of Payment. So long as Payee shall hold this Note, all
payments of principal and interest shall be made at the principal office of
Payee, _____, as specified by Payee in writing upon presentment of this Note.
3. Conversion and Redemption.
a. Conversion. Until payment by the Maker, any or all of this
Note allocatable to the principal amount of $_____ is convertible by the Payee
into duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock, par value $.02, of the Maker commencing on the date of this Note,
at the rate of one share of each $1.50 of the Indebtedness, subject to such
adjustment(s), if any, set forth below. The first $300.00 of principal of this
note is convertible by the Payee into duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock, par value $.02, of the Maker
commencing on the date of this Note at the rate of one share of each $.02 of the
Indebtedness for a total of 15,000 shares, subject to such adjustments(s), if
any, set forth below. The Payee shall exercise the option to convert by sending
this Note and written election to such effect to the Maker's transfer agent,
which election shall specify the amount of Indebtedness to be converted as well
as which allocable portion of the Indebtedness is to be converted.
b. Adjustments. In the event that the outstanding Common Stock
of the Maker hereafter is restructured or revised by recapitalization,
reclassification, combination of shares, stock split or split-up or stock
dividend, the aggregate number and kind of Common Stock subject to conversion
under this Note shall be adjusted appropriately, both as to the number of shares
of Common Stock and the conversion price. No fractional shares will be issued
upon any conversion, but an adjustment therefor in cash will be made with
respect to any fraction of a share which would otherwise be issuable based upon
the market price for one share of the Maker's Common Stock on the trading day
immediately preceding any notice of conversion hereunder multiplied by such
fraction or, in the alternative, at the election of the Maker, the fractional
share may be rounded up to the nearest whole share.
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<PAGE>
c. Sale, Exchange, etc. In case of any sale, exchange, tender
offer, redemption or buyout of the Maker's shares, or any consolidation of the
Maker with or merger of the Maker into another corporation, or in case of any
sale, transfer or lease to another corporation of all or substantially all other
property of the Maker, the Maker or such successor or purchasing corporation, as
the case may be, shall execute with the Payee an agreement that the Payee shall
have the right thereafter, upon payment of the per share conversion price in
effect immediately prior to such action, to convert, on the same basis which it
would have or have been entitled to receive after the happening of such
consolidation, merger, sale, transfer or lease had such conversion been
accomplished immediately prior to such action. Such agreement shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided herein. These provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or leases. This right shall
terminate following notice by the Maker and failure of Payee to exercise the
option to convert as provided in subparagraph (a) above.
d. Covenants. The Maker covenants and agrees that: (i) all
shares of Common Stock delivered upon conversion (in accordance with the terms
and conditions set forth herein) of this Note will, upon delivery, be duly and
validly authorized and issued, fully paid and non-assessable and free from all
liens and charges with respect to the purchase thereof; and (ii) it will at all
times reserve and keep available an authorized number of shares of its Common
Stock sufficient to permit the exercise in full of all outstanding options,
warrants and rights, including the conversion rights under this Note.
4. Security. This Note is secured by _____ shares of Common Stock of
the Maker owned by certain executives of the Maker pursuant to the terms of
pledge agreement dated as of the date hereof.
5.1 Default and Remedies.
a. Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default"):
(1) Failure to Pay. Maker fails to pay, when due, any
of the obligations provided for in this Note at their due date, and such failure
continues unremedied for a period of two (2) days after written notice from
Payee to Maker of such failure.
(2) Denominated Events. The occurrence of any event
expressly denominated as an Event of Default in this Note;
(3) Failure to Perform. Maker fails to perform or
observe any material covenant, term or condition of this Note to be performed or
observed by Maker and such failure continues unremedied for a period of ten (10)
days after written notice from Payee to Maker of such failure;
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<PAGE>
(4) Petition By or Against Maker. 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 insolvency laws providing for the
relief of debtors and such petition or complaint is not set aside, stayed or
terminated within sixty (60) days after filing; or
(5) Appointment of Receiver. A receiver, trustee,
conservator or liquidator is appointed for Maker, or for all or a substantial
part of its assets; or Maker shall be adjudicated bankrupt, insolvent or in need
of any relief provided to debtors by any court and such appointment or
adjudication is not set aside, stayed or terminated within sixty (60) days after
filing.
5.2 Remedies. Upon the occurrence of an Event of Default and
for so long as such default is continuing:
(1) The total amount of (i) this Note and the other
outstanding promissory notes issued as part of this series and all other sums
which are (A) then due and unpaid or (B) thereafter to become due and payable;
and (ii) interest on the foregoing sums, at the rate of 10% per month from said
occurrence until paid in full (the "Default Amount") shall, at the option of
Payee, become immediately due and payable without notice or demand.
(2) Payee may exercise any of the other remedies
provided under applicable laws.
(3) Maker shall be liable for all costs, charges and
expenses incurred by Payees including reasonable attorney's fees, by reason of
the occurrence of any Event of Default or the exercise of Payees' remedies with
respect thereto.
6. Offshore Investment Intent. This Note is given to Payee with the
understanding that Payee is acquiring this Note and the underlying shares of
Common Stock in an offshore transaction as defined in S.E.C. Rule 902(h) and not
with a view to, for resale in connection with, or with an intent of
participating directly or indirectly in any distribution in the Unites States or
to U.S. persons as defined in S.E.C. Rule 902(k) within the meaning of the
Securities Act of 1933, as amended.
4
<PAGE>
7. Miscellaneous.
7.1 Waivers. No waiver of any term or condition of this Note
shall be construed to be a waiver of any succeeding breach of the same term or
condition. No failure or delay of Payee to exercise any power hereunder, or to
insist upon strict compliance by Maker of any obligations hereunder, and no
custom or other practice at variance with the terms hereof shall constitute a
waiver of the right of Payee to demand exact compliance with such terms. Maker
hereby waives demand, presentment, dishonor, and notice of dishonor of this
note.
7.2 Invalid Terms. In the event any provision contained in
this Note shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability 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.
7.3 Successors. This Note shall be binding upon Maker, its
legal representatives, successors and assigns, and inure to the benefit of
Payee, its legal representatives, successors and assigns.
7.4 Controlling Law. This Note shall be read, construed and
governed in all respects in accordance with the laws of the _________; provided
however that: if any provision of this note is invalid or unenforceable under
___ law but is enforceable under Florida law, then Florida law shall govern the
construction and enforcement of that provision. The Maker and Payee each (a)
agrees that any legal suit, action or proceeding arising out of or relating to
this Note shall be instituted exclusively in ____ (b) waives any objection which
the Maker or such Payee may have now or hereafter to the venue of any such suit,
action or proceeding, and (c) irrevocably consents to the in personam
jurisdiction in ____, in any such suit, action or proceeding. The Maker and
Payee each further agrees to accept and acknowledge service of any and all
process which may be served in any such suit, action or proceeding in ____ and
agrees that service of process upon the Maker or the Payee mailed by certified
mail to their respective addresses shall be deemed in every respect effective
service of process upon the Maker or the Payee, as the case may be, in any such
suit, action or proceeding.
7.5 Amendments. This Note may be amended only by an instrument
in writing executed by the party against which enforcement of the amendment is
sought.
7.6 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be sufficiently
given if addressed to the Maker at 1181 South Rogers Circle, Suite 5, Boca
Raton, Florida 33487 and to Payee at ____ in the Subscription Agreement executed
by Payee, posted by certified or registered mail, return receipt requested or by
international overnight delivery carrier such as Federal Express, etc.. Any
party may change said address by giving the other party hereto notice of such
change of address. Notice given as
5
<PAGE>
hereinabove described shall be deemed given on the date of its deposit in the
mail or delivered to the delivery service 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.
7.7 Construction of Terms. Whenever the context so requires,
any gender is deemed to include any other, and the singular is deemed to include
the plural, and conversely.
7.8 Time of Essence. Time is of the essence in this Note and
each and every provision hereof.
7.9 Headings. All section and subsection headings herein,
wherever they appear, are for convenience only and shall not affect the
construction of any terms herein.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its duly authorized officer and its seal affixed hereto, as of the day and
year first above written.
NEWAGECITIES.COM, INC.
By:____________________________
Name: _________________________
Its: __________________________
ATTEST:
By:_______________________
Secretary
6
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of December __, 1999, by and between newagecities.com, inc., an
Idaho corporation (the "Company"), and (the "Subscriber" or the "Holder").
Preliminary Statements
In connection with the Subscriber's purchase of the Company's 8%
Secured Convertible Promissory Note (the "Note") in the principal amount of
US$___ dated December __, 1999, pursuant to a Subscription Agreement in
connection therewith, and the consummation of the transactions contemplated
thereby, the Company has agreed, upon the terms and subject to the conditions of
the Note, at the option of the Subscriber or other holders of the Notes to
convert the Notes into shares of the Company's Common Stock (the "Conversion
Shares").
The Company has also agreed to issue to the Agent (or the Holder) a
Warrant (the "Agent's Warrant") to purchase ________ shares of the Company's
Common Stock (the "Warrant") (the "Agent's Warrant Shares") and to issue to the
Agent a Contingent Warrant (the "Agent's Contingent Warrant") to purchase and
additional 150,000 shares of the Company's Common Stock (the "Agent's Contingent
Warrant Shares").
The Warrant, the Agent's Warrant Shares and the Agent's Contingent
Warrant Shares are collectively referred to as the Warrant Shares. The
Conversion Shares and the Warrant Shares are hereinafter collectively referred
to as the "Registrable Securities."
To induce the Subscriber to purchase the Note, the Company has agreed,
pursuant to the terms and conditions of this Agreement, to provide certain
registration rights with respect to the Registrable Securities.
Agreement
In consideration of the foregoing, the mutual covenants and conditions
set forth in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to become legally bound, hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Agent" shall mean Thomson Kernaghan & Co. Limited.
"Agent's Contingent Warrant," "Agent's Contingent Warrant Shares,"
"Agent's Warrant" and "Agent's Warrant Shares" each shall have the meaning
ascribed to such term in the Preliminary Statements to this Agreement.
"Agreement" shall mean this Registration Rights Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Shares" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
"Company" shall mean newagecities.com Inc., an Idaho company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as in effect from time to time.
"Filing Deadline" shall have the meaning ascribed to such term in
Section 2.1 of this Agreement.
"Holder" or "Holders" shall mean (a) the Agent, or the Subscriber for
whom the agent may be acting for and (b) any Person holding Registrable
Securities as a transferee of the Agent or Subscriber (directly or indirectly,
including subsequent transfers).
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing with the Commission one or more
registration statements covering Registrable Securities in compliance with the
Registrable Securities Act that is declared or ordered effective by the
Commission.
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" Registrable Securities" shall mean the Conversion Shares and
theWarrant Shares and any shares of capital stock issued or issuable with
respect to the Conversion Shares and the Warrant Shares as a result of any stock
split, stock dividend, recapitalization, exchange or similar event; provided,
however, that such Registrable Securities shall cease to be Registrable
Securities when (a) a registration statement with respect to such Registrable
Securities shall have been declared effective under the Registrable Securities
Act and such Registrable Securities shall have been disposed of pursuant to the
registration statement, (b) such Registrable Securities are distributed to the
public pursuant to Rule 144(k) (or any successor provisions) promulgated under
the Securities Act or (c) such Registrable Securities shall have ceased to be
outstanding.
"Registration Deadline" shall have the meaning ascribed to such term in
Section 2.1 of this Agreement.
"Registration Expenses" shall mean all expenses incurred in order to
comply with Article II hereof, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and disbursements of one (1) counsel for the Holders,
blue sky fees and expenses, and the expense of any special audits incident to or
required by any such registration, but excluding the compensation of regular
employees of the Company (which shall be paid in any event by the Company) and
excluding Selling Expenses.
"Restricted Registrable Securities" shall mean Registrable Securities
that are "restricted Registrable Securities" as defined in Rule 144 under the
Securities Act.
"Registrable Securities" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.
"Securities Act" shall mean the Registrable Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as in effect from time to time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions incurred in connection with the sale of Registrable Securities
pursuant to a registration effected hereunder.
"Warrant Shares" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Loan
Agreement.
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ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Mandatory Registration.
(a) The Company shall prepare and file with the Commission
within sixty (60) days from the date of this Agreement (the "Filing
Deadline") a registration statement or registration statements (as is
necessary) covering the issuance and the resale of all of the
Registrable Securities. Such registration statement shall initially
register for resale at least ____ Conversion Shares, and ______
Warrant Shares. The Company shall use its best efforts to have the
registration statement declared effective by the Commission within one
hundred and twenty (120) days after the Filing Deadline (the
"Registration Deadline"). The Company shall permit the registration
statement to become effective within five (5) business days after
receipt of a "no review" notice from the Commission. Such registration
statement shall be kept current and effective for the greater of (i) a
period of at least three (3) years from the Closing Date and (ii) a
period of at least ninety (90) days after (x) all of the Notes shall
have been converted into Conversion Shares or paid in full, and (y) the
Agent's Warrant and the Agent's Warrant shall have been fully exercised
or expired. If a registration statement with respect to the Registrable
Securities is not effective on the Registration Deadline date, the
Company agrees to and shall pay the Agent liquidated damages equal to
the value of investment at the rate of 2% of the investment amount for
each month after April 30, 2000. These liquidated damages are payable
monthly,pro-rated for partial months, until the registration statement
is effective.
Section 2.2 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 2.1 shall be borne by the Company; and all Selling Expenses
in connection with such registration, qualification or compliance shall be borne
by the holders of the Registrable Securities so registered pro rata on the basis
of the number of shares so registered.
Section 2.3 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Article II,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense, the Company will:
(a) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Registrable Securities Act with
respect to the disposition of all Registrable Securities covered by
such registration statement;
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<PAGE>
(b) furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirement of the Registrable Securities Act, and such other documents
as they may reasonably request (including a conformed copy of the
registration statement filed with the Commission and any amendments
thereto and an original executed underwriting agreement entered into in
connection with such registration) in order to facilitate the
disposition of Registrable Registrable Securities owned by them;
(c) use reasonable efforts to register and qualify the
Registrable Securities covered by such registration statement under
such other Registrable Securities or blue sky laws of one (1)
jurisdiction (in addition to those jurisdictions in which the Company
has otherwise agreed to so register and qualify such Registrable
Securities) as shall be reasonably requested by the Holders, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions;
(d) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement with
the managing underwriter(s) of such offering; each Holder participating
in such underwriting shall also enter into and perform its obligations
under such underwriting agreement;
(e) notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and
(f) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Article II, on
the date that such Registrable Securities are delivered to the
underwriters for sale in connection with registration pursuant to this
Article II, if such Registrable Securities are being sold through
underwriters, or on the date that the registration statement with
respect to such Registrable Securities becomes effective, if such
Registrable Securities are not being sold through underwriters, (i) a
copy of any opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters of the Company, and (ii) a copy of any letter, dated such
date, from the independent accountants of the Company, addressed to the
underwriters of the Company.
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Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (f) of this Section 2.3, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of a supplemented or amended prospectus and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense), all copies, other
than permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities that was in effect prior to such amendment
or supplement. In the event the Company shall give any such notice, the period
set forth in clause (a) of this Section 2.3 shall be extended by the number of
days during the period from and including the date of the giving of such notice
pursuant to clause (e) of this Section 2.3 to and including the date when each
seller of Registrable Securities covered by such registration statement shall
have received the copies of a supplemented or amended prospectus.
Section 2.4 Indemnification.
(a) The Company will indemnify each Holder, each Holder's
officers, directors and partners, and each Person controlling such
Holder (collectively, "Holder's Parties"), participating in any
registration, qualification, or compliance effected pursuant to this
Article II with respect to Registrable Securities held by such Holder
and each underwriter, if any, and each Person who controls any
underwriter, against all claims, losses, damages and liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to which they
may become subject under the Registrable Securities Act, the Exchange
Act or other federal or state law, arising out of or based on (i) any
untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other similar
document (including any related registration statement, notification or
the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (ii) any violation by
the Company of any federal, state or common law rule or regulation
applicable to the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder's
Parties each such underwriter, and each Person who controls any such
underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss,
damage, liability or action, as incurred, provided that the Company
will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any
untrue statement or omission, made in reliance on and in conformity
with written information furnished to the Company by such Holder's
Parties or underwriter or Person controlling such underwriter
specifically for use in the preparation thereof.
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(b) Each Holder will, if Registrable Securities held by such
Holder are included in the Registrable Securities as to which such
registration, qualification or compliance is being effected, severally
and not jointly, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company Registrable
Securities covered by such a registration statement, and each Person
who controls the Company or such underwriter within the meaning of the
Registrable Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on
(i) any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other similar document, or any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such directors, officers, Persons,
underwriters or control Persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, as incurred, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made
in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with the written
information furnished to the Company by such Holder specifically for
use in the preparation thereof, or (ii) any violation by any such
Holder of any federal, state or common law rule or regulation
applicable to such Holder in connection with the distribution of
Registrable Securities pursuant to a registration statement, and will
reimburse the Company, such Holders, such directors, officers, Persons,
underwriters or control Persons for any legal any other expenses
reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, as incurred; provided,
however, that the obligations of each such Holder hereunder shall be
limited to an amount equal to the aggregate proceeds received by such
Holder in such offering.
(c) Each party entitled to indemnification under this Section
2.4 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has received written notice of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party
to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be
withheld). The Indemnified Party may participate in such defense at
such party's expense; provided, however, that the Indemnifying Party
shall bear the expense of such defense of one counsel representing the
Indemnified Party if representation of both parties by the same counsel
would be inappropriate due to actual or potential conflicts of
interest. The failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 2.4, except to the extent such failure
to give notice shall materially and adversely prejudice the
Indemnifying Party in the defense of any such claim or any such
litigation. No Indemnifying Party, in the defense of any such claim or
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litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(d) (i) If the indemnification provided for in this Section
2.4 is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any loss,
liability, claim, damage or expense referred to herein, then
the Indemnifying Party hereunder shall contribute to the
amount paid or payable by such Indemnified Party as a result
of such loss, liability, claim, damage or expense, in such
proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and the Indemnified
Party on the other hand in connection with the statements or
omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party
and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a
material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the
parties' relevant intent, knowledge, access to information and
opportunities to correct or prevent such statement or
omission.
(ii) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 2.4 were
determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
considerations referred to above. The amount paid or payable
by an Indemnified Party as a result of the claims, losses,
damages and liabilities referred to above shall be deemed to
include, subject to the limitations set forth above, any legal
or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such
action or claim.
(iii) No Holder that is a seller of Registrable
Securities covered by such registration statement or Person
controlling such seller other than the Company shall be
obligated to make contribution hereunder that in the aggregate
exceeds the total public offering price of the Registrable
Securities sold by such Holder, less the aggregate amount of
any damages that such Holder and its controlling Persons have
otherwise been required to pay pursuant to this Section 2.4.
The obligations of such Holders to contribute are several in
proportion to their respective ownership of the Registrable
Securities covered by such registration statement and not
joint.
(iv) The indemnity and contribution provided herein
shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
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Section 2.5 Information by Holder. Each Holder of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Article
II.
Section 2.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission that may at any time
permit the sale of the Restricted Registrable Securities to the public without
registration, the Company agrees to:
(a) use its best efforts to facilitate the sale of the
Restricted Registrable Securities to the public without registration
under the Registrable Securities Act, pursuant to Rule 144 under the
Registrable Securities Act;
(b) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Registrable Securities
Act, at all times after the effective date of the first registration
statement filed by the Company for an offering of its Registrable
Securities to the general public;
(c) file with the Commission in a timely manner all reports
and other documents required of the Company under the Registrable
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements); and
(d) so long as a Holder owns any Restricted Registrable
Securities to furnish to the Holder forthwith upon request a written
statement by the Company as to its compliance with the public
information requirements of said Rule 144, and the reporting
requirements of the Registrable Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed by the Company as a Holder
may reasonably request in availing itself of any rule or regulation of
the Commission allowing a Holder to sell any such Registrable
Securities without registration.
Section 2.7 Transfer of Registration Rights. The rights granted under
this Article II may be assigned or otherwise conveyed by any Holder of
Registrable Securities to any transferee, subject to compliance with all
applicable Registrable Securities laws and regulations.
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Section 2.8 Certain Limitations in Connection with Future Grants
of Registration Rights.
From and after the date of this Agreement, without the prior written
consent of the Holders of a majority of the Registrable Securities, the Company
shall not enter into any agreement with any holder or prospective holder of any
Registrable Securities of the Company providing for the granting to such holder
of registration rights that would be superior to those granted to Holders
pursuant to Section 2.1.
Section 2.9 Restrictions on Market Manipulation. In the event any
shares of Common Stock are offered or sold by any Holder in a registration, each
such Holder will:
(a) advise the Company in writing of any offer, sale or other
disposition by it of any Common Stock in any manner other than as set
forth in the registration statement or any prospectus included therein
on or for the 30-day period prior to the filing of such registration
statement until the distribution under the registration statement has
been completed;
(b) not effect any stabilization activity in connection with
the Company's Common Stock;
(c) not bid or purchase, for any account in which it has a
beneficial interest, any Common Stock except as may be permitted
pursuant to Rule 10b-6 under the Exchange Act (if applicable);
(d) not until it has sold all of such shares of Common Stock,
attempt to induce any Person to purchase any Common Stock except as may
be permitted pursuant to Rule 10b-6; and
(e) not until it has sold all such shares of Common Stock, pay
any compensation for soliciting another to purchase any Registrable
Securities of the Company, except as may be permitted pursuant to Rule
10b-6.
ARTICLE III
MISCELLANEOUS
Section 3.1 Governing Law; Jurisdiction and Venue. This Agreement shall
be governed by and interpreted in accordance with the laws of the State of
Florida; provided, however, that if any provision of this Agreement is
unenforceable under the laws of the State of Florida, but is enforceable under
the laws of _____, then such provision shall be governed by and interpreted in
accordance with the laws of the _____. The parties agree that the courts of
_____, shall have exclusive jurisdiction and venue for the adjudication of any
civil action between them arising out of relating to this Agreement, and hereby
irrevocably consent to such jurisdiction and venue.
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Section 3.2 Successors and Assignees. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assignees, heirs, executors and administrators (as the
case may be) of the parties hereto.
Section 3.3 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 3.4 Notices, etc. All notices given under this Agreement and
under the other Loan Documents shall be in writing, addressed to the parties as
set forth below, and shall be effective on the earliest of (i) the date
received, or (ii) if given by facsimile transmittal on the date given if
transmitted before 5:00 p.m. the recipient's time, otherwise it is effective the
next day, or (iii) on the second business day after delivery to a major
international air delivery or air courier service (such as Federal Express or
Network Couriers):
<TABLE>
<CAPTION>
<S> <C> <C>
If to the Subscriber: If to the Company:
newagecities.com, inc.
1181 South Rogers Circle, Suite 5
Boca Raton, Florida 33487
Attention: Joe Ardito, Jr., CEO
Facsimile No. (561) 989-9404
</TABLE>
Section 3.5 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any Holder of any Registrable Securities,
upon any breach or default of the Company under this Agreement, shall impair any
such right, power or remedy of such Holder nor shall it be construed to be a
waiver of any such breach or default or an acquiescence therein or of or in any
similar breach or default thereunder occurring nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Holder of any breach or default under
this Agreement or any waiver on the part of any Holder of any provisions or
conditions of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any Holder shall be cumulative
and not alternative.
Section 3.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts and all of which together shall constitute one
instrument.
Section 3.7 Severability. In the event any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 3.8 Amendments. The provisions of this Agreement may be amended
at any time and from time to time, and particular provisions of this Agreement
may be waived, with and only with, an agreement or consent in writing signed by
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the Company and by the Holders of a majority of the Registrable Securities
voting as a single class.
The parties have executed this Registration Rights Agreement as of the
date first written above.
The Subscriber: The Company:
[Insert Subcriber Information] NEWAGECITIES,COM, INC.
By _____________________________
Name ___________________________
Title __________________________
Date signed_____________________
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WARRANT
WARRANT
Warrant No. 60
Void after 5:00 p.m. _____, on December __, 2005
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER WILL BE PROVIDED WITH OPINION OF COUNSEL
OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
-------------------------------------------------------------
WARRANT TO PURCHASE _______ SHARES OF COMMON STOCK
OF
NEWAGECITIES.COM, INC.
----------------------------------------------------------------
<PAGE>
This it to certify that, FOR VALUE RECEIVED, _______________________
or assigns ("Holder") is entitled to purchase, subject to the provisions of this
Warrant, from NEWAGECITIES.COM, INC., an Idaho corporation (the "Company"), the
fully paid, validly issued and non-assessable shares of Common Stock, $0.02 par
value, of the Company ("Common Stock") at any time or from time to time during
the period from the date hereof, through and including June 30, 2005, but not
later than 5:00 p.m. Toronto, Ontario time, on June 30, 2005 (the "Exercise
Period"), at the price of US$2.50 per share (the "Exercise Price"). The total
number of shares of Common Stock to be issued upon exercise of this Warrant
shall be _______ shares. The price to be paid for each share of Common Stock may
be adjusted from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the respective
exercise price of a share of Common Stock in effect at any time and as adjusted
from time to time is hereinafter sometimes referred to as the "Exercise Price."
The Company has agreed to register the issuance and resale of the
Common Stock issuable upon exercise of this Warrant under the U.S. Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Rights Agreement between the Company and the Holder of even date herewith.
In addition, as an alternative to payment of the aggregate exercise
price in accordance with the preceding paragraphs, but only in the event that
the issuance and resale of the Warrant Shares are not subject to a current
effective registration statement under the Securities Act, then the Holder may
elect to effect a cashless exercise by so indicating on the Exercise Form 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 Warrant
Shares for which this warrant is being exercised by the result obtained from
subtracting the exercise price in effect at such time from the closing price for
the Common Stock on the principal market for the Common Stock on the date
preceding the date of exercise.
A. EXERCISE OF WARRANT
This Warrant may be exercised in whole or in part at any time or from
time to time during the Exercise Period; provided, however, that (i) if the last
day of the Exercise Period is a day on which banking institutions in the City of
Toronto are authorized by law to close, then the Exercise Period shall terminate
on the next succeeding day that shall not be such a day, and during such period
the Holder shall have the right to exercise this Warrant into the kind and
amount of shares of stock and other securities and property (including cash)
receivable by a holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant may
be exercised by presentation and surrender hereof to the Company at its
principal office, with the Exercise Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Escrow Holder shall, to the extent that the Company has deposited shares of
Common Stock with the Escrow Holder for that purpose, issue and deliver to the
Holder a certificate or certificates for the designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of Warrant Shares purchasable thereunder.
Upon receipt by the Company of this Warrant at its principal office, or by the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be physically delivered to the Holder.
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THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT), (ii) IF NOT
EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S. PERSON HAS ANY INTEREST
IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT
BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS
DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE ACT.
B. RESERVATION OF SHARES AND COVENANTS OF THE COMPANY
The Company shall at all times have allotted and reserved for issuance,
and deposited with the Escrow Holder for delivery upon exercise of this Warrant
such number of shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrant.
The Company covenants with the Holder that so long as any Warrants
remain outstanding and may be exercised:
1. it will cause the shares of Common Stock and the certificates
representing the Common Stock subscribed and paid for pursuant
to the exercise of the Warrants to be duly issued and
deposited with the Escrow Holder for delivery in accordance
herewith and the terms hereof;
2. all shares of Common Stock that shall be issued upon exercise
of the right to purchase provided for herein, upon payment of
the prevailing Exercise Price herein provided, shall be fully
paid and non-assessable;
3. it will use its best efforts to maintain its corporate
existence; and
4. generally, it will well and truly perform and carry out all of
the acts or things to be done by it as provided herein.
C. FRACTIONAL SHARES
No fractional shares or script representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
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<PAGE>
1. If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ system, the
current market value shall be the last reported sale price of
the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or,
if no such sale is made (or reported) on such day, the average
closing bid and asked prices for such day on such exchange or
system; or
2. If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean
to the last reported bid and ask prices reported by the
Electronic Bulletin Board or National Quotation Bureau, Inc.
on the last business day prior to the date of the exercise of
this Warrant; or
3. If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and ask prices are not so reported,
the current market value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal
year of the Company ending prior to the date of the exercise
of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company for other warrants
of different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such Assignment Form and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other warrants that carry the same rights upon presentation hereof at the
principal office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt of the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Act and may be transferred only
in accordance therewith and as provided in the legends set forth in this
Warrant.
4
<PAGE>
E. RIGHTS OF THE HOLDER
The Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein.
F. ANTI-DILUTION PROVISIONS
The respective Exercise Price in effect at any time and the number and
kind of securities purchasable upon the exercise of the Warrant shall be subject
to adjustment from time to time upon the happening of certain events are
follows:
1. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the
respective Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined
by multiplying the respective Exercise Price by a fraction,
the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event
listed above shall occur.
2. Whenever the respective Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) above,
the number of Shares purchasable upon exercise of this Warrant
shall simultaneously be adjusted by multiplying the respective
number of Shares initially issuable upon exercise of this
Warrant by a fraction, the denominator of which shall be the
Exercise Price after giving effect to such action and the
numerator of which shall be the Exercise Price in effect
immediately prior to such action.
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<PAGE>
3. No adjustment in the respective Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least one cent ($0.01) in such price; provided,
however, that any adjustment that by reason of this Subsection
(3) is not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (F) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. Anything in this Section (F) to
the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the
respective Exercise Price, in addition to those required by
this Section (F), as it shall determine, in its sole
discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any federal income tax
liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).
4. In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this
Warrant thereafter shall become entitled to receive any shares
of the Company, other than Common Stock, thereafter the number
of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
Subsections (1) to (3) inclusive above.
5. Irrespective of any adjustments in the respective Exercise
Price or the related number or kind of shares purchasable upon
exercise of this Warrant, Warrants theretofore or thereafter
issued may continue to express the same price and number and
kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant.
G. OFFICER'S CERTIFICATE
Whenever the respective Exercise Price shall be adjusted as required by
the provisions of the foregoing Section (F), the Company shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its principal office,
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of related additional shares of
Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the holder or any holder of a Warrant executed and delivered pursuant to Section
(A) and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
H. NOTICES TO WARRANT HOLDERS
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<PAGE>
So long as this Warrant shall be outstanding, (i) if the Company shall
pay any dividend or make any distribution upon the Common Stock or (ii) if the
Company shall offer to the holders of Common Stock for subscription or purchase
by them any share of any class or any other rights, options or warrants (other
than this Warrant) or (iii) if a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen (15) days prior
to the date specified, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which a record date
is to be determined for the purpose of such dividend, distribution or issue of
rights, options, or warrants or such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise affect the action take by the Company.
I. RECLASSIFICATION, REORGANIZATION OR MERGER
In case of any reclassification, capital reorganization or other change
of outstanding shares Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock an other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of such number of shares
of Common Stock that might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (I) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (F) hereof.
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<PAGE>
J. WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date of
issue of the same.
K. GOVERNING LAW; JURISDICTION AND VENUE
This Warrant shall be governed by and interpreted in accordance with
the laws of the State of Florida; provided, however, that if any provision of
this Agreement is unenforceable under the laws of the State of Florida, but is
enforceable under the laws of the ___________________________, then such
provision shall be governed by and interpreted in accordance with the laws of
the Province of Ontario.
The parties agree that the courts of the ___________________________,
shall have exclusive jurisdiction and venue for the adjudication of any civil
action between them arising out of relating to this Agreement, and hereby
irrevocably consent to such jurisdiction and venue.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
newagecities.com, Inc..
By:_____________________________
Its:____________________________
DATED: December __, 1999
ATTEST:
_______________________
_______________________
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<PAGE>
AGENTS' CONTINGENT WARRANT
Warrant No. 61
Void after 5:00 p.m. Toronto, Ontario time, on December 22, 2002
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER WILL BE PROVIDED WITH OPINION OF COUNSEL
OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
-------------------------------------------------------------
CONTINGENT WARRANT TO PURCHASE 150,000 SHARES OF COMMON STOCK
OF
NEWAGECITIES.COM, INC.
----------------------------------------------------------------
<PAGE>
This it to certify that, FOR VALUE RECEIVED, limited or assigns
("Holder") is entitled to purchase, subject to the provisions of this Warrant,
from NEWAGECITIES.COM, INC., an Idaho corporation (the "Company"), the fully
paid, validly issued and non-assessable shares of Common Stock, $0.02 par value,
of the Company ("Common Stock") at any time or from time to time during the
period from the date hereof, through and including June 30, 2005, but not later
than 5:00 p.m. time, on June 30, 2005 (the "Exercise Period"), at the price of
US$ 2.50 per share (the "Exercise Price"). The total number of shares of Common
Stock to be issued upon exercise of this Warrant shall be shares. The price to
be paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price."
This warrant is exercisable if, and only if, an any time during the
Exercise Period, the closing bid price of the Common Stock shall be less than
US$ 1.26 for 20 consecutive trading days. Upon the happening of such event, this
warrant shall be and remain fully exercisable until the expiration of the
Exercise Period.
The Company has agreed to register the issuance and resale of the
Common Stock issuable upon exercise of this Warrant under the U.S. Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Rights Agreement between the Company and the Holder of even date herewith.
In addition, as an alternative to payment of the aggregate exercise
price in accordance with the preceding paragraphs, but only in the event that
the issuance and resale of the Warrant Shares are not subject to a current
effective registration statement under the Securities Act, then the Holder may
elect to effect a cashless exercise by so indicating on the Exercise Form 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 Warrant
Shares for which this warrant is being exercised by the result obtained from
subtracting the exercise price in effect at such time from the closing price for
the Common Stock on the principal market for the Common Stock on the date
preceding the date of exercise.
A. EXERCISE OF WARRANT
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<PAGE>
This Warrant may be exercised in whole or in part at any time or from
time to time during the Exercise Period; provided, however, that (i) if the last
day of the Exercise Period is a day on which banking institutions in the City of
Toronto are authorized by law to close, then the Exercise Period shall terminate
on the next succeeding day that shall not be such a day, and during such period
the Holder shall have the right to exercise this Warrant into the kind and
amount of shares of stock and other securities and property (including cash)
receivable by a holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant may
be exercised by presentation and surrender hereof to the Company at its
principal office, with the Exercise Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Escrow Holder shall, to the extent that the Company has deposited shares of
Common Stock with the Escrow Holder for that purpose, issue and deliver to the
Holder a certificate or certificates for the designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of Warrant Shares purchasable thereunder.
Upon receipt by the Company of this Warrant at its principal office, or by the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be physically delivered to the Holder.
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT), (ii) IF NOT
EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S. PERSON HAS ANY INTEREST
IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT
BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS
DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE ACT.
B. RESERVATION OF SHARES AND COVENANTS OF THE COMPANY
The Company shall at all times have allotted and reserved for issuance,
and deposited with the Escrow Holder for delivery upon exercise of this Warrant
such number of shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrant.
The Company covenants with the Holder that so long as any Warrants
remain outstanding and may be exercised:
1. it will cause the shares of Common Stock and the certificates
representing the Common Stock subscribed and paid for pursuant
to the exercise of the Warrants to be duly issued and
deposited with the Escrow Holder for delivery in accordance
herewith and the terms hereof;
2. all shares of Common Stock that shall be issued upon exercise
of the right to purchase provided for herein, upon payment of
the prevailing Exercise Price herein provided, shall be fully
paid and non-assessable;
3. it will use its best efforts to maintain its corporate
existence; and
4. generally, it will well and truly perform and carry out all of
the acts or things to be done by it as provided herein.
C. FRACTIONAL SHARES
3
<PAGE>
No fractional shares or script representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
1. If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ system, the
current market value shall be the last reported sale price of
the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or,
if no such sale is made (or reported) on such day, the average
closing bid and asked prices for such day on such exchange or
system; or
2. If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean
to the last reported bid and ask prices reported by the
Electronic Bulletin Board or National Quotation Bureau, Inc.
on the last business day prior to the date of the exercise of
this Warrant; or
3. If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and ask prices are not so reported,
the current market value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal
year of the Company ending prior to the date of the exercise
of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company for other warrants
of different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such Assignment Form and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other warrants that carry the same rights upon presentation hereof at the
principal office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt of the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Act and may be transferred only
in accordance therewith and as provided in the legends set forth in this
Warrant.
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<PAGE>
E. RIGHTS OF THE HOLDER
The Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein.
F. ANTI-DILUTION PROVISIONS
The respective Exercise Price in effect at any time and the number and
kind of securities purchasable upon the exercise of the Warrant shall be subject
to adjustment from time to time upon the happening of certain events are
follows:
1. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the
respective Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined
by multiplying the respective Exercise Price by a fraction,
the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event
listed above shall occur.
2. Whenever the respective Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) above,
the number of Shares purchasable upon exercise of this Warrant
shall simultaneously be adjusted by multiplying the respective
number of Shares initially issuable upon exercise of this
Warrant by a fraction, the denominator of which shall be the
Exercise Price after giving effect to such action and the
numerator of which shall be the Exercise Price in effect
immediately prior to such action.
5
<PAGE>
3. No adjustment in the respective Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least one cent ($0.01) in such price; provided,
however, that any adjustment that by reason of this Subsection
(3) is not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (F) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. Anything in this Section (F) to
the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the
respective Exercise Price, in addition to those required by
this Section (F), as it shall determine, in its sole
discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any federal income tax
liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).
4. In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this
Warrant thereafter shall become entitled to receive any shares
of the Company, other than Common Stock, thereafter the number
of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
Subsections (1) to (3) inclusive above.
5. Irrespective of any adjustments in the respective Exercise
Price or the related number or kind of shares purchasable upon
exercise of this Warrant, Warrants theretofore or thereafter
issued may continue to express the same price and number and
kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant.
G. OFFICER'S CERTIFICATE
Whenever the respective Exercise Price shall be adjusted as required by
the provisions of the foregoing Section (F), the Company shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its principal office,
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of related additional shares of
Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the holder or any holder of a Warrant executed and delivered pursuant to Section
(A) and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
6
<PAGE>
H. NOTICES TO WARRANT HOLDERS
So long as this Warrant shall be outstanding, (i) if the Company shall
pay any dividend or make any distribution upon the Common Stock or (ii) if the
Company shall offer to the holders of Common Stock for subscription or purchase
by them any share of any class or any other rights, options or warrants (other
than this Warrant) or (iii) if a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen (15) days prior
to the date specified, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which a record date
is to be determined for the purpose of such dividend, distribution or issue of
rights, options, or warrants or such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise affect the action take by the Company.
I. RECLASSIFICATION, REORGANIZATION OR MERGER
In case of any reclassification, capital reorganization or other change
of outstanding shares Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock an other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of such number of shares
of Common Stock that might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (I) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (F) hereof.
7
<PAGE>
J. WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date of
issue of the same.
K. GOVERNING LAW; JURISDICTION AND VENUE
This Warrant shall be governed by and interpreted in accordance with
the laws of the State of Florida; provided, however, that if any provision of
this Agreement is unenforceable under the laws of the State of Florida, but is
enforceable under the laws of ____, then such provision shall be governed by and
interpreted in accordance with the laws of the ______.
The parties agree that the courts of the _______, shall have exclusive
jurisdiction and venue for the adjudication of any civil action between them
arising out of relating to this Agreement, and hereby irrevocably consent to
such jurisdiction and venue.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
newagecities.com, Inc.
By:_____________________________
Its:____________________________
DATED: December 22, 1999
ATTEST:
- -----------------------
- -----------------------
8
<PAGE>
FORM OF NOTICE OF EXERCISE
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________ shares of Common Stock at the
Exercise Price of US$ ______ per share, for a total of US$
_________________.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________
(Please typewrite or print in block letters)
Address______________________________________
______________________________________
______________________________________
The undersigned represents and warrants to newagecities.com, Inc. that the
conditions for exercise of the within Warrant set forth in the first sentence of
the first paragraph above have been fully complied with and no U.S.
Person has any interest in the Warrant or the Warrant Shares.
Signature____________________________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
<PAGE>
ASSIGNMENT FORM
- ---------------
FOR VALUE RECEIVED,
_________________________________________________________
hereby sells, assigns and transfers unto
Name
_________________________________________________________
(Please typewrite or print in block letters)
Address
_________________________________________________________
_________________________________________________________
the right to purchase shares of Common Stock of Newagecities.com, Inc.,
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint__________________________ Attorney, to
transfer the same on the books of Newagecities.com, Inc., with full power of
substitution in the premises.
Date: __________________________
Signature: ___________________________________________________________________
(sign exactly as your name appears on the first page of this Warrant)
Note: The Warrant and the Common Stock issuable upon exercise of the Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only in accordance therewith and as provided in the legends
set forth in the Warrant.
<PAGE>
AGENTS' CONTINGENT WARRANT
Warrant No. 61
Void after 5:00 p.m. Toronto, Ontario time, on December 22, 2002
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER WILL BE PROVIDED WITH OPINION OF COUNSEL
OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
-------------------------------------------------------------
CONTINGENT WARRANT TO PURCHASE 150,000 SHARES OF COMMON STOCK
OF
NEWAGECITIES.COM, INC.
----------------------------------------------------------------
<PAGE>
This it to certify that, FOR VALUE RECEIVED, limited or assigns
("Holder") is entitled to purchase, subject to the provisions of this Warrant,
from NEWAGECITIES.COM, INC., an Idaho corporation (the "Company"), the fully
paid, validly issued and non-assessable shares of Common Stock, $0.02 par value,
of the Company ("Common Stock") at any time or from time to time during the
period from the date hereof, through and including June 30, 2005, but not later
than 5:00 p.m. time, on June 30, 2005 (the "Exercise Period"), at the price of
US$ 2.50 per share (the "Exercise Price"). The total number of shares of Common
Stock to be issued upon exercise of this Warrant shall be shares. The price to
be paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price."
This warrant is exercisable if, and only if, an any time during the
Exercise Period, the closing bid price of the Common Stock shall be less than
US$ 1.26 for 20 consecutive trading days. Upon the happening of such event, this
warrant shall be and remain fully exercisable until the expiration of the
Exercise Period.
The Company has agreed to register the issuance and resale of the
Common Stock issuable upon exercise of this Warrant under the U.S. Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Rights Agreement between the Company and the Holder of even date herewith.
In addition, as an alternative to payment of the aggregate exercise
price in accordance with the preceding paragraphs, but only in the event that
the issuance and resale of the Warrant Shares are not subject to a current
effective registration statement under the Securities Act, then the Holder may
elect to effect a cashless exercise by so indicating on the Exercise Form 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 Warrant
Shares for which this warrant is being exercised by the result obtained from
subtracting the exercise price in effect at such time from the closing price for
the Common Stock on the principal market for the Common Stock on the date
preceding the date of exercise.
A. EXERCISE OF WARRANT
2
<PAGE>
This Warrant may be exercised in whole or in part at any time or from
time to time during the Exercise Period; provided, however, that (i) if the last
day of the Exercise Period is a day on which banking institutions in the City of
Toronto are authorized by law to close, then the Exercise Period shall terminate
on the next succeeding day that shall not be such a day, and during such period
the Holder shall have the right to exercise this Warrant into the kind and
amount of shares of stock and other securities and property (including cash)
receivable by a holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant may
be exercised by presentation and surrender hereof to the Company at its
principal office, with the Exercise Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Escrow Holder shall, to the extent that the Company has deposited shares of
Common Stock with the Escrow Holder for that purpose, issue and deliver to the
Holder a certificate or certificates for the designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of Warrant Shares purchasable thereunder.
Upon receipt by the Company of this Warrant at its principal office, or by the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be physically delivered to the Holder.
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT), (ii) IF NOT
EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S. PERSON HAS ANY INTEREST
IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT
BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS
DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE ACT.
B. RESERVATION OF SHARES AND COVENANTS OF THE COMPANY
The Company shall at all times have allotted and reserved for issuance,
and deposited with the Escrow Holder for delivery upon exercise of this Warrant
such number of shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrant.
The Company covenants with the Holder that so long as any Warrants
remain outstanding and may be exercised:
1. it will cause the shares of Common Stock and the certificates
representing the Common Stock subscribed and paid for pursuant
to the exercise of the Warrants to be duly issued and
deposited with the Escrow Holder for delivery in accordance
herewith and the terms hereof;
2. all shares of Common Stock that shall be issued upon exercise
of the right to purchase provided for herein, upon payment of
the prevailing Exercise Price herein provided, shall be fully
paid and non-assessable;
3. it will use its best efforts to maintain its corporate
existence; and
4. generally, it will well and truly perform and carry out all of
the acts or things to be done by it as provided herein.
C. FRACTIONAL SHARES
3
<PAGE>
No fractional shares or script representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
1. If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ system, the
current market value shall be the last reported sale price of
the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or,
if no such sale is made (or reported) on such day, the average
closing bid and asked prices for such day on such exchange or
system; or
2. If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean
to the last reported bid and ask prices reported by the
Electronic Bulletin Board or National Quotation Bureau, Inc.
on the last business day prior to the date of the exercise of
this Warrant; or
3. If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and ask prices are not so reported,
the current market value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal
year of the Company ending prior to the date of the exercise
of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company for other warrants
of different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such Assignment Form and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other warrants that carry the same rights upon presentation hereof at the
principal office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt of the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Act and may be transferred only
in accordance therewith and as provided in the legends set forth in this
Warrant.
4
<PAGE>
E. RIGHTS OF THE HOLDER
The Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein.
F. ANTI-DILUTION PROVISIONS
The respective Exercise Price in effect at any time and the number and
kind of securities purchasable upon the exercise of the Warrant shall be subject
to adjustment from time to time upon the happening of certain events are
follows:
1. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the
respective Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined
by multiplying the respective Exercise Price by a fraction,
the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event
listed above shall occur.
2. Whenever the respective Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) above,
the number of Shares purchasable upon exercise of this Warrant
shall simultaneously be adjusted by multiplying the respective
number of Shares initially issuable upon exercise of this
Warrant by a fraction, the denominator of which shall be the
Exercise Price after giving effect to such action and the
numerator of which shall be the Exercise Price in effect
immediately prior to such action.
5
<PAGE>
3. No adjustment in the respective Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least one cent ($0.01) in such price; provided,
however, that any adjustment that by reason of this Subsection
(3) is not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (F) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. Anything in this Section (F) to
the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the
respective Exercise Price, in addition to those required by
this Section (F), as it shall determine, in its sole
discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any federal income tax
liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).
4. In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this
Warrant thereafter shall become entitled to receive any shares
of the Company, other than Common Stock, thereafter the number
of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
Subsections (1) to (3) inclusive above.
5. Irrespective of any adjustments in the respective Exercise
Price or the related number or kind of shares purchasable upon
exercise of this Warrant, Warrants theretofore or thereafter
issued may continue to express the same price and number and
kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant.
G. OFFICER'S CERTIFICATE
Whenever the respective Exercise Price shall be adjusted as required by
the provisions of the foregoing Section (F), the Company shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its principal office,
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of related additional shares of
Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the holder or any holder of a Warrant executed and delivered pursuant to Section
(A) and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
6
<PAGE>
H. NOTICES TO WARRANT HOLDERS
So long as this Warrant shall be outstanding, (i) if the Company shall
pay any dividend or make any distribution upon the Common Stock or (ii) if the
Company shall offer to the holders of Common Stock for subscription or purchase
by them any share of any class or any other rights, options or warrants (other
than this Warrant) or (iii) if a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen (15) days prior
to the date specified, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which a record date
is to be determined for the purpose of such dividend, distribution or issue of
rights, options, or warrants or such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise affect the action take by the Company.
I. RECLASSIFICATION, REORGANIZATION OR MERGER
In case of any reclassification, capital reorganization or other change
of outstanding shares Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock an other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of such number of shares
of Common Stock that might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (I) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (F) hereof.
7
<PAGE>
J. WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date of
issue of the same.
K. GOVERNING LAW; JURISDICTION AND VENUE
This Warrant shall be governed by and interpreted in accordance with
the laws of the State of Florida; provided, however, that if any provision of
this Agreement is unenforceable under the laws of the State of Florida, but is
enforceable under the laws of ____, then such provision shall be governed by and
interpreted in accordance with the laws of the ______.
The parties agree that the courts of the _______, shall have exclusive
jurisdiction and venue for the adjudication of any civil action between them
arising out of relating to this Agreement, and hereby irrevocably consent to
such jurisdiction and venue.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
newagecities.com, Inc.
By:_____________________________
Its:____________________________
DATED: December 22, 1999
ATTEST:
- -----------------------
- -----------------------
8
<PAGE>
FORM OF NOTICE OF EXERCISE
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________ shares of Common Stock at the
Exercise Price of US$ ______ per share, for a total of US$
_________________.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________
(Please typewrite or print in block letters)
Address________________________________________
________________________________________
________________________________________
The undersigned represents and warrants to newagecities.com, Inc. that the
conditions for exercise of the within Warrant set forth in the first sentence of
the first paragraph above have been fully complied with and no U.S.
Person has any interest in the Warrant or the Warrant Shares.
Signature____________________________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
<PAGE>
ASSIGNMENT FORM
- ---------------
FOR VALUE RECEIVED,
_________________________________________________________
hereby sells, assigns and transfers unto
Name
_________________________________________________________
(Please typewrite or print in block letters)
Address
_________________________________________________________
_________________________________________________________
the right to purchase shares of Common Stock of newagecities.com, Inc.,
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint_____________________________ Attorney,
to transfer the same on the books of newagecities.com, Inc., with full power of
substitution in the premises.
Date: __________________________
Signature: ___________________________________________________________________
(sign exactly as your name appears on the first page of this Warrant)
Note: The Warrant and the Common Stock issuable upon exercise of the Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only in accordance therewith and as provided in the legends
set forth in the Warrant.
<PAGE>
PLEDGE AND EXCHANGE AGREEMENT
December 22, 1999
Thomson Kernaghan & Co. Limited
365 Bay Street, Tenth Floor
Toronto, Ontario M5H 2V2, Canada
Reference: Newagecities.com
Ladies and gentlemen:
Newagecities.com (the "Company") is offering eight point six-six (8.66) units
(the "Units") in a private placement. Each Unit consists of one 8% Convertible
Promissory Note (each a "Note" and collectively the "Notes") in the principal
amount of $120,150 due April 30, 2000, which is convertible into 95,000 shares
of the Company's common stock ("Common Stock"), and which is secured by the
pledge of 650,000 shares of Common Stock, all as set forth in the term sheet
delivered to you on December 15, 1999, and the transaction documents dated
December 22, 1999, which include a Subscription Agreement, the Notes, a
Registration Rights Agreement, and Warrants (the "Transaction Documents").
In order to induce Thomson Kernaghan & Co. Limited ("Thomson Kernaghan") to
purchase six and 2/3 (6.66) Units, which will be evidenced by the Company's 8%
Convertible Secured Promissory Note (the "Thomson Kernaghan Note")in the
principal amount of $801,000 (which includes the purchase price of the Units and
Thomson Kernaghan's agents fee) and due on April 30, 2000, and in consideration
of your doing so, we, the undersigned hereby jointly and severally represent,
warrant and agree with you as follows:
1. We are the registered and beneficial owners of 650,000 shares of Common
Stock (the "Pledged Shares"). The Pledged Shares have been duly and validly
issued, are fully paid and non-assessable. We have good and marketable
title to the Pledged Shares, free and clear of any liens or claims, with
full power and authority to sell, assign, transfer and deliver the same
(subject to the restrictions set forth in paragraph 2 below).
2. The Shares are restricted securities. On April 6, 2000, (a) one year shall
have elapsed from the date on which each of us acquired and paid the
consideration given for the Shares, (b) our holding period for the Shares
set forth in SEC Rule 144(d) shall have expired, and (c) the Shares shall
be eligible for resale pursuant to SEC Rule 144, provided that there is
then current public information available with respect to the company as
required by SEC Rule 144(c).
<PAGE>
Thomson Kernaghan & Co. Limited
December 3, 1999
Page 2
Reference: Newagecities.com
3. We hereby pledge the Shares to Thomson Kernaghan, and grant Thomson
Kernaghan a security interest in the Shares, all pursuant to the Uniform
Commercial Code as in effect in Florida (the "Code"), as collateral for the
prompt and full performance of the Company's obligations under the
Transaction Documents (the "Obligations")including without limitation, the
prompt and full payment of the Thomson Kernaghan Note when due. If the
Company shall for any reason default in its performance or observance of
any of the Obligations, then Thomson Kernaghan shall have and may exercise
all of the remedies of a pledgee and secured party under the Code or as
otherwise provided by applicable law. These remedies are in addition to any
and all remedies provided in the Transaction Documents. Thomson Kernaghan's
remedies shall be cumulative, and the exercise of one shall not preclude
the exercise of any other.
4. The pledge of the Pledged Shares by each of us is a bona fide pledge within
the meaning of SEC Rule 144(d)(iv), and in the event of a default in the
obligation secured by the pledge, the Pledged Shares shall be deemed to
have been acquired by Thomson Kernaghan when they were acquired by each of
us respectively
5. Until the Thomson Kernaghan Note has been paid or converted in full, and
until the Company has fully performed and discharged all of the
Obligations, each of us agrees not to sell, assign or transfer any shares
of the Company's Common Stock without Thomson Kernaghan's prior written
consent.
6. If, for any reason, (a) on April 30, 2000, a registration statement filed
under the Securities Act of 1933, as amended (a "Registration Statement"),
shall not be in effect with respect to the Common Stock into which the
Notes are convertible and the Common Stock underlying the Warrants, or (b)
on or after April 30, 2000, the Company refuses or fails to deliver Common
Stock pursuant to an effective Registration Statement to Thomson Kernaghan
upon conversion of any of the Notes or exercise of any Warrant, then, in
any such event, upon the demand of Thomson Kernaghan, the undersigned shall
promptly deliver to Thomson Kernaghan the number of Shares equal to the
number of shares of Common Stock into which the Notes are convertible, and
the number of shares of Common Stock underlying the Warrants, in exchange
for the Notes and the Warrants or such interest therein as may be
represented by the aggregate number of the Shares, all as Thomson Kernaghan
shall specify.
7. The undersigned hereby irrevocably appoint First Level Capital, Inc., (the
"Custodian"), whose address is 5301 North Federal Highway, Suite 120, Boca
Raton, Florida 33487, as custodian of the Shares for the benefit of Thomson
Kernaghan, and hereby agree that delivery of the Shares to the Custodian
shall be valid and effective delivery for the account of Thomas Kernaghan
for the purposes of perfecting the security interest and rights of Thomson
Kernaghan under this agreement.
8. The undersigned have delivered the Shares to the Custodian, and hereby
irrevocably instruct the Custodian to hold the Shares for the benefit of
Thomson Kernaghan. Upon execution of this agreement, the undersigned agree
to execute blank stock powers with respect to the Shares, with their
signatures Medallion guarantied, and to deliver the stock powers to the
Custodian. The undersigned hereby irrevocably instruct the Custodian to
hold and deliver the stock powers together with the certificates for the
Shares to which they relate.
9. The undersigned hereby further irrevocably instruct the Custodian that at
any time on or after April 30, 2000, upon the receipt of a written
statement from Thomson Kernaghan that the Company has defaulted its
performance or observance of the Obligations, the Custodian shall deliver
to Thomson Kernaghan the number of Shares specified in the statement,
together with the executed stock powers related thereto, in exchange for
any Note or Notes, and any Warrants, or any interest in any of the
foregoing, tendered by Thomson Kernaghan with the statement.
10. This agreement shall terminate when the Company shall have fulfilled all of
its Obligations, and a Registration Statement with respect to the Common
Stock underlying the Notes and the Warrants shall continuously have been in
effect for at least 90 trading days.
<PAGE>
Thomson Kernaghan & Co. Limited
December 3, 1999
Page 3
Reference: Newagecities.com
11. This agreement shall be governed by and construed in accordance with the
laws of the state of Florida. The parties hereby consent to the
jurisdiction and venue of the courts of Ontario, Canada, to hear and
determine any action to enforce or construe this agreement. The prevailing
party in any such action shall be entitled to recover reasonable attorney's
fees.
Very truly yours,
<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------ ------------------------------------
Signature Signature
------------------------------------ ------------------------------------
Name Name
------------------------------------ ------------------------------------
Address Address
------------------------------------ ------------------------------------
City, State, Zip Code City, State, Zip Code
------------------------------------ ------------------------------------
Number of Shares Number of Shares
</TABLE>
<PAGE>
Thomson Kernaghan & Co. Limited
December 3, 1999
Page 4
Reference: Newagecities.com
The undersigned, First Level Capital, Inc., hereby accepts the appointment as
Custodian of the Shares pursuant to this agreement, and hereby agrees to be
bound as a party hereto and to perform all of its duties hereunder.
First Level Capital, Inc.
By _________________________________
Name _______________________________
Title ______________________________
Date signed ________________________
Consent of Independent Auditors
We consent to the use in this Registration Statement on Form SB-2,
Amendment No. 2 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
January 4, 2000
<PAGE>
Consent of Independent Auditors
We consent to the use in this Registration Statement on Form SB-2,
Amendment No.2 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
January 4, 2000
