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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
AMENDMENT NO. 2
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
A1 INTERNET.COM, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEVADA 03-7392107
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
15825 Shady Grove Road, Rockville, Maryland 20850 20850
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(Address of Principal Executive Offices)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (301) 947-0100
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.001 Par Value OTC Bulletin Board
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(TITLE OF CLASS)
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(TITLE OF CLASS)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
Information Regarding Forward Looking Statements: The statements contained in
this Form 10-SB that are not historical fact are "forward-looking statements".
These statements can often be identified by the use of forward-looking
terminology such as "estimates," "projects," "believes," "expects," "may,"
"will," "should," "intends," or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. We wish to caution the reader that these
forward-looking statements, such as the timing, costs and scope of acquisition
of, or investments in, existing businesses, the revenue and profitability levels
of such businesses, and other matters contained above and herein in this Form
10-SB regarding matters that are not historical facts, are only predictions. No
assurance can be given that the future results indicated, whether expressed or
implied, will be achieved. While sometimes presented with numerical specificity,
these projections and other forward-looking statements are based upon a variety
of assumptions relating to our business which, although we consider reasonable,
may not be realized. Because of the number and range of the assumptions
underlying our projections and forward-looking statements, many of which are
subject to significant uncertainties and contingencies that are beyond our
reasonable control, some of the assumptions inevitably will not materialize and
unanticipated events and circumstances may occur subsequent to the date of this
Form 10-SB. These forward-looking statements are based on our current
expectations, and we assume no obligation to update this information. Therefore,
our actual experience and results achieved during the period covered by any
particular projections or forward-looking statements may differ substantially
from those projected. Consequently, the inclusion of projections and other
forward-looking statements should not be regarded as a representation by us or
any other person that these estimates and projections will be realized, and
actual results may vary materially. There can be no assurance that any of these
expectations will be realized or that any of the forward-looking statements
contained herein will prove to be accurate.
ITEM 1. DESCRIPTION OF BUSINESS
Corporate History
A1 Internet.com, Inc. was incorporated under the laws of Nevada on
October 13, 1997, and was originally named Halo Holdings of Nevada, Inc. On July
9, 1999, we amended our articles of incorporation to adopt our current name,
which we believe more accurately reflects the business in which we are now
engaged.
From the date of our incorporation in 1997 until early 1999 our company
was engaged in skydiving and related business ventures. Between February and
April 1999 we sold our skydiving business and acquired three companies which are
providers of Internet connectivity and related products and services.
Specifically, in February 1999 we acquired Virtual Information Express, Inc. a
Maryland corporation which provides outsourced Internet services such as
e-commerce applications and collaborative technologies. In March 1999, we
acquired Computer Ease LLC, a Maryland limited liability company which provides
Web design and development services to corporate clients and associations.
Computer Ease has since been merged into our subsidiary A1 Internet Services,
Inc., a
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Delaware corporation. In April 1999 we acquired Networld Ohio, Inc., an Ohio
corporation, which is an Internet service provider ("ISP") based in Freemont,
Ohio. On August 30, 1999, we concluded an asset purchase agreement with Net
America, through which we acquired contracts to provide Internet connectivity
and, to a lesser extent, value added services to resellers of those services.
March 30, 1999, we sold Skydive USA, our subsidiary engaged in the skydiving
business and leased the two aircraft used in that business to that former
subsidiary. In addition, in October 1999, we formed Worldlink On-Line, Inc., a
Delaware corporation that is an ISP based in Boston, Massachusetts of which we
own 80%. During 1999 we also acquired a 14% interest in EBonline.com, Inc. As a
result of these transactions, our principal business now is providing Internet
access and related products and services, and we derived approximately 91% of
our revenues from this business in the first 9 months of 1999.
We are filing this Form 10-SB voluntarily in order to register our common
stock under the Securities Exchange Act of 1934. This will permit our common
stock to be quoted on the OTC Bulletin Board.
Our principal offices are located at 15825 Shady Grove Road, Rockville,
MD 20850 (telephone number 301-947-0100).
Overview
Through our subsidiaries we provide associations and businesses with
opportunities to generate revenues by supplying those associations and
businesses with Internet technology solutions and services that they can reoffer
under their own names and brands. Our products and services enable associations
and businesses to offer their members, customers and others a variety of revenue
producing solutions and services without making large investments in technology,
infrastructure or staff. The principal products and services which we offer are:
- Web site creation and design;
- Web site hosting;
- Co-location;
- Local telephone call access to the AT&T and Megapop Internet
networks through the AT&T network's approximately 1200 points of
presence and the Megapop network's approximately 775 points of
presence located across the United States and in Canada;
- Complete electronic commerce services;
- E-mail and related services such as conference and bulletin board
facilities and mailing list management; and
- Webcentric applications such as calendar services, document
management and encryption.
Through arrangements with content providers we also offer content for distance
based learning programs. In addition, we own one regional ISP located in Canton,
Ohio which had a total of 4,350 subscribers as of October, 1999. Recently we
have also begun a second ISP in Boston, Massachusetts.
Gravity Pilot Air, Inc., one of our wholly-owned subsidiaries, owns two
airplanes which are leased to a skydiving company. Although we determined to
discontinue our participation in the extreme sports and skydiving business upon
entering into the Internet services industry, we were unable to locate a buyer
for the airplanes. We leased the aircraft in order to make these assets
productive and to generate sufficient revenue to defray the cost of the
financing on the airplanes. The rental income from these aircraft accounted for
approximately 8% of our revenues in the
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first nine months of 1999. The lessee is 5 months in arrears on its lease
payments and, in December, it repudiated a prior agreement to bring its lease
payments current. We have instructed counsel to initiate legal proceedings
against the lessee and to pursue all available remedies against the lessee,
including retaking possession of the aircraft.
We also own 14% of Ebonlineinc.com Inc., a Nevada corporation which
maintains a mergers and acquisition Website. We acquired our shares of
Ebonlineinc from Bruce Bertman, our President, Treasurer and Director, at par
value for a total purchase price of $783.00. We are holding the Ebonlineinc
shares as an investment which, to date, has not generated any dividend income.
We have provided Internet-related services to Ebonlineinc for which we were
paid at the same rates we charge our other clients.
Industry Background
The Internet is a global network of multiple private and public networks
that use standardized communication protocols to communicate with each other.
The Internet was started in 1969 by the U.S. Department of Defense, Advanced
Research Projects Agency to enable scientists at universities to share
information and to develop a secure network. Use of the Internet has grown
rapidly since its initial commercialization in the early 1990s. Consumers and
companies in the United States have spearheaded adoption of the Internet as a
communication and commerce medium. While other regions of the world have been
slower to accept the Internet, its use is becoming a standard communications and
business tool worldwide.
The Internet has become an important communication and commercial medium
and presents a significant opportunity for associations and businesses to
interact in new and different ways with a larger number of members, customers,
employees, suppliers and partners. As use of the Internet grows, associations
and businesses are increasing the breadth and depth of their Internet product
and service offerings. Pioneering Internet-based organizations have developed
Internet products and services in areas such as finance, insurance, media,
tourism, retail and advertising. Other organizations have begun to use the
Internet for an expanding variety of applications, ranging from corporate or
association publicity and advertising, to sales, distribution, customer service,
employee training and communication with partners. Increasingly, Internet
operations are becoming mission-critical for many of these enterprises. To
ensure the reliability of their Internet operations, enterprises are requiring
that these operations have high performance standards, scalability and expert
management 24 hours a day, 7 days a week.
Enterprises generally utilize two types of Internet services:
connectivity and valued-added services. Connectivity services provide access to
the Internet, while value-added services consist of products such as Web design
and hosting, electronic commerce services, and communication services that
improve the internal and external operations of an enterprise. Internet
connectivity and value-added services represent two of the fastest growing
segments of the telecommunications services market. The availability of Internet
access, the advancements in technologies required to navigate the Internet and
the proliferation of content and applications available over the Internet have
attracted a growing number of Internet users.
The Internet service provider market is segmented into large national or
multinational providers with large high speed networks and regional or local
ISPs who enlist subscribers under their own names but typically rely upon the
larger providers for Internet access. The largest providers, like AT&T, have
what are referred to as "tier one" networks, which exchange Internet traffic
cost-free, at multiple public peering points, as well as through private peering
arrangements. As the number of ISPs has grown, the requirements to become a tier
one network have increased, resulting in a higher barrier to achieving tier one
provider status. Regional and local ISPs typically purchase access to the
Internet, and invest in
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equipment and personnel necessary to provide products and services and
customized hands-on support, and bear the cost of marketing. Since regional and
local ISPs often have limited financial resources, the range of products and
services which they offer is often limited.
Our Business Strategy
Our business strategy is to combine the global scale of tier one
providers with the local presence of regional and local ISPs. We provide
affordable connectivity on a global scale by contracting with AT&T and Megapop,
leading tier one providers, for access to their Internet network at a fixed
monthly fee per end-user. We enable associations, membership sales organizations
and other affinity groups to create non-dues revenue and sales programs by
offering their members high quality Internet products and services without the
investment in technology, equipment and personnel that would ordinarily be
required to establish an ISP. We enable existing regional and local ISPs to
reduce and control their costs, focus their energies on sales and enhance their
marketing by providing, at affordable rates, a variety of products and services
and high quality support services which those ISPs resell to their customers. In
effect, we enable associations, membership sales organizations and ISPs to
become virtual ISPs who market under their own name products and services which
they purchase from us.
We anticipate that a majority of the end-users of our services will be
derived from resellers of our products and services. Therefore, to a large
extent, our ability to grow depends upon the resources and dedication which
resellers are willing to commit to marketing our services. Our current business
strategy also depends upon being able to charge for connectivity to realize
recurring revenues. Recently various providers have begun offering free access
to the Internet. We believe that this practice will not become prevalent among
the customers we are targeting. If our belief is erroneous, we would be required
to develop a different approach to marketing our products and services. Much of
our anticipated growth will be derived from the sale of our electronic commerce
related products. Our ability to grow also depends upon the increasing
acceptance of electronic commerce and the reliability of the inventory, billing
and delivery systems utilized by electronic commerce vendors.
Markets
We focus on three market segments: associations; membership marketing
companies which have an existing customer base; and, regional and local ISPs.
Associations. There are numerous non-profit associations and a number of
other affinity groups in the United States. These organizations regularly
communicate with established memberships composed of persons with common
interests. We offer these organizations a means to communicate with their
members and to provide membership services. In addition, our connectivity
services generate subscription income and our electronic commerce products
provide organizations that are dependent upon membership dues for their
revenues with opportunities to realize non-dues revenue without large capital
investments.
Membership Marketing Companies. There are many large membership-marketing
businesses in the United States which have an established customer base. To
these businesses we offer sales programs with opportunities for recurring
profits, low barriers to entry and opportunities to build brand equity.
Regional and Local ISPs. There are more than 7,900 ISPs in the United
States, according to Thelist.com. We offer these ISPs the opportunity to control
their costs by purchasing connectivity and other products and services at a
fixed price for each end-user and reselling those products and services under
their own names or brands. This allows the ISPs to focus on marketing and
provides them with a broader range of products and services than they might
otherwise be able to offer.
Sales
Our direct sales force consists of two persons dedicated to association
and membership sales and three persons dedicated to the sale of Web site design,
Web site hosting, electronic mail services and other value added products. In
addition, we utilize indirect sales channels, principally the AT&T Internet
network sales force, trade associations and other affinity groups to supplement
our direct sales force.
Products and Services
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We offer a variety of Internet services including connectivity, electronic mail
services, electronic commerce services, Web hosting and Web site design. We
intend to develop a broader range of value added solutions and services
independently, through acquisitions and through strategic relationships with
providers. Following is a description of the products and services which we are
currently providing to our customers.
Connectivity
We offer a variety of Internet access solutions, providing basic
connectivity to the Internet, as well as value-added products and services such
as e-mail that enable our customers to expand their basic Internet connectivity
capability. We currently offer both analog and integrated services digital
network dial-up access at speeds up to 128 Kbps. We provide this access at local
telephone rates by means of approximately 1200 points of presence in the AT&T
Network and approximately 775 points of presence in the Megapop network which
are located throughout the United States and part of Canada. We also offer frame
relay dedicated connectivity at speeds up to 56 Kbps. Our Flex T-1(TM) Frame
Relay Account offers access to T-1 lines on an as needed basis and at bandwidths
ranging from 256 Kbps to in excess of 1024 Kbps. We also offer a Digital
Subscriber Line service that permits access to the Internet at up to 1.5 Mbps.
These services accommodate connectivity requirements of Internet users ranging
from the single user with a computer in his or her home to work groups and
businesses with multiple users.
Our connectivity service prices vary depending on whether the customer is
a retail or wholesale customer, although the services made available to both
customers are identical. Retail customers are end-users that purchase and
utilize our dial up connectivity services directly, while wholesale customers
are businesses and associations that resell our services to end-users. We
currently charge each retail customer a monthly fee ranging between $19.95 (for
our basic analog service) and $39.95 (for our premium ISDN service). As of
December 9, 1999, we had 5,000 retail customers which accounted for 55% of our
connectivity customers. Our wholesale customers are charged a monthly fee on a
sliding scale based on the number of users utilizing our connectivity services
through that wholesale customer. At current usage levels, we charge each
wholesale customer $13 per user, per month. As the number of subscribers
brought to us by a wholesale customer increases beyond 50,000, the monthly
charge per user will decrease until it reaches $9 per month for 250,000 or more
users. At December 9, 1999, we had 23 wholesale customers that resell our
services to approximately 4,000 end-users who represent 45% of our connectivity
customers.
Custom Site Design
Web site design is the development of the Web site content that will be
displayed on the Web site when it is being viewed on the Internet. We design Web
sites that convey our customers' marketing messages, and our services range
from the development of a basic Web page to the development of a sophisticated
e-commerce Web site. In addition, we provide other Web site-related services
including domain name registration, place Web site information in search
engines, issue electronic press releases and track the detailed use of each
site. We also offer co-linking of non-competing Web sites, banner
advertisements on Web sites and links to cyber malls, associations and groups.
Our prices for Web site design are based upon the time required and the
materials used to design the site.
Web Site Hosting
Our Web site hosting products include dedicated servers as well as shared
offerings that host multiple Web sites on a single server. A Web site provides a
company with a tangible identity and
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interactive presence on the Internet. The site allows a company to post
information about itself that is easily accessible to all Internet users. Web
sites are also the basis for providing electronic commerce, where a company can
advertise and sell its products and services. We offer a comprehensive range of
basic Web site hosting products, as well as a growing suite of enhanced Web site
hosting products including electronic commerce solutions. Generally, our
customers elect to outsource to us the hardware and software provisioning that
is necessary to host a Web site, where we can provide these services from a
reliable data center environment. We offer three basic Web site hosting plans,
the largest of which provides up to 5,000 megabytes of data transfer per month
and up to 50 megabytes of disk storage on servers located at dedicated space in
the Frontier Global network operations center. The Frontier Global center is
maintained and serviced by on-sight technical personnel 7 days a week, 24 hours
a day. Our monthly fees for the three plans are $34.95, $59.95 and $79.95,
respectively.
We also offer co-location to customers who have the resources to manage
their own servers and Websites and who prefer not to share a server with others.
Co-location customers receive the benefits of having their servers housed in the
network operations center, uninterrupted power supply, daily tape back-up and
the availability of a catastrophic recovery process. We charge each co-location
customer an initial set up fee of $150. Thereafter, our monthly charges vary
between $495 (for our basic monthly service plan) and $645 (for our premium
monthly service plan).
Electronic Commerce
Electronic commerce is the execution of commercial transactions over the
Internet. Our electronic commerce services provide businesses the ability to
sell products and services on the Internet. We create links to our customers'
Web sites that bring purchasers into our customers' on-line stores. Our
e-commerce service displays products, takes purchase orders for specified
quantities of each product ordered, collects billing addresses, credit card
information and shipping information, chooses a shipping method, forwards this
data to the seller for completion of each order, and prepares a confirmation of
each order for the purchaser. Our servers deploy the latest encryption software
and digital signature solutions in order to secure our customers' electronic
commerce transactions. Each secure Web Site has its own Verisign Digital ID and
dedicated payment system. We work directly with each customer's bank to ensure
secure, complete technology transfer while maintaining secure data protection
schemes. All customer information is housed on dedicated machines and protected
from unauthorized access by our Sun firewall. Our system is flexible and permits
sellers to add, delete or modify products, add pricing variations, change
product descriptions, update prices, and offer different pricing levels or
volume discounts. Our platform also enables clients to conduct electronic
auctions and to merchandise products in various other ways. Our prices for
providing electronic commerce services range from $99 to $249 per month,
depending on the complexity of the services desired by our customers.
We have also begun to utilize our electronic commerce platform to sell
products ourselves. We are currently offering a series of distance based
learning programs, that includes up to 300 courses and a range of high digital
imaging equipment. We are negotiating arrangements to obtain other products for
sale.
Collaboration Services
We offer a variety of collaboration services, which enable communication
over the Internet. These include virtual hosting of electronic mail. This allows
users to maintain their own domains while housing their e-mail on our servers.
We also offer the filtering of unsolicited e-mail. Our ListServe Management
product enables the broadcast of e-mail to an established user group. Our
E-Share product provides centralized controlled communication among a specified
group of people and is used to conduct training sessions electronically, thereby
eliminating the travel and related costs associated with live
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sessions. Our Web board product is used to post messages to members of a closed
group and allows recipients of messages to respond. We offer our customers
various combinations of these services which we call packages. We charge our
customers a monthly fee per user per package, which varies from $0.10 to $0.50
depending on the complexity of the package.
Customers
We provide value added services to Associations. Our association
customers include the National Franchise Association of Burger King, the
American Association and Society of Medical Executives, the Medical State
Society of New York, Meeting Planners International, the Aircraft Owner and
Pilot's Association, and the Association of American Railroads. Each of these
associations generate between $20,000 and $250,000 in revenues per year. As a
group, these associations account for approximately $750,000 of our annual
revenues.
At September 30, 1999 we had approximately 16,000 users of our
connectivity services. Approximately 7,000 of these were retail customers, and
approximately 9,000 were wholesale customers. In late November and early
December 1999 we terminated contracts with two ISPs who were resellers of our
services. As a result we now have approximately 9,000 users of our connectivity
services. The contracts with resellers which we terminated were a portion of the
assets acquired in the Net America asset purchase which was concluded on August
30, 1999. The remaining contracts acquired in that transaction do not yet
account for a significant portion of our revenues. At present 55% of our
revenues are derived from retail customers and 45% from our wholesale customers.
On July 23, 1999 we entered into an agreement with MundoNuevo.com to
provide Internet access and value added services which MundoNuevo.com would
reoffer to its customers. The agreement required MundoNuevo.com to make monthly
payments which reflected the minimum number of paid subscribers that
MundoNuevo.com believed it would sign up in the relevant period. MundoNuevo.com
was unable to sign up the minimum number of subscribers or to make the minimum
payments. Accordingly, the agreement with MundoNuevo.com was terminated by
mutual consent.
The following table sets forth certain information about the total number
of our end-users as of the dates shown:
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Total End-Users
Date (retail and wholesale combined)
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6/30/99 1,300
9/30/99 16,000
11/30/99 9,000
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Capacity
The principal activity for which we require capacity is Web site hosting.
Our ability to provide hosting services is directly impacted by the amount of
capacity and the number of servers available to us. At present, we have 30
servers, and estimate that at peak usage our facilities are 25% utilized. Based
on historical average usage our current capacity is sufficient to provide
hosting services to more than 100,000 subscribers. Due to our arrangement with
Frontier Global, a major provider of bandwidth, we have access to sufficient
bandwidth to meet our foreseeable needs.
Our future ability to service increasing numbers of customers depends in
part upon our ability to issue bills to, and collect payments from, large
numbers of customers. To that end, on September 3, 1999, we permanently licensed
Portal Software's Infranet management and billing software for a purchase price
of $897,833. The license also requires us to make minimum annual payments of
$125,600 so long as we utilize the software. Our minimum annual payments will
increase if we exceed 200,000 subscribers. The software is database driven and
enables us to automatically bill end-users for internet-
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related services that we provide. We expect the Portal software to significantly
enhance our efficiency as we build our customer base by reducing the amount of
time and manpower required to manage our customer billings.
Competition
The business of providing Internet connectivity services and solutions is
highly competitive and there are no substantial barriers to entry. We believe
that competition will intensify in the future and our ability to successfully
compete depends on a number of factors, including:
- the capacity, reliability and security of the network with which
we interconnect;
- the pricing structure of our services;
- expansion of the variety of products and services which we offer;
- our ability to adapt our products and services to new
technological developments;
- our ability to build and maintain a larger sales force which is
knowledgeable and effective;
- our ability to implement broad and effective distribution
channels; and
- principal market and economic trends.
Current and prospective competitors include:
- national, regional and local ISPs;
- long distance and local telecommunications providers;
- cable television companies; and
- Web site hosting providers.
Major long distance companies currently offer Internet access services
and major cable companies and companies using wireless terrestrial and
satellite-based technologies are expected to offer Internet connectivity and
related services in the near future. Such competitors have the ability to bundle
Internet connectivity with other services such as local and long distance
telecommunications. This bundling could adversely affect our ability to compete
and could result in a downward pressure on our prices that could adversely
affect our business, financial condition and results of operations.
More particularly, as providers of connectivity we compete with PSI,
MegaPop, UUNet and AT&T. In the area of Web site design we compete with USWeb.
Big Planet is a direct competitor in the business of providing packaged
Internet services to associations. Each of these competitors has significantly
greater market presence, established brand recognition, financial, technical
and personnel resources than we have. We strive to differentiate ourselves from
our competitors:
- by offering lower prices made possible by our lower overhead;
- with our ability to quickly adapt to new developments in our
industry resulting from the small size of our organization; and
- by offering the high quality AT&T network backbone.
Product Development
Microsoft, Allaire, Netscape, and Oracle, maintain programs with a number
of companies pursuant to which newly released products are provided soon after
they become available. We participate
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in these programs. Our technical and product development personnel, in
consultation with our sales and marketing personnel, develop specific
solutions using these products which we believe that associations and others of
our customer base will be able to utilize.
Employees
As of September 30, 1999 we had 41 full time and 1 part time employees as
follows:
- 7 full time employees in sales and marketing;
- 8 full time technical personnel;
- 9 full time and 1 part time employees in product development; and
- 17 full time in administration.
There are no collective bargaining agreements in effect. We believe the
relations with our employees are good.
Intellectual Property
We have no patented technology that would preclude or inhibit competitors
from entering our market. We have applied for registration of the trademark A1
Internet.com, Inc. (SM). We have entered into confidentiality and invention
assignment agreements with our employees to limit access to and disclosure of
our proprietary information. We intend to apply for copyrights as we develop new
products and solutions. There can be no assurance that these measures will prove
sufficient to prevent misappropriation of our intellectual property or to deter
independent third-party development of similar products.
Regulation
Our operations are not currently subject to direct regulation by
governmental agencies other than regulations applicable to businesses generally.
As use of the Internet continues to grow, jurisdictions in which we operate may
adopt regulations relating to prices charged users, content, privacy,
intellectual property protection, libel or other matters. If adopted, such
regulations could significantly affect our results of operations
Risk Factors
You should consider carefully the risks described below and other
information in this Form 10-SB. If any of the events identified in the following
risk factors actually occur, they could materially adversely affect our
business, financial condition and results of operations.
We Have a History of Losses and Cannot Be Certain We will Achieve Positive Cash
Flow
For the years ended December 31, 1997 and 1998, we had net losses and
negative cash flows. For the nine months ended September 30, 1999, we had a net
loss before extraordinary items of $2,453,622. In addition, we had an
accumulated deficit of $3,196,491 as of September 30, 1999. We are likely to
continue to incur significant additional losses in the intermediate term.
Even thereafter, we cannot be certain that we will achieve or sustain
positive cash flow or profitability from our operations. Our net losses and
negative cash flow from operating activities are likely to continue even longer
than we currently anticipate if:
- we do not establish and maintain a customer base that generates
sufficient revenue;
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- prices for our products or services decline faster than we have
anticipated;
- we do not remain competitive in the innovation and quality of our
products;
- we do not attract and retain qualified personnel;
Our ability to achieve our objectives is subject to financial,
competitive, regulatory, legal, technical and other factors, many of which are
beyond our control.
Our Web Page May Have Contained Certain Misleading Statements
We maintain a Web Page which contains various information relating to our
company. At times that Web Page contained statements which appeared to project
millions of dollars of highly profitable billings and accumulation of one
million users of our services by 2000. These statements were overly optimistic
and have been eliminated from our Web Page.
The Web Page contained a statement to the effect that we are involved in
the profitable business of leasing airplanes. Our involvement in the leasing of
airplanes is limited to the leasing of aircraft which we own because of our
prior skydiving venture. It is not a significant focus of our business and
produced only 8% of our revenues in the first nine months of 1999. This
statement has been eliminated from our Web Page.
Our Web Page contained a statement which might be read to state that we
are involved in the mergers and acquisitions arena. In fact, we hold a 14%
minority interest in EBonlineinc which maintains a Web site relating to that
business. We are passive investors in EBonlineinc. This statement has been
eliminated from our Web Page.
Purchases and Sales of Our Stock are Subject to Penny Stock Regulations
Our stock has had a market price of less than $5.00 per share in recent
times. The SEC has adopted regulations which generally define "penny stock" to
be any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price less than $5.00 per share, subject to certain
exceptions. During periods when our common stock does not qualify for inclusion
on the Nasdaq SmallCap Market or is removed therefrom, the common stock may
become subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prepared by the SEC relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our common stock and may affect
the ability of investors to sell our common stock in the public market.
11
<PAGE> 12
Our Limited Operating History Makes it Difficult to Assess Our Past Performance
and Future Prospects
You have limited historical operating and financial information on which
to base your evaluation of our performance and our prospects. We have acquired
four companies since the beginning of 1999 and disposed of substantially, all of
the businesses in which we were engaged in prior years. This limits the
comparability of our operating and financial information from period to period.
You should consider our prospects in light of the substantial risks,
expenses, uncertainties and difficulties frequently encountered by companies in
the new and rapidly evolving markets for Internet products and services. Such
risks include the possibility that:
- we will be unable to increase and sustain levels of interest in
our products and services by associations, membership marketing
companies and ISPs;
- we will fail to sell our products successfully through our direct
sales force;
- our competitors will develop services or products similar or
superior to our own;
- market prices for our products and services will fall as a result
of competition or other factors;
- we will be unable to identify, attract, motivate and retain
qualified personnel; and
- we will fail to fully integrate with our existing operations the
technology and operations of any of the businesses that we
acquire.
We cannot be sure that we will be successful in addressing such risks,
and the failure to do so could have a material adverse impact on our business,
financial condition and results of operation.
We are Dependent on AT&T and Megapop for Access to the Internet Network
Our ability to offer end-user access to a tier one Internet network on an
affordable basis is dependent upon our contractual relationship with AT&T and
Megapop which charge us a fixed monthly fee for each end-user. This enables us
to offer connectivity to tier one networks for which we pay only when end-users
subscribe for our services. If these contracts were to be terminated, or if the
terms were to be substantially amended, we might be required to enter into
arrangements for bandwidth with others on less favorable terms. There is no
assurance that we would be able to purchase connectivity on comparable terms and
there is no assurance that we would be able to pass on additional costs to our
customers. Our inability to obtain bandwidth on comparable terms could
materially and adversely affect our business, financial condition and results of
operations.
We Rely on Others to Market our Products and Services to End-Users
We believe that we will derive the majority of our recurring revenues
from subscription fees and fees for value added services paid by end-users of
our products and services. The amount of those revenues is dependent upon the
level of success achieved by associations, membership marketing companies and
ISPs in marketing our products and services to their members and customers. Most
of our contractual relationships with associations were formed recently and have
not yet generated substantial sales to end-users. Thus, we are not yet in a
position to assess whether our products and services will gain acceptance among
the members of these associations or whether these associations will invest the
resources necessary to market our products and services successfully. If sales
to end-users do not meet our expectations, our business would be adversely
affected and we would be required to develop alternate marketing and sales
strategies.
12
<PAGE> 13
We Are Subject to Risks As We Make Acquisitions and Engage in Strategic
Alliances
As part of our business strategy, we may acquire, make investments in, or
enter into strategic alliances with companies in complementary businesses, so as
to optimize our market presence in the regions we presently serve and expand
into other regions. In particular, we intend to acquire local and regional ISPs
and e-commerce companies. Any such future acquisitions, investments or strategic
alliances would involve risks, such as
- incorrect assessment of the value, strengths and weaknesses of
acquisition and investment opportunities;
- underestimating the difficulty of integrating the operations and
personnel of newly acquired companies;
- the potential disruption of our ongoing business, including
possible diversions of resources and management time;
- the potential inability to maintain uniform standards,
control, procedures and policies;
- and the threat of impairing relationships with employees and
customers as a result of changes in management or ownership.
We cannot assure you that we will be successful in overcoming these
risks. Moreover, we cannot be certain that any desired acquisition, investment
or strategic alliance could be made in a timely manner or on terms and
conditions acceptable to us. Neither can we assure you that we will be
successful in identifying attractive acquisition candidates. We expect that
competition for such acquisitions may be significant. Competition for Internet
companies is based on a number of factors including price, terms and conditions,
size, access to capital, and ability to offer cash, stock or other forms of
consideration. We may compete with others who have similar acquisition
strategies, many of whom may be larger and have greater financial and other
resources than we have.
An additional risk associated with acquisitions is that many attractive
acquisition candidates do not have audited financial statements and have varying
degrees of internal controls. Although we may believe that the available
financial information for a particular business is reliable, we cannot guarantee
that a subsequent audit would not reveal matters of significance, including with
respect to liabilities, contingent or otherwise. We expect that, from time to
time in the future, we will enter into acquisition agreements, the pro forma
effect of which is not known and cannot be predicted.
We May Have Difficulty Managing Our Rapid Growth
Our growth strategy has placed and will continue to place a significant
strain on our customer support, sales and marketing, administrative resources,
our network and operations and our management and billing systems. Such a strain
on our administrative and operational capabilities could adversely affect the
quality of our services and our ability to collect revenues. To manage our
growth effectively, we will have to enhance the efficiency of our operational
support, other back office systems and financial systems and controls. We cannot
assure you that we will be able to maintain adequate internal operating,
administrative and financial systems, and procedures and controls.
Managing our growth will become even more challenging as we expand our
target markets and our product and service offerings. Promotion and enhancement
of our products and services will depend largely on our success in continuing to
provide high quality Internet communications services, solution and product
support. We cannot guarantee that we will be able to maintain those levels of
quality. If we
13
<PAGE> 14
are unable to do so or otherwise fail to promote and maintain our products or
services, or if we incur excessive expenses in an attempt to improve our
services or promote and maintain our products, then our business, results of
operations and financial condition could be materially and adversely affected.
In addition, as we continue to grow we will have to expand and train our
employee base to handle the increased volume and complexities of our business.
We cannot assure you that we will be able to attract, train and manage
sufficient personnel to keep pace with our growth.
Sales of Shares by Our Shareholders Could Depress Our Stock Price
The market price of our common stock could drop as a result of sales of a
large number of our shares in the public market. The perception that such sales
may occur could have the same effect. As of September 30, 1999, our executive
officers and directors owned, directly or indirectly, approximately 33% of our
common stock.
We Are Subject to Security and Fraud Risks
Despite our efforts to implement network security measures, such as
limiting physical and network access to our computers, our Internet
infrastructure is vulnerable to computer viruses, break-ins and similar
disruptive problems caused by customers, employees or other Internet users.
Computer viruses, break-ins or other disruptive or security problems could lead
to interruptions, delays or cessation in service to our Internet customers.
Further, such inappropriate or unauthorized use of the Internet could also
potentially jeopardize the security of confidential information stored in the
computer systems of our customers and other parties connected to the Internet,
which may deter potential customers and give rise to liability to users whose
security or privacy has been violated. The security and privacy concerns of
existing and potential customers may inhibit the growth of the Internet service
industry in general and our customer base and revenues in particular. A
significant security breach could result in a loss of customers, damage to our
reputation, direct damages, costs of repair and detection and other expenses. In
addition, our revenues for any given period may be adversely affected by fraud
or debt collection problems that we experience. The occurrence of any of the
foregoing events could have a material adverse effect our business, results of
operations and financial condition.
We May Be Hurt By System Failures
Our success is largely dependent upon our ability to deliver high speed,
uninterrupted access to the Internet. Any system failure that causes
interruptions in our operations could have a material adverse effect on us. We
currently rely upon the AT&T Internet Network. Failures in this or any other
telecommunications network on which we rely would result in customers' receiving
no or diminished access to the Internet.
We Could Be Held Liable For Information Disseminated Over Our Network
The law relating to liability of ISPs for information and materials
carried on or disseminated through their networks is not completely settled. The
possibility that courts could impose liability for information or material
carried on or disseminated through our network could require us to take measures
to reduce our exposure to such liability. Such measures may require us to spend
substantial resources or to discontinue certain product or service offerings.
Any of these actions could have a material adverse effect on our business,
operating results and financial condition.
Due to the increasing use of the Internet, it is possible that additional
laws and regulations may be adopted with respect to the Internet covering issues
such as user privacy, pricing, taxes, defamation,
14
<PAGE> 15
obscenity, intellectual property protection, consumer protection, technology
export and other controls. Changes in the regulatory environment relating to the
Internet services industry could have a material adverse effect on our business,
results of operation and financial condition.
We Are Subject to Intellectual Property Risks
Legal standards relating to the validity, enforceability and scope of
protection of intellectual property rights in Internet-related industries are
uncertain and still evolving, and we cannot be certain as to the future
viability or value of any of our intellectual property rights or those of other
companies within the IT industry. We cannot assure you that the steps we have
taken to protect our intellectual property rights will be adequate or that third
parties will not infringe or misappropriate our proprietary rights. Any such
infringement or misappropriation, should it occur, could have a material adverse
effect on our business, results of operations and financial condition.
Furthermore, we cannot be certain that our business activities will not infringe
the proprietary rights of others or that such other parties will not assert
infringement claims against us. We anticipate that we may be subject to claims
in the ordinary course of our business, including claims of alleged infringement
of the trademarks and other intellectual property rights of third parties due to
the dissemination of our content or the provision of access by our online
services to content made available by third parties. Such claims and any
resultant litigation, should it occur, could subject us to significant liability
for damages and could result in invalidation of our property rights and, even if
not meritorious, could be time-consuming and expensive to defend, and could
result in the diversion of management time and attention, any of which could
have a material adverse effect on our business, results of operations and
financial condition.
We regard substantial elements of our products and services as
proprietary and we attempt to protect them by relying on trademark, service
mark, trade dress, copyright and trade secret laws and restrictions on
disclosure and transfer of title. We also enter into confidentiality agreements
with our employees, suppliers, distributors, consultants, vendors and customer
and license agreements with third parties and generally seek to control access
to and distribution of our technology, documentation and other proprietary
information. We are pursuing the registration of our service marks but we
currently have no patents or applications for patents pending for our products
or services. Effective service mark, copyright and trade secret protection may
not be available.
We Are Subject to the Risks Associated with Rapid Industry Changes
The Internet services industry in which we operate is characterized by
rapidly changing technology, evolving industry standards, emerging competition
and frequent new service, software and other product innovations. We cannot
guarantee that we will be able to identify new service opportunities
successfully and develop and bring new products and services to market in a
timely and cost-effective manner, or that products, software and services or
technologies developed by others will not render our products and services
non-competitive or obsolete. In addition, we cannot provide any assurance that
our product or service developments or enhancements will achieve or sustain
market acceptance or be able to address effectively the compatibility and
interoperability issues raised by technological changes or new industry
standards.
We Are Subject to Certain Risks Associated with the Year 2000
The Year 2000 problem results from the fact that many existing computer
programs and systems have used only two digits to identify the year in the date
field. These programs were designed and developed without considering the impact
of a change in the century designation. If not corrected,
15
<PAGE> 16
computer applications that use a two-digit format could fail or create erroneous
results in any computer calculation or other process involving the Year 2000 or
a later date.
We have identified two main areas of Year 2000 risk for our IT systems:
- Our internal computer systems or embedded chips could be disrupted
or fail; causing an interruption or decrease in productivity in
our operations; and
- Computer systems or embedded chips of third parties including
(without limitation) financial institutions, suppliers, vendors,
landlords, customers, suppliers of communications services and
others could be disrupted or fail, causing an interruption or
decrease in our ability to continue our operations.
We Do Not Expect to Pay Dividends
The Company does not anticipate paying cash dividends in the foreseeable
future. See "Price Range of Common Stock."
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION OF ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is based on our audited Consolidated
Financial Statements for the years ended December 31, 1997 and 1998 and our
unaudited Consolidated Financial Statements for the nine months ended September
30, 1998 and 1999. The reader should bear in mind that during the periods
covered by these financial statements we were engaged in different businesses.
Our business now focuses on providing Internet access and related products. We
entered this business by acquiring Virtual Information Express, Computer Ease,
and NetWorld Ohio in the first and second quarters of 1999. Before making those
acquisitions, we were engaged in the skydiving business. We sold the skydiving
business as of the end of the first quarter of 1999. We now receive rental
income from leasing our airplanes to the purchasers.
Much of our Internet related business is in an early stage of
development. For example, Computer Ease (now A1 Services.com) and Virtual
Information Express, which are providers of connectivity and value added
services, have only been generating revenues from that business since the second
quarter of 1998. Before that, their principal business was e-commerce sales of
computer hardware and accessories, a business on which we are now refocusing. We
anticipate that as the number of end-users of our services increases, a larger
percentage of our revenues will be derived from recurring charges for
connectivity, e-commerce and other value added services and a smaller percentage
of our revenues will be derived from Web site design and technical services.
However, we have not yet had sufficient experience in our current Internet
related business to define trends or to determine whether our expectations are
accurate.
During the next twelve months we intend to focus on increasing the
number of end-users of our services. To that end we will intensify our sales
efforts to wholesale customers who resell our products and services to their
own customers. We will also continue to review acquisition opportunities,
particularly acquisitions of ISPs. We believe that our current organization and
infrastructure enable us to rapidly assimilate such acquisitions and realize
savings on personnel and equipment. To meet our plan we anticipate adding up to
15 additional employees in computer programming, marketing, customer service
and sales during the next twelve months.
The following table sets forth certain information about the source
of our revenues:
<TABLE>
<CAPTION>
SOURCE OF REVENUES PERCENTAGE OF TOTAL REVENUES
- --------------------------------------------------------------------------------------------------------
YEAR ENDING NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30
1997 1998 1998 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONNECTIVITY - - - 38
HOSTING - - - 3
TECHNICAL SERVICE - - - 7
DESIGN FEES - - - 24
E-COMMERCE - - - 18
OTHER RECURRING - - - 0
INTERNET MARKET - - - 1
SKY DIVING 100 100 100 1
AIRPLANE LEASE - - - 8
OTHER INCOME - - - 6
DISCOUNTS - - - 0
TOTAL 100% 100% 100% 100%
- --------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 18
The following table sets forth certain information about our cost of sales:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL COST OF SALES
- --------------------------------------------------------------------------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30
1997 1998 1998 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COST OF SALES
CONNECTIVITY - - - 45
COMPUTER EQUIPMENT - - - 43
LABOR - - - 20
OTHER COST - - - 1
SKY DIVE COSTS 100 100 100 1
PURCHASE DISCOUNTS - - - (9)
TOTAL 100% 100% 100% 100%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Results of Operations - Nine Months Ended September 30, 1999 Compared to Nine
Months Ended September 30, 1998
Revenues
Total revenues increased from $76,203 to $1,867,789. In the nine months
ended September 30, 1998, all of our revenues were derived from the skydiving
business. In the nine months ended September 30, 1999, our revenues were derived
from the following sources:
<TABLE>
<S> <C>
Internet related business (primarily in the
second and third quarters) $1,702,270
Lease of our airplanes to the purchasers
of our skydiving business $ 143,156
Skydiving business (in the first quarter) $ 22,363
</TABLE>
The principal components of our Internet related revenues were:
<TABLE>
<S> <C> <C>
Connectivity $700,937 41.1%
Design Fees $455,250 26.7%
Electronic Commerce $339,071 19.9%
Technical Services $135,533 7.9%
</TABLE>
Cost of Sales
Cost of sales increased from $8,626 in the nine months ended September
30, 1998 to $773,857 in the nine months ended September 30, 1999. In the nine
months ended September 30, 1998, our cost of sales related wholly to the
skydiving business and consisted of pilot fees. In the nine months ended
September 30, 1999 our cost of sales consisted primarily of Internet related
costs as follows:
<TABLE>
<CAPTION>
Cost of Sales
-------------
<S> <C> <C>
Connectivity $334,308 45%
Design Fees 118,163 15%
Electronic Commerce 259,896 34%
Technical Services 35,097 5%
</TABLE>
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<PAGE> 19
Operating Expenses
The following table sets forth certain information regarding our
operating expenses:
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
------------------------------------------------ ---------------------------------------------
30-SEP-99 1998 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING EXPENSES
Salaries and related expenses 825,868 34.5% 112,500 35.2% 0 0.0% 0 0.0%
Travel and entertainment 92,374 3.9% 0 0.0% 903 0.2% 1,729 0.5%
Bad debt expense 40,318 1.7% 0 0.0% 0 0.0% 0 0.0%
Legal and professional 199,192 8.3% 41,000 12.8% 82,692 17.8% 23,000 6.4%
Occupancy costs 112,769 4.7% 10,218 3.2% 0 0.0% 0 0.0%
General and administrative 318,823 13.3% 23,146 7.2% 62,555 13.5% 33,954 9.5%
Consulting 244,155 10.2% 34,505 10.8% 185,588 40.0% 296,373 83.4%
Depreciation and amortization 556,947 23.3% 98,210 30.7% 131,989 28.5% 826 0.2%
------------------------------------------------ ---------------------------------------------
TOTAL OPERATING EXPENSES 2,390,446 100.0% 319,579 100.0% 463,727 100.0% 357,882 100.0%
------------------------------------------------ ---------------------------------------------
</TABLE>
Other Expenses
In the nine months ended September 30, 1999 our former Board of Directors
authorized, and we issued, 550,000 shares of our common stock valued at
$1,100,000. 300,000 of these shares were issued as advance payments for
consulting services to be provided by certain individuals who we understand had
expertise in marketing outdoor sports or extreme sports. The issuance of these
300,000 shares was authorized by our former Board of Directors at a time [Did
Bruce abstain or did Tambasco unilaterally act? We should clarify] that we were
about to dispose of our skydiving business and become a provider of
Internet-related services. The remaining 250,000 shares were issued to our
former President and director as executive compensation upon his becoming
President. We have been unable to determine the value of the services, if any,
received in exchange for these 550,000 shares. We have determined to seek
recovery of the 300,000 shares issued as advance payments for consulting
services, and we are attempting to determine whether we have a legal basis to
assert a claim for recovery of the remaining shares.
Results of Operations - Year Ended December 31, 1997 As Compared to Year Ended
December 31, 1998
Revenues
Total revenues in the year ended December 31, 1998 were $84,560 as
compared to $3,384 in the period from October 15, 1997 when we were formed, to
December 31, 1997. All of our 1997 and 1998 revenues were derived from the
skydiving business which we sold at the end of the first quarter of 1999.
Costs
Total cost increased from $357,882 in the year ended December 31, 1997 to
$463,727 in the year ended December 31, 1998. The largest components of these
costs were:
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<PAGE> 20
- consulting fees of $298,373 in 1997 and $185,588 in 1998 paid to
our former corporate executives and others;
- professional fees of $23,000 in 1997 and $82,692 in 1998;
- insurance of $18,771 in 1997 and $36,043 in 1998;
- and repair and maintenance of our airplanes of $8,849 in 1997 and
$9,769 in 1998.
Liquidity and Capital Reserves
Since our inception we have financed our operations primarily from the
private sales of debt securities. Total net proceeds from the sale of equity
securities in the period between our formation and September 30, 1999 amounted
to approximately $4,585,000.
Cash Flow
Operating activities used cash of $361,012, and $324,117 in the two
years ended December 31, 1997 and 1998 and $228,416 and $1,102,897 in the nine
months ended September 30, 1998 and 1999.
Investing activities used cash of $1,258,437 and $0 in the years ended
December 31, 1997 and 1998 and $0 and $1,376,985 in the nine months ended
September 30, 1998 and 1999.
Net Cash provided by financing activities was $1,621,268, and $332,503
in the years ended December 31, 1997 and 1998 and $242,489 and $4,547,490 in
the nine months ended September 30, 1998 and 1999.
Working Capital
Our working capital, defined as the excess of our current assets over our
current liabilities, was $1,116,527 at September 30, 1999 compared to
($795,879) at December 31, 1998 and ($390,404) at December 31, 1997.
As of September 30, 1999 we had no borrowing facility established with a
financial institution. We anticipate that our working capital together with the
net proceeds of a private offering of equity securities which we completed in
November 1999, in the amount of $5,020,000, will be sufficient to fund our
cash flow deficit through March 31, 2000 when we expect to be in a positive
cash flow position.
Year 2000
The Year 2000 problem results from the fact that many existing computer
programs and systems have used only two digits to identify the year in the date
field. These programs were designed and developed without considering the impact
of a change in the century designation. If not corrected, computer applications
that use a two-digit format could fail or create erroneous results in any
computer calculation or other process involving the Year 2000 or a later date.
We have identified two main areas of risk related to the Year 2000
problem for our IT systems:
- Our internal computer systems or embedded chips could be disrupted
or fail, causing an interruption or decrease in productivity in
our operations; and
20
<PAGE> 21
- Computer systems or embedded chips of third parties including
(without limitation) financial institutions, suppliers, vendors,
landlords, customers, suppliers of communications services and
others could be disrupted or fail, causing an interruption or
decrease in our ability to continue our operations.
We have evaluated our state of readiness for the Year 2000 issue. With
regard to our internal IT systems, we have concluded that substantially all of
those systems are Year 2000 compliant. Our personnel have tested and analyzed
our systems in the course of regular quality control and research and
development. We did not spend significant capital on this evaluation. To date,
the only costs in connection with our Year 2000 evaluation have been limited to
internal staff costs, which have been expensed as incurred. The financial
information contained in this Form 10-SB includes such costs, which are not
material. Based on our experience to date, we do not anticipate that we will be
required to incur significant additional operating expenses or to invest
material amounts to obtain Year 2000 compliance.
We have been assured by all major suppliers, vendors and customers that
the existing IT and other systems, upon which we rely for products and services
and for internal operations, are Year 2000 compliant. Based on those assurances,
we believe that the IT systems utilized in our principal network, backbone and
internal operations will meet Year 2000 requirements. We do not anticipate
significant interruptions of billings or service to customers or disruptions of
internal operations attributable to the Year 2000 problem. However, failure of
any one provider may have a material impact on our operations. We are heavily
dependent upon the veracity of their testing and statements of compliance as we
cannot replicate and independently test the services supplied to us. At this
time we cannot estimate the effect, if any, that non-compliant systems supplied
by these entities could have on us. It is possible that the impact on us could
be material if one or more of these systems are not Year 2000 compliant by the
end of the year. If any of our material third party suppliers or vendors are not
Year 2000 ready and their non-compliance causes a material disruption to any of
their respective businesses or services, our business, operations and/or
services could be materially and adversely affected. The most significant risks
that the Year 2000 issues could present to us include, without limitation,
disruption, delay or cessation of operations. For example, in the event of a
widespread telecommunications failure (which we believe is our most reasonably
likely worst case Year 2000 scenario), the entire Internet performance could
potentially be affected due to its very nature as a collection of interconnected
networks. A number of individual customers may suffer from complete outages of
service, though we believe that most Internet services would likely continue to
operate, although possibly at a reduced performance level. Other potential
adverse Year 2000 scenarios include the failure or impairment of software that
is provided by a third party and incorporated in one of our service platforms as
a result of a Year 2000 problem. In that case, the particular service that the
software supports could likewise become inoperable or perform incorrectly.
Further, in the event that third-party-supplied equipment (including customer
premise equipment) contains non-Year 2000-compliant technology, the systems,
operations or services supported by that equipment also could fail or be
interrupted.
ITEM 3. DESCRIPTION OF PROPERTIES
Our headquarters is located at 15825 Shady Grove Road, Suite 50,
Rockville, Maryland 20850, where we lease approximately 4527 square feet of
office space. The five-year term of the lease commenced on March 6,1996. The
current annual rent is $71,380.
We also lease approximately 450 square feet of office space in Sandusky,
Ohio at an annual rental of $3,750, and approximately 2800 square feet in
Fremont, Ohio at an annual rental of $16,800. The properties are the subject of
one-year leases expiring on July 31, 2000.
In Sharon, Massachusetts we lease 2785 square feet of office space at an
annual rent of $37,597.50. The lease is due to expire on August 1, 2000.
Our former executive offices were located in approximately 1150 square
feet of office space in Boca Raton, Florida. We are obligated for rental
payments on this property through September 29, 2001. The current annual rent is
$27,900. We moved our executive offices from Boca Raton, Florida to Rockville,
Maryland when we disposed of the skydiving business that is based in Florida and
acquired our principal Internet-related subsidiaries which are based in
Rockville, Maryland. We are attempting to sublet the space in Boca Raton but no
agreement for a sublease has been reached.
We lease approximately 400 square feet at Frontier's Global Center for
use as our data warehousing facility. The lease has a one-year renewable term
and we pay rent at the rate of $60,000 per year. The facility has more than one
gigabyte of Internet bandwidth available to us therefore allowing us to provide
T-1 hosting services on a pay as you go basis.
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<PAGE> 22
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of A1
Internet's common stock and Series A preferred stock as of November 30, 1999, by
each shareholder known by us to be the beneficial owner of more than 5% of A1
Internet's common stock or Series A preferred stock, each director and all
executive officers and directors as a group. Unless otherwise indicated by
footnote, each of the shareholders named in the table has sole voting and
investment power with respect to the shares of common stock beneficially owned.
<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS Number of Shares(1) Owned % OF CLASS
-------------- ---------------- ----------
<S> <C> <C> <C>
Common Bruce Bertman 3,368,000(2) 36.25
19200 Autumn Maple Lane
Gaithersburg, MD 20879
Common Larry Kerschenbaum 600,000 6.45
255 Wychmer Terr.
Wellington, FL 33414
Common Noved Holdings Inc. 565,000 6.08
932 Burke Street
Winston Salem, NC 27101
Common Leonard Tambasco
22355 Collington Dr.
Boca Raton, FL 33428 321,000(3) 3.45
Common Martin Sumichrast 100,000 1.08
6000 Fairview Rd.
Suite 1410
Charlotte, NC 28210
Common Donald Dea 40,000 0.43
12 Saint Ebbas Drive
Penfield, NY 14526
Preferred Richard Greene 70,000 6.27
15 Melville Lane
Great Neck, NY 11023
Preferred James Kotsopoulos 100,000 8.96
5662 Jerez Ct.
Fort Myers, FL 23914
Preferred Steven Etra 130,000(4) 11.65
Heather Hill Road
Brookville, NY 11545
Preferred Jay Raubvogel 222,222 19.92
5 Brook Lane
Brookville, NY 11545
Common All Executive officers and
directors as a group(5) 3,779,000 38.80
</TABLE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
(a) Our current directors and executive officers, who will serve until
the next annual meeting, or until their successors are elected or
appointed and qualified, are as follows:
- -------------------------
(1) Represents the number of shares of common stock owned of record and
beneficially by each named person or group, expressed as a percentage of
9,739,500 shares of A1 Internet's common stock outstanding as of November 30,
1999 or 1,115,553 shares of A1 Internet's Series A preferred stock, outstanding
as of November 30, 1999.
(2) 200,000 of Mr. Bertman's shares are held by Cyberrealm, Inc. and 100,000
shares are held by Stock Maker, Inc., both of which are exclusively owned by
Mr. Bertman.
(3) 200,000 of Mr. Tambasco's shares are currently held beneficially by his
children.
(4) Includes 65,000 shares owned by SRK Associates, LLC, of which Mr. Etra is
President.
(5) Includes: Bruce Bertman, Chief Executive Officer, President, Treasurer and
Director; Leonard Tambasco, Secretary; Martin Sumichrast, Director; and Donald
Dea, Director.
22
<PAGE> 23
<TABLE>
<CAPTION>
NAME AGE OFFICE HELD
<S> <C> <C>
Bruce Bertman 42 Director, President, Treasurer, and
Chairman of the Board of Directors
Martin A. Sumichrast 32 Director
Donald Dea 45 Director
Leonard J. Tambasco, Jr. 41 Secretary
</TABLE>
Bruce Bertman - Mr. Bertman has served as a Director since March 5, 1999 and
serves as our Chairman of the Board, Chief Executive Officer, President, and
Treasurer. Mr. Bertman is our full-time employee. Mr. Bertman has more than 12
years of experience in the high technology industry. From 1988 to 1991, he
served as Regional Manager and Operating Officer of Inacomp Computer Centers, a
predecessor of Inacom. From 1991 to 1993, Mr. Bertman was Vice President of
Microware Distributors, a computer product distribution organization, in charge
of government reseller programs on a national basis. In 1993, Mr. Bertman
founded Computer Ease, LLC, where he served as its President until we acquired
that company in 1999. In 1998, Mr. Bertman founded Stockmaker.com, Inc. and
serves as President and Chairman of that company. Mr. Bertman also currently
serves as a director of several internet-related companies, including
EBOnline.com Inc., Cyber Realm Inc., and Computer Kids Network, Inc.
Martin A. Sumichrast - Mr. Sumichrast has been a Director since May 21, 1999.
Mr. Sumichrast serves as a Director of A1 Internet. Mr. Sumichrast has also
served as a Director of Eastbrokers International Incorporated since its
inception in January 1993, and has served that company as its Chairman of the
Board, Chief Executive Officer and President since December 1998, Vice Chairman
from March 1997 through December 1998, Chief Financial Officer from January,
1993 to August, 1996, and Secretary from 1993 to the present. Mr. Sumichrast
also serves as Chairman of Eastbrokers North America, Inc., a subsidiary of
Eastbrokers International Incorporated.
Donald Dea - Mr. Dea has been a Director since October, 1999. Mr. Dea serves as
a Director of A1 Internet. Mr. Dea is a co-founder of Fusion Productions, a
meeting planning company. From 1984 to 1988, he worked for Xerox Corporation,
servings as: General Manager of U.S. Customer Operations, in charge of
developing strategic partnerships; General Manager of OEM/VAR Channel
Operations; Manager of Marketing and Quality.
Leonard Tambasco - Mr. Tambasco serves as our Secretary on a part-time basis and
devotes approximately 25% of his available working time to our company. From
March 5, 1999 until September 30, 1999, Mr. Tambasco served as our President and
a director. From 1998 until April 1999, Mr. Tambasco served as CEO and Chairman
of the Board of Computer Access International. From 1996 to 1998, Mr. Tambasco
was the Director of Purchasing and Contract for Computer Access International.
Between 1993 and 1996, Mr. Tambasco ran his own consulting firm, Callaway
International Corporation. Between 1976 and 1993, Mr. Tambasco worked as an
employee and later as the President of Trevus Construction Corporation, a
family-owned road and sewer contractor in New York City.
(b) There are no other officers or significant employees.
(c) No family relationships exist between the directors and the
officers.
(d) No legal proceedings have been instituted in the previous five
years against any of our directors or officers. We have no knowledge of any
legal proceedings against any predecessor director, officer, or promoter.
23
<PAGE> 24
ITEM 6. EXECUTIVE COMPENSATION
(a) GENERAL. No salary or regular compensation is paid to our directors.
Pursuant to our By-laws, directors are eligible to be reimbursed for their
actual out of pocket expenses incurred in attending Board of Directors meetings
and other director functions, as well as fixed fees and other compensation to be
determined by the Board of Directors. No such compensation or expense
reimbursements have been requested by the directors or paid to date. No formal
bonus, stock option plan, stock appreciation rights, stock incentive plan, or
other compensation or perquisites have been implemented. Salary amounts paid to
our executive officers are detailed in subsection (b) below.
(b) SUMMARY COMPENSATION TABLE. The following table sets forth certain
summary information concerning the compensation paid to the Chief Executive
Officer and certain executive officers for the fiscal year ended December 31,
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
FISCAL
NAME AND PRINCIPAL POSITION YEAR PAID SALARY BONUS OTHER COMPENSATION
<S> <C> <C> <C> <C>
Larry Kerschenbaum - Former CEO, Chairman of the Board* 1998 75,000 0 0
Thomas H. Keese - Former President** 1998 75,000 0 0
Leonard Tambasco - Former President 1999 0 0 250,000 shares
common stock***
</TABLE>
- ------------------------
*Mr. Kerschenbaum resigned as CEO and Chairman of the Board on March 5,
1999. Bruce Bertman was appointed CEO, President, and Treasurer in his place and
continues to serve in such offices.
**Mr. Keese resigned as our President on March 5, 1999.
***Mr. Tambasco received 250,000 shares of common stock as executive
compensation upon his becoming President of the company. See Management's
Discussion and Analysis of Financial Condition and Results of Operations - Other
Expenses.
(c) OPTION/SAR GRANTS. We have not granted any options or stock
appreciation rights during the last fiscal year.
(d) AGGREGATE OPTION/SAR EXERCISES. No stock options or stock
appreciation rights have been exercised in the last fiscal year.
(e) LONG TERM INCENTIVE PLAN AWARDS. No long term incentive plans have
been awarded.
(f) COMPENSATION OF DIRECTORS. No salary or regular compensation is paid
to our directors. Our directors are entitled to reimbursement of out of pocket
expenses incurred in connection with their duties as directors. To date, no such
expenses have been requested or paid.
(g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT. On March 5, 1999,
we entered into identical Employment Agreements with Bruce Bertman and Leonard
J. Tambasco, Jr. (collectively, the "Employment Agreements"). These Employment
Agreements were for a term of two years, commencing March 5, 1999. Unless we or
the employees provide notice of intent to terminate, the term of the Employment
Agreements is to automatically renew for additional one year periods. The
Employment Agreements provide for Mr. Bertman and Mr. Tambasco to receive a base
salary of $96,000 per year each, which amounts are to increase by 6% per year
beginning on the first anniversary of the term. In addition to the base salary,
the Employment Agreements call for the reimbursement of all ordinary business
expenses, as well as the payment of 80% of the cost of Family Health Insurance.
The Employment Agreements provide Mr. Bertman and Mr. Tambasco with a $650 per
month automobile allowance, and two weeks vacation per year, with additional
vacation to accrue at a rate of 1 week for
24
<PAGE> 25
each additional year of employment. Mr. Tambasco has since resigned as President
and is currently a part-time officer. Accordingly, a modification of his
agreement is being negotiated.
(h) REPORT ON REPRICING OF OPTIONS/SARs. No options or stock appreciation
rights have been granted.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) The following transactions have been undertaken within the last two
years with related parties.
In connection with the resignation of Larry Kerschenbaum, we paid him a
total of $35,000 as severance pay. This amount was paid in seven monthly
payments of $5,000 each.
On February 1, 1999, we entered into an Exchange Agreement with Bruce
Bertman, our present Chief Executive Officer, President, Treasurer and Chairman
of the Board, pursuant to the which we purchased 100% of the outstanding common
stock of Virtual Information Express from Mr. Bertman in exchange for 300,000
shares of our restricted common stock, valued at $2 per share.
On March 24, 1999, we entered into an Exchange Agreement with the members
of Computer Ease, pursuant to which we purchased 100% of the membership units of
Computer Ease, in exchange for 4,000,000 shares of our restricted common stock
and our agreement to provide Computer Ease with $500,000 in working capital. At
the time of the transaction, Mr. Bertman was the majority owner of Computer
Ease. Computer Ease has since merged with our wholly-owned subsidiary, Al
Internet Services, Inc.(SM).
On March 30, 1999, our wholly-owned subsidiary, Skydive USA, was sold to
Larry Kerschenbaum and Thomas Keese, two of our founding shareholders, officers
and directors. In consideration for Skydive USA, Messrs. Kerschenbaum and Keese
returned to us a total of 400,000 shares of our outstanding common stock.
On March 31, 1999, our wholly-owned subsidiary, Gravity Pilot Air, Inc.,
agreed to lease its two airplanes to Skydive USA, a former subsidiary, for a
term of twelve months. Gravity Pilot Air, Inc. receives base rent of $21,176 per
month for the use of the airplanes, and an additional $35 for each hour of
flight of the leased aircraft.
On March 9, 1999, we issued 250,000 shares of our common stock to Leonard
J. Tambasco, Jr. in exchange for his agreement to serve as our President.
On April 20, 1999, we issued 120,000 shares of our common stock to Bruce
Bertman in full payment for the $372,692 owed to Mr. Bertman by Computer Ease
and Virtual Information Express.
During the first six months of 1999, our former President, Larry
Kerschenbaum, and our former CEO, Thomas Keese, forgave various items of
indebtedness carried on our books totaling $177,331. This was done because we
challenged the validity of the debt and did not receive substantiation
therefore.
During 1997 and 1998, Computer Ease borrowed various amounts from Bruce
Bertman and Mr. Bertman incurred $62,292 in reimbursable business expenses on
behalf of that company. Some of these amounts were repaid. Upon our acquisition
of Computer Ease, we became responsible for the balance owed to Mr. Bertman. As
of September 30, 1999, the outstanding balance was $370,649.
At the time of our acquisition of Computer Ease, it had accounts
receivable from two companies owned by Bruce Bertman, CyberRealm, Inc. and
Stockmaker.com, Inc. These accounts receivable represented amounts owed to
Computer Ease for goods and services purchased by CyberRealm, Inc. and
Stockmaker.com, Inc. at regular prices and services. Computer Ease, LLC also had
accounts payable to Stockmaker.com, Inc. as commissions for referrals provided
by Stockmaker.com, Inc.
25
<PAGE> 26
When we acquired Computer Ease, we assumed the rights and obligations of
Computer Ease, LLC with regard to the accounts receivable and accounts payable.
On September 30, 1999, we purchased from Bruce Bertman computer hardware
and equipment valued at $558,020. In consideration for Mr. Bertman's
contribution of this hardware and equipment, we paid the purchase price by
offsetting accounts payable to Stockmaker.com, Inc. and Cyber Realm Inc., in the
amounts of $304,875 and $248,623, respectively. We also offset accounts
receivable from Stockmaker, Inc. in the amount of $29,650. The balance of
$34,172 was paid to Mr. Bertman in cash.
Before we acquired Computer Ease, it sold services to, and purchased
computer products and equipment from, Eurobridge D.C., Inc., a company
affiliated with Bruce Bertman. When we acquired Computer Ease, it had a net
payable to Eurobridge totaling $67,393, which amount we subsequently paid in
full.
On July 1, 1999, we entered into a Placement Agreement with EBI
Securities Corporation, a subsidiary of Eastbrokers International Incorporated,
pursuant to which EBI Securities Corporation agreed to act as Placement Agent
for up to $10 million of our preferred stock. Our director, Martin Sumichrast,
serves as Chairman of the Board, Chief Executive Officer and President of
Eastbrokers International Incorporated. We own approximately 14% of
EBOnlineinc.com, a company of which Mr. Bertman owns approximately 7% and
Eastbrokers International Incorporated owns approximately 45%.
On April 5, 1999, Martin Sumichrast purchased 100,000 shares of our
restricted common stock at a price of $2 per share. Mr. Sumichrast executed a
non-negotiable term note for the principal balance of $200,000, due on December
31, 2004. The note from Mr. Sumichrast is payable in either cash or our common
stock.
On February 2, 1999, we issued to EBI Securities Corporation a warrant to
purchase 500,000 shares of our common stock with an exercise price of $.10 per
share as payment for professional services performed in the first quarter of
1999.
There have been no other related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation S-B. There are no transactions between A1 Internet and other
companies for which our directors serve as directors or employees other than in
the normal course of business. With the exception of Fusion Productions, we
charge companies that share directors or officers with us at the same rate at
which we charge other, unrelated companies. Our director, Donald Dea, is a
co-founder of Fusion Productions. Fusion Productions was a client of Computer
Ease for almost 6 years prior to the time we purchased Computer Ease in March,
1999. We continue to charge Fusion Productions the same or higher rate than the
rates which we charged prior to Mr. Dea becoming one of our directors.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of Common Stock, par
value $.001 per Share. As of September 30, 1999, 9,739,500 shares were
outstanding. The holders of Common Stock have one vote per share on all matters
(including election of directors) without provision for cumulative voting. The
Common Stock is not redeemable and has no conversion or preemptive rights. There
are no sinking fund provisions for any of the Company's securities. The Common
Stock currently outstanding is validly issued, fully paid and nonassessable. In
the event of liquidation of the Company, the holders of Common Stock will share
equally in any balance of the Company's assets available for distribution to
them after satisfaction of creditors and preferred shareholders. The Company may
pay dividends, in cash or in securities or other property, when and as declared
by the Board of Directors from funds legally available therefore, but has paid
no cash dividends on its Common Stock to date and does not anticipate paying
dividends in the foreseeable future.
26
<PAGE> 27
Preferred Stock
The Company is authorized to issue 5,000,000 Shares of Preferred Stock,
par value $.001 per Share. The Company has designated 2,000,000 Shares as Series
A Convertible Preferred Stock (the "Series A Preferred Stock") and issued
1,115,553 of such shares as of October 30, 1999. Each share of Series A
Preferred Stock is entitled one vote per share of Common Stock into which it is
convertible and votes with the Common Stock as a single class, except in
certain limited circumstances.
Subject to certain adjustments, each share of Series A Preferred Stock is
convertible into one share of Common Stock. The Series A Preferred Stock is
convertible upon the written request of a holder and is automatically converted
upon the effectiveness of a registration statement filed by us under the
Securities Act of 1933 which relates in whole or in part to registration of the
Common Stock into which the Series A Preferred Stock is convertible.
Holders of at least fifty-one percent (51%) of the Series A Preferred
Stock have this right to demand that we register the Common Stock into which the
Series A Preferred Stock is convertible under the Securities Act. In addition,
holders have the right to include the Common Stock into which their Series A
Preferred Stock is convertible in certain registration statements filed by us.
The Series A Preferred Stock is preferred as to both earnings and assets,
and in the event of liquidation, dissolution, or winding up of the Company,
holders of the Series A Preferred Stock shall be entitled to be paid $4.50 per
share before any assets of the Company are distributed among or paid over to the
holders of the Common Stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Our common stock is traded on the OTC Bulletin Board under the symbol
"AWON." In the period between October10, 1998, when trading on the OTC Bulletin
Board began, and May 24, 1999, our common stock traded under the symbol "HALO".
As of October 29, 1999 we had 283 registered stockholders of record. The closing
price of our common stock on the OTC Bulletin Board was 6-3/16 on October 29,
1999.
The following table sets forth for the periods indicated the high and low
bid prices for our common stock as reported each quarterly period in 1997, 1998
and 1999. The prices are inter-dealer prices, do not include retail mark ups,
mark downs or commissions and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
High Low
1998 ---- ---
----
<S> <C> <C>
Fourth Quarter (beginning October 10, 1998) 5 3-3/4
1999
----
First Quarter 7-1/2 1
Second Quarter 8 5.13
Third Quarter 7-3/4 5
Fourth Quarter (through October 29, 1999) 6-3/4 6
</TABLE>
ITEM 2. LEGAL PROCEEDINGS
We are not party to any legal proceeding which could have a material
effect upon our business, financial condition or results of operations.
27
<PAGE> 28
ITEM 3. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
For the fiscal year ended December 31, 1999, we have retained Spicer,
Jeffries & Co. as our principal independent accountant to replace Cohen & Kameny
CPA's PLCC, our principal accountant for the fiscal years ended December 31,
1997 and 1998. Cohen & Kameny's report on our financial statements for the past
two fiscal years did not contain an adverse opinion or disclaimer of opinion and
was not modified as to uncertainty, audit scope, or accounting principals. The
decision to change accountants was approved by our Board of Directors. There
were no disagreements with our former accountant, whether or not resolved, on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which if not resolved would have caused our
former accountant to make reference to the subject matter of the disagreement(s)
in connection with its report.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
(a) We have made the following sales of unregistered common stock
since our organization on October 17, 1997. All sales listed below
which were made on or before April 26, 1999, were made by Halo
Holdings of Nevada, Inc. All sales since that date were made by A1
Internet.
<TABLE>
<CAPTION>
DATE
OF ISSUE TITLE PURCHASER SHARES SOLD CONSIDERATION EXEMPTION
---------- --------- ------------------- ------------- ----------------------------- ------------
<S> <C> <C> <C> <C> <C>
10/15/97 Common Larry W. Kerschenbaum 1,500,000 Founder Services of $1,500 Section 4(2)
10/15/97 Common Thomas H. Keesee 1,500,000 Founder Services of $1,500 Section 4(2)
1/15/98 Common E&L Investments, Inc. 250,000 $250,000 Regulation D
1/15/98 Common Sarah Kerschenbaum 25,000 $25,000 Regulation D
1/15/98 Common Dave Mazess 100,000 $100,000 Regulation D
1/15/98 Common Brian Campbell 45,000 $45,000 Regulation D
1/15/98 Common Estate of James Darby 55,000 $55,000 Regulation D
1/15/98 Common Elliott Broidy 250,000 $250,000 Regulation D
1/15/98 Common Cored Capital Corporation 250,000 $250,000 Regulation D
1/15/98 Common Atlantic Aero, Inc. 25,000 $25,000 Regulation D
12/21/98 Common Gravity Pilot Air, Inc. 300,000 Merger (exchange all Section 4(2)
outstanding stock)
1/27/99 Common Brian Campbell 25,000 $25,000 Receivable Regulation D
1/27/99 Common Clifford Morgan 27,500 Consulting services Section 4(2)
1/27/99 Common Eduardo Lautieri 7,500 $7,500 Receivable Regulation D
3/5/99 Common Lenny Tambasco 250,000 Executive compensation Section 4(2)
3/5/99 Common Eduardo Lautieri 250,000 Consulting services Section 4(2)
3/5/99 Common Moe Cohen 50,000 Consulting services Section 4(2)
3/25/99 Common South Florida Glazing 25,000 $50,000 Regulation D
3/25/99 Common Ben Beckes 53,000 $106,000 Regulation D
3/25/99 Common Larry Littlefield 5,000 $10,000 Regulation D
3/25/99 Common Bobby Nelson Bodiford 12,500 $25,000 Regulation D
3/25/99 Common Phyllis Lott 5,000 $10,000 Regulation D
3/25/99 Common Amerigo Investor Group 40,000 $80,000 Note Regulation D
3/25/99 Common Eduardo Lautieri 14,000 $28,000 Regulation D
3/25/99 Common Yucatan Holding Company 1,000 $2,000 Regulation D
3/25/99 Common Dorothy Littlefield 3,500 $7,000 Regulation D
3/25/99 Common Blue Sky Unlimited 80,000 $160,000 Note Regulation D
3/30/99 Common Bruce Bertman 3,400,000 Exchange for Computer Ease Section 4(2)
LLC
3/30/99 Common Mark Bertman 200,000 Exchange for Computer Ease Section 4(2)
LLC
3/30/00 Common Jeffrey Lieberman 200,000 Exchange for Computer Ease Section 4(2)
LLC
3/30/99 Common Dustin Cobb 200,000 Exchange for Computer Ease Section 4(2)
LLC
3/30/99 Common Bruce Bertman 29,750 Exchange for Virtual Section 4(2)
Information Express Inc.
3/30/99 Common Mark Bertman 1,750 Exchange for Virtual Section 4(2)
Information Express, Inc.
3/30/99 Common Jeffrey Lieberman 1,750 Exchange for Virtual Section 4(2)
Information Express, Inc.
3/30/99 Common Dustin Cobb 1,750 Exchange for Virtual Section 4(2)
Information Express, Inc.
3/30/99 Common Net World Ohio Inc. 37,000 Merger (exchange all Section 4(2)
outstanding stock)
4/6/99 Common Cimarron Capital Corporation 23,000 $46,000 Regulation D
4/6/99 Common Market Edge Inc. 15,000 $30,000 Regulation D
4/6/99 Common Arlan Akerlind 5,000 $10,000 Regulation D
4/6/99 Common George and Diane Morgan 10,000 $20,000 Regulation D
4/6/99 Common Keith Krupka 40,000 $80,000 Regulation D
4/6/99 Common Morton and Joyce Sosin 10,000 $20,000 Regulation D
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C>
4/6/99 Common Therese Esposito 5,000 $10,000 Regulation D
4/6/99 Common Elliot Broidy 118,000 $236,000 Regulation D
4/6/99 Common Deborah Ann Ingraham 5,000 $10,000 Regulation D
4/6/99 Common John L. House 10,000 $20,000 Regulation D
4/6/99 Common Mark Bertman 10,000 $20,000 Regulation D
4/13/99 Common Bruce Bertman 120,000 Exchange for debt Section 4(2)
7/12/99 Common Bruce Bertman 265,000 Exchange for Virtual Section 4(2)
Information Express, Inc.
7/12/99 Common Martin Sumichrast 100,000 $200,000 Note Section 4(2)
8/19/99 Common NetAmerica 190,000 $1,330,000 in assets Section 4(2)
8/30/99 Common Quanta Corporation 5,000 Consulting services Section 4(2)
8/30/99 Common Mike Strauss 5,000 Consulting services Section 4(2)
9/22/99 Preferred* Frank Huang 11,111 $50,000 Regulation D
9/23/99 Preferred* Matt Goud 10,000 $45,000 Regulation D
8/24/99 Preferred* Steven and Irene DeCosta 20,000 $90,000 Regulation D
8/30/99 Preferred* Michael Cohen 44,444 $200,000 Regulation D
8/24/99 Preferred* Roderick O'Shea 10,000 $45,000 Regulation D
8/16/99 Preferred* Northridge Development Corp. 40,000 $180,000 Regulation D
8/11/99 Preferred* David Tevet 15,000 $67,500 Regulation D
8/16/99 Preferred* Richard Carter 15,000 $67,500 Regulation D
8/05/99 Preferred* Jesse Goldstein 5,000 $22,500 Regulation D
9/30/99 Preferred* HBC Investment Group, Inc. 50,000 $225,000 Regulation D
9/12/99 Preferred* Galt Asset Management, LLC 20,000 $90,000 Regulation D
8/30/99 Preferred* Kandel & Son Profit Sharing Plan 6,000 $27,000 Regulation D
8/30/99 Preferred* Richard Kandel 16,000 $72,000 Regulation D
8/30/99 Preferred* Richard Greene 70,000 $315,000 Regulation D
9/15/99 Preferred* Dr. Steven Kobren 22,222 $100,000 Regulation D
8/27/99 Preferred* Steven Etra 65,000 $292,500 Regulation D
9/21/99 Preferred* Jay Raubvogel 222,222 $1,000,000 Regulation D
8/27/99 Preferred* Blanche Etra 22,000 $99,000 Regulation D
9/10/99 Preferred* SRK Associates, LLC 65,000 $292,500 Regulation D
9/07/99 Preferred* Jean Etra 18,000 $81,000 Regulation D
9/30/99 Preferred Ferro Pasquale 23,000 Exchange for Debt Section 4(2)
9/30/99 Preferred Alan Lisenby 55,555 Exchange for Debt Section 4(2)
9/30/99 Preferred Outerbanks Limited 44,444 $200,000 Section 4(2)
10/10/99 Preferred* Lenord and Rosemarie Imperio 10,000 $45,000 Regulation D
10/04/99 Preferred* Matt Bencriscutto 20,000 $90,000 Regulation D
10/10/99 Preferred* Jerry Poole 33,333 $150,000 Regulation D
10/10/99 Preferred* Galt IT 30,000 $135,000 Regulation D
10/10/99 Preferred* James Kotsopoulos 100,000 $450,000 Regulation D
10/10/99 Preferred* Polymer Applications 30,000 $135,000 Regulation D
10/15/99 Preferred Calvin Caldwell 22,222 Exchange for Debt Section 4(2)
</TABLE>
*The principal underwriters for this transaction were EBI Securities Corporation
and J.B. Sutton Group, LLC. Both EBI and JB Sutton received a warrant to
purchase 500,000 shares of common stock exercisable at $5.50 per share and which
expires 5 years from the date of issuance. In addition, each of EBI and JB
Sutton were given the right to receive warrants to purchase 50,000 shares of
common stock at an exercise price of $2.75 per share for each $500,000 increment
that A1 Internet's gross sales falls below $13,000,000 on each of February 28,
2000 and August 31, 2000.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company intends to maintain insurance against all liability incurred
by its officers and directors in defense of any actions to which they may be
made parties by reason of their positions as officers and directors and is in
the process of obtaining this insurance.
Nevada law authorizes a Nevada corporation to indemnify its officers and
directors against claims or liabilities arising out of such person's conduct as
officers or directors if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Company. The Articles of Incorporation provide for indemnification of the
directors and officers of the Company. In addition, the Bylaws of the Company
provide for indemnification of the directors, officers, employees, or agents of
the Company. In general, these provisions provide for indemnification in
instances when such persons acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the Company.
29
<PAGE> 30
PART III
ITEM 1. INDEX TO EXHIBITS
FINANCIAL STATEMENTS AND EXHIBITS
The following documents are attached hereto and incorporated herein by
reference.
<TABLE>
<S> <C> <C>
A. FINANCIAL STATEMENTS
F-1 Audited Financial Statements as of December 31, 1998,
including audited balance sheet, and audited statements
of income, cash flows, and changes in stockholders' equity.
F-2 Unaudited Financial Statements as of September 30, 1999,
including unaudited balance sheet, and related statements
of income and cash flows.
B. EXHIBIT
2.1 Acquisition Agreement dated October 17, 1997, between
Halo Holdings of Nevada, Inc., Tom Keesee and Larry
Kerschenbaum, regarding the acquisition of Gravity
Pilot Air, Inc. (filed herewith).
2.2 Stock Purchase Agreement dated February 1, 1999,
between Halo Holdings of Nevada, Inc. and Bruce
Bertman, regarding the acquisition of Virtual
Information Express, Inc. (filed herewith).
2.3 Stock Purchase Agreement dated February 1, 1999,
between Halo Holdings of Nevada, Inc. and Bruce
Bertman, regarding the acquisition of ComputerEase,
LLC (filed herewith).
2.4 Stock Purchase Agreement dated March 31, 1999,
between Larry W. Kerschenbaum and Halo Holdings of
Nevada, Inc., regarding the sale of Skydive USA
(filed herewith).
2.5 Stock Purchase Agreement dated April 19, 1999,
between Halo Holdings of Nevada, Inc. and the
Shareholders of Networld of Ohio, Inc., regarding the
acquisition of Networld of Ohio, Inc. (filed
herewith) (The following attachments are not
included but are incorporated herein by reference and
will be provided to the SEC upon request: Schedule
2(d) Leased Property; Schedule 5.14 Disclosed
Liabilities; Schedule 5.15 Material Terms; Schedule
5.16(a) Tangible Property; Schedule 5.16(b) Real
Property; Schedule 5.16(c) Other Assets; Schedule
5.19 Affiliated Transactions; Schedule 5.20 Bank
Accounts; Schedule 5.21 Environmental Compliance;
Schedule A Common Stock).
2.6 Purchase and Sale Agreement dated August 19, 1999,
between A1 Internet Services, Inc., NetAmerica, Inc.,
William Fritts and Bruce Bertman, regarding A1
Internet's acquisition of contracts from NetAmerica
(filed herewith) (The following attachments are not
included but are incorporated herein by reference and
will be provided to the SEC upon request: Exhibit A
List of Intangible Assets; Exhibit B Bill of Sale;
Exhibit C Promissory Note and Security Agreement; and
Exhibit D Stock Pledge).
3.1 Articles of Incorporation of A1 Internet.com, Inc.
(filed as Exhibit 3.I.A to A1 Internet's First
Amendment to Form 10-SB12G filed as of November 17,
1999, No. 000-27243, and incorporated herein by
reference).
3.2 Certificate of Amendment of Articles of Incorporation
(filed as Exhibit 3.B to A1 Internet's First
Amendment to Form 10-SB12G filed as of November 17,
1999, No. 000-27243, and incorporated herein by
reference).
3.3 Bylaws of Halo Holdings of Nevada, Inc. (filed as
Exhibit 3.II to A1 Internet's First Amendment to Form
10-SB filed as of November 17, 1999, No. 000-27243,
and incorporated herein by reference).
4.1 Certificate of Designation for A1 Internet's Series A
Convertible Preferred Stock (filed as Exhibit 2.C to
A1 Internet's Form 10-SB12G filed as of September 3,
1999, No. 000-27243, and incorporated herein by
reference).
4.2 Agreement to Lock Up dated May 19, 1999, between
Jerry Lee Poole, EBI Securities and the J.B. Sutton
Group, Inc., regarding the transfer restrictions on
certain A1 Internet common stock owned by Mr. Poole
(filed herewith).
4.3 Agreement to Lock Up dated May 19, 1999, between
Bruce Bertman, EBI Securities and the J.B. Sutton
Group, Inc., regarding the transfer restrictions on
certain A1 Internet common stock owned by Bruce
Bertman (filed herewith).
4.4 Agreement to Lock Up dated May 19, 1999, between
Noved Holdings, EBI Securities and the J.B. Sutton
Group, Inc., regarding the transfer restrictions on
certain A1 Internet common stock owned by Noved
Holdings (filed herewith).
4.5 Agreement to Lock Up dated May 19, 1999, between
Leonard Tambasco, EBI Securities and the J.B. Sutton
Group, Inc., regarding the transfer restrictions on
certain A1 Internet common stock owned by Leonard
Tambasco (filed herewith).
4.6 Agreement to Lock Up dated May 19, 1999, between
Larry Kerschenbaum, EBI Securities and the J.B.
Sutton Group, Inc., regarding the transfer
restrictions on certain A1 Internet common stock
owned by Larry Kerschenbaum (filed herewith).
10.D.1 Aircraft Lease dated March 31, 1999, between Gravity
Pilot Air, Inc. and Skydive USA, regarding the lease
of aircraft to Skydive USA (filed herewith).
16.1 Letter on Change in Certifying Accountant from Cohen
Kameny CPA's PLLC, dated November 12, 1999 (filed as
Exhibit 16 to A1 Internet's First Amendment to Form
10-SB filed as of November 17, 1999, No. 000-27243,
and incorporated herein by reference).
21.1 List of all Subsidiaries of A1 Internet and the State
or other jurisdiction of incorporation or
organization of each (filed herewith).
</TABLE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
A1 INTERNET.COM, INC.,
A Nevada Corporation
Date December 10, 1999 By: /s/ Bruce Bertman
---------------------------- ---------------------------
Bruce Bertman,
President
30
<PAGE> 31
F-1
HALO HOLDINGS OF NEVADA, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<PAGE> 32
[COHEN & KAMENY LETTERHEAD]
Independent Auditors' Report
To The Board of Directors
Halo Holdings of Nevada, Inc.
We have audited the accompanying consolidated balance sheets of Halo Holdings of
Nevada, Inc. as of December 31, 1998 and 1997, and the related consolidated
statements of income and retained earnings, cash flows, and changes in
Shareholders equity for the years then ended. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Halo Holdings of
Nevada, Inc. as of December 31, 1998 and 1997, and the results of operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ COHEN & KAMENY
--------------------------
COHEN & KAMENY CPA'S PLLC
Riverdale, New York
March 23, 1999
<PAGE> 33
HALO HOLDINGS OF NEVADA, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(See Independent Auditors' Report)
ASSETS
------
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 10,205. $ 1,819.
FIXED ASSETS: (Notes 2a and 5)
Aircraft 1,008,256. 1,008,256.
Equipment 9,159. 9,159.
Less: accumulated depreciation 170,654. 69,649.
------------ -------------
NET FIXED ASSETS 846,761. 947,766.
------------ -------------
OTHER ASSETS:
Prepaid expenses (Notes 6) 22,388. 7,340.
Goodwill-net of amortization (Note 2c) 278,861. 309,845.
------------ -------------
TOTAL OTHER ASSETS 301,249. 317,185.
------------ -------------
TOTAL ASSETS $ 1,158,215. $ 1,266,770.
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses 37,313. -- .
Loan payable-bank 18,059. -- .
Loans payable - shareholders (Note 4) 109,261. 196,670.
Note payable - current portion (Note 5) 641,451. 195,553.
------------ -------------
TOTAL CURRENT LIABILITIES: 806,084. 392,223.
------------ -------------
LONG TERM LIABILITIES:
Note payable (Note 5) -- . 544,045.
Loan payable 80,000. 80,000.
------------ -------------
TOTAL LONG TERM LIABILITIES: 80,000. 624,045.
------------ -------------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 20,000,000 shares authorized, 4,300. 3,500.
4,300,000 and 3,500,000 issued and outstanding
for 1998 and 1997 respectivly (Note 3)
Preferred stock 300,000 shares $.25 par value issued and -- . 75,000.
outstanding for 1997 (Note 3)
Additional paid in capital 1,100,700. 526,500.
Retained earnings (Notes 1 and 3) (832,869). (354,498).
------------ -------------
TOTAL STOCKHOLDERS' EQUITY: 272,131. 250,502.
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,158,215. $ 1,266,770.
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
COHEN AND KAMENY CPA'S PLLC
Page 2.
<PAGE> 34
HALO HOLDINGS OF NEVADA, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS
(DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(See Independents Auditors' Report)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
NET SALES $ 84,560. $ 3,384.
OPERATING EXPENSES (Schedule 1) 463,727. 357,882.
------------ ------------
NET (LOSS) FROM OPERATIONS (379,167). (354,498).
OTHER INCOME (EXPENSE):
Interest Expense (99,204). -- .
------------ ------------
NET LOSS (478,371). (354,498).
RETAINED EARNINGS (DEFICIT)-BEGINNING OF YEAR (354,498). -- .
------------ ------------
RETAINED EARNINGS (DEFICIT)-END OF YEAR $(832,869). $(354,498).
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
COHEN AND KAMENY CPA'S PLLC
Page 3.
<PAGE> 35
HALO HOLDINGS OF NEVADA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(See Independent Auditors' Report)
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
CASH FLOWS USED FROM OPERATING ACTIVITIES:
Net (loss) $ (478,371). $ (354,498).
Depreciation and amortization 131,989. 826.
(Increase) in prepaid expenses (15,048). -
Increase in accounts payable and accrued expenses 37,313. -
------------- --------------
NET CASH (USED) BY OPERATING ACTIVITIES (324,117). (353,672).
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Goodwill - -
Net investment equipment - (8,259).
------------- --------------
NET CASH (USED BY INVESTING ACTIVITIES - (8,259).
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) Increase in note payable (98,147). -
Increase in loan payable-bank 18,059. -
(Decrease) Increase in loans payable-shareholders (87,409). 180,118.
Increase in loans payable - -
Increase from common stock issued 800. 3,500.
Increase in additional paid in capital 574,200. 526,500.
(Decrease) in loan payable - (346,368).
(Decrease) increase in preferred stock (75,000). -
------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 332,503. 363,750.
------------- --------------
NET INCREASE IN CASH 8,386. 1,819.
Cash at beginning of year 1,819. -
CASH - AT END OF YEAR $ 10,205. 1,819.
============= ==============
SUPPLEMENTAL DISCLOUSRES
Schedule on Noncash Investing and Financing Transactions
The company acquired the assets of Gravity Pilot Air, Inc.
for convertible preferred stock. In connection with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired 1,125,597.
Preferred stock issued (75,000).
--------------
Liabilities assumed 1,050,597.
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
COHEN AND KAMENY CPA'S PLLC
Page 4.
<PAGE> 36
HALO HOLDINGS OF NEVADA, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(See Independents Auditors' Report)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
<S> <C> <C> <C> <C> <C> <C>
Opening Balances - $ - - $ - $ - $ -
Acquisition of- 3,500,000 3,500 - - 526,500 -
Halo Holdings, Inc.
Acquisition of- - - 300,000 75,000 - -
Gravity Pilot Air, Inc.
Net loss - year ended December 31, 1997 - - - - - (354,498)
------------- ----------- ------------ ----------- ------------- --------------
Balances at December 31, 1997 3,500,000 3,500 300,000 75,000 526,500 (354,498)
Conversion of preferred stock 300,000 300 (300,000) (75,000) 74,700 -
Shares issued in private sale 500,000 500 - - 499,500 -
Net loss - year ended December 31, 1998 - - - - - (478,371)
------------- ----------- ------------ ----------- ------------- --------------
Balances at December 31, 1998 4,300,000 $ 4,300 $ - $ - $1,100,700 $ (832,869)
============= =========== ============ =========== ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
COHEN AND KAMENY CPA'S PLLC
Page 5
<PAGE> 37
HALO HOLDINGS OF NEVADA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF THE COMPANY'S BUSINESS:
HALO Holdings of Nevada, Inc. (the Company) was incorporated in
October 1997 in the state of Nevada. Subsequent to it's
incorporation the Company acquired HALO Holdings, Inc. (a
Delaware Corporation) in November 1997 in a transaction, which
was treated as pooling of interests. The combined entity was
formed to pursue various business opportunities in the fragmented
and growing area of extreme sports, skydiving, and aviation and
extreme sports entertainment industries. In furtherance of its
goals, the Company acquired Gravity Pilot Air, Inc. (a Delaware
Corporation) which had been engaged in various business
operations related to skydiving and extreme sports. The
acquisition of Gravity Pilot Air, Inc. was treated as a purchase
and is presented in these financial statements on a consolidated
basis.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with
generally accepted accounting principles, and require management
to make certain estimates and assumptions based on these
principles. Outlined below are those policies considered
particularly significant.
(a) DEPRECIATION:
Fixed assets are reflected at cost. Depreciation is provided
using the straight-line method as follows:
Machinery & equipment 5 years
Aircraft 10 years
(b) STATEMENT OF CASH FLOWS:
For purposes of the statement of cash flows, the company
considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
(c) GOODWILL:
Goodwill is amortized over the lesser of the useful life of the
related assets or 10 years.
COHEN AND KAMENY CPA'S PLLC
Page 8
<PAGE> 38
HALO HOLDINGS OF NEVADA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998
NOTE 3 - CAPITAL STOCK
Pursuant to the incorporation of the Company it has authorized
20,000,000 shares of it's common stock at a par value of $.001.
Upon the completion of the acquisition of HALO Holdings, Inc. the
Company issued 3,500,000 shares of its common stock in exchange
for all of the outstanding shares of HALO Holdings, Inc. on a 1
to 1 basis. This transaction was accounted for as a pooling of
interests.
On October 17, 1997 the Company authorized the acquisition of
Gravity Pilot Air, Inc. in exchange for 300,000 of it's newly
authorized convertible preferred stock with a par value of $.25
per share. The conversion feature stipulated that the preferred
shares could be converted to the Company's common shares on a 1
for 1 basis if the price of the common shares reached $5.00 per
share bid price on a public market. These shares were
subsequently converted in November 1998 when the bid price for
the common shares reached $5.00 per share.
On January 15, 1998 the Company authorized the issuance of its
common shares pursuant to a private placement offering of 500,000
common shares at $1.00 per share. This offering resulted in the
issuance of 500,000 shares with proceeds to the Company of
$500,000.
NOTE 4 - LOANS PAYABLE SHAREHOLDERS:
During the years ended December 31, 1998 and 1997 various
shareholders of the Company made loans to the Company or made
payments on behalf of the Company to third parties in settlement
of certain debts the Company had incurred. These loans are
payable upon demand and bear no interest.
NOTE 5 - NOTE PAYABLE:
In connection with the acquisition of it's aircraft, the Company
financed this transaction through a note payable in which the
note holder has a secured interest in the aircraft to the extent
of the outstanding balance on the note. This note bears interest
at a rate of 14% per annum and is payable in monthly installments
consisting of principal and interest. The terms of the note
stipulate that a final payment of the outstanding balance is due
on November 4, 1999.
COHEN AND KAMENY CPA'S PLLC
Page 9
<PAGE> 39
HALO HOLDINGS OF NEVADA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 6 - PREPAID EXPENSES:
As part of the note payable agreement (Note 5) the Company also
agreed to maintain a separate reserve account with the note
holder corresponding to the engine utilization of the aircraft.
The amount required to be reserved is based upon the number of
hours the aircraft has been in flight. The amounts reserved
are intended to defray maintenance costs associated with the
aircraft.
As of December 31, 1998 and 1997 the balance in this account was
$22,388 and $7,340 respectively.
NOTE 7 - PROVISIONS FOR INCOME TAXES:
Due to net operating losses, which can be carried forward, the
Company has not had to make any provision for income taxes.
NOTE 8 - SUBSEQUENT EVENTS
On January 29, 1999 in a continuing effort to raise capital for
it's continued growth, the Company made a private offering of
500,000 shares of it's common stock at a price of $2.00 per
share.
Since the date of these financial statements the Company has
signed letters of intent with three companies with the express
intent of acquiring these companies. As intended, the acquisition
of these companies will consist of an exchange of 100% of the
common stock of the companies to be acquired for newly issued
common stock of the Company. Two of the companies mentioned above
are in the business of providing internet services and access.
The third company to be acquired is an extreme sports adventure
internet web site.
COHEN AND KAMENY CPA'S PLLC
Page 10
<PAGE> 40
F-2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ComputerEase, LLC
We have audited the accompanying balance sheets of ComputerEase, LLC as of
December 31, 1998 and 1997, and the related statements of operations, changes in
members' equity, and cash flows for the years then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ComputerEase, LLC as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 5 to the financial statements, in March 1999 the Company
was acquired by A1 Internet.com, Inc.
Denver, Colorado
July 23, 1999
<PAGE> 41
COMPUTEREASE, LLC
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
------------------------------
<TABLE>
<CAPTION>
ASSETS
------
1998 1997
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Receivables
Trade $ 136 570 $ 121 002
Other - 2 885
Inventory, at cost 11 244 9 094
--------------- ---------------
TOTAL CURRENT ASSETS 147 814 132 981
--------------- ---------------
PROPERTY AND EQUIPMENT,
AT COST (NOTES 1 AND 3) 414 995 401 958
Less accumulated depreciation (250 215) (145 585)
--------------- ---------------
164 780 256 373
--------------- ---------------
$ 312 594 $ 389 354
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Bank overdraft $ 10 180 $ 49 585
Accounts payable 193 357 148 480
Due to members (Note 2) 306 102 183 809
Due to related parties (Note 2) 107 661 280 004
Other 61 487 859
--------------- ---------------
TOTAL CURRENT LIABILITIES 678 787 662 737
NOTE PAYABLE-RELATED PARTY (NOTE 2) 100 000 100 000
--------------- ---------------
TOTAL LIABILITIES 778 787 762 737
COMMITMENTS (NOTE 4)
MEMBERS' EQUITY (466 193) (373 383)
--------------- ---------------
$ 312 594 $ 389 354
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements. 4
<PAGE> 42
COMPUTEREASE, LLC
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
NET SALES $ 8 257 678 $ 8 382 314
COST OF SALES (6 809 861) (7 480 671)
--------------- ---------------
GROSS PROFIT 1 447 817 901 643
--------------- ---------------
OPERATING EXPENSES:
Salaries and related expenses 650 808 477 434
Travel and entertainment 139 387 40 993
Marketing, advertising and promotion 132 675 84 439
Bad debt expense 236 691 49 021
General and administrative 165 242 63 179
Occupancy costs 157 616 181 371
Communications 58 208 120 743
--------------- ---------------
TOTAL OPERATING EXPENSES 1 540 627 1 017 180
--------------- ---------------
NET LOSS $ (92 810) $ (115 537)
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements. 5
<PAGE> 43
COMPUTEREASE, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------
<TABLE>
<S> <C>
BALANCE, DECEMBER 31, 1996 $ (257 846)
Net loss (115 537)
-------------------
BALANCE, DECEMBER 31, 1997 (373 383)
Net loss (92 810)
-------------------
BALANCE, DECEMBER 31, 1998 $ (466 193)
===================
</TABLE>
The accompanying notes are an integral part of these statements. 6
<PAGE> 44
COMPUTEREASE, LLC
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (92 810) $ (115 537)
Adjustments to reconcile net loss to cash flows provided
by (used in) operating activities:
Depreciation 104 630 105 189
Bad debt expense 236 691 49 021
Increase in trade receivables (252 259) (107 826)
Increase (decrease) in other receivables 2 885 (2 685)
Increase in inventory (2 150) (7 595)
Decrease in other assets - 23 880
(Decrease) increase in bank overdraft (39 405) 49 585
Increase (decrease) in accounts payable 44 877 (90 899)
Increase (decrease) in other liabilities 60 628 (67 005)
--------------- ---------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 63 087 (163 872)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (13 037) (212 831)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to related parties - 100 000
Proceeds from (payments on) member loans 122 293 (7 451)
Proceeds from (payments on) related party loans (172 343) 280 004
--------------- ---------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (50 050) 372 553
--------------- ---------------
NET DECREASE IN CASH - (4 150)
CASH, BEGINNING OF YEAR - 4 150
--------------- ---------------
CASH, END OF YEAR $ - $ -
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 12 717 $ 14 950
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements. 7
<PAGE> 45
COMPUTEREASE, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
Computer Ease, LLC (the Company) was organized under the laws of the State of
Maryland on May 17, 1993. The limited liability company will continue until
January 1, 2000, unless terminated sooner as provided for in the Operating
Agreement (see Note 5). The Company's activites include the buying and selling
of computer equipment, web design and providing internet access. The Company has
both domestic and international customers.
The Company consists of four members. The Company has only one class of units of
membership interest. The operating agreement provides that each member share in
net income based on their respective proportion of units of interest, and net
losses based on their respective capital contributions. The agreement also
provides that no member will be personally liable for any debt, obligation or
liability of the Company.
USE OF 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.
CASH EQUIVALENTS
The Company considers investments with an original maturity of three months or
less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash and receivables, are carried
at amounts which approximate fair value. Payables and other liabilities are
carried at amounts which approximate fair value.
INVENTORY
Inventory consists of computer equipment and is carried at the lower of cost or
market. Cost is determined on a specific identification basis.
PROPERTY AND EQUIPMENT
The Company provides for depreciation of property and equipment using
accelerated methods based on estimated useful lives of five years.
LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
For purposes of evaluating the recoverability of long-lived assets, the
recoverability test is performed using undiscounted net cash flows estimated to
be generated by the asset.
8
<PAGE> 46
COMPUTEREASE, LLC
NOTES TO FINANCIAL STATEMENTS
---------------------------------------
(CONTINUED)
NOTE 1- ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING
POLICIES (continued)
INCOME TAXES
As a limited liability company, the Company is not a tax paying entity for
federal income tax purposes. Accordingly, no income tax provision (benefit) is
reported in these financial statements. The distributive share of net income or
loss is reportable by the members in their respective tax returns.
NOTE 2- NOTE PAYABLE - RELATED PARTY, DUE TO RELATED PARTIES AND DUE TO MEMBERS
Note payable-related party consists of a $100,000 note payable to the father of
a member, at 15% interest. The note requires monthly interest payments and
matures on November 1, 2000. Interest expense on the note payable amounted to
$12,500 and $14,950 in 1998 and 1997, respectively.
The due to related parties and members shown on the accompanying balance sheet
are advances that are non-interest bearing and have no due date.
NOTE 3- MAJOR CUSTOMERS
The following customers each accounted for more than 10% of sales in 1998 and
1997:
<TABLE>
<CAPTION>
% of Sales
-------------------------
Customer 1998 1997
--------------------- ------------------- -----------
<S> <C> <C>
A - Netherlands 20.3 -
B - France 31.1 -
C - United Kingdom - 13.1
D - United States - 13.4
E - United States - 21.1
</TABLE>
In 1998, the Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information". The following table presents information
by geographic area as of and for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Revenues Long-Lived Assets
-------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
United States $ 2,473,921 $ 5,100,978 $ 164,780 $ 256,373
Belgium 751,745 -- -- --
Denmark -- 688,000 -- --
France 4,246,818 240,500 -- --
Netherlands 511,800 535,075 -- --
Luxembourg 253,000 -- -- --
United Kingdom -- 1,772,322 -- --
Other Foreign Countries 20,394 45,439 -- --
------------- ------------ ------------ -----------
$ 8,257,678 $ 8,382,314 $ 164,780 $ 256,373
============= ============ ============ ===========
</TABLE>
NOTE 4- COMMITMENTS
The Company leases office space from a non-related party under an operating
lease. Future minimum lease payments under the non-cancellable lease as of
December 31, 1998 are 1999-$71,000, 2000-$73,500 and 2001-$12,000.
Total rental expense amounted to $76,183 and $64,303 in 1998 and 1997,
respectively.
NOTE 5- SUBSEQUENT EVENTS
In March 1999, A1 Internet.com, Inc., issued 4,000,000 shares of its common
stock in exchange for all of the outstanding units of membership of the Company.
A1 Internet.com, Inc. is an internet service provider. In May 1999, the Company
was then merged with A1 Internet Services, Inc., a wholly-owned subsidiary of A1
Internet.com, Inc.
9
<PAGE> 47
F-3
A1 INTERNET.COM, INC. AND SUBSIDIARIES
(formerly Halo Holdings of Nevada, Inc.)
Consolidated Balance Sheet
September 30, 1999
==================
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash $ 2,077,813
Receivables:
Trade, net (Note 1) 813,383
Note receivable, current portion (Note 3) 33,333
Related parties 49,100
Other 28,300
Prepaid expenses 167,184
Other current assets 27,664
------------
3,196,777
------------
PROPERTY AND EQUIPMENT, AT COST (NOTE 1):
Aircraft 1,008,256
Computers and equipment 1,819,371
Less: accumulated depreciation (533,704)
------------
2,293,923
------------
OTHER ASSETS:
Goodwill, net of amortization (Note 2) 9,254,066
Contracts (Notes 1 and 6) 1,498,000
Note receivable (Note 3) 46,987
Other 54,222
------------
10,853,275
------------
$16,343,975
============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 606,769
Loans payable-shareholders (Note 4) 422,749
Notes payable (Note 5) 992,108
Other 58,624
------------
2,080,250
------------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
SHAREHOLDERS' EQUITY (NOTE 6):
Common stock, $.001 par value, 20,000,000 shares authorized,
9,739,500 shares issued and outstanding 9,739
Preferred stock, $.001 par value, 5,000,000 shares authorized,
848,889 shares issued and outstanding 849
Additional paid-in capital 17,889,628
Notes receivable-common stock (440,000)
Retained earnings (deficit) (3,196,491)
------------
14,263,725
------------
$16,343,975
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 48
A1 INTERNET.COM, INC. AND SUBSIDIARIES
(formerly Halo Holdings of Nevada, Inc.)
Consolidated Statements of Operations
Nine Months Ended September 30, 1999 and 1998
=============================================
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998
---- ----
<S> <C> <C>
NET SALES $ 1,867,789 $ 76,203
COST OF SALES (773,857) (8,626)
------------ -----------
GROSS PROFIT 1,093,932 67,577
------------ -----------
OPERATING EXPENSES:
Salaries and related expenses 825,868 112,500
Travel and entertainment 92,374 -
Bad debt expense 40,318 -
Legal and professional 199,192 41,000
Occupancy costs 112,769 10,218
General and administrative 318,823 23,146
Consulting 244,155 34,505
Depreciation and amortization 556,947 98,210
------------ -----------
TOTAL OPERATING EXPENSES 2,390,446 319,579
------------ -----------
OTHER INCOME (EXPENSE):
Consulting fees (1,100,000) -
Interest income 19,106 -
Interest expense (76,214) (76,203)
------------ -----------
TOTAL OTHER EXPENSE (1,157,108) (76,203)
------------ -----------
NET LOSS BEFORE EXTRAORDINARY ITEM (2,453,622) (328,205)
EXTRAORDINARY ITEM-FORGIVENESS OF DEBT 90,000 -
------------ -----------
NET LOSS $(2,363,622) $ (328,205)
============ ===========
BASIC AND DILUTED NET LOSS PER COMMON
SHARE BEFORE EXTRAORDINARY ITEM (NOTE 1) $ (0.31) $ (0.08)
============ ===========
BASIC AND DILUTED NET LOSS PER COMMON SHARE (NOTE 1) (0.30) (0.08)
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (NOTE 1) 7,910,739 3,974,359
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 49
A1 Internet.Com and Subsidiaries
(Formerly Halo Holdings of Nevada, Inc.)
Consolidated Statement of Shareholders' Equity
Nine Months Ending September 30, 1999
=====================================
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Paid in
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1998 4,300,000 $ 4,300 - $ - $ 1,100,700
Issuance of common stock for cash
and notes receivable, less offering
costs of $50,000 500,000 500 - - 949,500
Issuance of warrants for offering costs of
$50,000 and acquisition costs of $717,979 - - - - 767,979
Business acquisitions:
Virtual Information Express, Inc. 300,000 300 - - 599,700
Computer Ease LLC 4,000,000 4,000 - - 7,996,000
NetWorld Ohio, Inc. 37,000 37 - - 73,963
Shares issued for services 560,000 560 - - 1,169,440
Shares issued in private sale 32,500 32 - - 32,468
Reacquired shares through disposition
of Skydive USA (400,000) (400) - - (799,600)
Gain on sale of Skydive USA to shareholder - - - - 514,383
Conversion of shareholder loan 120,000 120 - - 322,572
Conversion of shareholder loan - - - - 227,331
Issuance of warrants in connection with notes payable - - - - 122,952
Conversion of notes payable to stock, net of warrants - - 123,000 124 490,551
Issuance of preferred stock, net of offering
costs of $473,795 - - 725,889 725 2,791,979
Shares issued in private sale 100,000 100 - - 199,900
Shares issued in connection with acquisition
of contracts 190,000 190 - - 1,329,810
Net loss - - - - -
----------- -------- --------- ------ ------------
BALANCES, SEPTEMBER 30, 1999 9,739,500 $ 9,739 848,889 $ 849 $17,889,628
=========== ======== ========= ====== ============
<CAPTION>
Notes
Receivable (Deficit)
---------- ---------
<S> <C> <C>
BALANCES, DECEMBER 31, 1998 $ - $ (832,869)
Issuance of common stock for cash
and notes receivable, less offering
costs of $50,000 (240,000) -
Issuance of warrants for offering costs of
$50,000 and acquisition costs of $717,979 - -
Business acquisitions:
Virtual Information Express, Inc. - -
Computer Ease LLC - -
NetWorld Ohio, Inc. - -
Shares issued for services - -
Shares issued in private sale - -
Reacquired shares through disposition
of Skydive USA - -
Gain on sale of Skydive USA to shareholder - -
Conversion of shareholder loan - -
Conversion of shareholder loan - -
Issuance of warrants in connection with notes payable - -
Conversion of notes payable to stock net of warrants - -
Issuance of preferred stock, net of offering
costs of $473,795 - -
Shares issued in private sale (200,000) -
Shares issued in connection with acquisition
of contracts - -
Net loss - (2,363,622)
----------- -------------
BALANCES, SEPTEMBER 30, 1999 $(440,000) $(3,196,491)
=========== =============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 50
A1 Internet.Com, Inc.
(Formerly Halo Holdings of Nevada, Inc.)
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,363,622) $ (328,204)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 556,947 98,210
Bad debt expense 40,318 -
Forgiveness of debt (90,000) -
Issuance of common stock for services 1,170,000 -
Increase in trade receivables (352,424) -
Increase in other assets (28,795) -
Increase in prepaid expenses (144,796) (6,769)
Increase in accounts payable and accrued expenses 109,475 8,347
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,102,897) (228,416)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from note receivable 100,000 -
Payments on note and other receivables (238,215) -
Acquisition of contracts (168,000) -
Acquisition of Virtual Information Express, Inc., net of cash acquired 2 -
Acquisition of Computer Ease, LLC, net of cash acquired - -
Acquisition of NetWorld Ohio, Inc., net of cash acquired (89,138) -
Purchases of property and equipment (981,634) -
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,376,985) -
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) related party loans, net - (167,215)
Proceeds from (payments on) shareholder loans, net 266,125 (90,296)
Proceeds from notes payable 1,003,500 -
Payments on notes payable (307,339) -
Issuance of common stock, net 792,500 500,000
Issuance of preferred stock, net 2,792,704 -
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,547,490 242,489
------------ ------------
NET INCREASE IN CASH 2,067,608 14,073
CASH, BEGINNING OF PERIOD 10,205 1,819
------------ ------------
CASH, END OF PERIOD $ 2,077,813 $ 15,892
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 76,214 $ 76,203
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of loans payable to capital $ 550,023 $ -
============ ============
Issuance of common stock for notes receivable $ 440,000 $ -
============ ============
Retirement of common stock from disposition of subsidiary $ 800,000 $ -
============ ============
Issuance of warrants in connection with notes payable $ 122,952 $ -
============ ============
Conversion of notes payable to preferred stock $ 490,675 $ -
============ ============
Issuance of common stock for contracts $ 1,330,000 $ -
============ ============
The Company purchased all of the capital stock of Virtual Information
Express, Inc., Computer Ease, LLC and Networld Ohio, Inc. for cash, notes
payable and common stock. In connection with the acquisitions, liabilities
were assumed as follows:
Fair value of assets acquired $ 10,857,170
Cash paid (89,136)
Notes payable issued (180,000)
Common stock issued (8,674,000)
Common stock warrants issued (717,979)
------------
Liabilities assumed $ 1,196,055
============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 51
A1 INTERNET.COM, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING
POLICIES
ORGANIZATION AND BUSINESS
The consolidated financial statements include A1 Internet.com, Inc. (formerly
Halo Holdings of Nevada, Inc.) and its wholly owned subsidiaries, A1 Internet
Services, Inc. (formerly Computer Ease, LLC), Gravity Pilot Air, Inc., Networld
Ohio, Inc., and Virtual Information Express, Inc. All significant intercompany
balances and transactions have been eliminated in consolidation.
The Company, through its subsidiaries, provides internet connectivity through
two networks throughout the United States and Canada and related products and
services, including Web design. The Company's ability to offer end-user access
to an internet network is dependent upon the Company's contractual relationships
with both providers. Should these contracts be terminated or terms amended, the
Company might be required to enter into other arrangements with others on less
favorable terms. In addition, the Company relies on outside parties to market
their products and services to end users.
The September 30, 1999 and 1998 amounts included herein are unaudited. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly, the financial position, results of
operations, cash flows and changes in shareholders' equity have been made.
USE OF 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.
CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments, including cash, receivables and other current assets, are
carried at amounts which approximate fair value. Accounts payable, loans and
notes payable and other liabilities are carried at amounts which approximate
fair value.
ACCOUNTS RECEIVABLE
The Company performs on-going credit evaluations of its customers. The Company
has established an allowance for doubtful accounts at September 30, 1999 of
$40,318.
<PAGE> 52
A1 INTERNET.COM, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT
The Company provides for depreciation of equipment using accelerated and
straight-line methods based on estimated useful lives of five years.
Depreciation of aircraft is computed using the straight-line method based on an
estimated useful life of ten years.
CONTRACTS
Internet service contracts in the amount of $1,498,000 shown on the accompanying
balance sheet are being amortized over the life of the contracts, which is three
years.
GOODWILL
The company amortizes goodwill on a straight line basis over a period of ten
years.
LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived assets,
the recoverability test is performed using undiscounted net cash flows estimated
to be generated by the asset.
REVENUE RECOGNITION
The Company recognizes revenue from connectivity, hosting and leasing of
airplanes over the period that the service is provided. Revenue from technical
support is recognized when the work is completed. Electronic commerce revenue is
recognized at the time of the sale. Web design revenue is recognized as such
revenues accrue under the terms of the related contract. Installation and
start-up charges are recognized upon completion of the related work.
INCOME TAXES
The Company utilizes the asset and liability method of accounting for income
taxes, as prescribed by Statement of Financial Accounting Standards No. 109
(SFAS 109). Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply in the years in which these temporary
differences are expected to be recovered or settled. Changes in tax rates are
recognized in income in the period that includes the enactment date.
NET LOSS PER SHARE OF COMMON STOCK
Net loss per share of common stock is based on the weighted average number of
shares of common stock outstanding. Common stock equivalents are not included in
the weighted average calculation since their effect would be anti-dilutive.
<PAGE> 53
A1 INTERNET.COM, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2- BUSINESS COMBINATIONS
Computer Ease, LLC ("CE") was organized on May 17, 1993 as a limited liability
company. CE's activities include the buying and selling of computer equipment,
web design and providing internet access. In March 1999, the Company issued
4,000,000 shares of its common stock at $2.00 per share in exchange for all of
the outstanding units of membership of CE. This transaction was accounted for
using the purchase method of accounting. At the time of the purchase, assets and
liabilities of CE were $836,981 and $876,583, respectively. The excess of the
purchase price (including acquisition costs of $717,979, see Note 6) over the
fair value of the net assets acquired was recorded as goodwill of $8,757,581. In
May 1999, CE was then merged with A1 Internet Services, Inc., a wholly-owned
subsidiary of A1 Internet.com, Inc. A1 Internet Services, Inc. is the surviving
entity.
Virtual Information Express, Inc. ("VI") was incorporated on June 10, 1998. The
Company is engaged in the business of electronic commerce. In February 1999, the
Company acquired VI for 300,000 shares of its common stock at $2.00 per share in
exchange for all of the outstanding shares of VI. This transaction was accounted
for using the purchase method of accounting. At the time of the purchase, assets
and liabilities of VI were $49,002 and $50,000, respectively. The excess of the
purchase price over the fair value of the net assets acquired was recorded as
goodwill of $600,998.
Networld Ohio, Inc. ("Networld") was incorporated on June 15, 1995 and is
engaged in the business of providing internet service. The Company acquired
Networld in April 1999. The acquisition consisted of a cash payment of $90,000,
37,000 shares of common stock at $2.00 per share, and a short term non-interest
bearing promissory note of $180,000 maturing December 15, 1999. This transaction
was accounted for using the purchase method of accounting. At the time of the
purchase, assets and liabilities of Networld were $235,007 and $247,142,
respectively. The excess of the cost of the acquisition over the fair value of
the net assets acquired was recorded as goodwill of $356,135.
The following summarized, proforma results of operations of the Company assumes
that the Company acquired VI, CE and Networld as of January 1, 1998:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998
---- ----
<S> <C> <C>
Gross revenue $ 2,918,202 $ 8,388,575
Net loss before extraordinary item (2,010,676) (310,251)
Net loss (1,920,676) (310,251)
Net loss per common share
before extraordinary item (.16) (.04)
Net loss per common share (.16) (.04)
</TABLE>
The weighted average calculation used above includes the shares issued in
connection with the acquisitions as if they had been issued for all periods
presented.
<PAGE> 54
A1 INTERNET.COM, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 30, 1999, Skydive USA, a wholly owned subsidiary of the Company, was
sold to major shareholders of the Company. These two individuals tendered a
total of 400,000 shares valued at $2.00 per share of the Company's common stock
to the Company as consideration for the sale. The difference between the value
of the common stock ($800,000) returned and the net assets relating to Skydive
USA of $285,617, resulted in a net gain of $514,383. However, because the
transaction was among significant related parties and was determined to not be
at arms length, the gain was recorded as an increase to additional paid-in
capital. As a result, the net effect of the transaction was a net charge to
shareholders' equity of $285,617.
NOTE 3- NOTES RECEIVABLE
Notes receivable at September 30, 1999 consists of the following:
<TABLE>
<CAPTION>
Note receivable bearing interest at 6%, due April 1, 2002,
payable in monthly installments of $3,042:
<S> <C>
Current portion $33,333
Long term portion
$46,987
-------
$80,320
=======
</TABLE>
NOTE 4- LOANS PAYABLE-SHAREHOLDERS AND NOTE PAYABLE-SHAREHOLDER
The loans payable to shareholders shown on the accompanying balance sheet
includes a $96,000 loan bearing interest at 15% and due on demand after April 1,
2000. The remaining amounts are advances that are non-interest bearing and have
no due date.
NOTE 5- NOTES PAYABLE
Notes payable at September 30, 1999 consists of the following:
<TABLE>
<S> <C>
14% note payable, due November 30, 1999, payable in
monthly installments of $16,296, secured by aircraft $558,333
* 8% note payable, (face amount $200,000) principal and interest due
October 10, 1999, convertible into preferred stock at $4.50 per share 169,978
* 8% note payable, (face amount $250,000) principal and interest due
September 2, 1999, convertible into preferred stock at $4.50 per share 219,897
Non-interest bearing note payable, due December 15, 1999,
payable in monthly installments of $20,000 43,900
--------
$992,108
========
</TABLE>
<PAGE> 55
A1 INTERNET.COM, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
* In connection with the issuance of these notes payable, $60,125 has been
allocated to the detachable stock warrants (see Note 6).
NOTE 6- SHAREHOLDERS' EQUITY
COMMON STOCK
On January 29, 1999 the Company authorized the issuance of its common shares
pursuant to a private placement offering of 500,000 common shares at $2.00 per
share. This offering resulted in the issuance of 500,000 shares with proceeds to
the Company of $710,000 and notes receivable from shareholders of $240,000, net
of offering costs.
During the period ended September 30, 1999, the Company issued 560,000 common
shares for services, of which 500,000 of these shares were issued to related
parties. In addition, 32,500 shares of common stock were sold for $1.00 per
share in a private sale to current shareholders. Also, 120,000 shares of common
stock were issued to an officer and stockholder as repayment of a $372,692 debt.
Another shareholder forgave debt totaling $177,331, which was credited to
paid-in capital.
The Company issued 100,000 shares of common stock at $2.00 per share to a
director of the Company for a note receivable.
The Company acquired certain contracts from an unrelated entity to provide
internet service for cash of $168,000 and 190,000 shares of common stock valued
at $7.00 per share.
PREFERRED STOCK
In July 1999, the Company commenced a private placement offering of its Series A
preferred stock at $4.50 per share. As of September 30, 1999, this offering has
resulted in the issuance of 725,889 shares with proceeds to the Company of
$2,792,704, net of offering costs. In connection with this offering, warrants to
purchase 500,000 shares of the Company's common stock at $5.50 per share, will
be issued to the underwriter at the closing of the offering. These warrants will
expire 5 years from the date of issuance.
In addition, notes payable in the amount of $490,675 were converted to 123,000
shares of Series A preferred stock pursuant to the note payable agreements.
Subject to certain adjustments, each share of Series A preferred stock is
convertible into one share of common stock. The Series A preferred stock is
convertible upon written request of the holder. The Series A preferred stock is
preferred as to both earnings and assets, and in the event of liquidation,
dissolution or winding up of the Company, holders of the Series A preferred
stock shall be entitled to be paid $4.50 per share before any assets of the
Company are distributed among or paid over to the holders of the common stock.
<PAGE> 56
A1 INTERNET.COM, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCK WARRANTS
Common stock warrants have been issued in connection with certain private
offerings, business acquisitions and notes payable. At September 30, 1999,
warrants to purchase common stock at various prices were outstanding, which
expire as follows:
<TABLE>
<CAPTION>
Number Outstanding
And Exercisable at
Expiration Date September 30, 1999 Exercise Price
--------------- ------------------ --------------
<S> <C> <C>
June 1, 2004 500,000 $ .10
June 1, 2004 42,500 5.50
---------
542,500
=========
</TABLE>
The 500,000 warrants shown above were issued in connection with the January 29,
1999 private placement and the acquisition of Computer Ease, LLC (see Note 2).
These warrants were valued at $767,979, of which $50,000 was for offering costs
and $717,979 was for costs incurred in connection with the acquisition.
The 42,500 warrants shown above are detachable stock warrants issued in
connection with various notes payable agreements. These warrants were valued at
$122,952. 22,500 of these warrants, valued at $62,827, were issued in connection
with notes payable that were converted to preferred stock.
The fair value of all of the above described warrants was estimated using the
Black-Scholes option pricing model, with the following assumptions: dividend
yield of 0%; expected volatility of 48%; risk free rate of 4.5%; and expected
life of five years.
NOTE 7- INCOME TAXES
A1 Internet.com, Inc. has an unused net operating loss carryforward of
approximately $830,000 for income tax purposes, of which approximately $350,000
expires in 2012 and the remainder in 2018. However, the ability to utilize such
losses to offset future taxable income is subject to various limitations imposed
by the rules and regulations of the Internal Revenue Service. A portion of the
net operating losses are limited each year to offset future taxable income, if
any, due to the change of ownership in A1 Internet.com, Inc.'s outstanding
shares of common stock. This net operating loss carryforward may result in
future income tax benefits of approximately $282,200; however, because
realization is uncertain at this time, a valuation reserve in the same amount
has been established. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
<PAGE> 57
A1 INTERNET.COM, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant components of A1 Internet.com, Inc.'s deferred tax liabilities and
assets as of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax liabilities $ --- $ ---
========== =========
Deferred tax assets:
Net operating loss carryforwards 282 200 119 000
---------- ---------
Total deferred tax assets 282 200 119 000
Valuation allowance for deferred tax assets (282 200) (119 000)
---------- ---------
$ --- $ ---
========== =========
</TABLE>
The valuation allowance for deferred tax assets was increased by $119,000 and
$173,200 during 1998 and 1997, respectively.
NOTE 8- BUSINESS SEGMENTS
In 1998, the Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information". The following table presents information by
geographic area as of and for the periods ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Revenues Long-Lived Assets
-------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
United States $ 1 378 789 $ 76,203 $13,264,619 $ 1,159,401
Netherlands 489 000 -- -- --
----------- ----------- ----------- -----------
$ 1,867,789 $ 76,203 $13,264,619 $ 1,159,401
=========== =========== =========== ===========
</TABLE>
The following table represents the income, profit or loss, and total assets of
each of the Company's reportable segments.
<TABLE>
<CAPTION>
Normal Airplane Total
<S> <C> <C> <C>
Revenue 1,702,270 165,519 1,867,789
Profit(Loss) 2,401,816 (51,806) (2,453,622)
Assets 15,800,622 761,983 16,562,605
</TABLE>
The Company's sole business for the period ending September 30, 1998 was
skydiving, therefore all items presented in the accompanying financial
statements for that period relate to that business.
The following customers each accounted for more than 10% of sales for the nine
months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
% of Sales % of Receivables
Nine Months Ended September 30, Nine Months Ended September 30,
Customer 1999 1998 1999 1998
-------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
A-Netherlands 26.2 -- 49.5 --
B-United States 12.2 -- 27.7 --
</TABLE>
<PAGE> 58
A1 INTERNET.COM, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9- RELATED PARTY TRANSACTIONS
In connection with the resignation of the former Chief Executive Officer of the
Company, the former Chief Executive Officer was paid $35,000 in severance pay.
NOTE 10- COMMITMENTS AND CONTINGENCIES
The Company leases office space from a non-related party under an operating
lease. Future minimum lease payments under the non-cancelable lease as of
December 31, 1998 are 1999-$205,000, 2000-$136,000 and 2001-$33,000.
Total rental expense for the periods ended September 30, 1999 and 1998 was
$107,128 and $449, respectively.
The Company has deposits in banks in excess of the FDIC insured amount of
$100,000. The amounts in excess of $100,000 are subject to loss should the bank
cease business.
<PAGE> 59
A1 INTERNET.COM, INC. AND SUBSIDIARIES
INTRODUCTION TO PRO FORMA COMBINED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined balance sheet reflects the
acquisitions of Computer Ease, LLC, Virtual Information Express, Inc. and
Networld Ohio, Inc. by A1 Internet.com, Inc. as if they had occurred on December
31, 1998.
The following unaudited pro forma combined statements of operations reflect the
acquisitions of Computer Ease, LLC, Virtual Information Express, Inc. and
Networld Ohio, Inc. by A1 Internet.com, Inc. as if they had occurred on January
1, 1998.
The acquisition of Computer Ease, LLC consisted of the issuance of 4,000,000
shares of common stock at $2.00 per share.
The acquisition of Virtual Information Express, Inc. consisted of the issuance
of 300,000 shares of common stock at $2.00 per share.
The acquisition of Networld Ohio, Inc. consisted of a cash payment of $90,000,
37,000 shares of common stock at $2.00 per share and a short-term promissory
note of $180,000.
The acquisitions were accounted for using the purchase method of accounting.
Under the purchase method of accounting, assets acquired and liabilities assumed
are recorded at their fair values. No adjustments have been made in the pro
forma balance sheet to the carrying values of the assets acquired and
liabilities assumed since management believes that their carrying values
approximate fair value.
<PAGE> 60
F-4
A1 INTERNET.COM, INC. AND SUBSIDIARIES
(FORMERLY HALO HOLDINGS OF NEVADA, INC.)
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
-----------------
<TABLE>
<CAPTION>
ASSETS VIRTUAL
------ COMPUTER INFORMATION NETWORLD
A1 INTERNET.COM, INC. EASE, LLC EXPRESS, INC. OHIO, INC.
--------------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 10,205 $ - $ - $ 8,515
Receivables: - - -
Trade - 136,570 - 15,937
Other - - - 125
Inventory, at cost - 11,244 - 7,793
Other - - - 8,924
----------- ----------- ------------ ------------
10,205 147,814 - 41,294
----------- ----------- ------------ ------------
PROPERTY AND EQUIPMENT, AT COST:
Aircraft 1,008,256 - - -
Equipment 9,159 414,995 - 221,775
Less: accumulated depreciation (170,654) (250,215) - (61,373)
----------- ----------- ------------ ------------
846,761 164,780 - 160,402
----------- ----------- ------------ ------------
OTHER ASSETS:
Prepaid expenses 22,388 - - -
Goodwill, net of amortization 278,861 - - -
Other - - 49,000 -
----------- ----------- ------------ ------------
301,249 - 49,000 -
----------- ----------- ------------ ------------
$1,158,215 $ 312,594 $ 49,000 $ 201,696
=========== =========== ============ ============
LIABILITIES AND SHAREHOLDERS EQUITY
-----------------------------------
CURRENT LIABILITIES:
Bank overdraft $ - $ 10,180 $ - $ -
Accounts payable and accrued expenses 37,313 193,357 - 163,437
Loan payable-bank 18,059 - - -
Loans payable-shareholders 109,261 306,102 50,000 -
Due to related parties - 107,661 - -
Note payable-current portion 641,451 - - -
Other - 61,487 - 68,103
----------- ----------- ------------ ------------
806,084 678,787 50,000 231,540
----------- ----------- ------------ ------------
LONG TERM LIABILITIES:
Note payable-related party - 100,000 - -
Loan payable 80,000 - - -
----------- ----------- ------------ ------------
80,000 100,000 - -
----------- ----------- ------------ ------------
SHAREHOLDERS' EQUITY:
Members' equity - (466,193) - -
Common stock 4,300 - 35 500
Additional paid-in capital 1,100,700 - 65 -
Deficit (832,869) - (1,100) (30,344)
----------- ----------- ------------ ------------
272,131 (466,193) (1,000) (29,844)
----------- ----------- ------------ ------------
$ 1,158,215 $ 312,594 $ 49,000 $ 201,696
=========== =========== ============ ============
<CAPTION>
PRO FORMA
AFTER
ASSETS ACQUISITION OF
------ PRO FORMA NETWORLD
ADJUSTMENTS OHIO, INC.
----------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ - $ 18,720
Receivables:
Trade - 152,507
Other - 125
Inventory, at cost - 19,037
Other - 8,924
------------ ------------
- 199,313
------------ ------------
PROPERTY AND EQUIPMENT, AT COST:
Aircraft - 1,008,256
Equipment - 645,929
Less: accumulated depreciation - (482,242)
------------ ------------
- 1,171,943
------------ ------------
OTHER ASSETS:
Prepaid expenses - 22,388
Goodwill, net of amortization 9,339,881 (a) 9,618,742
Other - 49,000
------------ ------------
9,339,881 9,690,130
------------ ------------
$ 9,339,881 $11,061,386
============ ============
LIABILITIES AND SHAREHOLDERS EQUITY
-----------------------------------
CURRENT LIABILITIES:
Bank overdraft $ - $ 10,180
Accounts payable and accrued expenses - 394,107
Loan payable-bank - 18,059
Loans payable-shareholders - 465,363
Due to related parties - 107,661
Note payable-current portion (180,000)(a) 821,451
Other (90,000)(a) 219,590
---------- ------------
(270,000) 2,036,411
---------- ------------
LONG TERM LIABILITIES:
Note payable-related party - 100,000
Loan payable - 80,000
---------- ------------
- 180,000
---------- ------------
SHAREHOLDERS' EQUITY:
Members' equity (466,193)(a) -
Common stock (3,802)(a) 8,637
Additional paid-in capital (9,606,207)(a) 10,706,972
Deficit 1,006,321 (a) (1,870,634)
---------- ------------
(9,069,881) 8,844,975
---------- ------------
$ (9,339,881) $11,061,386
========== ============
</TABLE>
See Notes to Pro Forma Combined Consolidated Balance Sheet.
<PAGE> 61
A1 INTERNET.COM, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
(a) Adjustment to record the issuance of 37,000 shares of common stock of A1
Internet.com, Inc. in exchange for all of the outstanding common stock of
Networld Ohio, Inc., the cash payment of $90,000 which would be a payable
at December 31, 1998, the $180,000 note payable, the goodwill generated by
the transaction, the removal of Networld Ohio, Inc.'s accumulated deficit
and the effect of the purchase on paid-in capital.
Also includes adjustment to record the issuance of 4,000,000 shares of
common stock of A1 Internet.com, Inc. at $2.00 per share in exchange for
all of the outstanding common stock of Computer Ease, LLC, the goodwill
generated by the transaction, the removal of Computer Ease, LLC members'
equity and the effect of the purchase on paid-in capital. Costs associated
with the acquisition amounted to $717,979 through the issuance of warrants
to purchase common stock valued using the Black-Scholes option pricing
model.
Also includes adjustment to record the issuance of 300,000 shares of common
stock of A1 Internet.com, Inc. at $2.00 per share in exchange for all of
the outstanding common stock of Virtual Information Express, Inc., the
goodwill generated by the transaction, the removal of Virtual Information
Express, Inc.'s accumulated deficit and the effect of the purchase on
paid-in capital.
Also includes adjustment to record amortization of goodwill of $10,377,646
over 120 months.
<PAGE> 62
A1 INTERNET.COM, INC. AND SUBSIDIARIES
(FORMERLY HALO HOLDINGS OF NEVAD, INC.)
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
----------------------------
<TABLE>
<CAPTION>
VIRTUAL
COMPUTER INFORMATION NETWORLD
A1 INTERNET.COM, INC. EASE, LLC EXPRESS, INC. OHIO, INC.
---------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET SALES $ 84,560 $ 8,257,678 $ - $ 598,106
COST OF SALES - (6,809,861) - (216,202)
------------------- -------------- ---------------- ---------------
GROSS PROFIT 84,560 1,447,817 - 381,904
------------------- -------------- ---------------- ---------------
OPERATING EXPENSES:
Salaries and related expenses - 650,808 - 148,144
Bad debt expense - 236,691 - -
General and administrative 331,738 535,779 1,100 39,596
Depreciation 101,005 104,632 - 46,408
Amortization 30,984 - - -
------------------- -------------- ---------------- ---------------
TOTAL OPERATING EXPENSES 463,727 1,527,910 1,100 234,148
------------------- -------------- ---------------- ---------------
OTHER INCOME (EXPENSE):
Interest expense (99,204) (12,717) - (11,587)
------------------- -------------- ---------------- ---------------
NET LOSS $ (478,371) $ (92,810) $ (1,100) $ 136,169
=================== ============== ================ ===============
NET LOSS PER SHARE OF
COMMON STOCK (0.12)
===================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 4,030,959
===================
<CAPTION>
PRO FORMA
AFTER
ACQUISITION OF
PRO FORMA NETWORLD
ADJUSTMENTS OHIO, INC.
--------------- -------------------
<S> <C> <C>
NET SALES $ - $ 8,940,344
COST OF SALES - $ (7,026,063)
-------------- ------------------
GROSS PROFIT - 1,914,281
-------------- ------------------
OPERATING EXPENSES:
Salaries and related expenses - 798,952
Bad debt expense - 236,691
General and administrative - 908,213
Depreciation - 252,045
Amortization 1,015,902 (a) 1,046,886
-------------- ------------------
TOTAL OPERATING EXPENSES 1,015,902 3,242,787
-------------- ------------------
OTHER INCOME (EXPENSE):
Interest expense - (123,508)
-------------- ------------------
NET LOSS $ (1,015,902) $ (1,452,014)
============== ==================
NET LOSS PER SHARE OF
COMMON STOCK (0.17)
==================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 8,367,959 (b)
==================
</TABLE>
See Notes to Combined Consolidated Statement of Operations
<PAGE> 63
A1 INTERNET.COM, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
(a) Adjustment to record the amortization of goodwill of $10,159,016 over 120
months.
(b) The weighted average shares outstanding after the acquisition represents
the issuance of 37,000 shares of common stock of A1 Internet.com, Inc. to
the shareholders of Networld Ohio, Inc, the issuance of 4,000,000 shares of
common stock of A1 Internet.com, Inc. to the members of Computer Ease, LLC
and the issuance of 300,000 shares of common stock of A1 Internet.com, Inc.
to the shareholder of Virtual Information Express, Inc. The weighted
average shares outstanding was computed as if the shares issued in
connection with these acquisitions had been outstanding for the entire
period.
<PAGE> 1
EXHIBIT 2.1
ACQUISITION AGREEMENT
This Agreement, entered into on this 17 day of October, 1997, by and
between Halo Holdings of Nevada, a Nevada corporation (hereinafter referred to
as "Halo Nevada"), and Tom Keesee ("Keesee") and Larry Kerschenbaum
("Kerschenbaum"), as the sole shareholders of Gravity Pilot Air, Inc., a
Delaware corporation (hereinafter referred to as "Gravity"), and Halo Holdings,
Inc., a Delaware corporation (hereinafter referred to as "Halo Delaware").
WHEREAS, in the interest of better serving the business interests of
Gravity and Halo Delaware, Halo Nevada has been formed, and
WHEREAS, the purpose of this Acquisition Agreement is for the eventual
transfer of all of the business and operations of Gravity and Halo Delaware
into Halo Nevada.
NOW THEREFORE, the parties hereto agree as follows:
1. Within ninety (90) days of the date of this Agreement, Halo Delaware
agrees to transfer all of its assets to Halo Nevada.
2. Within ninety (90) days of the date of this Agreement, Keesee and
Kerschenbaum, the sole shareholders of Gravity, shall exchange all of the
existing shares of common stock of Gravity for 300,000 shares of convertible
preferred stock of Halo Nevada (hereinafter referred to as "Preferred Shares").
The conversion feature of the Preferred Shares shall not be exercisable until
the common stock price reaches $5.00 per share bid price on a public market.
The conversion ration of the Preferred Shares shall be one Preferred share per
share of common stock of Halo Nevada.
3. Halo Nevada agrees to assume any and all liabilities of Halo Delaware
and Gravity respectively upon the completion of the exchange and transfer as
provided herein.
4. Halo Delaware and Gravity hereby expressly agree not to transfer or
otherwise dispose of any significant assets of the respective corporations
until this transaction is complete without the express written consent of Halo
Nevada and their lender, Elliott Broidy.
5. Halo and Gravity jointly and severally agree to assume all of the
debts of Halo Nevada if the transaction that is the subject of this Agreement
is not consummated within ninety (90) days of the date of this Agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto set their hands this 17 day of
October, 1997.
Halo Holdings, Inc. Halo Holdings of Nevada, Inc.
By: /s/ THOMAS KEESEE By: /s/ THOMAS KEESEE
------------------------- ------------------------
Thomas Keesee, President Thomas Keesee, President
Gravity Pilot Air, Inc.
By: /s/ THOMAS KEESEE /s/ THOMAS KEESEE
------------------------- ------------------------
Thomas Keesee, President Thomas Keesee
/s/ LARRY KERSCHENBAUM
------------------------
Larry KERSCHENBAUM
<PAGE> 1
EXHIBIT 2.2
HALO HOLDINGS INC.
EXCHANGE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into this 1st
day of February, 1999, between Bruce Bertman, referred to as
"seller-shareholder;" and HALO Holdings of Nevada, Inc., a corporation
organized and existing under the laws of Nevada, referred to as "buyer" or
"HALO."
RECITALS
(1) Seller-shareholder owns all of the outstanding shares of common stock
of Virtual Information Express Inc., referred to as
"seller-corporation" or "Virtual."
(2) Buyer wishes to buy, and seller-shareholder wishes to sell, subject to
the provisions of this Agreement, 100% of the outstanding common
shares, assets and liabilities of the seller-corporation, including
but not limited to its computer and office equipment, network
equipment, product and service specifications, receivables and new
business proposals.
Now, therefore, in consideration of the above, and of the mutual covenants
contained in this agreement and other good and valuable consideration, it is
agreed as follows:
1. Consideration
The consideration for the acquisition of 100% of the issued outstanding shares
of Virtual shall be $600,000 (the "Purchase Price") payable at Closing with
shares of HALO Common Stock at the fair market value of $2 per share as
determined by the board of Directors of HALO Holdings of Nevada, Inc.
2. Conduct of Business Before Closing
Seller-corporation and seller-shareholder covenant and agree that, from the
date of this agreement until the date of closing, seller-corporation will at
all times conduct its business in the usual and ordinary course and will not,
without the written consent of buyer, (a) purchase, sell, or otherwise dispose
of any property or services of any kind, other than purchases and sales in the
ordinary course of business; (b) mortgage, pledge, create security interests in
or otherwise encumber any of its properties or assets; (c) make or incur any
capital commitment or expenditure or any unusual or long term commitment; (d)
grant any increase in salary or other increased compensation to any of its
employees; (e) declare or pay any dividend or make any other distribution to
shareholders; (f) reveal to third persons any trade secrets, customer lists, or
other confidential or proprietary information, or act otherwise in any manner
that may adversely affect its rights, interests, assets, or business; or (g)
issue or sell any additional capital interest, stock or other securities, or
grant any rights to subscribe for or to purchase, or any options or warrants
for the purchase of any additional capital interest, stock or other securities.
<PAGE> 2
3. Closing
The closing of the purchase and sale provided for in this agreement shall take
place at Halo's offices, on March 30, 1999 or at such time and place as may be
mutually agreed on by the parties, the time and date being referred to in this
agreement as the closing date. At the closing, seller-shareholder shall
deliver to buyer all share certificates, assignments, and other instruments
that may be necessary, desirable, or appropriate to transfer and assign to
buyer all of the outstanding capital shares of seller-corporation, all in form
and substance satisfactory to counsel for buyer and with any applicable
documentary tax stamps attached.
4. Representations and Warranties of Seller-shareholder
Seller-shareholder represents and warrants to and agrees with buyer as follows:
(a) Seller-corporation is a corporation duly organized, validly existing,
and in good standing under the laws of Maryland, with full corporate power to
carry on its business as now being conducted and to own and operate the
properties and assets now owned and operated by it. Seller-corporation is duly
qualified to transact business and in good standing in each jurisdiction where
the ownership of its properties or the conduct of its business requires it to
be licensed or qualified to do business. Seller-corporation has delivered to
buyer a copy of its Certificate of Incorporation and all amendments thereto,
together with a copy of its bylaws as amended, certified by its secretary.
(c) The outstanding capital shares of seller-corporation and any
subsidiaries are legally and validly issued, fully paid and nonassessable. Any
subsidiaries have not issued and do not have outstanding any option, warrant or
convertible securities or other right to purchase or convert any obligation
into such corporation's securities and have not agreed to issue or sell any
additional securities.
(d) Seller-corporation does not own 10% or more of the outstanding stocks
of any corporation except those that it owns all of the outstanding stock.
(e) Seller-shareholder is the beneficial owner of 100% of the capital
shares of seller-corporation. There are no options, warrants, or other
agreements or commitments obligating seller-corporation to issue any additional
capital interest, shares of capital stock or other securities.
(f) Neither the execution nor the delivery of this agreement by
seller-corporation and seller-shareholder, nor the performance of any of their
respective obligations under this agreement, will result in a breach or
violation of any term or provision of or constitute a default under any
indenture, mortgage, or other agreement or instrument to which either of them
is a party.
<PAGE> 3
(g) Seller-shareholder has good title to all of the shares of
seller-corporation to be sold by seller-shareholder, with full right, power,
and authority to sell and deliver such shares pursuant to this agreement. On
delivery of the shares pursuant to this agreement, buyer will receive good and
marketable title to the shares, free and clear of all liens, encumbrances,
restrictions, equities, and any claims.
5. Representations and Warranties of Buyer
Buyer represents and warrants to and agrees with seller-corporation and seller
shareholder as follows:
(a) Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of Nevada.
(b) The execution, delivery, and performance of this agreement by buyer
has been duly authorized by its board of directors, and will not result in any
breach of or violate or constitute a default under the Certificate of
Incorporation or bylaws of buyer or any indenture, mortgage, or other agreement
or instrument to which it is a party.
6. Conditions to Obligations of Buyer
The obligations of buyer under this agreement are subject to the fulfillment,
at or prior to the closing date, of the following conditions:
(a) All representations and warranties of seller-shareholder contained in
this agreement and in any certificate or other instrument delivered pursuant to
the provisions of this agreement, or in connection with the transactions
contemplated by this agreement, shall be true on the closing date with the same
force and effect as though the representations and warranties had been made on
the closing date.
(b) Seller-corporation and seller-shareholder shall have performed and
complied with all the terms, covenants, and conditions of this agreement to be
performed or complied with by them, respectively, on or before the closing
date.
The conditions contained in this Section are included in this agreement for the
benefit of buyer and, without constituting a waiver of any of its rights under
this agreement, may be waived, in whole or in part, by buyer.
7. Conditions to Obligations of Seller-shareholder
The obligations of seller-shareholder under this agreement are subject to the
fulfillment, on or before the closing date, of the following conditions:
(a) All representations and warranties of buyer contained in this
agreement, and in any certificate or other instrument delivered pursuant to the
provisions of this agreement, or in connection with the transactions
contemplated by this agreement, shall be true on
<PAGE> 4
the closing date with the same force and effect as though the representations
and warranties had been made on the closing date.
(b) Buyer shall have performed and complied with all the terms, covenants,
and conditions of this agreement to be performed or complied with by it on or
before the closing date.
The conditions contained in this Section are included for the benefit of
seller-shareholder and, without constituting a waiver of any of
seller-shareholder's rights under this agreement, may be waived, in whole or
in part, by seller-shareholder.
8. Choice of Law
This agreement shall be construed according to the laws of the state of New
York.
9. Signatures
This Agreement may be executed in one or more duplicates or counterparts, any
of which shall be deemed to be the original even if the others are not
produced.
In witness whereof, the ponies have executed this agreement on the date first
above written.
/s/ BRUCE BERTMAN
- -----------------
Bruce Bertman
HALO Holdings of Nevada, Inc.
By: [SIG]
-----------------------
<PAGE> 1
EXHIBIT 2.3
HALO HOLDINGS, INC.
EXCHANGE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into this 24th
day of March, 1999, between Bruce Bertman, referred to as "seller-shareholder,"
and HALO Holdings of Nevada, Inc., a corporation organized and existing under
the laws of Nevada, referred to as "buyer" or "HALO."
RECITALS
(1) Seller-shareholder owns the majority of the outstanding shares of
common stock of Computer Ease LLC, referred to as "seller-corporation"
or "Computer Ease."
(2) Buyer wishes to buy, and seller-shareholder wishes to sell, subject to
the provisions of this Agreement, 100% of the outstanding common
shares, assets and liabilities of the seller-corporation, including
but not limited to its computer and office equipment, network
equipment, product and service specifications, receivables and new
business proposals.
Now, therefore, in consideration of the above, and of the mutual covenants
contained in this agreement and other good and valuable consideration, it is
agreed as follows:
1. Consideration
The consideration for the acquisition of 100% of the issued outstanding shares
of Computer Ease shall be $8,000,000 (the "Purchase Price") payable at Closing
with shares of HALO Common Stock at the fair market value of $2 per share as
determined by the board of Directors of HALO Holdings of Nevada, Inc.
2. Conduct of Business Before Closing
Seller-corporation and seller-shareholder covenant and agree that, from the date
of this agreement until the date of closing, seller-corporation will at all
times conduct its business in the usual and ordinary course and will not,
without the written consent of buyer, (a) purchase, sell, or otherwise dispose
of any property or services of any kind, other than purchases and sales in the
ordinary course of business; (b) mortgage, pledge, create security interests in
or otherwise encumber any of its properties or assets; (c) make or incur any
capital commitment or expenditure or any unusual or long term commitment; (d)
grant any increase in salary or other increased compensation to any of its
employees; (e) declare or pay any dividend or make any other distribution to
shareholders; (f) reveal to third persons any trade secrets, customer lists,
or other
<PAGE> 2
confidential or proprietary information, or act otherwise in any manner that may
adversely affect its rights, interests, assets, or business; or (g) issue or
sell any additional capital interest, stock or other securities, or grant
any rights to subscribe for or to purchase, or any options or warrants for the
purchase of any additional capital interest, stock or other securities.
3. Closing
The closing of the purchase and sale provided for in this agreement shall take
place at the offices of HALO, no later than March 31, 1999 or at such time and
place as may be mutually agreed on by the parties, the time and date being
referred to in this agreement as the closing date. At the closing,
seller-shareholder shall deliver to buyer all share certificates, assignments,
and other instruments that may be necessary, desirable, or appropriate to
transfer and assign to buyer all of the outstanding capital shares of
seller-corporation, all in form and substance satisfactory to counsel for buyer
and with any applicable documentary tax stamps attached.
4. Representations and Warranties of Seller-shareholder
Seller-shareholder represents and warrants to and agrees with buyer as follows:
(a) Seller-corporation is a corporation duly organized, validly existing,
and in good standing under the laws of Maryland, with full corporate power to
carry on its business as now being conducted and to own and operate the
properties and assets now owned and operated by it. Seller-corporation is duly
qualified to transact business and in good standing in each jurisdiction where
the ownership of its properties or the conduct of its business requires it to
be licensed or qualified to do business. Seller-corporation has delivered to
buyer a copy of its Certificate of Incorporation and all amendments thereto,
together with a copy of its bylaws as amended, certified by its secretary.
(c) The outstanding capital shares of seller-corporation and any
subsidiaries are legally and validly issued, fully paid and nonassessable. Any
subsidiaries have not issued and do not have outstanding any option, warrant or
convertible securities or other right to purchase or convert any obligation
into such corporation's securities and have not agreed to issue or sell any
additional securities.
(d) Seller-corporation does not own 10% or more of the outstanding stocks
of any corporation except those that it owns all of the outstanding stock.
(e) Seller-shareholder is the beneficial owner of 73% of the capital shares
of seller-corporation. There are no options, warrants, or other agreements or
commitments obligating seller-corporation to issue any additional capital
interest, shares of capital stock or other securities.
(f) Neither the execution nor the delivery of this agreement by
seller-corporation and seller-shareholder, nor the performance of any of their
respective obligations under this
<PAGE> 3
agreement, will result in a breach or violation of any term or provision of or
constitute a default under any indenture, mortgage, or other agreement or
instrument to which either of them is a party.
(g) Seller-shareholder has good title to all of the shares of
seller-corporation to be sold by seller-shareholder, with full rights, power,
and authority to sell and deliver such shares pursuant to this agreement. On
delivery of the shares pursuant to this agreement, buyer will receive good and
marketable title to the shares, free and clear of all liens, encumbrances,
restrictions, equities, and any claims.
5. Representations and Warranties of Buyer
Buyer represents and warrants to and and agrees with seller-corporation and
seller-shareholder as follows:
(a) Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of Nevada.
(b) The execution, delivery, and performance of this agreement by buyer has
been duly authorized by its board of directors, and will not result in any
breach of or violate or constitute a default under the Certificate of
Incorporation or bylaws of buyer or any indenture, mortgage, or other agreement
or instrument to which it is a party.
6. Conditions to Obligations of Buyer
The obligations of buyer under this agreement are subject to the fulfillment,
at or prior to the closing date, of the following conditions:
(a) All representations and warranties of seller-shareholder contained in
this agreement and in any certificate or other instrument delivered pursuant to
the provisions of this agreement, or in connection with the transactions
contemplated by this agreement, shall be true on the closing date with the same
force and effect as though the representations and warranties had been made on
the closing date.
(b) Seller-corporation and seller-shareholder shall have performed and
complied with all the terms, covenants, and conditions of this agreement to be
performed or complied with by them, respectively, on or before the closing date.
The conditions contained in this Section are included in this agreement for the
benefit of buyer and, without constituting a waiver of any of its rights under
this agreement, may be waived, in whole or in part, by buyer.
7. Conditions to Obligations of Seller-shareholder
The obligations of seller-shareholder under this agreement are subject to the
fulfillment, on or before the closing date, of the following conditions:
<PAGE> 4
(a) All representations and warranties of buyer contained in this
agreement, and in any certificate or other instrument delivered pursuant to the
provisions of this agreement, or in connection with the transactions
contemplated by this agreement, shall be true on the closing date with the same
force and effect as though the representations and warranties had been made on
the closing date.
(b) Buyer shall have performed and complied with all the terms, covenants,
and conditions of this agreement to be performed or complied with by it on or
before the closing date.
The conditions contained in this Section are included for the benefit of
seller-shareholder and, without constituting a waiver of any of
seller-shareholder's rights under this agreement, may be waived, in whole or in
part, by seller-shareholder.
8. Choice of Law
This agreement shall be construed according to the laws of the state of New
York.
9. Signatures
This Agreement may be executed as one or more duplicates or counterparts, any of
which shall be deemed to be the original even if the others are not produced.
In witness whereof, the parties have executed this agreement on the date first
above written.
/s/ BRUCE BERTMAN
- --------------------------
Bruce Bertman
HALO Holdings of Nevada, Inc.
By: /s/ LEONARD TAMBASCO
Pres
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EXHIBIT 2.4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made on March 31, 1999, among Larry W.
Kerschenbaum ("Buyer"), and Halo Holdings of Nevada, a Nevada Corporation
(the "Seller").
Buyer desires to purchase from Seller, and the Seller desires to sell to Buyer,
all of the shares of its wholly owned subsidiary of Skydive USA (the "Company")
all upon the terms and conditions set forth below. In addition, Seller agrees
to lease to buyer two (2) airplanes on a year-to-year basis.
Now, therefore, in consideration of, and in reliance upon, the covenants,
representations and warranties contained in this Agreement, the parties agree
as follows:
1. PURCHASE AND SALE OF STOCK. Upon the terms and provisions of this
Agreement, Buyer agrees to purchase and accept delivery from each Seller of,
and each Seller agrees to sell, assign, transfer and deliver to Buyer, at the
Closing provided for in Section 4, all of the shares of Common Stock of the
Company, free and clear of all liens, claims, charges, restrictions, equities
or encumbrances of any kind.
2. CONSIDERATION. The total consideration to be paid by the Buyer for the
Common Stock shall be paid as a Stock Payout. Buyer shall deliver to the
Seller's Representative at Closing 400,000 shares of Halo Holding of Nevada,
Inc.'s Common Stock.
3. ASSUMPTION AND RETENTION OF LIABILITIES. Following the closing, Buyer shall
be responsible for all current and future liabilities.
4. CLOSING. The closing of the purchase and sale of the Stock (the "Closing")
shall take place at the offices of Kogan & Taubman, LLC., 39 Broadway, Suite
2704, New York, New York 10006, (or at such other place as the parties may
mutually agree) on March 31, 1999, (or on such other date upon which the
parties shall mutually agree), contemporaneously with the execution of this
Agreement. If the Closing is postponed, all references to the Closing Date in
this Agreement shall refer to the postponed date.
4.1 DOCUMENTS TO BE DELIVERED BY SELLER AT CLOSING. At the Closing, as a
representative of the Seller, the Seller's representative will:
(a) Deliver to Buyer a lease agreement ("the Lease Agreement") between the
Seller and the Buyer stating that the Buyer shall lease two airplanes from the
Seller on a year-to-year basis. Buyer will pay the costs to maintain the
airplanes and the insurance on the airplanes. The Lease Agreement shall be in
substantially the same form as annexed hereto.
(b) Deliver to Buyer a certified copy of the Company's Certificate of
Incorporation and all amendments thereto as in effect on the Closing Date and
of the Company's Bylaws as amended to the Closing Date, and all ancillary
documents;
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(c) Deliver to Buyer all consents, authorizations, waivers and similar
approvals of Governmental Bodies and other Persons, if any, which are required
to be obtained by the Company or the Seller in order to enable or permit the
Seller to transfer ownership of all of the common stock to Buyer; and
(d) Deliver to Buyer stock certificates for the shares of Common Stock of the
Company to be sold by the Seller, or cause the transfer to Buyer by electronic
book transfer of the shares of Common Stock to be sold by the Seller, in each
case free and clear of all liens, claims, charges, restrictions, equities or
encumbrances of any kind, and with any necessary stock transfer stamps, along
with duly executed stock powers in form satisfactory to Buyer.
4.2 DOCUMENTS AND FUNDS TO BE DELIVERED BY BUYER AT CLOSING. At the
closing, Buyer will:
(a) Deliver the Seller's representative the stock certificates
representing the 400,000 shares of Halo Holdings of Nevada, Inc. Common Stock
representing the total purchase price of all the shares of the Company's Common
Stock. Each case free and clear of all liens, claims, charges, restrictions,
equities or encumbrances of any kind, and with any necessary stock transfer
stamps, along with duly executed stock powers in form satisfactory to Seller.
(b) Deliver to Seller's representative a lease agreement ("the Lease
Agreement") between the Seller and the Buyer stating that the Buyer shall lease
two airplanes from the Seller on a year-to-year basis. Buyer will pay the costs
to maintain the airplanes and the insurance on the airplanes. The Lease
Agreement shall be in substantially the same form as annexed hereto.
4.3 FORM AND SUBSTANCE OF DOCUMENTS. The documents and instruments
referred to in Sections 4.1 and 4.2 shall be in form and substance satisfactory
to counsel for the party to whom they are delivered.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND THE SELLER. The
Company and the Seller jointly and severally represent and warrant to Buyer as
follows:
5.1 ORGANIZATION, EXISTENCE AND AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada. The Company has all requisite corporate power and authority to
own or lease its properties and assets, to conduct its business as currently
conducted and to enter into and perform this Agreement and all other agreements
entered into in connection with the transactions contemplated hereby. Copies of
the Company's Articles of Incorporation, as amended to date, and Bylaws, as
amended to date, have been delivered to the Buyer and are complete and correct.
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5.2 STOCK OWNERSHIP. The Seller owns all of the outstanding shares of
capital stock of the Company, free and clear of all liens, claims, charges,
restrictions, equities and encumbrances of any kind. Seller has full power and
the legal right to sell, assign, transfer and deliver to Buyer the stock
described in this paragraph.
5.3 AUTHORIZATION OF AGREEMENT; NO VIOLATION. The Seller has all necessary
corporate or other power and authority to execute, deliver and perform this
Agreement and to consummate the sale of the shares of Common Stock and the
other transactions contemplated by this Agreement. This Agreement has been duly
executed by or on behalf of the Seller and constitutes the legal, valid and
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms. Neither the execution, delivery or performance of this
Agreement nor the consummation of any of the transactions provided for in this
Agreement (i) will violate the Certificate of Incorporation or Bylaws, if any,
of the Company or any law, rule or regulation applicable to the Company or any
Seller, (ii) will result in any breach of or default under any provision of any
contract or agreement of any kind to which the Seller is a party or by which
the Seller is bound or to which any property or asset of the Seller is subject,
(iii) is prohibited by or requires the Seller obtain or make any consent,
authorization, approval, registration or filing under any statute, law,
ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority, or of any
other person, (iv) will cause any acceleration of maturity of any note,
instrument or other obligation to which the Seller is a party or by which the
Seller is bound or with respect to which any Seller is an obligor or guarantor
or (v) will result in the creation or imposition of any lien, claim, charge,
restriction, equity or encumbrance of any kind whatever upon or give to any
other person any interest or right (including any right of termination or
cancellation) in or with respect to any of the properties, assets, business,
agreements or contracts of the Seller.
5.4 LITIGATION. There are no actions, suits, proceedings or
investigations, either at law or in equity, or before any commission or other
administrative authority in any United States or foreign jurisdiction, of any
kind now pending or, to the best of the Seller's knowledge (i) threatened
against the Company or the Seller; (ii) that question the validity of this
Agreement; or (iii) seek to delay, prohibit or restrict in any manner any
action taken or to be taken by the Company or any Seller under this Agreement.
5.5 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated by it have been carried on by the Seller directly
with the Buyer and without the intervention of any other person and in a manner
as not to give rise to any valid claim against any of the parties for any
finder's fee, brokerage commission or like payment.
5.6 NO UNTRUE STATEMENTS. No statement by the Seller contained in this
Agreement and no written statement contained in any certificate, schedule or
other document required to be furnished by the Seller to Buyer pursuant to this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary in order to make the
statements not misleading.
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6. REPRESENTATIONS AND WARRANTIES BY BUYER. Buyer represents and warrants
to each of the Seller as follows:
6.1 AUTHORIZATION OF AGREEMENT; NO VIOLATION. Buyer has all necessary
corporate power and authority to execute, deliver and perform this Agreement.
Buyer's Board of Directors has duly authorized the execution, delivery and
performance of this Agreement and the consummation of the purchase of the
shares of Common Stock to be purchased by it under this Agreement and the other
transactions contemplated by this Agreement. This Agreement has been duly
executed by or on behalf of Buyer and constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Neither the execution, delivery or performance of this Agreement nor the
consummation of any of the transactions provided for in this Agreement (i) will
violate or conflict with any provision of Buyer' s Certificate of Incorporation
or Bylaws or any law, rule or regulation applicable to Buyer, (ii) will result
in any breach of or default under any provision of any contract or agreement of
any kind to which Buyer is a party or by which Buyer is bound or to which any
property or asset of Buyer is subject, (iii) is prohibited by or, except for
the filing of a Form 10-D with the SEC, requires Buyer to obtain or make any
consent, authorization, approval, registration or filing under any statute,
law, ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority, or of any
other person, (iv) will cause any acceleration of maturity of any note,
instrument or other obligation to which Buyer is a party or by which Buyer is
bound or with respect to which Buyer is an obligor or guarantor or (v) will
result in the creation or imposition of any lien, claim, charge, restriction,
equity or encumbrance of any kind whatever upon or give to any other person any
interest or right (including any right of termination or cancellation) in or
with respect to any of the properties, assets, business, agreements or
contracts of Buyer.
6.2 LITIGATION. There are no actions, suits, proceedings or
investigations, either at law or in equity, or before any commission or other
administrative authority in any United States or foreign jurisdiction, of any
kind now pending or, to the best of Buyer's knowledge, threatened against
Buyer, that (i) question the validity of this Agreement or (ii) seek to delay,
prohibit or restrict in any manner any action taken or to be taken by Buyer
under this Agreement.
6.3 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated by it have been carried on by Buyer directly with
each Seller or Seller's representative and without the intervention of any
other person and in a manner as not to give rise to any valid claim against any
of the parties for any finder's fee, brokerage commission or like payment.
6.4 NO UNTRUE STATEMENTS. No statement by Buyer contained in this
Agreement and no written statement contained in any certificate, Schedule or
other document required to be furnished by Buyer to the Seller pursuant to this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary in order to make the
statements not misleading.
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7. CONDITIONS OF SALE; ABANDONMENT OF SALE
7.1. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer
to purchase the Common Stock shall be subject to the following conditions:
(a) Representations and Warranties of Company and the Warranting Seller to
be True; Performance of Obligations; Compliance with Covenants and Conditions.
The representations and warranties of the Company and the Seller herein shall
be true in all material respects on the Closing Date with the same effect as
though made at such time, except to the extent waived hereunder. The Company
and the Seller shall have performed or caused to be performed all obligations
and complied with all covenants and conditions required by this Agreement to be
performed or complied with by it or them at or prior to the Closing Date.
(b) Statutory Requirements; Governmental Approvals. All statutory
requirements imposed on the Company and the Seller for the valid consummation
by the Company, the Seller and the Buyer of the transactions contemplated by
this Agreement shall have been fulfilled by the Company and the Seller. All
federal and state governmental agencies and authorities, the consent,
authorization or approval of which is necessary or desirable under any
applicable law, rule, order or regulation to permit consummation by Company,
the Seller and the Buyer of the transactions contemplated by this Agreement,
shall have consented to, authorized, or approved such transactions.
(c) Adverse Proceedings. No action or proceeding by or before any court or
other governmental body shall have been instituted or threatened by any
governmental body or other person or entity which seeks to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or which might
materially adversely affect the right of the Buyer to own the Common Stock or
to own, operate or control the Company, or which might subject the Company to
any material liability after the Closing.
(d) Tender of Common Stock. The Seller shall have tendered all of the
Common Stock, in the manner contemplated by Section 4.1.
7.2. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of the Seller
to transfer the Common Stock pursuant to the terms of this Agreement shall be
subject to the following conditions:
(a) Representations and Warranties of the Buyer to be True. The
representations and warranties of the Buyer herein contained shall be true in
all material respects at the Closing Date with the same effect as though made
at such time, except to the extent waived under this Agreement. The Buyer shall
have performed all obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by it prior to the
Closing Date.
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(b) Statutory Requirements. All statutory requirements imposed on the
Buyer for the valid consummation by the Company, the Seller and the Buyer of
the transactions contemplated by this Agreement shall have been fulfilled by
the Buyer, and all authorizations, consents and approvals of any governmental
agencies and authorities required to be obtained by the Buyer in order to
permit consummation by the Company, the Seller and the Buyer of the
transactions contemplated by this Agreement shall have been obtained.
(c) Delivery of Common Stock. Buyer has delivered to Seller's
representative the stock certificates for representing the 400,000 shares of
Halo Holdings of Nevada Inc.'s Common Stock, in each case free and clear of all
liens, claims, charges, restrictions, equities or encumbrances of any kind, and
with any necessary stock transfer stamps, along with duly executed stock powers
in form satisfactory to Seller.
7.3. TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSFER. Anything herein
to the contrary notwithstanding, this Agreement and the transfer of Common
Stock contemplated hereby may be terminated at any time before the Closing
Date, as follows, and in no other manner:
(a) Mutual Consent. By mutual written consent of the Seller, Company and
the Buyer.
(b) Termination by Buyer. Buyer may, without liability to Company or the
Seller, terminate this Agreement by notice to the Company at any time prior to
the Closing if default shall be made by Company or the Seller in the observance
or in the due and timely performance of any of the terms hereof to be performed
by the Company or the Seller that cannot be cured at or prior to the Closing.
(c) Termination by the Seller. The Seller may, without liability to the
Buyer, terminate this Agreement by notice to the Buyer at any time prior to the
Closing if default shall be made by the Buyer in the observance or in the due
and timely performance of any of the terms hereof to be performed by Buyer that
cannot be cured at or prior to the Closing.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement, any Schedule and any certificate
delivered at the Closing of the Company, the Seller, or the Buyer shall be
deemed to have been relied upon in spite of any investigation that has been or
will be made or omitted by any party to this Agreement and shall survive the
Closing to the extent provided in this Section 8.
8.2 SELLER'S INDEMNIFICATION THE OBLIGATIONS. Subject to the terms and
conditions of this Section 8, the Seller jointly and severally agrees to
indemnify and hold Buyer harmless against and in respect of:
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(a) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of any misrepresentation or
breach of warranty of the Company or the Seller contained in this Agreement or
in any statement or certificate delivered by the Company or the Seller or
Seller's representatives; and
(b) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of any breach of any covenant of
the Company or the Seller contained in this Agreement.
8.3 BUYER'S INDEMNIFICATION OBLIGATIONS. Subject to the terms and
conditions of this Section 8, Buyer agrees to indemnify and hold the Seller
harmless against and in respect of:
(a) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of any misrepresentation or breach
of warranty of the Buyer contained in this Agreement or in any statement or
certificate delivered by the Buyer;
(b) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of any breach of any covenant of
the Buyer contained in this Agreement; and
(c) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of the purchase by the Buyer from
the Seller of the shares of the Company's Common Stock (it being understood
that in no event shall Buyer indemnify any Seller for any losses suffered or
taxes payable in respect of profits realized upon the sale by the Seller's
shares of Common Stock).
8.4 PROCEDURE FOR INDEMNIFICATION CLAIMS. The respective indemnification
obligations of each of the Seller and the Buyer pursuant to Sections 8.2 and
8.3 shall be conditioned upon compliance by the Seller and the Buyer with the
following procedures for indemnification claims based upon or arising out of
any claim, action or proceeding by any person not a party to this Agreement:
(a) If at any time a claim shall be made, or an action or proceeding shall
be commenced, against a party to this Agreement (the "Aggrieved Party") which
could result in liability of the other party (the "Indemnifying Party") under
its indemnification obligations under this Agreement, the Aggrieved Party shall
give to the Indemnifying Party notice of that claim, action or proceeding
within 15 days following its commencement (except that failure to give that
notice shall not excuse the Indemnifying Party except to the extent that it is
materially prejudiced by that failure). The notice shall state the basis for
the claim, action or proceeding and the amount claimed, (to the extent that
amount is determinable at the time when the notice is given) and shall permit
the Indemnifying Party to assume the defense of any such claim, action or
proceeding (including any action or proceeding resulting from any such claim)
with counsel which is reasonably acceptable to the Aggrieved Party. Failure by
the Indemnifying Party to
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notify the Aggrieved Party of his, her, or its election to defend the claim,
action or proceeding within a reasonable time, but in no event more than 15
days after the notice shall have been given to the Indemnifying Party, shall be
deemed a waiver by the Indemnifying Party of his, her, or its right to defend
the claim, action or proceeding; provided, however, that the Indemnifying Party
shall not be deemed to have waived the right to contest and defend against any
claim of the Aggrieved Party for indemnification under this Agreement based
upon or arising out of that claim, action or proceeding;
(b) If the Indemnifying Party assumes the defense of any such claim,
action or proceeding, the obligation of the Indemnifying Party as to that
claim, action or proceeding shall be limited to taking all steps necessary in
the defense or settlement of it and, provided the Indemnifying Party is held to
be liable for indemnification under this Agreement, to holding the Aggrieved
Party harmless from and against any and all losses, damages and liabilities
caused by or arising out of any settlement approved by the Indemnifying Party
or any judgment or award rendered in connection with that claim, action or
proceeding. The Aggrieved Party may participate, at his, her, or its expense,
in the defense of that claim, action or proceeding provided that the
Indemnifying Party shall direct and control the defense of that claim, action
or proceeding. The Aggrieved Party agrees to cooperate and make available to
the Indemnifying Party all books and records and such officers, employees and
agents as are reasonably necessary and useful in connection with the defense.
The Indemnifying Party shall not, in the defense of the claim, action or
proceeding, enter into any settlement without the prior written consent of the
Aggrieved Party, which consent shall not be unreasonably withheld;
(c) If the Indemnifying Party does not assume or proceed with the vigorous
defense of any such claim, action or proceeding, the Aggrieved Party may, at
the risk, cost and expense of the Indemnifying Party, defend against the claim,
action or proceeding in a manner as he, she, or it may deem appropriate. The
Indemnifying Party agrees to cooperate and make available to the Aggrieved
Party all books and records and such officers, employees and agents as are
reasonably necessary and useful in connection with the defense. The Aggrieved
Party shall not, in the defense of any such claim, action or proceeding, enter
into any settlement without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld.
9. MISCELLANEOUS.
9.1 ASSURANCE OF FURTHER ACTION. From time to time after the Closing and
without further consideration, each of the parties to this Agreement shall
execute and deliver, or cause to be executed and delivered, such further
instruments and agreements, and shall take such other actions, as any other
party may reasonably request in order to more effectively effectuate the
transactions contemplated by this Agreement.
9.2 EXPENSES. Whether or not the Closing is consummated, each of the
parties will pay all of his, her, or its own legal and accounting fees and
other expenses incurred in the preparation of this Agreement and the
performance of the terms and provisions of this Agreement.
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9.3 WAIVER. The parties to this Agreement may by written agreement (i)
extend the time for or waive or modify the performance of any of the
obligations or other acts of the parties to this Agreement or (ii) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement.
9.4 NOTICES. All notices, requests or other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed by overnight courier or by first class certified
mail, postage prepaid, addressed as follows: if to Buyer, to Larry Kerschenbaum,
Attention: President (with a copy to 255 Wychmere Terrace, Wellington, Florida
33414; if to any of the Seller or the Seller's representative at 7900 Glades
Road Suite 435, Boca Raton, Florida 33434 Attention: Leonard Tambasco or to some
other address as may have been furnished in writing to the party giving the
notice by the party to whom notice is to be given.
9.5 ENTIRE AGREEMENT. This Agreement embodies the entire agreement among
the parties and there have been and are no agreements, representations or
warranties, oral or written, among the parties other than those set forth or
provided for in this Agreement. This Agreement may not be modified or changed,
in whole or in part, except by a supplemental agreement signed by each of the
parties.
9.6 RIGHTS UNDER THIS AGREEMENT; NONASSIGNABILITY. This Agreement shall
bind and inure to the benefit of the parties to this Agreement and their
respective heirs, legal representatives, successors and permitted assigns, but
shall not be assignable by any party without the prior written consent of the
other parties. Nothing contained in this Agreement is intended to confer upon
any person, other than the parties to this Agreement and their respective
heirs, legal representatives, successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to the
conflicts of laws principles of that State.
9.8 ARBITRATION. Any dispute arising under or involving any provision
under this Agreement or any issue regarding the Buyer's purchase of Seller's
stock, as listed on the attached Schedule A, the issue shall be submitted to
the American Arbitration Association and resolved by final and binding
arbitration under its rules.
9.9 HEADINGS; REFERENCES TO SECTIONS AND SCHEDULES. The headings of the
Sections, paragraphs and subparagraphs of this Agreement are solely for
convenience of reference and shall not limit or otherwise affect the meaning of
any of the terms or provisions of this Agreement. The references in this
Agreement to Sections and Schedules, unless otherwise indicated, are references
to sections of and schedules to this Agreement.
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9.10 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but which together constitute one and the same
instrument. In Witness, the parties have duly executed this Agreement as of the
date first above written.
By: /s/ LAWRENCE KIRSHENBAUM Date: 5/7/99
------------------------------ --------------
Lawrence Kirshenbaum
Halo Holdings of Nevada, Inc.
By: /s/ LEONARD TAMBASCO Date: 5/7/99
------------------------------ --------------
Leonard Tambasco
President
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EXHIBIT 2.5
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made on April 19, 1999, among Halo Holdings of
Nevada, Inc., a Nevada corporation ("Buyer"), and all of the Shareholders of
NetWorld of Ohio, Inc., an Ohio Corporation (the "Company").
Buyer desires to purchase from each of the Shareholders, and each of the
Shareholders, desires to sell to buyer, all of the shares of Common Stock of the
company owned by him, her, or it, all upon the terms and conditions set forth
below.
Now, Therefore, in consideration of, and in reliance upon, the covenants,
representations and warranties contained in this Agreement, the parties agree
as follows:
1. PURCHASE AND SALE OF STOCK. Upon the terms and provisions of this
Agreement, Buyer agrees to purchase and accept delivery from each Shareholder
of, and each Shareholder agrees to sell, assign, transfer and deliver to Buyer,
at the Closing provided for in Section 3, the number of shares of Common Stock
set forth opposite such Shareholder's name on the attached Schedule A, free and
clear of all liens, claims, charges, restrictions, equities or encumbrances of
any kind.
2. CONSIDERATION. The total consideration to be paid by the Buyer for the
Common Stock shall be paid as follows:
(a) Cash Payment. A cash payment of ninety thousand dollars ($90,000)(the
"Cash Payment").
(b) Purchase Note. Buyer shall deliver to the Shareholders' representative
at Closing a promissory note (the "Purchase Note"), in the principled amount of
$180,000 bearing no interest and requiring Buyer to make payments in accordance
with the schedule set forth on the annexed to the promissory note, total
payments to be made by December 15, 1999.
(c) Stock Payout. Buyer shall deliver to the Shareholders' Representative
at Closing 37,000 shares of Halo Holdings restricted Common Stock.
(d) Other Consideration. Buyer shall provide Shareholders with free dialup
access, web site hosting, and domain names services for five years.
Shareholders shall pay any third party verifiable costs.
3. ASSUMPTION AND RETENTION OF LIABILITIES.
(a) Closing Balance Sheet. The Company shall prepare a closing balance
sheet (the "Closing Balance Sheet") for the Company dated at least three (3)
days prior to the Closing. The Closing Balance Sheet shall be prepared in
accordance with Generally Accepted Accounting Principles ("GAAP") and shall
fairly represent the assets and liabilities of the Company as of the date of
such Closing Balance Sheet.
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(b) Buyer's Assumption of Liabilities. Buyer will assume liabilities, set
forth on the Closing Balance Sheet, up to a maximum of $270,000. If the closing
balance sheet contains liabilities in excess of $270,000, Buyer will identify
sufficient Balance Sheet liabilities that Buyer will not assume.
(c) Liabilities in Excess of $270.000. Buyer shall have the right to
choose which liabilities on the Closing Balance Sheet it shall assume. Any
additional liabilities shall be assumed by the prior shareholders.
(d) Liabilities under Existing Leases. Buyer shall not assume any
liabilities under the presently existing lease between the Company and or
______________ space that the Company leases. A list of all leased property or
space is listed on Schedule 2(d).
4. CLOSING. The closing of the purchase and sale of the Stock (the
"Closing") shall take place at the office of Kogan & Taubman, LLC., 39
Broadway, Suite 2704, New York, New York 10006, (or at such other place as the
parties may mutually agree) on April 19, 1999, (or on such other date upon
which the parties shall mutually agree), contemporaneously with the execution
of this Agreement. If the Closing is postponed, all references to the Closing
Date in this Agreement shall refer to the postponed date.
4.1 DOCUMENTS TO BE DELIVERED BY SHAREHOLDERS AT CLOSING. At the Closing
the Shareholders' representative will:
(a) Deliver to Buyer an Assumption of Liabilities for Mr. Eickert for any
liabilities on the Closing Balance Sheet that cause the Company to have
liabilities in excess of $270,000;
(b) Deliver to Buyer a certified copy of the Company's Certificate of
Incorporation and all amendments thereto as in effect on the Closing Date and
of the Company's Bylaws as amended to the Closing Date, and all ancillary
documents;
(c) Deliver to Buyer a certificate of the President or a Vice President of
the Company, dated the Closing Date, certifying the accuracy of the Company's
and Shareholders' representations and warranties hereunder and that the Company
and the Shareholders have performed and complied with all agreements and
conditions required by this Agreement to be performed and complied with by the
Company and the Shareholders prior to or at the Closing;
(d) Deliver to Buyer all consents, authorizations, waivers and similar
approvals of Governmental Bodies and other Persons, if any, which are required
to be obtained by the Company or the Shareholders in order to enable or permit
the Shareholders to transfer ownership of all of the common stock to Buyer.
(e) Deliver to Buyer stock certificates for the shares of Common Stock to
be sold by the Shareholders, or cause the transfer to Buyer by electronic book
transfer of the shares of Common Stock to be sold by the Shareholders, in each
case free and clear of all liens,
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claims, charges, restrictions, equities or encumbrances of any kind, and with
any necessary stock transfer stamps, along with duly executed stock powers in
form satisfactory to Buyer; and
(f) Deliver to Buyer an opinion, dated as of the Closing Date, of Charles
Openinsky, Esq., counsel for the Company, in form and substance satisfactory to
Kogan & Taubman, LLC., counsel for Buyer, to the effect that:
(i) To the best of the knowledge of Company's counsel, each Shareholder
has good and valid title to the shares of Common Stock set forth opposite his,
her, or its name in the attached Schedule A, free and clear of all liens,
claims, charges, restrictions, equities or encumbrances of any kind, and has
full power and the legal right to sell those shares of Common Stock to Buyer
pursuant to this Agreement;
(ii) Each Shareholder has all necessary corporate or other power and
authority to execute and deliver this Agreement;
(iii) This Agreement has been duly executed and delivered by or on behalf of
each Shareholder and is a legal, valid and binding obligation of each
Shareholder enforceable against each Shareholder in accordance with its terms,
except (a) as this Agreement may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or other laws or equitable principles
relating to or affecting the enforcement of creditors' rights and (b) that the
granting of specific performance is subject to the discretion of a court of
equity;
(iii) The execution and delivery of this Agreement by each Shareholder and
the consummation of the transactions provided for in this Agreement will not
result in any breach of any contract or agreement which is known to Company's
counsel and to which that Shareholder is a party or by which that Shareholder
is bound;
(v) Each Shareholder has duly executed and delivered the stock power of
that Shareholder referred to in Section 3.1(A) and, assuming Buyer is
purchasing the shares of Common Stock pursuant to this Agreement in good faith
and without notice of adverse claims within the meaning of the Uniform
Commercial Code of the State of New York, the sale by each Shareholder of the
shares of Common Stock owned by him, her, or it pursuant to this Agreement will
transfer to Buyer good title to those shares of Common Stock, free and clear of
all liens, claims, charges, restrictions, equities or encumbrances of any kind;
and
(vi) Company's counsel knows of no litigation, proceeding or investigation
pending or threatened against any of the Shareholders which questions the
validity of this Agreement or any action taken or to be taken by any of the
Shareholders under this Agreement.
4.2 DOCUMENTS AND FUNDS TO BE DELIVERED BY BUYER AT CLOSING. At the
Closing, Buyer will deliver to the Shareholders' representative:
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(a) a certified or bank cashier's check or wire transfer payable to the
order of the Shareholders' representative in the amount of the Cash Payment;
and
(b) the Purchase Note in substantially the same form as annexed hereto,
(c) the certificate or certificates representing the stock payment, and
attached hereto on Schedule 2(b)
(d) an opinion, dated as of the Closing Date, of Kogan & Taubman, LLC.,
counsel for Buyer, in form and substance satisfactory to Charles Openinski,
Esq., counsel for the Company, to the effect that:
(i) Buyer has all necessary corporate power and authority to execute and
deliver this Agreement;
(ii) This Agreement has been duly authorized, executed and delivered by
Buyer and is a valid and binding obligation of Buyer enforceable against Buyer
in accordance with its terms, except (a) as the Agreement may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or other laws or
equitable principles relating to or affecting the enforcement of creditors'
rights and (b) that the granting of specific performance is subject to the
discretion of a court of equity;
(iii) The execution and delivery of this Agreement and the consummation of
the transactions provided for in this Agreement will not violate the
Certificate of Incorporation or Bylaws of Buyer or result in any breach of any
contract or agreement known to Buyer's counsel to which Buyer is a party or by
which Buyer is bound; and
(iv) Buyer's counsel knows of no litigation, proceeding or investigation
pending or threatened against Buyer which questions the validity of this
Agreement or any action taken or to be taken by Buyer under this Agreement.
4.3 FORM AND SUBSTANCE OF DOCUMENTS. The documents and instruments
referred to in Sections 4.1 and 4.2 shall be in form and substance satisfactory
to counsel for the party to whom they are delivered.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND THE SHAREHOLDERS.
The Company and the Shareholders jointly and severally represent and warrant to
Buyer as follows:
5.1 Organization, Existence and Authority. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio. The Company has all requisite corporate power and authority to
own or lease its properties and assets, to conduct its business as currently
conducted and to enter into and perform this Agreement and all other agreements
entered into in connection with the transactions contemplated hereby. Copies of
the Company's Articles of Incorporation, as amended to
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date, and Bylaws, as amended to date, have been delivered to the Buyer and are
complete and correct. The Company is not required to be qualified or licensed
to do business as a foreign corporation in any jurisdiction. The Company has
all authorizations, approvals, orders, licenses, certificates and permits of
and from all governmental or regulatory bodies necessary to own or lease its
properties and assets and to conduct its business as currently conducted.
5.2 NO SUBSIDIARIES. The Company does not own, directly or indirectly, any
capital stock or other equity securities of any corporation or have any direct
or indirect equity or ownership interest in any business upon the Closing. The
Company is not subject to any obligation or requirement to provide funds for or
to make any investment (in the form of a loan, capital contribution or
otherwise) in any entity.
5.3 CAPITALIZATION; OWNERSHIP. The authorized capital stock of the Company
consists of 500 shares of Common Stock, par value $.01 per share, of which 500
shares of the Common Stock are issued and outstanding on the date hereof. All
such 500 issued and outstanding shares of Common Stock of the Company are owned
by the Shareholders. All of such Common Stock are duly authorized, validly
issued, fully paid and non-assessable and there are no liens, encumbrances,
security interests, charges or restrictions with respect to such stock. All
such Common Stock has been issued in compliance with applicable federal and
state securities laws. Except as set forth on Schedule 5.3, there are no
outstanding subscriptions, options, warrants, contracts, calls, rights or
commitments of any character relating to the issuance of or granting of rights
in or to acquire any security of the Company, nor are any outstanding
securities convertible into or exchangeable for other securities of the
Company. The Company has no outstanding obligation to repurchase, redeem, or
otherwise acquire any of its capital stock.
5.4 STOCK OWNERSHIP. Each Shareholder owns all of the shares of Common
Stock set forth opposite that Shareholder's name on the attached Schedule A,
which constitute all of the outstanding shares of capital stock of the Company
owned by that Shareholder, free and clear of all liens, claims, charges,
restrictions, equities and encumbrances of any kind. The Shareholders have full
power and the legal right to sell, assign, transfer and deliver to Buyer the
stock described in this paragraph.
5.5 AUTHORIZATION OF AGREEMENT; NO VIOLATION. Each Shareholder has all
necessary corporate or other power and authority to execute, deliver and
perform this Agreement and to consummate the sale of the shares of Common Stock
owned by that Shareholder and the other transactions contemplated by this
Agreement. This Agreement has been duly executed by or on behalf of the
Shareholders and constitutes the legal, valid and binding obligation of the
Shareholders, enforceable against each of the Shareholders in accordance with
its terms. Neither the execution, delivery or performance of this Agreement nor
the consummation of any of the transactions provided for in this Agreement (i)
will violate the Certificate of Incorporation or Bylaws, if any, of the Company
or any law, rule or regulation applicable to the Company or any Shareholder,
(ii) will result in any breach of or default under any provision of any
contract or
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agreement of any kind to which any Shareholder is a party or by which any
Shareholder is bound or to which any property or asset of any Shareholder is
subject, (iii) is prohibited by or requires any Shareholder obtain or make any
consent, authorization, approval, registration or filing under any statute,
law, ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority, or of any
other person, (iv) will cause any acceleration of maturity of any note,
instrument or other obligation to which any Shareholder is a party or by which
any Shareholder is bound or with respect to which any Shareholder is an obligor
or guarantor or (v) will result in the creation or imposition of any lien,
claim, charge, restriction, equity or encumbrance of any kind whatever upon or
give to any other person any interest or right (including any right of
termination or cancellation) in or with respect to any of the properties,
assets, business, agreements or contracts of any Shareholder.
5.6 REQUIRED CONSENTS. The Shareholders have obtained all Required
Consents, each of which either (i) has been obtained on or prior to the date
hereof, (ii) shall have been obtained on or prior to the Closing Date, or (iii)
to the extent legally permissible, shall be obtained by Shareholders as
promptly as practical following the Closing Date. Schedule 5.6 hereto indicates
with respect to each Required Consent listed therein whether such Required
Consent has been obtained as of the date hereof and, if not, when Company
reasonably expects that such Required Consent will have been obtained pursuant
to clauses (ii) or (iii) above. If any Required Consent hereto is not obtained
in accordance with this Section 5, then Shareholders shall cooperate with
Buyer, in all respects, to provide to Buyer the benefits that would have been
available to Buyer had such Required Consent been obtained.
5.7 INTELLECTUAL PROPERTY RIGHTS. The Company owns, is licensed or
otherwise would have the rights to use all of the Intellectual Property Rights
used in the conduct of the Business as currently conducted, all of which
Intellectual Property Rights are, to the Shareholders' knowledge, valid and
enforceable against third parties.
5.8 TAX AND OTHER RETURNS AND REPORTS. To Shareholders' knowledge and
belief, except as disclosed on the Closing Balance Sheet, (a) all federal,
state and local tax returns, reports and statements required to be filed by
Company in connection with the Business have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns, reports and
statements are required to be filed, and all such returns, reports and
statements properly reflect the tax liabilities of Company in relation to the
Business for the periods, properties or events covered thereby; (b) all
federal, state and local taxes, assessments, interest, penalties, deficiencies,
fees and other governmental charges or impositions have been properly accrued
or paid; (c) The Company has not received any notice of assessment or proposed
assessment by the Internal Revenue Service or any other taxing authority in
connection with any Tax Returns and there are no pending tax examinations of or
tax claims asserted against Company or any of its assets or properties; (d)
there are no tax liens on any of the Assets; and (e) the Shareholders have no
knowledge of any basis for any additional assessment of any Taxes in relation
to the Business.
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5.9 LITIGATION. There are no actions, suits, proceedings or
investigations, either at law or in equity, or before any commission or other
administrative authority in any United States or foreign jurisdiction, of any
kind now pending or, to the best of Shareholders' knowledge, threatened against
the Company or the Shareholders that (i) would have a materially adverse effect
on the business of the company, (ii) question the validity of this Agreement,
or (iii) seek to delay, prohibit or restrict in any manner any action taken or
to be taken by the Company or any Shareholder under this Agreement.
5.10 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated by it have been carried on by the Shareholders
directly with the Buyer and without the intervention of any other person and in
a manner as not to give rise to any valid claim against any of the parties for
any finder's fee, brokerage commission or like payment.
5.11 NO UNTRUE STATEMENTS. No statement by any Shareholder contained in
this Agreement and no written statement contained in any certificate, schedule
or other document required to be furnished by the Shareholders to Buyer
pursuant to this Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary in
order to make the statements not misleading.
5.12 ACKNOWLEDGMENTS BY SHAREHOLDERS. Each Shareholder acknowledges that
he, she, or it has, and has had, access to all information pertinent to the
business, financial condition, operations, affairs and prospects of the Buyer
and its subsidiaries that he, she, or it requires or that any reasonably
prudent seller of the shares of the Common Stock set forth opposite that
Shareholder's name on Schedule A would require. That Shareholder further
acknowledges that the Shareholder has had the benefit of financial and legal
advisors with respect to this Agreement and that the Shareholder is not relying
on Buyer or any person on behalf of or retained by Buyer for any disclosure of
information with respect to the Buyer and its subsidiaries.
5.13 COMPLIANCE WITH EMPLOYMENT LAWS; EMPLOYEE RELATIONS. The Company is in
material compliance with all federal, state and municipal laws and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, and is not engaged in any unfair labor practice and is not
in arrears in the payment of wages or withholding taxes or any other employee
benefit taxes or imposts. None of Company's employees is represented by any
labor union and there is no labor strike, dispute, grievance or other labor
trouble pending or, to the knowledge of the Company or the knowledge of the
Shareholders, threatened with respect to The Company.
5.14 NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.14, the
Company has no liabilities or obligations, fixed, accrued, contingent, assumed
or otherwise and whether due or to become due, which are not fully reflected or
provided for on the Closing Balance Sheet other than liabilities and
obligations incurred in or as a result of the ordinary course of business since
the Balance Sheet Date, none of which individually or in the aggregate has been
or is materially adverse to the business or condition of the
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Company. For purposes of this Section 5.14, Amaterially adverse means any
individual liabilities in excess of $5,000 or liabilities in excess of $10,000
in the aggregate.
5.15 DEBT INSTRUMENTS. Schedule 5.15 lists and briefly describes the
material terms and conditions of all mortgages, indentures, notes and other
obligations for or relating to borrowed money or commitments therefor
(including conditional sales contracts and chattel mortgages) to which the
Company is a party or which have been assumed by the Company or to which any of
its material properties or assets are subject. The material terms and
conditions shall include the principal amount, interest rate, original and
maturity dates, sinking fund installments, prepayment premiums, restrictive
covenants and any other material provisions. The Company is not in default in
any respect under any of the foregoing and there has not occurred any event
which with the passage of time or the giving of notice would constitute such a
default or allow any party to accelerate the performance of the Company's
obligations thereunder.
5.16 TITLE TO ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) Schedule 5.16(a) sets forth a true, correct and complete list of all
items of tangible personal property owned by the Company as of the date of the
Closing Balance Sheet having either a net book value per unit or an estimated
fair market value per unit in excess of $10,000.
(b) The Company has good and clear record and marketable title to, or a
valid leasehold interest in, all of its material assets and property reflected
in the Closing Balance Sheet, except assets and property disposed of in the
ordinary course of business and consistent with past practice, and, except as
set forth on 5.16(b), none of such assets or properties is subject to any
material defects of title, mortgage, pledge, lien, security interest, lease,
charge, encumbrance, objection or joint ownership (collectively, the
"Encumbrances").
(c) Except as set forth on Schedule 5.16(c), the facilities, machinery,
furniture, office and other equipment of the Company that are used in its
business are sufficient for the operations of Company are in good operating
condition and repair, subject only to the ordinary wear and tear. Company is
not in material default in any respect under any Encumbrances to which it or
its properties and assets are subject.
5.17 PRODUCT WARRANTIES.
(a) Except as set forth in Schedule 5.17, the Company does not have any
(i) unexpired expressed or implied product warranty with respect to any product
that it manufactures or sells or that it (or its predecessor) has heretofore
manufactured or sold; (ii) the Company has not received any notice of any claim
based on any product warranty; and (iii) neither the Company or the
Shareholders knows or has any reasonable ground to know of any claim (actual or
threatened) based on any product warranty.
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5.18 FULL DISCLOSURE All documents furnished by the Company and the
Shareholders to the Buyer pursuant to or in connection with this Agreement are
true and correct copies and there are no amendments or modifications to those
documents. The books and records of the Company are accurate and complete in
all material respects, and have been maintained in accordance with good
business practice.
5.19 TRANSACTIONS WITH AFFILIATES. There is no transaction, and no
transaction now proposed, to which the Company was or is to be a party and in
which any director or officer of the Company or any person owning of record or
beneficially more than 5% of the outstanding capital stock of any class of the
Company or any associate of any such person had or has a direct or indirect
material interest, other than obligations of the Company to the Shareholders
disclosed pursuant to Schedule 5.19.
5.20 BANK ACCOUNTS; POWERS OF ATTORNEY; ETC. Except as listed in Schedule
5.20, the Company does not have (a) any bank account, safe deposit box or
assets on deposit with any bank, or (b) any power of attorney or other
authorization outstanding, except for powers of attorney or authorizations
issued in the ordinary course of business with respect to patents, customs,
insurance and tax matters.
5.21 COMPLIANCE AND WITH ENVIRONMENTAL LAWS. Except as set forth in
Schedule 5.21, the Company has complied and is in compliance in all material
respects with all applicable Environmental Laws pertaining to any premises
which it owns, leases, subleases or otherwise occupies in connection with the
conduct of the day to day operations of its business (collectively the
"Premises"). To the knowledge of Shareholders, no violation by Company or
Shareholders is being alleged of any applicable Environmental Law relating to
the Premises, or the use or ownership thereof, or to the operation of the
Business.
6. REPRESENTATIONS AND WARRANTIES BY BUYER. Buyer represents and warrants
to each of the Shareholders as follows:
6.1 CORPORATE POWER. Buyer is a corporation validly existing and in good
standing under the laws of the State of Nevada and has the corporate power to
carry on its business as now being conducted and to acquire the shares of
Common Stock set forth on the attached Schedule A.
6.2 AUTHORIZATION OF AGREEMENT; NO VIOLATION. Buyer has all necessary
corporate power and authority to execute, deliver and perform this Agreement.
Buyer's Board of Directors has duly authorized the execution, delivery and
performance of this Agreement and the consummation of the purchase of the
shares of Common Stock to be purchased by it under this Agreement and the other
transactions contemplated by this Agreement. This Agreement has been duly
executed by or on behalf of Buyer and constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Neither the execution, delivery or performance of this Agreement nor the
consummation of any of the transactions provided for in this Agreement (i) will
violate or conflict with any provision of Buyer's Certificate of Incorporation
or Bylaws or any law,
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rule or regulation applicable to Buyer, (ii) will result in any breach of or
default under any provision of any contract or agreement of any kind to which
Buyer is a party or by which Buyer is bound or to which any property or asset
of Buyer is subject, (iii) is prohibited by or, except for the filing of a Form
10-D with the SEC, requires Buyer to obtain or make any consent,
authorization, approval, registration or filing under any statute, law,
ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority, or of any
other person, (iv) will cause any acceleration of maturity of any note,
instrument or other obligation to which Buyer is a party or by which Buyer is
bound or with respect to which Buyer is an obligor or guarantor or (v) will
result in the creation or imposition of any lien, claim, charge, restriction,
equity or encumbrance of any kind whatever upon or give to any other person any
interest or right (including any right of termination or cancellation) in or
with respect to any of the properties, assets, business, agreements or
contracts of Buyer.
6.3 LITIGATION. There are no actions, suits, proceedings or
investigations, either at law or in equity, or before any commission or other
administrative authority in any United States or foreign jurisdiction, of any
kind now pending or, to the best of Buyer's knowledge, threatened against
Buyer, that (i) question the validity of this Agreement or (ii) seek to delay,
prohibit or restrict in any manner any action taken or to be taken by Buyer
under this Agreement.
6.4 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated by it have been carried on by Buyer directly with
each Shareholder or Shareholders' representative and without the intervention
of any other person and in a manner as not to give rise to any valid claim
against any of the parties for any finder's fee, brokerage commission or like
payment.
6.5 NO UNTRUE STATEMENTS. No statement by Buyer contained in this
Agreement and no written statement contained in any certificate, Schedule or
other document required to be furnished by Buyer to any Shareholder pursuant to
this Agreement contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary in order to make
the statements not misleading.
7. CONDITIONS OF SALE: ABANDONMENT OF SALE.
7.1. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer
to purchase the Common Stock shall be subject to the following conditions:
(a) Representations and Warranties of Company and the Warranting
Shareholders to be True; Performance of Obligations; Compliance with Covenants
and Conditions. The representations and warranties of the Company and the
Shareholders herein shall be true in all material respects on the Closing Date
with the same effect as though made at such time, except to the extent waived
hereunder. The Company and the Shareholders shall have performed or caused to
be performed all obligations and complied with all
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covenants and conditions required by this Agreement to be performed or complied
with by it or them at or prior to the Closing Date.
(b) Statutory Requirements; Governmental Approvals. All statutory
requirements imposed on the Company and the Shareholders for the valid
consummation by the Company, the Shareholders and the Buyer of the transactions
contemplated by this Agreement shall have been fulfilled by the Company and the
Shareholders. All federal and state governmental agencies and authorities, the
consent, authorization or approval of which is necessary or desirable under any
applicable law, rule, order or regulation to permit consummation by Company,
the Shareholders and the Buyer of the transactions contemplated by this
Agreement, shall have consented to, authorized, or approved such transactions.
(c) Opinion of Counsel to Company and the Shareholders. The Buyer shall
have received from Charles Openinski Esq.,, counsel to the Company and the
Shareholders, the opinion required by Section 4.1(e) in form and substance
mutually agreed to by Company and the Buyer.
(d) Adverse Proceedings. No action or proceeding by or before any court or
other governmental body shall have been instituted or threatened by any
governmental body or other person or entity which seeks to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or which might
materially adversely affect the right of the Buyer to own the Common Stock or
to own, operate or control the Company, or which might subject the Company to
any material liability after the Closing.
(e) Resignations. The Buyer shall have received written resignations,
effective as of the Closing Date of Uwe Eickert, Aribert Eickert, Barry Watts,
Achim Ramon Eickert, in their capacity as directors of Company
(f) Employment Agreement of Barry Watts. At closing, Barry Watts will have
entered into an employment agreement in substantially the same form as annexed
hereto with the Buyer.
(g) Assumption of Liabilities by Uwe Eickert. At closing, Buyer shall have
received an Assumption of Liabilities from Mr. Eickert reasonably acceptable
to the Company for any liabilities on the Closing Balance Sheet in excess of
$270,000.
(h) Tender of Common Stock. The Shareholders shall have tendered all of
the Common Stock, in the manner contemplated by Section 4.1.
(i) Property Leases. The Buyer shall have received an assignment,
cancellation, or such other document, reasonably acceptable to counsel for the
Buyer, that releases Buyer from any obligation or liability under any lease for
property or space between the Company and A. Eickert Trust.
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7.2. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The obligations of the
Shareholders to transfer the Common Stock pursuant to the terms of this
Agreement shall be subject to the following conditions:
(a) Representations and Warranties of the Buyer to be True. The
representations and warranties of the Buyer herein contained shall be true in
all material respects at the Closing Date with the same effect as though made
at such time, except to the extent waived under this Agreement. The Buyer shall
have performed all obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by it prior to the
Closing Date.
(b) Statutory Requirements. All statutory requirements imposed on the
Buyer for the valid consummation by the Company, the Shareholders and the Buyer
of the transactions contemplated by this Agreement shall have been fulfilled by
the Buyer, and all authorizations, consents and approvals of any governmental
agencies and authorities required to be obtained by the Buyer in order to
permit consummation by the Company, the Shareholders and the Buyer of the
transactions contemplated by this Agreement shall have been obtained.
(c) Opinion of Counsel to the Buyer. The Shareholders shall have received
from Kogan & Taubman, LLC, counsel to the Buyer, the opinion required by
Section 4.2(d), in form and substance mutually agreed to by the Shareholders
and the Buyer.
7.3. TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSFER. Anything herein
to the contrary notwithstanding, this Agreement and the transfer of Common
Stock contemplated hereby may be terminated at any time before the Closing
Date, as follows, and in no other manner:
(a) Mutual Consent. By mutual written consent of the Shareholders, Company
and the Buyer.
(b) Termination by Buyer. Buyer may, without liability to Company or the
Shareholders, terminate this Agreement by notice to the Company at any time
prior to the Closing if default shall be made by Company or the Shareholders in
the observance or in the due and timely performance of any of the terms hereof
to be performed by the Company or the Shareholders that cannot be cured at or
prior to the Closing.
(c) Termination by the Shareholders. The Shareholders may, without
liability to the Buyer, terminate this Agreement by notice to the Buyer at any
time prior to the Closing if default shall be made by the Buyer in the
observance or in the due and timely performance of any of the terms hereof to
be performed by Buyer that cannot be cured at or prior to the Closing.
(d) Expiration Date. By either the Buyer or the Shareholders if the
transfer of the Common Stock shall not have become effective by May 15, 1999
(which date may be extended by mutual agreement of the Buyer and the
Shareholders) unless such failure is
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due to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants, agreements and conditions hereof to be performed or
observed by such party at or before the Closing Date.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement, any Schedule and any certificate
delivered at the Closing of the Company, the Shareholders, or the Buyer shall
be deemed to have been relied upon in spite of any investigation that has been
or will be made or omitted by any party to this Agreement and shall survive the
Closing to the extent provided in this Section 8.
8.2 SHAREHOLDER'S INDEMNIFICATION THE OBLIGATIONS. Subject to the terms
and conditions of this Section 8, each of the Shareholders jointly and
severally agrees to indemnify and hold Buyer harmless against and in respect
of:
(a) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of any misrepresentation or
breach of warranty of the Company or the Shareholders contained in this
Agreement or in any statement or certificate delivered by the Company or the
Shareholders or Shareholders' representatives; and
(b) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of any breach of any covenant of
the Company or the Shareholders contained in this Agreement.
8.3 BUYER'S INDEMNIFICATION OBLIGATIONS. Subject to the terms and
conditions of this Section 8, Buyer agrees to indemnify and hold each of the
Shareholders harmless against and in respect of:
(a) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of any misrepresentation or
breach of warranty of the Buyer contained in this Agreement or in any statement
or certificate delivered by the Buyer;
(b) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of any breach of any covenant of
the Buyer contained in this Agreement; and
(c) any and all losses, liabilities, damages or expenses (including legal
fees and expenses) relating to or arising out of the purchase by the Buyer from
the Shareholders of the shares of Common Stock set forth on the attached
Schedule A (it being understood that in no event shall Buyer indemnify any
Shareholder for any losses suffered or taxes payable in respect of profits
realized upon the sale by such Shareholder of his, her, or its shares of Common
Stock).
13
<PAGE> 14
8.4 PROCEDURE FOR INDEMNIFICATION CLAIMS. The respective indemnification
obligations of each of the Shareholders and the Buyer pursuant to Sections 8.2
and 8.3 shall be conditioned upon compliance by the Shareholders and the Buyer
with the following procedures for indemnification claims based upon or arising
out of any claim, action or proceeding by any person not a party to this
Agreement:
(a) If at any time a claim shall be made, or an action or proceeding shall
be commenced, against a party to this Agreement (the "Aggrieved Party") which
could result in liability of the other party (the "Indemnifying Party") under
its indemnification obligations under this Agreement, the Aggrieved Party shall
give to the Indemnifying Party notice of that claim, action or proceeding
within 15 days following its commencement (except that failure to give that
notice shall not excuse the Indemnifying Party except to the extent that it is
materially prejudiced by that failure). The notice shall state the basis for
the claim, action or proceeding and the amount claimed, (to the extent that
amount is determinable at the time when the notice is given) and shall permit
the Indemnifying Party to assume the defense of any such claim, action or
proceeding (including any action or proceeding resulting from any such claim)
with counsel which is reasonably acceptable to the Aggrieved Party. Failure by
the Indemnifying Party to notify the Aggrieved Party of his, her, or its
election to defend the claim, action or proceeding within a reasonable time,
but in no event more than 15 days after the notice shall have been given to the
Indemnifying Party, shall be deemed a waiver by the Indemnifying Party of his,
her, or its right to defend the claim, action or proceeding; provided, however,
that the Indemnifying Party shall not be deemed to have waived the right to
contest and defend against any claim of the Aggrieved Party for indemnification
under this Agreement based upon or arising out of that claim, action or
proceeding;
(b) If the Indemnifying Party assumes the defense of any such claim,
action or proceeding, the obligation of the Indemnifying Party as to that
claim, action or proceeding shall be limited to taking all steps necessary in
the defense or settlement of it and, provided the Indemnifying Party is held to
be liable for indemnification under this Agreement, to holding the Aggrieved
Party harmless from and against any and all losses, damages and liabilities
caused by or arising out of any settlement approved by the Indemnifying Party
or any judgment or award rendered in connection with that claim, action or
proceeding. The Aggrieved Party may participate, at his, her, or its expense,
in the defense of that claim, action or proceeding provided that the
Indemnifying Party shall direct and control the defense of that claim, action
or proceeding. The Aggrieved Party agrees to cooperate and make available to
the Indemnifying Party all books and records and such officers, employees and
agents as are reasonably necessary and useful in connection with the defense.
The Indemnifying Party shall not, in the defense of the claim, action or
proceeding, enter into any settlement without the prior written consent of the
Aggrieved Party, which consent shall not be unreasonably withheld;
(c) If the Indemnifying Party does not assume or proceed with the vigorous
defense of any such claim, action or proceeding, the Aggrieved Party may, at
the risk, cost and expense of the Indemnifying Party, defend against the claim,
action or proceeding in a
14
<PAGE> 15
manner as he, she, or it may deem appropriate. The Indemnifying Party agrees to
cooperate and make available to the Aggrieved Party all books and records and
such officers, employees and agents as are reasonably necessary and useful in
connection with the defense. The Aggrieved Party shall not, in the defense of
any such claim, action or proceeding, enter into any settlement without the
prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
9. COVENANT NOT TO COMPETE.
Except as contemplated herein, the Shareholders hereby agree that for a period
of five years, beginning April 19, 1999, the Shareholders shall not, without
Buyer's prior written consent, directly or indirectly, own, manage, operate,
join, control, or participate in the ownership, management, operation, or
control of, or be connected as a partner, consultant, or otherwise with, any
profit or non-profit business or organization that, directly or indirectly
competes with, or is about to compete with, the Buyer.
10. MISCELLANEOUS.
10.1 ASSURANCE OF FURTHER ACTION. From time to time after the Closing and
without further consideration, each of the parties to this Agreement shall
execute and deliver, or cause to be executed and delivered, such further
instruments and agreements, and shall take such other actions, as any other
party may reasonably request in order to more effectively effectuate the
transactions contemplated by this Agreement.
10.2 EXPENSES. Whether or not the Closing is consummated, each of the
parties will pay all of his, her, or its own legal and accounting fees and
other expenses incurred in the preparation of this Agreement and the
performance of the terms and provisions of this Agreement.
10.3 WAIVER. The parties to this Agreement may by written agreement (i)
extend the time for or waive or modify the performance of any of the
obligations or other acts of the parties to this Agreement or (ii) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement.
10.4 NOTICES. All notices, requests or other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed by overnight courier or by first class certified
mail, postage prepaid, addressed as follows: if to Buyer, to Halo Holdings,
Inc., Attention: Leonard Tombasco, 22355 Collington Drive, Boca Raton, Florida
33428 (with a copy to Kogan & Taubman, LLC., 39 Broadway, Suite 2704, New York,
New York 10006; if to any of the Shareholders or the Shareholders'
representative at Uwe Eickert 2201 Commerce Drive, Freemont Ohio 43420, or to
some other address as may have been furnished in writing to the party giving
the notice by the party to whom notice is to be given.
15
<PAGE> 16
10.5 ENTIRE AGREEMENT. This Agreement embodies the entire agreement among
the parties and there have been and are no agreements, representations or
warranties, oral or written, among the parties other than those set forth or
provided for in this Agreement. This Agreement may not be modified or changed,
in whole or in part, except by a supplemental agreement signed by each of the
parties.
10.6 RIGHTS UNDER THIS AGREEMENT; NONASSIGNABILITY. This Agreement shall
bind and inure to the benefit of the parties to this Agreement and their
respective heirs, legal representatives, successors and permitted assigns, but
shall not be assignable by any party without the prior written consent of the
other parties. Nothing contained in this Agreement is intended to confer upon
any person, other than the parties to this Agreement and their respective
heirs, legal representatives, successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to the
conflicts of laws principles of that State.
10.8 ARBITRATION. Any dispute arising under or involving any provision
under this Agreement or any issue regarding the Buyer's purchase of
Shareholders' stock, as listed on the attached Schedule A, the issue shall be
submitted to the American Arbitration Association and resolved by final and
binding arbitration under its rules.
10.9 HEADINGS; REFERENCES TO SECTIONS AND SCHEDULES. The headings of the
Sections, paragraphs and subparagraphs of this Agreement are solely for
convenience of reference and shall not limit or otherwise affect the meaning of
any of the terms or provisions of this Agreement. The references in this
Agreement to Sections and Schedules, unless otherwise indicated, are references
to sections of and schedules to this Agreement.
10.10 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but which together constitute one and the same
instrument. In Witness, the parties have duly executed this Agreement on April
19, 1999, as of the date first above written.
Halo Holdings of Nevada, Inc.
By: /s/ BRUCE BERTMAN
Bruce Bertman, CEO
NetWorld of Ohio, Inc.
By: /s/ UWE D. EICKERT
Uwe D. Eickert, President
Shareholders
16
<PAGE> 1
EXHIBIT 2.6
NETAMERICA, INC. and A1 INTERNET SERVICES, INC.
PURCHASE AND SALE AGREEMENT
This Sale of Assets Agreement is entered into this day by and between
NETAMERICA, INC., a Washington Corporation, (Seller"), William Fritts, and A1
INTERNET SERVICES, INC., a Delaware corporation, ("Purchaser"), and Bruce
Bertman (Bertman).
Seller operates a business primarily engaged in providing Internet Service to
subscribers. Seller's principal place of business is Suite 2950 -- 900 Fourth
Avenue, Seattle, Washington. Seller owns equipment, contract rights and
miscellaneous assets used in connection with the operation of its business.
Purchaser desires to acquire the above listed assets used or useful, or intended
to be used, in the operation of Seller's business, and Seller desires to sell
such assets to Purchaser.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Assets Purchased; Liabilities Assumed.
1.1 Assets Purchased. Sellers agree to sell to Purchaser and Purchaser
agrees to purchase from Seller, on the terms and conditions set forth in this
Agreement, the assets set forth in Exhibit A (Contract listings and Domain
Name).
1.2 Liabilities Assumed. Purchaser shall not be responsible for any
liabilities of NetAmerica, Inc., other than those specifically accepted by this
agreement.
1.3 Excluded Assets. Excluded from this sale and purchase contract are
Seller's accounts receivable, cash, notes receivable, prepaid accounts, and any
other assets of the business not specified in Section 1.1. and related Exhibits.
Section 2. Purchase Price for Assets other than Inventories.
The consideration for the purchase of Assets shall be $150,000.00, plus 190,000
shares of the Rule 144 Restricted common stock of A1 Internet.com, Inc.
Section 3. Payment of Purchase Price.
The price for the Assets shall be paid as follows:
3.1 Purchaser has previously paid $150,000.00, receipt of which is hereby
acknowledged.
3.2 The payment of $150,000.00 was originally in the form of a loan from
purchaser
PAGE 1- AGREEMENT FOR SALE OF ASSETS
<PAGE> 2
to seller, evidenced by a promissory note and security agreement, a copy of each
is set out in Exhibit C. Upon closing purchaser shall cancel the promissory note
and security agreement, and seller will acknowledge that purchaser's obligations
pursuant to such note have been satisfied.
3.3 The balance of the purchase price of 190,000 shares shall be issued
to the seller on closing in the name of NETAMERICA, INC. with certificates in a
50,000 share denomination, 100,000 share denomination, a 10,000 denomination and
a 30,000 denomination. Upon closing purchaser shall deliver 160,000 of the
shares specified herein to seller by overnight messenger. The remaining 30,000
shares shall upon closing be delivered to Kogan & Taubman LLC and pledged to A1
Internet Services, Inc. pursuant to that certain Stock Pledge Agreement, a copy
of which is set forth in Exhibit D and held as additional security against
NetAmerica Inc.'s failure to pay its outstanding tax liability. Such additional
security shall not in any way limit or restrict any further indemnity provided
by NetAmerica, Inc. or William Fritts herein. Such additional 30,000 shares
shall be released to seller upon evidence of payment of the IRS obligation
securing the lien. Purchaser will pay, before delinquency, all sales/use tax on
this sale within 30 days from closing.
3.4 As additional consideration for this agreement, Bruce Bertman has
tendered to NetAmerica, Inc., 85,000 shares A1 Internet.Com, Inc., the receipt
of which are hereby acknowledged. It is specifically agreed that the proceeds
from the sale of approximately 55,000 shares such stock shall be used to satisfy
seller's outstanding Federal Tax lien of approximately $120,000.00.
Section 4. Sellers' Representations and Warranties.
Sellers' represent and warrant to Purchaser as follows:
4.1 Title to Assets. Except as described in Exhibit A of this Agreement,
Seller holds good and marketable title to the Assets. Other, than a Federal Tax
lien attaching to the extent of $120,000.00 the assets are free and clear of
restrictions on or conditions to transfer or assignment, and free and clear of
liens, charges, or encumbrances.
4.2 Litigation. Seller has no knowledge of any claim, litigation,
proceeding, or investigation pending or threatened against Seller that might
result in any material adverse change in the business or condition of Assets
being conveyed under this Agreement and not otherwise disclosed herein.
4.3 Authorization. The execution, delivery, and performance of this Agreement
have been duly authorized and approved by the board of directors and
shareholders of Seller, and this Agreement constitutes a valid and binding
Agreement of Seller in accordance with its terms.
Section 5. Purchaser's Representations and Warranties.
PAGE 2- AGREEMENT FOR SALE OF ASSETS
<PAGE> 3
5.1 Conditions and Best Efforts. Purchaser will use its best efforts to
effectuate the transactions contemplated by this Agreement and to fulfill all
the conditions of Purchaser's obligations under this Agreement, and shall do all
acts and things as may be required to carry out Purchaser's obligations and to
consummate this Agreement.
5.2 Confidential Information. If the sale is not closed, Purchaser will
not disclose to third parties any confidential information received from
Sellers' in the course of investigating, negotiating, and performing the
transactions contemplated by this Agreement.
5.3 Authorization. Purchaser represents and warrants that it is fully
authorized to enter into this transaction and to issue the number and kind of
shares contemplated by this agreement.
Section 6. Conditions Precedent to Purchaser's Obligations.
Prior to consummating this agreement, Purchaser shall have obtained any
necessary consent to the assignment of the VISP agreements contemplated as set
out in Exhibit A.
Section 7. Conditions Precedent to Obligations of Sellers.
Seller's obligation to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, prior to or at the Closing Date of all
representations and warranties made in this Agreement by Purchaser which shall
be true as of the Closing Date as fully as though such representations and
warranties had been made on and as of the Closing Date, and Purchaser shall not
have violated or shall not have failed to perform in accordance with any
covenant contained in this Agreement.
Section 8. Purchaser's Acceptance.
8.1 Purchaser represents and acknowledges that it enters into this
Agreement on the basis of its own examination, personal knowledge, and opinion
of the value of assets transferred.
8.2 Purchaser has not relied on any representations made by Seller other
than those specified in this Agreement. Purchaser further acknowledges that
Seller has not made any agreement or promise to repair or improve any equipment,
or other personal property being sold to Purchaser under this Agreement, and
that Purchaser takes all such property in the condition existing on the date of
this Agreement, except as otherwise provided in this Agreement.
Section 9. Risk of Loss.
The risk of loss, damage, or destruction to any of the equipment, inventory, or
other personal
PAGE 3- AGREEMENT FOR SALE OF ASSETS
<PAGE> 4
property to be conveyed to Purchaser under this Agreement shall be borne by
Purchaser upon delivery or Closing, whichever is earlier. In the event of such
loss, damage, or destruction, Seller, to the extent reasonable, shall replace
the lost property or repair or cause to repair the damaged property to its
condition prior to the damage. If replacement, repairs, or restorations are not
completed prior to Closing, then the purchase price shall be adjusted by an
amount agreed upon by Purchaser and Seller that will be required to complete the
replacement, repair, or restoration following Closing.
Section 10. Indemnification and Survival.
10.1 Survival of Representations and Warranties. All representations and
warranties made in this Agreement shall survive the Closing of this Agreement,
except that any party to whom a representation or warranty has been made in this
Agreement shall be deemed to have waived any misrepresentation or breach of
representation or warranty of which such party had knowledge prior to Closing.
Any party learning of a misrepresentation or breach of warranty or
representation under this Agreement shall immediately give written notice
thereof to all other parties to this Agreement. The representations and
warranties in this Agreement shall terminate three years from the Closing Date,
and such representations or warranties shall thereafter be without force or
effect, except any claim with respect to which notice has been given to the
party to be charged prior to such expiration date.
10.2 Seller NetAmerica, Inc. agrees to indemnify and hold Purchaser
harmless from any liabilities not accepted by Purchaser herein.
10.3 William Fritts, Seller's CEO, and Seller agree to indemnify and hold
Purchaser harmless specifically from any obligations owed by NetAmerica, Inc. to
the Internal Revenue Service and not specifically accepted by Purchaser herein;
which liabilities may have attached by lien to the subject matter of this sale.
10.4 Purchaser's Indemnification. Purchaser agrees to defend, indemnify,
and hold harmless Sellers from and against any and all claims, liabilities, and
obligations of every kind and description arising out of or related to the
operation of the Purchaser's business following Closing or arising out of
Purchaser's failure to perform obligations of Seller assumed by Purchaser
pursuant to this Agreement.
Section 11. Bulk Transfers.
Purchaser and Seller acknowledge that the Bulk Transfer law of the State of
Washington RCW 62. Et seq. has been repealed and that neither party intends to
comply with the former law.
PAGE 4- AGREEMENT FOR SALE OF ASSETS
<PAGE> 5
Section 12. Miscellaneous Provisions.
12.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a written agreement
signed by its three parties.
12.2 Notices. All notices, requests, demands, and other communications
required or permitted hereunder will be in writing and will be deemed to have
been duly given when delivered by hand or two days after being mailed postage
prepaid to the address below, or such other as Purchaser or Sellers may
designate in writing:
Purchaser: Bruce Bertman
Al Internet Services Inc.
15825 Shady Grove Road
Suite 50
Rockville, Md. 20850
With a copy to: Louis Taubman
Kogan & Taubman, L.L.C.
39 Broadway, Suite 2704
New York, New York 10006
Seller or William Fritts William Fritts
NetAmerica, Inc.
2950 - 900 Fourth Ave.
Seattle, WA 98164
12.3 Attorney Fees. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
12.4 Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
12.4 Computation of Time. In computing any period of time pursuant to
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday, Sunday
or a legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday or legal holiday.
12.5 Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them
PAGE 5- AGREEMENT FOR SALE OF ASSETS
<PAGE> 6
respecting the subject matter of this Agreement. Any amendments to this
Agreement must be in writing and signed by the party against whom enforcement of
that amendment is sought.
12.6 Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
12.7 Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purpose of the Agreement.
12.8 Counterparts. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the parties
hereto even though all the parties are not signatories to the original or the
same counterpart. An authentic fax signature shall be deemed valid as if an
original signature for purposes of this agreement.
12.9 Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Dated: 8-19-99 Dated: 8-19-99
Seller, NetAmerica, Inc. Purchaser, A1 Internet Services, Inc.
By: By:
/s/ William Fritts /s/ Bruce Bertman
William Fritts, its CEO Bruce Bertman, its Chairman
Exhibits:
A - List of Intangible Assets
B - Bill of Sale/assignment
C - Promissory Note and Security Agreement
D- Stock Pledge
PAGE 6- AGREEMENT FOR SALE OF ASSETS
<PAGE> 1
EXHIBIT 4.2
AGREEMENT TO LOCK UP
THIS AGREEMENT TO LOCK UP, DATED MAY 19, 1999 (HEREINAFTER REFERRED TO AS
THE "AGREEMENT"), IS MADE BY AND BETWEEN JERRY LEE POOLE (HEREINAFTER REFERRED
TO AS "SHAREHOLDER"), AND EBI SECURITIES AND THE J.B. SUTTON GROUP, LLC.,
(HEREINAFTER REFERRED TO AS THE "PLACEMENT AGENTS".)
RECITALS
A. The Placement Agents are endeavoring to provide private placement financing
for Halo Holdings of Nevada, Inc (the "Company").
B. Shareholder believes that the Agreement is necessary to ensure that the
financing takes place.
IN CONSIDERATION of the mutual benefits to be derived by the parties hereunder,
the promises contained herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged by each party, the parties hereby
agree and covenant as follows:
SECTION I OWNERSHIP OF SHARES
a.) Shareholder is the beneficial owner of those shares of common stock of the
Company (hereinafter referred to as the "Common Stock") as is set forth
below:
Shareholder Shares
Jerry Lee Poole 145,000
b.) Shareholder further covenants and agrees that he/she is the beneficial owner
of the Common Stock as set forth above, and that other than this Agreement,
his/her ownership of the Common Stock is not subject to any liens,
encumbrances, options, agreements to sell or other obligation which would
impair his ownership of the Common Stock as set forth above.
SECTION II AGREEMENT TO LOCKUP
Shareholder hereby agrees not to offer, sell or contract to sell, encumber or
otherwise dispose of, directly or indirectly (including short sales, sales
against the tax and/or other hedging to derivative transactions) or announce an
offering of, any Common Stock beneficially owned by the shareholder until twelve
months from the closing of the June 1999 Private Placement.
<PAGE> 2
SECTION III INVOLUNTARY TRANSFERS
In the event of any sale, transfer, or disposition of any Common Stock contrary
to this Agreement in any manner, whether voluntary or involuntary, including but
not limited to, sale, transfer or disposition under judicial order, legal
process, attachment, enforcement of a pledge, trust, or encumbrance, or sale
under any of them, the purchaser or one to whom the stock passes or is disposed
of shall offer in writing to sell to the Company all of such stock, within 10
days after such sale, transfer, or disposition, provided however, that the
purchase price of such Common Stock shall be the lesser of the price paid by the
offeror or the current fair market value of the Common Stock, which shall be
equal to the average closing bid price of the Common Stock on the OTC Bulletin
Board or such other National Market on which the shares of the Company's common
stock is traded during the twenty (20) business days preceding the date the
Common Stock was sold or otherwise transferred.
SECTION IV TRANSFER IN VIOLATION OF AGREEMENT
Any sale, transfer, disposition, or encumbrance of any Common Stock subject to
this Agreement made in violation to the terms and conditions of this Agreement
shall be absolutely null and void, and the Common Stock shall not be transferred
or recognized by the Company.
SECTION V STOCK CERTIFICATE LEGEND
Shareholder agrees that he/she will hold his Common Stock subject to the terms
of this Agreement, and will not sell, transfer, pledge, assign, encumbrance, or
otherwise dispose of its Common Stock in any manner except as provided by the
terms of this Agreement. Each shareholder agrees that the certificates
representing the Common Stock owned by each Shareholder will be endorsed with
the following legend:
"SALE, TRANSFER, PLEDGE, ASSIGNMENT, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF AN AGREEMENT TO
LOCKUP DATED MAY 19, 1999, WHICH MAY BE EXAMINED AT THE PRINCIPAL OFFICE OF THE
COMPANY."
SECTION VI TERMINATION
This Agreement shall terminate on the earlier of:
(a) The date indicated in Section II or,
(b) Agreement of the placement agents.
<PAGE> 3
SECTION VII REMEDIES
In the event of a breach or threatened breach of this Agreement by shareholder
or those acting on Shareholder's behalf, Shareholder agrees that the Company
will not have adequate remedy at law and will be entitled to equitable relief,
including an injunction in respect of such breach or threatened breach. The
election by the Company to seek equitable remedies shall not prohibit the
Company from also pursuing any other available remedies, whether legal or
equitable in nature, against the breaching Shareholder.
SECTION VIII ARBITRATION
Any dispute arising out of or relating to this Agreement, or the breach thereof
shall be submitted to final and binding arbitration before the American
Arbitration Association in accordance with its rules and regulations. Nothing in
this Section VIII, however, shall prohibit the Company from seeking equitable
relief in a court of competent jurisdiction pursuant to Section VII of this
Agreement, nor shall such action by the Company operate as a waiver of its right
to compel binding arbitration of a dispute arising out of or relating to this
agreement, or a breach thereof.
SECTION IX GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
SECTION X BINDING OF SUCCESSORS
This Agreement is binding on the Shareholders, the Heirs, Executors,
Administrators, Successors, and Assigns.
SECTION XI COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original, but each of which shall constitute one and the same
document.
<PAGE> 4
SECTION XII ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement between the parties.
AGREED AND ACCEPTED ON THE DATE FIRST WRITTEN ABOVE BY:
By: /s/ Jerry Lee Poole
------------------------------------------
Jerry Lee Poole
The J.B. Sutton Group, LLC.
By: /s/
------------------------------------------
EBI Securities Inc.
By: /s/
------------------------------------------
<PAGE> 1
EXHIBIT 4.3
AGREEMENT TO LOCK UP
THIS AGREEMENT TO LOCK UP, DATED MAY 19, 1999 (HEREINAFTER REFERRED TO AS
THE "AGREEMENT"), IS MADE BY AND BETWEEN BRUCE BERTMAN (HEREINAFTER REFERRED TO
AS "SHAREHOLDER"), AND EBI SECURITIES AND THE J.B. SUTTON GROUP, LLC.,
(HEREINAFTER REFERRED TO AS THE "PLACEMENT AGENTS".)
RECITALS
A. The Placement Agents are endeavoring to provide private placement financing
for Halo Holdings of Nevada, Inc (the "Company").
B. Shareholder believes that the Agreement is necessary to ensure that the
financing takes place.
IN CONSIDERATION of the mutual benefits to be derived by the parties hereunder,
the promises contained herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged by each party, the parties hereby
agree and covenant as follows:
SECTION I OWNERSHIP OF SHARES
a.) Shareholder is the beneficial owner of those shares of common stock of the
Company (hereinafter referred to as the "Common Stock") as is set forth
below:
Shareholder Shares
----------- ------
Bruce Bertman 3,000,000
b.) Shareholder further covenants and agrees that he/she is the beneficial owner
of the Common Stock as set forth above, and that other than this Agreement,
his/her ownership of the Common Stock is not subject to any liens,
encumbrances, options, agreements to sell or other obligation which would
impair his ownership of the Common Stock as set forth above.
SECTION II AGREEMENT TO LOCKUP
Shareholder hereby agrees not to offer, sell or contract to sell, encumber or
otherwise dispose of, directly or indirectly (including short sales, sales
against the tax and/or other hedging to derivative transactions) or announce an
offering of, any Common Stock beneficially owned by the shareholder until twelve
months from the closing of the June 1999 Private Placement.
<PAGE> 2
SECTION III INVOLUNTARY TRANSFERS
In the event of any sale, transfer, or disposition of any Common Stock contrary
to this Agreement in any manner, whether voluntary or involuntary, including but
not limited to, sale, transfer or disposition under judicial order, legal
process, attachment, enforcement of a pledge, trust, or encumbrance, or sale
under any of them, the purchaser or one to whom the stock passes or is disposed
of shall offer in writing to sell to the Company all of such stock, within 10
days after such sale, transfer, or disposition, provided however, that the
purchase price of such Common Stock shall be the lesser of the price paid by the
offeror or the current fair market value of the Common Stock, which shall be
equal to the average closing bid price of the Common Stock on the OTC Bulletin
Board or such other National Market on which the shares of the Company's common
stock is traded during the twenty (20) business days preceding the date the
Common Stock was sold or otherwise transferred.
SECTION IV TRANSFER IN VIOLATION OF AGREEMENT
Any sale, transfer, disposition, or encumbrance of any Common Stock subject to
this Agreement made in violation to the terms and conditions of this Agreement
shall be absolutely null and void, and the Common Stock shall not be transferred
or recognized by the Company.
SECTION V STOCK CERTIFICATE LEGEND
Shareholder agrees that he/she will hold his Common Stock subject to the terms
of this Agreement, and will not sell, transfer, pledge, assign, encumbrance, or
otherwise dispose of its Common Stock in any manner except as provided by the
terms of this Agreement. Each shareholder agrees that the certificates
representing the Common Stock owned by each Shareholder will be endorsed with
the following legend:
"SALE, TRANSFER, PLEDGE, ASSIGNMENT, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF AN AGREEMENT TO
LOCKUP DATED MAY 19, 1999, WHICH MAY BE EXAMINED AT THE PRINCIPAL OFFICE OF THE
COMPANY."
SECTION VI TERMINATION
This Agreement shall terminate on the earlier of:
(a) The date indicated in Section II or,
(b) Agreement of the placement agents.
<PAGE> 3
SECTION VII REMEDIES
In the event of a breach or threatened breach of this Agreement by shareholder
or those acting on Shareholder's behalf, Shareholder agrees that the Company
will not have adequate remedy at law and will be entitled to equitable relief,
including an injunction in respect of such breach or threatened breach. The
election by the Company to seek equitable remedies shall not prohibit the
Company from also pursuing any other available remedies, whether legal or
equitable in nature, against the breaching Shareholder.
SECTION VIII ARBITRATION
Any dispute arising out of or relating to this Agreement, or the breach thereof
shall be submitted to final and binding arbitration before the American
Arbitration Association in accordance with its rules and regulations. Nothing in
this Section VIII, however, shall prohibit the Company from seeking equitable
relief in a court of competent jurisdiction pursuant to Section VII of this
Agreement, nor shall such action by the Company operate as a waiver of its right
to compel binding arbitration of a dispute arising out of or relating to this
agreement, or a breach thereof.
SECTION IX GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
SECTION X BINDING OF SUCCESSORS
This Agreement is binding on the Shareholders, the Heirs, Executors,
Administrators, Successors, and Assigns.
SECTION XI COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original, but each of which shall constitute one and the same
document.
<PAGE> 4
SECTION XII ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement between the parties.
AGREED AND ACCEPTED ON THE DATE FIRST WRITTEN ABOVE BY:
By: /s/ BRUCE BERTMAN
--------------------------------
Bruce Bertman
The J.B. Sutton Group, LLC.
By: /s/
-----------------------------
EBI Securities Inc.
By: /s/
-----------------------------
<PAGE> 1
EXHIBIT 4.4
AGREEMENT TO LOCK UP
THIS AGREEMENT TO LOCK UP, DATED MAY 19, 1999 (HEREINAFTER REFERRED TO AS
THE "AGREEMENT"), IS MADE BY AND BETWEEN NOVED HOLDINGS (HEREINAFTER REFERRED TO
AS "SHAREHOLDER"), AND EBI SECURITIES AND THE J.B. SUTTON GROUP, LLC.,
(HEREINAFTER REFERRED TO AS THE "PLACEMENT AGENTS".)
RECITALS
A. The Placement Agents are endeavoring to provide private placement financing
for Halo Holdings of Nevada, Inc (the "Company").
B. Shareholder believes that the Agreement is necessary to ensure that the
financing takes place.
TN CONSIDERATION of the mutual benefits to be derived by the parties hereunder,
the promises contained herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged by each party, the parties hereby
agree and covenant as follows:
SECTION I OWNERSHIP OF SHARES
a.) Shareholder is the beneficial owner of those shares of common stock of the
Company (hereinafter referred to as the "Common Stock") as is set forth
below:
Shareholder Shares
Noved Holdings 530,000
b.) Shareholder further covenants and agrees that he/she is the beneficial owner
of the Common Stock as set forth above, and that other than this Agreement,
his/her ownership of the Common Stock is not subject to any liens,
encumbrances, options, agreements to sell or other obligation which would
impair his ownership of the Common Stock as set forth above.
SECTION II AGREEMENT TO LOCKUP
Shareholder hereby agrees not to offer, sell or contract to sell, encumber or
otherwise dispose of, directly or indirectly (including short sales, sales
against the tax and/or other hedging to derivative transactions) or announce an
offering of, any Common Stock beneficially owned by the shareholder until twelve
months from the closing of the June 1999 Private Placement.
<PAGE> 2
SECTION III INVOLUNTARY TRANSFERS
In the event of any sale, transfer, or disposition of any Common Stock contrary
to this Agreement in any manner, whether voluntary or involuntary, including but
not limited to, sale, transfer or disposition under judicial order, legal
process, attachment, enforcement of a pledge, trust, or encumbrance, or sale
under any of them, the purchaser or one to whom the stock passes or is disposed
of shall offer in writing to sell to the Company all of such stock, within 10
days after such sale, transfer, or disposition, provided however, that the
purchase price of such Common Stock shall be the lesser of the price paid by the
offeror or the current fair market value of the Common Stock, which shall be
equal to the average closing bid price of the Common Stock on the OTC Bulletin
Board or such other National Market on which the shares of the Company's common
stock is traded during the twenty (20) business days preceding the date the
Common Stock was sold or otherwise transferred.
SECTION IV TRANSFER IN VIOLATION OF AGREEMENT
Any sale, transfer, disposition, or encumbrance of any Common Stock subject to
this Agreement made in violation to the terms and conditions of this Agreement
shall be absolutely null and void, and the Common Stock shall not be transferred
or recognized by the Company.
SECTION V STOCK CERTIFICATE LEGEND
Shareholder agrees that he/she will hold his Common Stock subject to the terms
of this Agreement, and will not sell, transfer, pledge, assign, encumbrance, or
otherwise dispose of its Common Stock in any manner except as provided by the
terms of this Agreement. Each shareholder agrees that the certificates
representing the Common Stock owned by each Shareholder will be endorsed with
the following legend:
"SALE, TRANSFER, PLEDGE, ASSIGNMENT, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF AN AGREEMENT TO
LOCKUP DATED MAY 19, 1999, WHICH MAY BE EXAMINED AT THE PRINCIPAL OFFICE OF THE
COMPANY."
SECTION VI TERMINATION
This Agreement shall terminate on the earlier of:
(a) The date indicated in Section II or,
(b) Agreement of the placement agents.
<PAGE> 3
SECTION VII REMEDIES
In the event of a breach or threatened breach of this Agreement by shareholder
or those acting on Shareholder's behalf, Shareholder agrees that the Company
will not have adequate remedy at law and will be entitled to equitable relief,
including an injunction in respect of such breach or threatened breach. The
election by the Company to seek equitable remedies shall not prohibit the
Company from also pursuing any other available remedies, whether legal or
equitable in nature, against the breaching Shareholder.
SECTION VIII ARBITRATION
Any dispute arising out of or relating to this Agreement, or the breach thereof
shall be submitted to final and binding arbitration before the American
Arbitration Association in accordance with its rules and regulations. Nothing in
this Section VIII, however, shall prohibit the Company from seeking equitable
relief in a court of competent jurisdiction pursuant to Section VII of this
Agreement, nor shall such action by the Company operate as a waiver of its right
to compel binding arbitration of a dispute arising out of or relating to this
agreement, or a breach thereof.
SECTION IX GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
SECTION X BINDING OF SUCCESSORS
This Agreement is binding on the Shareholders, the Heirs, Executors,
Administrators, Successors, and Assigns,
SECTION XI COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original, but each of which shall constitute one and the same
document.
<PAGE> 4
SECTION XII ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement between the parties.
AGREED AND ACCEPTED ON THE DATE FIRST WRITTEN ABOVE BY:
By; /s/ DANIEL D. STARCZEWSKI
---------------------------------------
Noved Holdings
Daniel D. Starczewski, President
The J.B. Sutton Group, LLC.
By; /s/
---------------------------------------
EBI Securities Inc.
By; /s/
---------------------------------------
<PAGE> 1
EXHIBIT 4.5
AGREEMENT TO LOCK UP
THIS AGREEMENT TO LOCK UP, DATED MAY 19, 1999 (HEREINAFTER REFERRED TO AS
THE "AGREEMENT"), IS MADE BY AND BETWEEN LEONARD TAMBASCO (HEREINAFTER REFERRED
TO AS "SHAREHOLDER"), AND EBI SECURITIES AND THE J.B. SUTTON GROUP, LLC.,
(HEREINAFTER REFERRED TO AS THE "PLACEMENT AGENTS".)
RECITALS
A. The Placement Agents are endeavoring to provide private placement financing
for Halo Holdings of Nevada, Inc (the "Company").
B. Shareholder believes that the Agreement is necessary to ensure that the
financing takes place.
IN CONSIDERATION of the mutual benefits to be derived by the parties hereunder,
the promises contained herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged by each party, the parties hereby
agree and covenant as follows:
SECTION I OWNERSHIP OF SHARES
a.) Shareholder is the beneficial owner of those shares of common stock of the
Company (hereinafter referred to as the "Common Stock") as is set forth
below:
Shareholder Shares
----------- ------
Leonard Tambasco 350,000
b.) Shareholder further covenants and agrees that he/she is the beneficial owner
of the Common Stock as set forth above, and that other than this Agreement,
his/her ownership of the Common Stock is not subject to any liens,
encumbrances, options, agreements to sell or other obligation which would
impair his ownership of the Common Stock as set forth above.
SECTION II AGREEMENT TO LOCKUP
Shareholder hereby agrees not to offer, sell or contract to sell, encumber or
otherwise dispose of, directly or indirectly (including short sales, sales
against the tax and/or other hedging to derivative transactions) or announce an
offering of, any Common Stock beneficially owned by the shareholder until twelve
months from the closing of the June 1999 Private Placement.
<PAGE> 2
SECTION III INVOLUNTARY TRANSFERS
In the event of any sale, transfer, or disposition of any Common Stock contrary
to this Agreement in any manner, whether voluntary or involuntary, including but
not limited to, sale, transfer or disposition under judicial order, legal
process, attachment, enforcement of a pledge, trust, or encumbrance, or sale
under any of them, the purchaser or one to whom the stock passes or is disposed
of shall offer in writing to sell to the Company all of such stock, within 10
days after such sale, transfer, or disposition, provided however, that the
purchase price of such Common Stock shall be the lesser of the price paid by the
offeror or the current fair market value of the Common Stock, which shall be
equal to the average closing bid price of the Common Stock on the OTC Bulletin
Board or such other National Market on which the shares of the Company's common
stock is traded during the twenty (20) business days preceding the date the
Common Stock was sold or otherwise transferred.
SECTION IV TRANSFER IN VIOLATION OF AGREEMENT
Any sale, transfer, disposition, or encumbrance of any Common Stock subject to
this Agreement made in violation to the terms and conditions of this Agreement
shall be absolutely null and void, and the Common Stock shall not be transferred
or recognized by the Company.
SECTION V STOCK CERTIFICATE LEGEND
Shareholder agrees that he/she will hold his Common Stock subject to the terms
of this Agreement, and will not sell, transfer, pledge, assign, encumbrance, or
otherwise dispose of its Common Stock in any manner except as provided by the
terms of this Agreement. Each shareholder agrees that the certificates
representing the Common Stock owned by each Shareholder will be endorsed with
the following legend:
"SALE, TRANSFER, PLEDGE, ASSIGNMENT, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF AN AGREEMENT TO
LOCKUP DATED MAY 19, 1999, WHICH MAY BE EXAMINED AT THE PRINCIPAL OFFICE OF THE
COMPANY."
SECTION VI TERMINATION
This Agreement shall terminate on the earlier of:
(a) The date indicated in Section II or,
(b) Agreement of the placement agents.
<PAGE> 3
SECTION VII REMEDIES
In the event of a breach or threatened breach of this Agreement by shareholder
or those acting on Shareholder's behalf, Shareholder agrees that the Company
will not have adequate remedy at law and will be entitled to equitable relief,
including an injunction in respect of such breach or threatened breach. The
election by the Company to seek equitable remedies shall not prohibit the
Company from also pursuing any other available remedies, whether legal or
equitable in nature, against the breaching Shareholder.
SECTION VIII ARBITRATION
Any dispute arising out of or relating to this Agreement, or the breach thereof
shall be submitted to final and binding arbitration before the American
Arbitration Association in accordance with its rules and regulations. Nothing in
this Section VIII, however, shall prohibit the Company from seeking equitable
relief in a court of competent jurisdiction pursuant to Section VII of this
Agreement, nor shall such action by the Company operate as a waiver of its right
to compel binding arbitration of a dispute arising out of or relating to this
agreement, or a breach thereof.
SECTION IX GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
SECTION X BINDING OF SUCCESSORS
This Agreement is binding on the Shareholders, the Heirs, Executors,
Administrators, Successors, and Assigns.
SECTION XI COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original, but each of which shall constitute one and the same
document.
<PAGE> 4
SECTION XII ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement between the parties.
AGREED AND ACCEPTED ON THE DATE FIRST WRITTEN ABOVE BY:
By: /s/ LEONARD TAMBASCO
---------------------------
Leonard Tambasco
The J.B. Sutton Group, LLC.
By:
---------------------------
Bud Clarke
EBI Securities Inc.
By:
---------------------------
<PAGE> 1
EXHIBIT 4.6
AGREEMENT TO LOCK UP
THIS AGREEMENT TO LOCK UP, DATED MAY 19, 1999 (HEREINAFTER REFERRED TO AS
THE "AGREEMENT"), IS MADE BY AND BETWEEN LARRY KERSCHENBAUM (HEREINAFTER
REFERRED TO AS "SHAREHOLDER"), AND EBI SECURITIES AND THE J.B. SUTTON GROUP,
LLC., (HEREINAFTER REFERRED TO AS THE "PLACEMENT AGENTS".)
RECITALS
A. The Placement Agents are endeavoring to provide private placement financing
for Halo Holdings of Nevada, Inc (the "Company").
B. Shareholder believes that the Agreement is necessary to ensure that the
financing takes place.
IN CONSIDERATION of the mutual benefits to be derived by the parties hereunder,
the promises contained herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged by each party, the parties hereby
agree and covenant as follows:
SECTION I OWNERSHIP OF SHARES
a.) Shareholder is the beneficial owner of those shares of common stock of the
Company (hereinafter referred to as the "Common Stock") as is set forth
below:
Shareholder Shares
Larry Kerschenbaum 700,000
b.) Shareholder further covenants and agrees that he/she is the beneficial owner
of the Common Stock as set forth above, and that other than this Agreement,
his/her ownership of the Common Stock is not subject to any liens,
encumbrances, options, agreements to sell or other obligation which would
impair his ownership of the Common Stock as set forth above.
SECTION II AGREEMENT TO LOCKUP
Shareholder hereby agrees not to offer, sell or contract to sell, encumber or
otherwise dispose of, directly or indirectly (including short sales, sales
against the tax and/or other hedging to derivative transactions) or announce an
offering of, any Common Stock beneficially owned by the shareholder until twelve
months from the closing of the June 1999 Private Placement.
<PAGE> 2
SECTION III INVOLUNTARY TRANSFERS
In the event of any sale, transfer, or disposition of any Common Stock contrary
to this Agreement in any manner, whether voluntary or involuntary, including but
not limited to, sale, transfer or disposition under judicial order, legal
process, attachment, enforcement of a pledge, trust, or encumbrance, or sale
under any of them, the purchaser or one to whom the stock passes or is disposed
of shall offer in writing to sell to the Company all of such stock, within 10
days after such sale, transfer, or disposition, provided however, that the
purchase price of such Common Stock shall be the lesser of the price paid by the
offeror or the current fair market value of the Common Stock, which shall be
equal to the average closing bid price of the Common Stock on the OTC Bulletin
Board or such other National Market on which the shares of the Company's common
stock is traded during the twenty (20) business days preceding the date the
Common Stock was sold or otherwise transferred.
SECTION IV TRANSFER IN VIOLATION OF AGREEMENT
Any sale, transfer, disposition, or encumbrance of any Common Stock subject to
this Agreement made in violation to the terms and conditions of this Agreement
shall be absolutely null and void, and the Common Stock shall not be transferred
or recognized by the Company.
SECTION V STOCK CERTIFICATE LEGEND
Shareholder agrees that he/she will hold his Common Stock subject to the terms
of this Agreement, and will not sell, transfer, pledge, assign, encumbrance, or
otherwise dispose of its Common Stock in any manner except as provided by the
terms of this Agreement. Each shareholder agrees that the certificates
representing the Common Stock owned by each Shareholder will be endorsed with
the following legend:
"SALE, TRANSFER, PLEDGE, ASSIGNMENT, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF AN AGREEMENT TO
LOCKUP DATED MAY 19, 1999, WHICH MAY BE EXAMINED AT THE PRINCIPAL OFFICE OF THE
COMPANY."
SECTION VI TERMINATION
This Agreement shall terminate on the earlier of:
(a) The date indicated in Section II or,
(b) Agreement of the placement agents.
<PAGE> 3
SECTION VII REMEDIES
In the event of a breach or threatened breach of this Agreement by shareholder
or those acting on Shareholder's behalf, Shareholder agrees that the Company
will not have adequate remedy at law and will be entitled to equitable relief,
including an injunction in respect of such breach or threatened breach. The
election by the Company to seek equitable remedies shall not prohibit the
Company from also pursuing any other available remedies, whether legal or
equitable in nature, against the breaching Shareholder.
SECTION VIII ARBITRATION
Any dispute arising out of or relating to this Agreement, or the breach thereof
shall be submitted to final and binding arbitration before the American
Arbitration Association in accordance with its rules and regulations. Nothing in
this Section VIII, however, shall prohibit the Company from seeking equitable
relief in a court of competent jurisdiction pursuant to Section VII of this
Agreement, nor shall such action by the Company operate as a waiver of its right
to compel binding arbitration of a dispute arising out of or relating to this
agreement, or a breach thereof
SECTION IX GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
SECTION X BINDING OF SUCCESSORS
This Agreement is binding on the Shareholders, the Heirs, Executors,
Administrators, Successors, and Assigns.
SECTION XI COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original, but each of which shall constitute one and the same
document.
<PAGE> 4
SECTION XII ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement between the parties.
AGREED AND ACCEPTED ON THE DATE FIRST WRITTEN ABOVE BY:
- -----------------------------
Lawrence Kirchenbaum
The J.B. Sutton Group, LLC.
By:
--------------------------
EBI Securities Inc.
By:
--------------------------
<PAGE> 1
EXHIBIT 10.D.1
AIRCRAFT LEASE
Agreement for lease of aircraft made on March 31, 1999, between Gravity Pilot,
Inc.("lessor"), and Skydive USA ("lessee").
In consideration of the mutual promises contained in this agreement, the
parties agree as follows:
SECTION ONE.
LEASE OF AIRCRAFT
Lessor leases to lessee, for the rental and on the terms and conditions
contained in this agreement, the aircraft, its accessories and equipment,
referred to as the leased property, described in the schedule, marked Schedule
1, attached and, by this reference, incorporated into this agreement, for terms
as follows:
Term. lessor leases the leased property to lessee for a term of twelve (12)
months, beginning on the day of delivery of the leased property and ending at
the expiration of twelve (12) months thereafter. After the first term, the lease
is renewable for successive terms of twelve (12) months each, but not to exceed
twenty (20) renewal terms, at the option of lessee. At any time during the
renewal of this agreement (but this cancellation provision shall not apply to
the first term), either party shall be entitled to cancel the lease on first
giving ninety (90) days written notice prior to the date as of which
cancellation is desired to be effective.
SECTION TWO.
RENT
a. For the use of the aircraft, its accessories and equipment, lessee agrees to
pay to lessors rent in the amount $21,176.00 per month during the term of the
lease, including any renewal, payable on the first day of each month.
b. Such payments shall be made at the offices of lessors or if rentals due or to
become due are assigned, at the principal office of the assignee. Such payment
shall be made in sufficient time to reach the designated place of payment so
that the payment can be collected on or before the due date. Interest shall be
paid on each delinquent installment of rent from the tenth day after the due
date until the payment shall have been collected at the designated place of
payment at the rate of nine percent (9%) per year.
c. additional rent of $35.00 shall be made for each hour of flight of the leased
aircraft. Such additional rent shall be paid to the Gravity Pilot Engine Reserve
Account ("reserve account") as described in Schedule 2(c), attached hereto. All
records regarding the reserve account will be inspected by lessor on a monthly
basis by cross-referencing the contribution to the reserve account with the
relevant flight records for the leased aircraft.
SECTION THREE.
FINANCING BY LESSOR FOR PAYMENT OF AIRCRAFT
<PAGE> 2
a. Lessor may borrow money for the purpose of financing payments of the purchase
price of the leased property under this lease or any part thereof, and in that
connection may, as security, give the lender a security interest or as the case
may be or bill of sale to secure any debt or other lien on the property;
provided, however, that any such security interest or other lien or security
instrument shall contain a provision expressly making the liens of the security
instruments subject and subordinate to the rights of lessee under this lease, so
long as lessee is not in default under the provisions of this agreement.
b. Lessor may assign to the lender all or such of lessor rights under this
agreement, including rentals, claims, and rights to moneys due or to become due,
as may be necessary or desirable to provide further security to the lender.
After any such assignment, the terms and provisions of this lease may not be
altered, modified, or waived without the written consent of the assignee, but no
such assignment shall operate to relieve lessor of their obligations and duties
under this agreement.
SECTION FOUR.
INSPECTION AND EXAMINATION
Lessor and any insurance company or companies insuring the leased property are
given the right and privilege, from time to time, to inspect the leased
property, and to examine the books and records relating thereto, on the premises
of lessee, or wherever located, if, in the sole judgment of lessor or insurer,
the inspection is deemed necessary.
SECTION FIVE.
PERMANENT BASE OF AiRCRAFT
a. Lessor shall deliver the aircraft to lessee, at Palm Beach County Glades
Airport, 3800 State Road, Pahokee, Florida 33476. Lessee agrees to use the
aircraft in the areas as specified in the insurance policy or policies
applicable to the aircraft.
b. The aircraft shall be permanently based at Palm Beach County Glades Airport,
3800 State Road, Pahokee, Florida 33476, and such permanent base location shall
not be changed without the prior, express, and written consent of lessor and any
holder of any security interest in the leased property.
SECTION SIX.
COMPLIANCE WITH LEASE
Lessee covenants and agrees to accept this lease on the terms set forth, to pay
the rentals and other charges provided, and to comply with all of the other
terms of this agreement.
SECTION SEVEN.
MAINTENANCE OF AIRCRAFT
Lessee covenants and agrees, at its own cost and expense, to maintain the leased
property in mechanical condition adequate to comply with the laws, rules,
orders, ordinances, and regulations of the United States Of America, its
territories or possessions, the individual states of the United States, its
territories or possessions, or states of the United States in which the leased
property shall be used or operated, or such other countries in which
<PAGE> 3
lessee shall operate the leased property in accordance with the terms and
conditions of the insurance carrier.
SECTION EIGHT.
REPAIRS, ALTERATIONS, AND MODIFICATIONS
a. During the term of this lease, lessee, at its own cost and expense, covenants
and agrees to make all alterations, modifications, and repairs (including
replacement parts) to leased property that shall be necessary to keep and
maintain it at all times in first class mechanical condition and repair, and any
condition and repair necessary to comply with the terms of the insurance
carrier, or the Federal Aviation Administration, or the Department of
Transportation, or its successor. Any alterations, modifications, equipment
installations, or replacements made by lessee shall become and remain the
property of lessor at the expiration of this lease, in the same manner as though
the alterations, modifications, equipment installations, or replacements were in
or on the leased property at the time of the commencement of this lease.
b. Wherever practicable all repairs, servicing, and replacements of the leased
property shall be made under the direct supervision of the repair facility
approved by the manufacturer of the leased property, except such repairs,
servicing, or replacements that are of an emergency character.
SECTION NINE.
FUEL, STORAGE CHARGES, AND THE LIKE
Lessee covenants and agrees to furnish at its own cost and expense all fuels
oils, lubricants, and other materials necessary for the operation of the leased
property, to pay all storage and hangar charges, and to keep the painting and
lettering of the leased property in good condition, so that it will present a
neat appearance at all times.
SECTION TEN.
MAJOR ALTERATIONS OR MODIFICATIONS
Lessee covenants and agrees not to make or cause to be made any major or
structural alterations or modifications of the property leased under this
agreement without the prior, express, and written consent of lessor and any
holder of a security interest in the leased property.
SECTION ELEVEN.
PILOTS
Lessee covenants and agrees to operate all aircraft leased to lessee under this
lease only with a safe, careful, and licensed pilot to be selected, employed
and/or contracted for, controlled and paid by lessee, such pilots being
conclusively presumed to be the agents of lessee only. Lessee shall require
pilots to operate the aircraft with reasonable care and diligence, and to use
every reasonable precaution to prevent loss or damage to the aircraft, and to
prevent injury to third persons, or property of third persons; and on written
complaint from lessor specifying any reckless or abusive handling of the
aircraft leased under this agreement, lessee shall remove any such pilot and
substitute therefor a careful and safe pilot, as soon as it is reasonably
possible to do so.
<PAGE> 4
SECTION TWELVE.
PUNCTUALITY IN PAYMENTS
Lessee covenants and agrees that punctuality in the payments, rent, and other
charges stipulated in this lease and which shall be of the essence of this
lease, and such rental payments and other charges cannot be waived or extended
for any cause whatever, except as expressly provided for in this agreement.
SECTION THIRTEEN.
COMPLIANCE WITH LAWS
a. Lessee covenants and agrees to comply with all of the laws, rules, orders,
ordinances, and regulations of the United States of America, its territories or
possessions, and of any other country, state, municipality, or any
duly-constituted authority regarding the use, operation, or possession of an
aircraft, and will indemnify lessor from any and all fines, forfeitures, or
penalties arising out of any violation.
b. Lessee further agrees not to use or operate the leased property in violation
of any such law, rule, ordinance, orders, or regulations.
c. Lessee shall be liable to lessor for the loss of any of the leased property
caused by the confiscation thereof by any public authority by reason of illegal
use thereof by lessee or its agents, servants, or employees. On any such
confiscation all rentals remaining due under this lease for any aircraft
confiscated shall become legally due and payable, in addition to other remedies
of lessors or either of them to enforce rights and claims arising by reason of
the confiscation.
SECTION FOURTEEN.
ASSIGNMENT OF LEASE
a. Lessee covenants and agrees that it will not, during either the first term or
any renewal, assign this lease or any interest in it or sublease of the leased
property or any of it without the prior written consent of lessor during the
first term of this lease or during any renewal. Such consent will not, in any
event, be unreasonably withheld. During any term lessee will not assign, pledge,
or encumber the leased property in any manner or permit liens to become
effective on the property.
b. In the event any lien, attachment, levy, or other encumbrance of any kind is
levied or placed or threatened to be levied or placed on or against the leased
property, lessee will immediately send the lessor written notice and will
indemnify lessor against any and all expenses, including, but not limited to,
those arising out of any lawsuit and damage incurred or caused by any such lien,
attachment, levy, or other encumbrance.
SECTION FIFTEEN.
TRANSFER ON TERMINATION
Lessee covenants and agrees, on termination of this lease for any cause, lessee
will promptly return the leased property to lessor in the same condition in
which it was received by lessee, ordinary wear and tear and natural depreciation
and loss or damage
<PAGE> 5
for which lessor are reimbursed by insurance excepted; and will promptly execute
any and all papers necessary to effect the transfer to lessor.
SECTION SIXTEEN.
IDENTIFICATION OF AIRCRAFT
Lessee covenants and agrees that it will attach to the outside of the body of
the leased aircraft a stencil or plaque in a manner to comply with the laws, if
any, of the United States of America, its territories or possessions, or any
state or country where licensed and operated, to protect and show the interest
of lessor.
SECTION SEVENTEEN.
TAXES
a. Lessee covenants and agrees to pay when due all personal property taxes,
sales taxes, use taxes, taxes on lease rentals, sales consummation taxes, any
special taxes imposed or charges of any kind on or in respect to the leased
property for the use, operation, or possession thereof, and other taxes
applicable to the leased property, except net income and franchise taxes of
lessor, that become effective during the term of this lease.
b. In respect to any such taxes or charges assessed or imposed directly against
lessee, lessee agrees to furnish satisfactory evidence to lessor of the paying
of such taxes or charges.
c. In respect to any such taxes or charges assessed or imposed directly against
lessor, or taxes or charges assessed or imposed directly against lessee which
lessor, for any reason, shall be compelled to pay, lessee agrees, except as
herein expressly provided, to pay the taxes or charges, within ten (10) days
after receiving a bill from lessor for the taxes or charges. In the event that
lessee fails to pay such bill, together with all penalties and forfeitures
imposed, within such time, the unpaid bill shall bear interest at the rate of
nine percent (9%) per year commencing at the end of the above-stated ten-day
period.
d. Lessee shall have the right to dispute or contest in good faith and at
lessee's expense, the payment of any such taxes or charges assessed or imposed
directly against lessor, and/or lessee. During the period that any such taxes or
charges are being contested in good faith, payment of the contested taxes or
charges in accordance with the terms of this lease may be delayed until final
determination has been made of the amount due.
SECTION EIGHTEEN.
COOPERATION WITH LESSOR
Lessee covenants and agrees to execute and deliver to lessor any and all
instruments and documents that may be reasonably necessary to protect lessor's
interest under this lease or the interest of any holder of a security interest
in the leased property.
SECTION NINETEEN.
RECORDING AND REGISTRATION FEES
<PAGE> 6
a. Lessee covenants and agrees to pay licensing, registering, and recording
fees, including fees for the proper recording or registering of this lease or
any assignments of the lease and any security instrument that lessor may give as
security to any assignee of lessor.
b. Lessor, on lessee's written request, accompanied by payment in full, shall
purchase any licenses necessary for the use and operation of the leased
property.
SECTION TWENTY.
INDEMNIFICATION OF LESSOR
a. Lessee covenants and agrees, except with respect to an insured loss to the
property leased under this agreement to the extent of the collectible insurance,
to indemnify lessor against any and each loss, claim, and/or liability,
regardless of the nature, including attorney fees and other expenses or
liabilities, imposed by law or otherwise, on lessor arising out of the use or
operation of the leased property during the period the aircraft is leased under
this lease.
b. Without in anyway limiting the generality of the above, during the term of
this lease, lessee shall indemnify lessor against any and all claims arising
from any loss, injury, damage, or claims, including injuries to or death of
passengers or third persons, and damage to or destruction of property, public or
private, arising out of, or in connection with, the operation or maintenance of
the aircraft while in possession of the lessee, its sublessees, bailees, agents,
or representative.
SECTION TWENTY-ONE.
INSURANCE
a. Beginning with and at all times during the term of this lease and any renewal
as provided in this agreement, lessee shall at its own expense, procure and
maintain, in full force and effect, insurance written by responsible insurance
companies approved in writing by lessor. Such insurance shall cover lessor and
any other persons or corporations having an interest in the aircraft as their
interests may appear against all liability for loss, injury, damage, or claims
caused by or arising out of, or in connection with, the operation or maintenance
of the aircraft, including injuries to or deaths of passengers or third persons,
and damage to or destruction of property, public or private. All insurance shall
be in form and amount approved by lessor.
b. Without in any way limiting the generality of the above, lessee shall keep
and maintain the following types of insurance in amounts with minimum limits
acceptable to lessor or its assigns: (1) passenger liability insurance, (2)
bodily injury insurance, (3) property damage insurance, and (4) excess coverage
insurance, to be applicable to the three classes of risks mentioned above.
c. In addition to the above, during the term of the lease, lessee shall, at is
own expense, procure and maintain on the aircraft whole insurance policies
written by responsible insurance companies, such policies to be approved by
lessor or its assigns as to amounts and form. Each such policy shall include
for the benefit of lessor a breach of warranty endorsement without a
"components parts" clause. In the event of total loss, lessee may not,
without the written consent of lessor or its assigns, effect negotiation and
settlement with the insurance companies or any policies. Such policies shall
expressly provide that the insurer shall give lessor or its assigns at least
thirty (30)days' written notice of cancellation or material change in policy
coverage. The
<PAGE> 7
proceeds of the insurance, at the option of lessor, shall be applied (1)
towards the replacement, restoration, or repair of the aircraft, or (2)
toward the payment of the obligations of lessee under this agreement. Lessee
appoints lessor as lessee's attorney in fact to make claims for, receive
payment of, and execute and endorse any and all documents, checks, or drafts
for the loss or damage under any insurance policy.
d. Lessee agrees to follow strictly the requirement stated in any applicable
insurance policy or policies pertaining to the operation of the aircraft and
further agrees not to so act or to fail to act as to cause the insurance
coverage to be impaired. A violation of any of these agreements shall entitle
lessor of the lease outstanding at the time to cancel the lease in addition to
any other remedies provided by law.
e. A certificate of insurance evidencing the above-described coverage will be
furnished lessor as soon as possible after the closing of the agreement, and the
policies, or true copies of them, and shall be retained in the possession of
lessor during the term of this agreement.
SECTION TWENTY-TWO
TITLE TO PROPERTY
The leased property at all times shall remain and be the sole and exclusive
property of lessor. Lessee shall have no rights of property therein but only the
right to use the property on the conditions set forth in this agreement.
SECTION TWENTY-THREE.
TERMINATION FOR BANKRUPTCY OR THE LIKE
Lessor shall have the right to terminate this lease, without notice to lessee,
if lessee shall file a voluntarily petition in bankruptcy, shall make an
assignment for the benefit of creditors, or shall be voluntarily or
involuntarily adjudicated as bankrupt by any court of competent jurisdiction; or
if voluntary or involuntary proceedings for reorganization are filed by or
against lessee, or if a receiver shall be appointed for lessee's business and is
not discharged within 30 days thereafter, or if lessee shall have permitted or
suffered any lien, distress, attachment, levy, or execution to attach to or to
be made levied against any or all of the property of lessee, not promptly
discharged.
SECTION TWENTY-FOUR
DEFAULT FOR NONPAYMENT OF RENTALS
a. In the event lessee shall fail to make any of the rental or other payments
provided in this agreement, or fail to comply with any of the other terms and
conditions of this lease and the failure to comply with any of the other terms
and conditions of this lease shall continue for ten (10) days after written
notice from lessor to lessee, lessor shall have the right at their option,
cumulative of all other rights, to declare this lease in default and declare the
entire unpaid rental immediately due and payable. At any time that lessee is in
default under any of the terms and conditions of this lease, by declaration or
otherwise, lessor may take possession of the leased property, including all
parts, accessories, and equipment, and after such possession is taken all of
lessee's rights in the leased property shall then cease and terminate.
<PAGE> 8
b. Lessor's remedies in place of lessee's default shall be cumulative and lessor
may exercise any and all other lawful remedies they may have by virtue of
lessee's breach of this lease, by declaration or otherwise.
c. In the event of default and lessor's taking or deserving to take possession
of the leased property, lessee does hereby waive any procedure, whether
statutory or otherwise, in order to immediately place the leased property in
lessor's possession. Lessee further agrees to turn over the leased property to
lessor, or their attorneys, agents, or servants, the right to enter the premises
where the leased property is stored, for the purpose of securing possession of
the property.
SECTION TWENTY-FIVE.
FAILURE OF AIRCRAFT TO FUNCTION
Lessor shall not be liable to lessee for loss of use of the leased property or
interruption of lessee's business if the leased property fails to function, or
to be out of use for repairs or services, or for any other cause whatever.
SECTION TWENTY-SIX
TOTAL DESTRUCTION OF AIRCRAFT
a. In the event of the total destruction of the leased aircraft, the term
created, or any renewal of it, shall terminate immediately, and, subject as
provided below, lessee and lessor shall then be relieved of any further
obligation related to the surrender of the aircraft.
b. The net proceeds of insurance carried on the leased aircraft pursuant to the
provisions of Section Twenty shall, in the event of the total destruction of the
leased aircraft, be made payable and shall be paid to lessor. If lessee elects
within thirty (30) days of such total destruction to enter into a lease with
lessor substantially identical with this lease, in respect of a different
aircraft, the rental payable under the new lease shall be calculated using a
cost factor of the difference between the net insurance proceeds and the
acquisition cost to lessor of the different aircraft, that will form the subject
matter of the lease.
c. Net insurance proceeds, as used, is defined as the amount received from the
insurance company less any liens on the aircraft.
SECTION TWENTY-SEVEN.
ENTIRE AGREEMENT
This agreement constitutes the entire agreement between the parties, and any
prior understanding or representation of any kind preceding the date of this
agreement shall not be binding on either party except to the extent incorporated
in this agreement.
SECTION TWENTY-EIGHT.
MODIFICATION OF AGREEMENT
<PAGE> 9
Any modification of this agreement or additional obligation assumed by either
party in connection with this agreement shall be binding only if in writing
signed by each party or an authorized representative of each party.
SECTION TWENTY-NINE.
NO WAIVER
The failure of either party to THIS agreement to insist on the performance of
any of the terms and conditions of this agreement, or the waiver of any breach
of any of the terms and conditions of this agreement, shall not be construed as
thereafter waiving any such terms and conditions, but the terms and conditions
shall continue and remain in full force and effect as if no such forbearance or
waiver had occurred.
SECTION THIRTY.
GOVERNING LAW
This agreement shall be governed by, construed, and enforced in accordance with
the laws of New York
SECTION THIRTY-ONE.
PARAGRAPH HEADINGS
The titles to the paragraphs of this agreement are solely for the convenience of
the parties and shall not be used to explain, modify, simplify, or 8ID in the
interpretation of the provisions of this agreement.
SECTION THIRTY-TWO.
NOTICES
a. All notices required to be given under the terms of this lease, or that any
party to this agreement may desire to give to the other, shall be in writing,
signed by or on behalf of the party giving the same, and sent by United States
registered mail addressed to the other party. All notices from lessor to lessee
shall be addressed to lessee at Skydive, USA at Pa]m Beach County Glades
Airport, 3800 State Road, Pahokee, Florida 33476, or at such other address as
lessee shall hereafter furnish to lessor, in writing.
b. All notices from lessee to lessor shall be addressed to first lessor at Halo
Holdings of Nevada, Inc., 7900 Glades Road, Boca Raton, Florida 33434, and such
other address as first lessor shall hereafter furnish to lessee in writing.
SECTION THIRTY-FOUR.
EFFECT OF PARTIAL INVALIDITY
The invalidity of any portion of this agreement will not and shall not be deemed
to affect the validity of any other provision. In the event any provision of
this agreement is held to be invalid, the parties agree that the remaining
provisions shall be deemed to be in full force and effect as if they had been
executed by both parties subsequent to the expungement of the invalid provision.
<PAGE> 10
In witness whereof, each party to this agreement has caused it to be executed as
of the date first set forth above.
Skydive USA
By: /s/ LAWRENCE KIRSHENBAUM Date: 5/7/99
------------------------------ ----------------
Lawrence Kirshenbaum, President
Larry W. Kershenbaum
Gravity Pilot, Inc.
By: /s/ LEONARD TAMBASCO Date:
- ---------------------------------
Leonard Tambasco, President
<PAGE> 11
SCHEDULE 1
<TABLE>
<CAPTION>
Amount Aircraft Model Aircraft
- ------ -------------- --------
Number Serial Number
- ------ -------------
<S> <C> <C>
1 Cessna Caravan 208B N9347B
20bb0050
1 Cessna 206
N9262X P206-0102
</TABLE>
<PAGE> 12
SCHEDULE 2(c)
Payments to Gravity Pilot Engine Reserve Account shall be made to:
Joda Partnership
14323 South Outer Forty Road
Suite 120 South
Town & Country, MO 63017
<PAGE> 1
Exhibit 21.1
1. A1 Internet Services, Inc. (formerly ComputerEase, LLC), a Maryland
corporation.
2. Gravity pilot Air, Inc., a Delaware corporation.
3. NetWorld of Ohio, Inc., an Ohio corporation.
4. Virtual Information Express, Inc., a Maryland corporation.
