<PAGE>
As filed with the Securities and Exchange Commission on May 9, 2000
Registration No. 333-
==========================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ENTREPORT CORPORATION
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 7379 65-0703923
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
10455 SORRENTO VALLEY ROAD, SUITE 204
SAN DIEGO, CALIFORNIA 92121
858-643-5100
(Address and telephone number of principal executive offices
and principal place of business)
--------------------------------------
WILLIAM A. SHUE
ENTREPORT CORPORATION
10455 SORRENTO VALLEY ROAD, SUITE 204
SAN DIEGO, CALIFORNIA 92121
858-643-5100
(Name, address and telephone number of agent for service)
---------------------------
COPIES TO:
DANIEL K. DONAHUE, ESQ.
OPPENHEIMER WOLFF & DONNELLY LLP
500 NEWPORT CENTER DRIVE, SUITE 700
NEWPORT BEACH, CA 92660
(949) 719-6000
---------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
----------------------------
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
----------------------------------------------------
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
=============================== ======================== ====================== ===================== =================
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED PROPOSED
SECURITIES AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER SHARE (1) OFFERING PRICE REGISTRATION FEE
- ------------------------------- ------------------------ ---------------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 6,091,114 Shares $4.44 $27,044,546 $7,139.62
=============================== ======================== ====================== ===================== =================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
based upon the last sale of the Registrant's common stock on May 8, 2000, as
reported in the over-the-counter market.
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
6,091,114 Shares
ENTREPORT
CORPORATION
Common Stock
This prospectus relates to the offer and sale of 5,841,114 shares of
our common stock by the selling stockholders identified in this prospectus and
our offer and sale of up to 250,000 shares of common stock. The selling
stockholders will determine when they will sell their shares, and in all cases,
will sell their shares at the current market price or at negotiated prices at
the time of the sale. Although we have agreed to pay the expenses related to the
registration of the shares being offered, we will not receive any proceeds from
the sale of the shares by the selling stockholders.
Our common stock is currently traded on the OTC Bulletin Board under
the symbol "ERTE." We have applied to list our common stock on the NASDAQ
Smallcap Stock Market. On May 8, 2000, the last reported sale price of the
common stock on the OTC Bulletin Board was $4.44 per share.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT CERTAIN
FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is ____________, 2000
i
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C> <C> <C>
Summary...........................................1 Principal Stockholders...........................22
Risk Factors......................................4 Description of Securities........................23
Market for Common Equity and Related Legal Matters....................................23
Stockholder Matters.............................7
Experts..........................................24
Selling Stockholders..............................8
Changes in and Disagreements with Accountants....25
Management's Discussion and Analysis or
Plan of Operation..............................11 Available Information............................25
Business.........................................12 Index to Financial Statements....................26
Management.......................................18
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER DESCRIBED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
UNDER THIS PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF OR SINCE THE DATE
OF ANY DOCUMENTS INCORPORATED HEREIN BY REFERENCE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES, OR AN OFFER OR SOLICITATION IN
ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN EACH STATE.
ii
<PAGE>
SUMMARY
YOU SHOULD READ THIS SUMMARY IN CONJUNCTION WITH THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS FORMS OF FORWARD-LOOKING STATEMENTS. WHEN USED IN THIS
PROSPECTUS, THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "ESTIMATE" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS, WHICH ARE
IDENTIFIED AND DESCRIBED IN THE "RISK FACTORS" SECTION, BELOW. SHOULD ONE OR
MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING
ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY FROM THOSE ANTICIPATED,
ESTIMATED, OR PROJECTED AND THE VARIATIONS MAY BE MATERIAL. WE CAUTION YOU NOT
TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, ALL OF WHICH
SPEAK ONLY AS OF THE DATE MADE.
OUR COMPANY
GENERAL. We provide internet sites enabling various Internet
communities to access industry specific information, training and goods and
services. Each industry or community will have its own dedicated Internet site,
or Web portal, where members may access content through links provided by
various content providers. For example, our initial Web portal, located at
www.isucceed.com, is dedicated to the approximately 1,000,000 residential real
estate agents located in the United States and Canada. We have entered into
agreements with over 150 of the top real estate agents, speakers and trainers in
North America who have agreed to post content and training on the Internet at
our real estate Web portal at very low cost to us. We launched our real estate
Web portal on April 25, 2000.
OUR PRODUCTS AND SERVICES. Each of our portals are intended to provide
rich content to specific industry groups, including a broad array of resources
and services such as:
o both live and recorded training o search engines
o e-mail o on-line shopping
o forums o chat rooms
Some resources and services such as e-mail, forums, search engines, shopping and
training will be common to all portals. However, each portal will also contain
resources and services tailored to the needs and interests of the specific
industry group for that portal. By adopting this approach, we believe that each
portal will be of more utility to its targeted users than are the majority of
current portals which seek to attract the public at large.
OUR REVENUE MODEL. We intend to generate revenue through:
o membership fees charged to subscribers to our Web portals
o advertising income from third party advertisers at our Web
portals
o percentage interests in the income derived by third parties who
provide seminars, training and speeches at our Web portals
o commissions earned on the sale of products and services at our
Web store
OUR MARKET. Our market includes those groups of professionals,
independent contractors, sales people and others that are large and cohesive
enough to represent a community of business people with similar business goals
and needs. These industry groups include nationwide members of industry
segments, such as the approximately 1,000,000 real estate agents in North
America, or the employees and agents of large national and international sales
organizations. All of these industry segments currently spend significant
amounts of money on training, information and other goods and services intended
to fulfill or further their business needs and goals.
-1-
<PAGE>
Our business plan is based on management's collective experience that
the members of many industry segments are currently underserved in terms of
training and information relating to their industry and job functions. We
believe that the primary problem facing industry segments in need of training
and content is the ability to access the available training and content in a
timely and cost effective basis. Training and content has been traditionally
disseminated by way of live sessions and seminars and through the distribution
of books, audio and video tapes. However, these traditional methods typically
involve relatively high costs to the recipients and fail to ensure the
distribution of information on a timely basis.
Our internal research and analysis suggests that the members of many
industry segments are willing to pay for a service that can deliver meaningful
training and content on a timely and cost effective basis. We believe that the
need within these industry segments and organizations for timely and cost
effective training and content presents a significant market opportunity for
EntrePort. We also believe that the training and information provided by our Web
portals will enhance the skills of the subscribers and increase their profit
potential.
OUR SOLUTION. We intend to address the need for business training and
information through the consolidation of proprietary training and content in Web
portals within industry segments. The Internet offers the opportunity to provide
certain targeted industry segments with training and information that is
broader, more current and more accessible than previously available, all at a
lower cost to the recipient. By consolidating content and presenting it in Web
portals, we will be able to offer our customers current training and information
that is accessible by them 24 hours a day, seven days a week for a relatively
low monthly membership fee.
OUR STRATEGY. Our objective is to be the premier producer of Web
portals directed at industry specific audiences. We believe that we have the
ability to offer a financial model unlike the majority of other e-commerce
companies. The key to our strategy is our proposed strategic alliances with
industry marketing experts. Many marketing experts derive their revenue from the
sale of proprietary marketing products, typically books, audio and video tapes.
To this end, marketers typically sponsor, at their expense, seminars and other
means of paid advertising for purposes of reaching their audience.
We will offer these marketers the opportunity to post content, either
by way of text, audio or video tape, and to sponsor seminars at our portals at
no cost to them. Additionally, we will allow the marketers the opportunity to
offer their proprietary products for sale at our Web store. At the end of each
content posting or training segment, the marketers' products will be showcased
and members will be directed to our Web store where the products will be
available for purchase. We do not intend to warehouse the products but will take
orders, process credit cards and pass along the order to the respective provider
for shipment. We intend to charge the marketer a commission, exclusive of
shipping and handling charges, which we believe to be significantly higher than
commissions typically received by on-line distributors. To date, we have signed
agreements with over 150 of the top real estate agents, speakers and trainers in
North America who have agreed to provide us with commissions on all sales of
their products through our Web store.
In addition to content, we believe that our industry marketing experts
will provide access to significant numbers of subscribers at little or no cost
to us. We expect that the marketing experts that post content and sponsor or
participate in seminars will bring to the portal the same marketing audience
they have been selling to for years. Our primary marketing objective will be to
bring content to the public via live seminars thereby capitalizing on each
marketer's experience and ability to sign up a predictable amount of members at
the end of each seminar.
Our executive offices are located at 10455 Sorrento Valley Road, Suite
204, San Diego, California 92121. Our telephone number is (858) 643-5100. Our
Internet address is www.entreport.com. Information contained at our Web site
shall not be deemed to be a part of this prospectus.
-2-
<PAGE>
THE OFFERING
This offering relates to the offer and sale of 5,841,114 shares of our
common stock by the selling stockholders identified in this prospectus. The
selling stockholders will determine when they will sell their shares, and in all
cases, will sell their shares at the current market price or at negotiated
prices at the time of the sale. Although we have agreed to pay the expenses
related to the registration of the shares being offered, we will not receive any
proceeds from the sale of the shares by the selling stockholders.
We are offering for sale up to 250,000 shares of our common stock.
While we may sell some or all of the 250,000 shares for cash, it is our
intention to issue the 250,000 shares for noncash consideration, including
services rendered. We have no plans or arrangements at this time to issue any of
the 250,000 common shares and we do not intend to issue any of the 250,000
common shares for noncash consideration except to non-affiliates in arms' length
transactions. In the event we issue any of the 250,000 common shares for cash,
we expect to do so at prevailing market prices.
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below has been derived from
our financial statements. You should read this information in conjunction with
the financial statements and notes thereto, included elsewhere in this
memorandum.
<TABLE>
STATEMENT OF OPERATIONS DATA:
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Net revenue............................ $ 11,911 $ -0-
Net loss............................... (1,891,812) (800)
BALANCE SHEET DATA:
December 31, 1999 December 31, 1998
----------------- -----------------
Cash and cash equivalents.............. $ 1,458,139 --
Working capital ....................... 1,185,869 --
Total assets........................... 2,433,618 --
Total liabilities...................... 477,667 --
Total stockholders' equity............. 1,955,951 --
</TABLE>
-3-
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus before investing in our common stock. Our
business and results of operations could be seriously harmed by any of the
following risks. The trading price of our common stock could decline due to any
of these risks, and you may lose part or all of your investment.
WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE NO SIGNIFICANT OPERATING
HISTORY. We were founded in 1996 and began our current Internet-based business
of developing Web portals offering general information, communication tools,
training and other goods and services to members of certain industry specific
Internet communities in March 1999. As of the date of this prospectus, we have
not completed the development of any of our proposed Web portals and have not
had any meaningful revenue producing operations on which you can evaluate our
potential for future success. Our activities to date have included the market
analysis for and development of our initial Web portals.
As a new company, we are subject to all risks, expenses, and
uncertainties frequently encountered by companies in the new and rapidly
evolving markets for Internet-related products and services. Any unanticipated
expenses, problems, or technical difficulties may result in material delays both
in the completion of our Web portals and in offering our services to the market.
WE HAVE GENERATED VERY LIMITED REVENUES. From our inception in October
1996 to December 31, 1999, we generated revenues of only $11,911 and incurred a
cumulative loss of $1,897,637. We expect to continue incurring operating losses
until we are able to derive meaningful revenues from our Web portals.
WE HAVE LIMITED SOURCES OF FINANCING AND WILL REQUIRE ADDITIONAL
CAPITAL TO SUPPORT OUR GROWTH. We had $1,185,869 of working capital as of
December 31, 1999. In February and March 2000, we conducted a private placement
of our common shares for the net proceeds of $6.4 million. While we believe that
our present working capital is sufficient to fulfill our needs through December
31, 2000, we believe that we will require significant additional capital in
order to fund the development and launch of our future Web portals. If we are
unable to obtain additional financing in sufficient amounts or on acceptable
terms, our operating results and prospects could be adversely affected.
OUR BUSINESS MODEL IS NEW AND HAS NOT BEEN PROVEN BY US OR ANYONE ELSE.
We have not commenced commercial operations based on our business model and, to
our knowledge, no other business has engaged in operations primarily devoted to
offering information, communication tools, training and other goods and services
to members of industry specific Internet communities. Although we believe that
the uniqueness of our business model offers advantages, it is untried and
unproven so we have no assurances of consumer acceptance or market success.
While there are certain businesses engaged primarily in the business of
developing communities of personalized web sites and portals, these businesses
are not as target specific as we are, thus their success may not be an indicator
of our potential success.
BECAUSE WE HAVE FEW PROPRIETARY RIGHTS, OTHERS CAN PROVIDE PRODUCTS AND
SERVICES SUBSTANTIALLY EQUIVALENT TO OURS. We hold no patents. We believe that
most of the technology used by us in the design and implementation of our Web
portals is generally known and available to others. Consequently, others can
design and implement Web portals substantially equivalent to ours. We rely on a
combination of confidentiality agreements and trade secret law to protect our
confidential information. Additionally, we restrict access to confidential
information on a "need to know" basis. However, there can be no assurance that
we will be able to maintain the confidentiality of our proprietary information.
If our trademark or other proprietary rights are violated, or if a third party
claims that we violate their trademark or other proprietary rights, we may be
required to engage in litigation. Proprietary rights litigation tends to be
costly and time consuming. Bringing or defending claims related to our
proprietary rights may require us to redirect our human and monetary resources
to address those claims.
-4-
<PAGE>
OUR MARKETS ARE HIGHLY COMPETITIVE. The on-line commerce market is new,
rapidly evolving and intensely competitive. We expect competition to intensify
in the future because barriers to entry are minimal and current and new
competitors can launch new Web sites at a relatively low cost. To remain
competitive, we must continue to enhance and improve the responsiveness,
functionality and features of our on-line products and services. The Internet
and the on-line commerce industry are characterized by rapid technological
change, changes in user and customer requirements and preferences and frequent
product and service introductions. If competitors introduce products and
services embodying new technologies, then our existing Web portals may become
obsolete. Our future success will depend on our ability to enhance our existing
services and to develop new services that address the increasingly sophisticated
and varied needs of our prospective subscribers.
WE MAY BE SUBJECT TO CLAIMS AS A RESULT OF INFORMATION PUBLISHED ON,
POSTED ON OR ACCESSIBLE FROM OUR INTERNET SITES. We may be subject to claims of
defamation, negligence, copyright or trademark infringement (including
contributory infringement) or other claims relating to the information contained
on our Web portals, whether written by us or third parties. These types of
claims have been brought against on-line services in the past and can be costly
to defend regardless of the merit of the lawsuit. Although recent federal
legislation protects on-line services from some claims when the material is
written by third parties, this protection is limited. Furthermore, the law in
this area remains in flux and varies from state to state. While no claims have
been made against us to date, our business could be seriously harmed if one were
asserted.
OUR SUCCESS RELIES ON THE POPULARITY AND CONTINUED USE OF THE INTERNET
AS WAY OF CONDUCTING BUSINESS. Our success will depend in large part on
continued growth in, and the use of, the Internet. There are critical issues
concerning the commercial use of the Internet which remain unresolved. The
issues concerning the commercial use of the Internet which we expect to effect
the development of the market for our products and services include:
o security o ease of access
o reliability o quality of service
o cost
Demand and market acceptance of the Internet are subject to a high level of
uncertainty and are dependent on a number of factors, including the growth in
consumer access to and acceptance of new interactive technologies that
facilitate interactive communications between organizations and targeted
audiences. If the Internet fails to develop or develops more slowly than we
expect as a commercial or business medium, it will adversely affect our
business.
OUR FUTURE E-COMMERCE OPERATING RESULTS ARE UNPREDICTABLE. Our revenues
and operating results may fluctuate significantly from quarter to quarter due to
a number of factors, not all of which are in our control. These factors include:
o our ability to attract and retain new members and maintain
customer satisfaction;
o new Web sites, services and products introduced by us or by our
competitors;
o price competition;
o decreases in the level of growth, use of, or consumer acceptance
of, the Internet and other on-line services for the purchase of
products and services;
o our ability to upgrade and develop our products, services systems
and infrastructure;
o traffic levels on our Web sites and our ability to convert that
traffic into subscribers;
o technical difficulties or system downtime affecting the Internet
or on-line services generally, or the operation of our Web sites;
and
o government regulations related to use of the Internet for
commerce or sales and distribution of products and services.
-5-
<PAGE>
WE MAY NOT BE ABLE TO DELIVER VARIOUS SERVICES IF THIRD PARTIES FAIL TO
PROVIDE RELIABLE SOFTWARE, SYSTEMS AND RELATED SERVICES. We are dependent on
third parties for software, systems and related services. Several of the third
parties that provide software and services to us have a limited operating
history, have relatively immature technology and are themselves dependent on
reliable delivery of services from others. As a result, our ability to deliver
various services to our users may be adversely affected by the failure of these
third parties to provide reliable software systems and related services.
WE ARE DEPENDENT UPON OUR KEY PERSONNEL. Our performance is
substantially dependent on the continued services and on the performance of our
senior management and other key personnel, particularly David D'Arcangelo and
William Shue. We currently have three year employment agreements in place with
Messrs. D'Arcangelo and Shue. Additionally, we plan to obtain "key person" life
insurance for our key personnel, however, at this time, no such policies are in
effect. Our performance will also depend upon our ability to retain and motivate
other officers and key employees. The loss of the services of any of our
executive officers or other key employees could have a material adverse effect
on our business, prospects, financial condition and results of operations. Our
future success also depends on our ability to identify, attract, hire, train,
retain and motivate other highly skilled technical, managerial, merchandising,
marketing and customer service personnel. Competition for such personnel is
intense, and there can be no assurance that we will be able to successfully
attract, assimilate or retain sufficiently qualified personnel. The failure to
retain and attract the necessary technical, managerial, merchandising, marketing
and customer service personnel could have a material adverse effect on our
business, prospects, financial condition and results of operations.
CONTROL BY MANAGEMENT MAY LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME
OF DIRECTOR ELECTIONS AND OTHER TRANSITIONS REQUIRING STOCKHOLDER APPROVAL.
Because our present directors and executive officers beneficially own
approximately 38.2% of the outstanding common stock, management will be able to
exercise significant influence over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions, and may have veto power over any stockholder action or approval
requiring a majority vote.
NO DIVIDENDS. We have not paid any cash dividends to date and do not
expect to pay dividends for the foreseeable future. We intend to retain
earnings, if any, as necessary to finance the operation and expansion of our
business.
THERE IS NO ACTIVE TRADING MARKET FOR OUR SHARES. Our common stock is
traded on the OTC Bulletin Board under the symbol "ERTE." On May 8, 2000, the
last reported sale price of the common stock on the OTC Bulletin Board was $4.44
per share. The range of last sale prices of our stock over the previous 52 weeks
included a high and low of $10.375 and $1.125, respectively. However, we
consider our common stock to be "thinly traded" and any last reported sale
prices may not be a true market-based valuation of our common stock.
WE HAVE NO ASSURANCES THAT WE WILL QUALIFY FOR NASDAQ LISTING. We have
applied for a listing of our common stock on the NASDAQ Smallcap Stock Market.
However, to qualify for NASDAQ listing, we will need $4,000,000 in net tangible
assets plus additional tangible assets of approximately the amount of our
projected cumulative negative cash flow until such time as we operate
profitably. Additionally, the NASDAQ Smallcap Stock Market has certain
subjective criteria for listing applications. Even if we are successful in
meeting the capital requirements, there can be no assurance that the NASDAQ will
list our common stock on the NASDAQ Smallcap Stock Market.
FORWARD-LOOKING STATEMENTS. This prospectus contains forms of
forward-looking statements that are based on our beliefs as well as assumptions
made by and from information currently available to us. When used in this
Prospectus, the words "believe," "expect," "anticipate," "estimate," and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks, uncertainties and assumptions, which are
identified and described in this "Risk Factors" section. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated,
or projected. We caution potential investors not to place undue reliance on any
forward-looking statements, all of which speak only as of the date made.
-6-
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock trades on the OTC Bulletin Board under the symbol
"ERTE." We have applied to list our common stock on the NASDAQ Smallcap Stock
Market. The following table shows the high and low bid prices of our common
stock for the periods indicated since the inception of trading in February 1999
as reported by the OTC Bulletin Board. These quotations reflect inter-dealer
prices without retail markup, markdown or commission and may not necessarily
represent actual transactions.
HIGH LOW
1999
First quarter (from February 16, 1999) $ 2.25 $ .05
Second quarter 6.50 1.00
Third quarter 8.25 2.13
Fourth quarter 7.50 1.25
2000
First quarter 10.63 4.44
Second quarter (through May 8, 2000) 8.63 4.00
As of the date of this prospectus, we had approximately 149 record
holders of our common stock.
-7-
<PAGE>
SELLING STOCKHOLDERS
This prospectus relates to the offer and sale of 5,841,114 shares of
our common stock by the selling stockholders identified below. With the
exception of Tony Acone and Scott Lucas, none of the selling stockholders are or
have been affiliates of ours. Mr. Acone and Mr. Lucas have served on our board
of directors since November 1999 and April 2000, respectively. Prior to his
appointment to our board, Mr. Acone purchased 25,000 shares of common stock and
Mr. Lucas purchased 150,000 common shares in our private placement offerings.
The selling stockholders will determine when they will sell their shares, and in
all cases, will sell their shares at the current market price or at negotiated
prices at the time of the sale. Although we have agreed to pay the expenses
related to the registration of the shares being offered, we will not receive any
proceeds from the sale of the shares by the selling stockholders.
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of the date of this prospectus by
each selling stockholders:
<TABLE>
Shares Beneficially Owned
Prior to Offering
---------------------------------
<CAPTION>
Number of Number of Shares Beneficially Owned
Name Shares owned Shares offered After Offering(1)
- ------------------------------------- ------------- -------------- -------------------------
<S> <C> <C> <C>
ABS LLC 50,000 50,000 0
Acone, Tony(2) 175,000 25,000 150,000
Andrews, Calvin P. & Carrie M. 25,000 25,000 0
Bi Coastal Consulting Corp. 75,000 75,000 0
Blomquist, Rick 10,000 10,000 0
Blomquist, William G. 5,000 5,000 0
Bradford, John D. 13,000 13,000 0
Copeland, Alfred T. 5,000 5,000 0
Cutler, Frank 200,000 200,000 0
The Del Mar Consulting
Group, Inc. 500,000 133,334 366,666
Dunlap, Brad C. 1,000 1,000 0
Feshbach, Matthew L. 50,000 50,000 0
Furla, George 137,500 137,500 0
Furla, Leo G. & Angelica L. 12,500 12,500 0
Furla, Peter 25,000 25,000 0
Furla, Spero 25,000 25,000 0
Galanis, Themis G. 25,000 25,000 0
Gilford Financial Corp. 5,000 5,000 0
Jonathan & Nancy Glaser
Family Trust dtd. 12/16/98 25,000 25,000 0
Gray, Charles C. 20,000 20,000 0
Green, Robert 25,000 25,000 0
Gunther Family Trust 50,000 50,000 0
The Halo Group, LLC 47,500 47,500 0
Hardy, Thomas 15,000 15,000 0
N. Herrick Irrevocable
Securities Trust 50,000 50,000 0
Hixon, Barry C. 500 500 0
Santa Barbara Bank & Trust
Custodian fbo Jason F. Hughes
Roth IRA 2,500 2,500 0
Hughes, Jason F. 1,500 1,500 0
KAMC Corporation 131,350 131,350 0
IGSB-Karan I, LLC 486,080 486,080 0
-8-
<PAGE>
Santa Barbara Bank & Trust
Custodian fbo Steven L.
Karan Roth IRA 9,920 9,920 0
Arthur G. Kaiser Profit Sharing
Trust dtd. 3/8/74 50,000 50,000 0
Kearns, Donald B. & Jean K.
Wickersham 15,000 15,000 0
Kieft, Gerald N. 1,000 1,000 0
Prudential Securities C/F
Elizabeth C. Kennedy IRA 20,000 20,000 0
Knowles Family Trust
dtd. 4/3/96 50,000 50,000 0
Kossoff, Jerome & Maxine 50,000 50,000 0
Liberty View Fund LLC 67,500 67,500 0
Liberty View Funds, L.P. 382,500 382,500 0
The Licklider Living Trust
dtd. 5/2/86 125,000 125,000 0
Marchese, Frank 12,500 12,500 0
Miller, Michael 25,000 25,000 0
Millennium Capital Corporation 25,000 25,000 0
Karen Misasi-Humphreys
Roth IRA 5,000 5,000 0
Bear Stearns Securities Corp.
C/F Steven Mizel Roth IRA 50,000 50,000 0
Montgomery, J.D. 5,000 5,000 0
Pappas, Nicholas C. 12,500 12,500 0
Reichl, George 12,500 12,500 0
Remes, Peter C. 12,500 12,500 0
Richter, Roger 25,000 25,000 0
Romer, Russell & Linda L. 12,500 12,500 0
Roth Capital Partners(3) 377,500 377,500 0
Rothman, Henry 25,000 25,000 0
Schachner, Mark 50,000 50,000 0
Schmid, Jason T. 2,500 2,500 0
Schmid, Jeffrey L. 15,000 15,000 0
Schmid, Lewis R. 22,500 22,500 0
Shapiro, Craig 25,000 25,000 0
Coleman Fine Arts Ltd.
Defined Benefit Pension Plan 25,000 25,000 0
St. Claire Capital
Management, Inc. 12,500 12,500 0
Teal Fund, L.P. 125,000 125,000 0
Tucillo, John 7,000 7,000 0
Walshe, Joseph A. 20,000 20,000 0
WH Partners 75,000 75,000 0
Willey, Frank P. 25,000 25,000 0
Stuart Zimmerman Revocable
Trust dtd. 3/26/97 25,000 25,000 0
Bridge Ventures, Inc. 25,000 25,000 0
Posner, Linda 25,000 25,000 0
Jagid, Bruce 12,500 12,500 0
Lucas, Scott G.(4) 170,000 150,000 20,000
Lava Investments Limited 250,000 250,000 0
Emmett, Randall 50,000 50,000 0
Trencher, Christopher 10,000 10,000 0
Copeland, Alfred T. 100,000 100,000 0
Wachtel, William B. 50,000 50,000 0
-9-
<PAGE>
Gail A. Doyle Revocable
Trust dtd. 12/12/94 12,500 12,500 0
Ronald C. Erbetta & Sandra F.
Erbetta Family Trust
dtd. 3/2/88 12,500 12,500 0
Merlino, Frank A. 12,500 12,500 0
Anthony Erbetta Declaration
of Trust 50,000 50,000 0
London, Robert S. 250,000 250,000 0
Primo Capital Growth Fund 75,000 75,000 0
Rosebud Capital Growth
Fund Ltd. 75,000 75,000 0
Stanley Hollander 39,000 39,000 0
John Muradian & Stacey
Muradian, JTWROS 20,000 20,000 0
E&M Family Living Trust
dtd. 11/28/95 12,500 12,500 0
Glenn Lyons and Nancy Gerdt
Trust dtd. 5/27/92 12,500 12,500 0
DiManno, Michael A. 7,500 7,500 0
Jensen, C. James 50,000 50,000 0
Matulich, Jay and Kathy 7,500 7,500 0
Gabbert, Roger D. 17,000 17,000 0
Carpenter, Richard S. 10,000 10,000 0
Lamberson, Jeff 10,000 10,000 0
Hawkins, Michael W. 12,500 12,500 0
Beller, Gary L. 12,500 12,500 0
Wolfley, D. Dennis 2,500 2,500 0
Rothchild, Joseph B. & Sarah J. 50,000 50,000 0
Sandman, Sheila 11,000 11,000 0
Goto, Eric K. 10,000 10,000 0
Serra, Jose E. & Cecilia P. 25,000 25,000 0
Koretz, Allan R. 12,500 12,500 0
Copeland, Thomas G. 25,000 25,000 0
Copeland, Thomas G. 50,000 50,000 0
Knowles, Michael A 25,000 25,000 0
Altavilla, Jr., Anthony D. 15,000 15,000 0
Altavilla, Jr., Anthony D. 10,000 10,000 0
McCarthy, Thomas G. 12,500 12,500 0
Frankson, Carl 10,000 10,000 0
Terry Paranych Group, Ltd. 12,500 12,500 0
Reichl, George 15,000 15,000 0
Reichl, George 27,500 27,500 0
Trencher, Christopher 25,000 25,000 0
Kauser Partners 100,000 100,000 0
Anderson, Carl A. 5,000 5,000 0
Gefsky, H. Arnold 5,000 5,000 0
Intrepid Securities Ltd. 237,430 237,430 0
Jacobs, Alan 7,500 7,500 0
Jacobs, Michael 7,500 7,500 0
Ingleby, Raymond S. 200,000 200,000 0
Fillet, Stephen W. 12,000 12,000 0
Trinity American Corporation 50,000 50,000 0
Sloan, Paul 25,000 25,000 0
Howe, H. Page 5,000 5,000 0
- ------------
</TABLE>
(1) Assumes all of the offered shares are sold.
(2) Includes options granted to Mr. Acone to purchase 150,000 shares of common
stock.
(3) Represents shares issuable under a presently exercisable common stock
purchase warrant.
(4) Includes options granted to Mr. Lucas to purchase 20,000 shares of common
stock.
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
We are a development stage company engaged in developing Web portals on
the Internet for purposes of offering information, communication tools and
training to members of certain industry specific Internet communities. To date,
we have not completed the development of any of our proposed Web portals or
commenced material revenue producing operations. We launched our initial Web
portal devoted to residential real estate agents in April 2000. Our activities
to date have included the market analysis for and development of our initial Web
portals. In early 1999, we conducted in-house beta testing of several industry
specific Web portals, for which we received $11,911 in revenue during the year
ended December 31, 1999.
We intend to generate revenue through:
o commissions earned on the sale of products and services at our
Web store
o membership fees charged to subscribers to our Web portals
o advertising income from third party advertisers at our Web
portals
o percentage interests in the income derived by third parties who
provide seminars, training and speeches at our Web portals
We have financed our activities to date through the sale of securities.
From March through May 1999, we conducted the private placement sale of
convertible notes for gross proceeds of $695,000. The principal amount of the
notes were convertible into shares of common stock at the rate of $2.00 to $3.00
per share. In June 1999, all $695,000 in principal was converted into a total of
267,500 shares of common stock. During the period August to January 2000, we
conducted the private placement sale of 1,524,430 shares of common stock at
$2.00 per share for gross proceeds of $3,048,280. During February and March
2000, we conducted the private placement sale of 3,525,000 shares of common
stock at $2.00 per share for the gross proceeds of $7,050,000.
As of December 31, 1999, we had working capital of $1,185,869. Since
that date, we received approximately $6.4 million in additional capital which
represented the net proceeds from our sale of common stock during the three
months ended March 31, 2000.
Our plan of operations over the next 12 months includes the expected
completion of our initial Web portal devoted to real estate and the development
of other industry specific Web portals. We believe that our working capital as
of the date of this prospectus will be sufficient to satisfy our estimated
working capital requirements through the end of the current fiscal year ending
December 31, 2000. However, we believe that we will need significant additional
working capital during fiscal 2001. There can be no assurance that we will be
able to obtain sufficient additional capital to fund our working capital
requirements in a timely manner. As of the date of this prospectus, we employ 33
people on a full-time basis. We intend to employ an additional 20 people over
the remainder of fiscal 2000.
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on
our beliefs as well as assumptions and information currently available to us.
When used in this prospectus, the words "believe," "expect," "anticipate,"
"estimate" and similar expressions are intended to identify forward-looking
statements. These statements are subject to those risks, uncertainties and
assumptions included in the section "Risk Factors. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated,
or projected. We caution you not to place undue reliance on any forward-looking
statements, all of which speak only as of the date of this prospectus.
-11-
<PAGE>
BUSINESS
GENERAL
We are a development stage company involved in consolidating
proprietary training content in Web portals within industry segments through
what we believe to be a unique low-cost content and membership acquisition
model. Our initial Web portal, located at www.isucceed.com, is dedicated to the
approximately 1,000,000 residential real estate agents located in the United
States and Canada. As of the date of this prospectus, we have entered into
agreements with over 150 of the top real estate agents, speakers and trainers in
North America who have agreed to post their content and training on the Internet
at our real estate Web portal at very low cost to us. We launched our real
estate Web portal on April 25, 2000.
Each of our portals are intended to provide rich content to specific
industry groups, including a broad array of resources and services such as:
o both live and recorded training o search engines
o e-mail o on-line shopping
o forum o chat rooms
Some resources and services such as e-mail, forums, search engines,
shopping and training will be common to all portals. However, each portal will
also contain resources and services tailored to the needs and interests of the
specific industry group for that portal. By adopting this approach, we believe
that each portal will be of more utility to its targeted users than are the
majority of current portals which seek to attract the public at large.
OUR MARKET
Our market includes those groups of professionals, independent
contractors, sales people and others that are large and cohesive enough to
represent a community of business people with similar business goals and needs.
These groups include nationwide members of industry segments, such as the
approximately 1,000,000 real estate agents in North America, or the employees
and agents of large national and international sales organizations. All of these
industry segments currently spend significant amounts of money on training,
information and other goods and services intended to fulfill or further their
business needs and goals.
Our business plan is based on management's collective experience that
the members of many industry segments are currently underserved in terms of
training and information relating to their industry and job functions. We
believe that the primary problem facing industry segments in need of training
and content is the ability to access the available training and content on a
timely and cost effective basis. Training and content has been traditionally
disseminated by way of live sessions and seminars and through the distribution
of books, audio and video tapes. However, these traditional methods typically
involve relatively high costs to the recipients and fail to ensure the
distribution of information on a timely basis.
Our internal research and analysis suggests that the members of many
industry segments are willing to pay for a service that can deliver meaningful
training and content on a timely and cost effective basis. We believe that the
need within these industry segments and organizations for timely and cost
effective training and content presents a significant market opportunity for
EntrePort. We also believe that the training and information provided by our Web
portals will enhance the skills of the subscribers and increase their profit
potential.
OUR SOLUTION
Our business model is designed to take advantage of the unique
opportunities offered by the Internet. The increasing use of the Internet as a
commercial medium has been accompanied by a diversification in the type of
commerce that is conducted on the Internet and a proliferation in the types of
products and services available on the Internet. The Internet has created a
dynamic and particularly attractive medium for business, empowering businesses
and consumers to distribute and gather more services and information than is
feasible with traditional commerce systems, to communicate and shop in ways that
can be more convenient for them and to interact with each other in many new
ways. As the Internet has become more accessible and widely used for
transactions, it has emerged as a primary business channel alongside the
telephone, paper-based communication and face-to-face interaction.
-12-
<PAGE>
We intend to address the need for business training and information
through the consolidation of proprietary training and content in Web portals
within industry segments. The Internet offers the opportunity to provide certain
targeted industry segments with training and information that is broader, more
current and more accessible than has previously been available, all at a lower
cost to the recipient. By consolidating content and presenting it in Web
portals, we will be able to offer our customers current training and information
that is accessible by them 24 hours a day, seven days a week for a relatively
low monthly membership fee.
OUR STRATEGY
Our objective is to be the premier producer of Web portals directed at
industry specific audiences. To this end, we intend to position ourselves as a
membership driven marketing model capable of generating multiple revenue streams
while, at the same time, generating product/services and members at no or little
cost to the company. In this respect, we believe that we have the ability to
offer a financial model unlike the majority of other e-commerce companies. The
key to our strategy is our proposed strategic alliances with industry marketing
experts. Many marketing experts derive their revenue from the sale of
proprietary marketing products, typically books, audio and video tapes.
Marketers, therefore, typically sponsor, at their expense, seminars and other
means of paid advertising for purposes of reaching their audience.
We will offer these marketers the opportunity to post content, either
by way of text, audio or video tape, and sponsor seminars at our portals at no
cost to them. Additionally, we will allow the marketers the opportunity to offer
their proprietary products for sale at our Web store. At the end of each content
posting or training segment, the marketers' products will be showcased and
members will be directed to our Web store where the products will be available
for purchase. We do not intend to warehouse the products but will take orders,
process credit cards and pass along the order to the respective provider for
shipments. We intend to charge the marketer a commission, exclusive of shipping
and handling charges, which we believe to be significantly higher than
commissions typically received by on-line distributors. To date, we have signed
agreements with over 150 of the top real estate agents, speakers and trainers in
North America who have agreed to provide us with commissions on all sales of
their products through our Web store.
In addition to content, we believe that our industry marketing experts
will provide access to significant numbers of portal subscribers at little or no
cost to us. We expect that the marketing experts that post content and sponsor
or participate in seminars will bring to the portal the same marketing audience
they have been selling to for years. Our primary marketing objective will be to
bring content to the public via live seminars thereby capitalizing on each
marketer's experience and ability to sign up a predictable amount of members at
the end of each seminar.
In summary, we believe that our business model offers the following
potential benefits and advantages:
o Access to leading edge content from recognized marketing experts
at no our little cost to us
o Access to the clients and followers of the marketing experts,
thereby creating an immediate significant base of potential
paying subscribers at little or no cost to us
o Allowing members and visitors to develop a relationship with the
marketing experts, thereby increasing loyalty, retention and
product sales
o Creation of a deep content library deliverable on demand to
members
-13-
<PAGE>
OUR PRODUCTS AND SERVICE
We intend to develop Web portals that will offer general information,
communication tools, training and other goods and services to members of certain
industry specific Internet communities. These Web portals will be accessible by
the general public, however, only established subscribers or registered visitors
will be permitted to use our portals as the case may be.
Our Web portals will be accessible by a minimum hardware configuration
consisting of a 486 personal computer with Windows `95 or greater, with 16
megabytes of RAM, 20 megabytes of free hard disk space, a 14,400 modem and an
Internet connection. All services will be provided in a Windows-based menu
driven format with "point and click" interactivity. Persons who wish to use our
Web portals will be able to subscribe over the Internet by completing an
application available at the Web portal, opening an account and making a deposit
with us via credit card. In May 1999, we were approved as a credit card merchant
by Imperial Bank.
Our portals will provide rich content to specific industry groups. Each
portal will offer a broad array of resources and services such as e-mail,
forums, search engines, and on-line shopping as well as both live and recorded
training. Some resources and services such as e-mail, forums, search engines,
shopping and training will be common to all portals. However, each portal will
also contain resources and services tailored to the needs and interests of the
particular industry group for that portal. By adopting this approach, we believe
that each portal will be of more utility to its targeted users than are the
majority of current portals which seek to attract the public at large.
OUR REAL ESTATE PORTAL. Our first Web portal is located at
www.isucceed.com and is aimed at real estate professionals in the United States
and Canada. According to the National Association of Realtors there are over
720,000 realtors in the United States alone. The U.S. Census Bureau estimates
that in 1998, this industry employed 1,231,471 people and generated over $141
billion in revenue.
We believe, based on our internal marketing analysis and discussions
with senior executives in the real estate industry, that the real estate
industry is looking to increase operating efficiencies and profits through the
deployment of computer/Internet technologies, particularly in the area of sales
training. We will offer membership based on-line training for real estate
professionals.
Our real estate portal includes the following content:
o listing for profit
o profiting on "for sale by owners"
o target marketing systems
o pre-list packaging
o virtual home tours
o pricing strategies
o agent referrals
o zero cost programs
o customer service
o referrals to home buyers
o continuing education
-14-
<PAGE>
FUTURE PORTAL POSSIBILITIES. We intend to replicate our initial portal
for additional industry specific groups large and cohesive enough to support an
Internet community.
We are currently working with a team of marketing experts whose job is
to develop additional portals, including the development of a database of
programming ideas and the retention of recognized industry talent to provide
content and members. Our goal is to become the leading on-line, industry
specific portal service.
MARKETING
As noted above, we intend to market our Web portals primarily through
proposed strategic alliances with industry marketing experts. We also intend to
market our products and services through a combination of on-line and off-line
advertising, including traditional industry print, targeted direct mail,
telemarketing (phone fax and e-mail) and through the visibility created by the
seminars hosted or sponsored by us.
We intend to use a direct sales force as well as alternative
distribution channels. Through the combination of a direct sales force and
alternative distribution channels, we believe we will be able to more rapidly
access markets and increase revenue-producing traffic on our portal network. To
implement our distribution strategy, we intend to develop an in-house direct
sales force to market our portal products and services directly to large
corporations in the target markets. In addition, the direct sales force will
target national and international accounts and target large audiences through an
aggressive seminar program.
As part of our distribution strategy, we are developing several
alternative distribution channels, including agents and resellers. Agents and
resellers will be independent individuals and organizations, respectively,
selling our portal services in exchange for revenue based commissions.
COMPETITION
The market for members, visitors and Internet advertising is new and
rapidly evolving, and competition for members, visitors and advertisers is
intense and is expected to increase significantly in the future. Barriers to
entry are relatively insubstantial. We believe that the principal competitive
factors for companies seeking to create communities on the Internet are critical
mass, functionality, brand recognition, member affinity and loyalty, broad
demographic focus and open access to visitors. Other companies who are primarily
focused on creating Web-based communities on the Internet are GeoCities,
Tripod/Lycos, Angelfire, Xoom and theglobe.com. We will likely also face
competition in the future from Web directories, search engines, software
archives, content sites, commercial on-line services, sites maintained by ISPs
and other entities that attempt to or establish communities on the Internet by
developing their own or purchasing one of our competitors. In addition, we could
face competition in the future from traditional media companies, a number of
which, including Disney, CBS and NBC, have recently made significant
acquisitions of or investments in Internet companies. Further, there can be no
assurance that our competitors and potential competitors will not develop
communities that are equal or superior to or that achieve greater market
acceptance than ours.
We also compete for visitors with many Internet content providers and
Internet service providers, including Web directories, search engines, shareware
archives, content sites, commercial on-line services and sites maintained by
ISPs, as well as thousands of Internet sites operated by individuals and
government and educational institutions. These competitors include free
information, search and content sites or services, such as AOL, CNET, CNN/Time
Warner, Excite, Infoseek, Lycos, Netscape, Microsoft and Yahoo!.
-15-
<PAGE>
We also compete with these companies, as well as traditional forms of
media such as newspapers, magazines, radio and television, for advertisers and
advertising revenue. We believe that the principal competitive factors in
attracting advertisers include the amount of traffic on our Web site, brand
recognition, customer service, the demographics of our members and viewers, or
ability to offer targeted audiences and the overall cost-effectiveness of the
advertising medium offered by us. We believe that the number of Internet
companies relying on Web-based advertising revenue will increase greatly in the
future. Accordingly, we will likely face increased competition, resulting
increased pricing pressures on our advertising rates which could in turn have a
material adverse effect on our business, results of operations and financial
condition.
Virtually all of our existing and potential competitors, including Web
directories and search engines and large traditional media companies, have
longer operating histories in the Web market, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than us. Such competitors are able to undertake more extensive
marketing campaigns for their brands and services, adopt more aggressive
advertising pricing policies and make more attractive offers to potential
employees, distribution partners, commerce companies, advertisers and third
party content providers. There can be no assurance that Internet content
providers and ISPs, including Web directories, search engines, shareware
archives, sites that offer professional editorial content, commercial on-line
services and sites maintained by ISPs will not be perceived by advertisers as
having more desirable Web sites for placement of advertisements. In addition,
many of our potential current advertising customers and strategic partners have
established collaborative relationships with certain of our competitors or
potential competitors, and other high-traffic Web sites. Accordingly, there can
be no assurance that we will be able to develop and grow our memberships,
traffic levels and advertiser customer base. There can also be no assurance that
we will be able to compete successfully against our current or future
competitors or that competition will not have a material adverse effect on our
business, results of operations and financial condition.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard our technology as propriety and attempt to protect it by
relying on trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. We
currently have no patents or patents pending and do not anticipate that patents
will become a significant part of our intellectual property in the foreseeable
future. We generally enter into confidentiality or license agreements with our
employees and consultants, and generally control access to and distribution of
our documentation and other proprietary information. Despite these precautions,
it may be possible for a third party to copy or otherwise obtain and use our
proprietary information without authorization or to develop similar technology
independently. We intend to pursue the registration of our service marks in the
United States and internationally, and have applied for the registration in the
United States for the service mark "EntrePort." Effective trademark, service
mark, copyright and trade secret protection may not be available in every
country in which our services are distributed or made available through the
Internet, and policing unauthorized use of our proprietary information will be
difficult.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any proprietary rights of ours or other companies within
this market. There can be no assurance that the steps taken by us will prevent
misappropriation or infringement of our proprietary information. Any such
infringement or misappropriation, should it occur, might have a material adverse
effect on our business results of operations and financial condition. In
addition, litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or to determine the validity and
scope of the proprietary rights of others. Such litigation might result in
substantial costs and diversion of resources and management attention and could
have a material adverse effect on our business, results of operations and
financial condition. Furthermore, there can be no assurance that our business
activities will not infringe upon the proprietary rights of others, or that
other parties will not assert infringement claims against us.
-16-
<PAGE>
TECHNOLOGICAL CAPABILITY AND SUPPORT
We have engaged Stellcom, a Web development company located in San
Diego, California, to build our Web portals. We have recently hired personnel to
internally manage and service the portals on a daily basis. We believe that this
strategy will be the most efficient and productive method of building our portal
network.
We intend to provide a high level of customer support to our customer
base. We intend to provide technical and customer service support via our
corporate e-mail, 24 hours a day, seven days a week. In addition to the support
channel, we intend to provide for instant messaging and support chat rooms. To
assist in providing quality and responsive support, we intend to develop or
acquire software programs that record, acknowledge, route, queue, and generate
reports on e-mail.
EMPLOYEES
As of the date of this prospectus, we employ 33 people on a full-time
basis and we intend to employ an additional 20 people over the remainder of the
fiscal year 2000. None of our employees are covered by an ongoing collective
bargaining agreement with us and we believe that our relationship with our
employees is good.
COMPANY LOCATION AND FACILITIES
Our executive offices are located in San Diego, California and consist
of 3,000 square feet of office space. We lease this space pursuant to a three
year lease expiring on March 31, 2002, at the rate of $3,345 per month. As of
the date of this Prospectus, we require an additional 20,000 square feet of
office space and are presently negotiating for leased space in the San Diego
County area at a rate ranging from approximately $13,000 to $15,000 per month.
We believe there is an adequate supply of suitable office space available for
lease on terms acceptable to us.
LITIGATION
We are not a party to any material litigation.
-17-
<PAGE>
MANAGEMENT
Set forth below are the directors and officers of EntrePort.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David J. D'Arcangelo 44 Chairman of the Board
William A. Shue 43 President, Chief Executive Officer, Chief Financial
Officer, Secretary and Director
Tony Acone 56 Director
Scott Lucas 40 Director
</TABLE>
Mr. D'Arcangelo has served as Chairman of our Board of Directors since
February 17, 1999. From February 17, 1999 to March 21, 1999, Mr. D'Arcangelo
also served as our President and Chief Executive Officer. From 1994 to 1999, Mr.
D'Arcangelo served as President of the D'Arcangelo Companies, a business
marketing and training consulting firm. Mr. D'Arcangelo's book, "Wealth Starts
at Home," published by McGraw-Hill, was released in 1997.
Mr. Shue has served as our President, Chief Executive Officer, Chief
Financial Officer, Secretary and as a director since April 17, 1999. From 1994
to 1999, Mr. Shue served as an independent consultant to the seminar production
industry. Mr. Shue was a co-founder of Caribiner International, Inc., a
NYSE-listed business communications company, and served as President of
Caribiner International from 1986 to 1993. Mr. Shue is a former CPA and has an
MBA in Finance from the University of Houston.
Mr. Acone has served as a director since November 1999. Mr. Acone was a
co-founder of Prime Ticket Sports Network and served as President of that
company from 1985 to 1989 and Assistant to the Chairman from 1989 to 1994, at
which time Prime Ticket was sold to Fox Sports Television Network. Mr. Acone has
been a private investor since 1994.
Mr. Lucas has served as a director since April 2000. Mr. Lucas has
served as the Chairman and Chief Executive Officer of YourPut.com, a private
information management company, since 1997. From 1995 to 1997, Mr. Lucas was
Chief Equity Officer for AIM Capital Management, Houston, Texas, where he held
senior fiduciary duties for 30 mutual funds containing nearly $90 billion in
assets. Prior to AIM, Mr. Lucas was Vice President at Goldman Sachs & Co., New
York, where he was responsible for marketing and strategy for Equity Derivatives
and Program Trading for the Western U.S. and Canada.
WEB PORTAL ADVISORY BOARDS
We intend to form advisory boards for each of our Web portals made up
of experts and leading representatives of the industry segment serviced by the
portal. Our initial advisory board dedicated to our real estate portal has been
organized and its initial meeting took place in September 1999. The real estate
advisory board is made up of 14 persons and includes top producing and highly
recognized real estate agents and influential corporate representatives from
real estate software companies, mortgage brokers and title companies.
-18-
<PAGE>
EXECUTIVE COMPENSATION
CASH COMPENSATION OF EXECUTIVE OFFICERS. The following table sets forth
the cash compensation paid to the Chief Executive Officer and to all other
executive officers for services rendered during the fiscal years ended December
31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ---------------------------
NAME AND POSITION YEAR SALARY BONUS OTHER ANNUAL RESTRICTED COMMON SHARES ALL
COMPENSATION STOCK UNDERLYING OTHER
AWARDS ($) OPTIONS GRANTED COMPEN
(# SHARES) -SATION
- --------------------------- ---- -------- ------- -------------- ---------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
David J. D'Arcangelo, 1999 $70,833 -0- -0- -0- 50,000 -0-
Chairman (1) 1998 $ 0 -0- -0- -0- -0- -0-
1997 $ 0 -0- -0- -0- -0- -0-
William A. Shue, President 1999 $62,500 -0- -0- -0- 300,000 -0-
and CEO(2) 1998 $ 0 -0- -0- -0- -0- -0-
1997 $ 0 -0- -0- -0- -0- -0-
</TABLE>
- ---------------
(1) Commencing March 17, 1999, EntrePort has paid Mr. D'Arcangelo a salary of
$100,000 per year.
(2) Commencing April 17, 1999, EntrePort has paid Mr. Shue a salary of $100,000
per year.
-19-
<PAGE>
<TABLE>
OPTION/SAR GRANTS IN 1999 FISCAL YEAR
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
NAME NUMBER OF % OF TOTAL OPTIONS/SARS EXERCISE OR EXPIRATION DATE
SECURITIES GRANTED TO EMPLOYEES IN BASE PRICE
UNDERLYING FISCAL YEAR ($/SH)
OPTIONS/SARS
GRANTED (#)
- ------------------------- --------------------- ------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
David J. D'Arcangelo 50,000 3% $1.00 April 1, 2004
William Shue 300,000 17% $1.00 April 1, 2004
</TABLE>
EMPLOYMENT AGREEMENTS. We have entered into employment agreements with
our Chairman of the Board of Directors, Mr. David D'Arcangelo, and our Chief
Executive Officer, Mr. William Shue. Pursuant to their agreements, Mr.
D'Arcangelo and Mr. Shue are required to devote their entire business time to
the affairs of the company. We pay both Mr. D'Arcangelo and Mr. Shue a salary of
$8,333.34 per month, however we are obligated to increase their salaries to the
market level, which in no event shall be less than $200,000 per year plus car
allowance, at such time as we have received sufficient capital, either by way of
additional investment or profits from operations, to warrant the increase in
salaries. Mr. D'Arcangelo's employment agreement expires on April 1, 2002 and
Mr. Shue's employment agreement expires on April 18, 2002. Both agreements are
subject to automatic one year extensions unless either party chooses not to
renew within 90 date of the expiration of the current term.
COMPENSATION OF DIRECTORS. All of our directors receive reimbursement
for out-of-pocket expenses for attending Board of Directors meetings. We intend
to appoint additional members to the Board of Directors, including outside or
non-officer members to the board. Any outside directors may receive an
attendance fee for each meeting of the Board of Directors. From time to time we
may engage certain members of the Board of Directors to perform services on
behalf of the Company and compensate such persons for the services which they
perform.
RELATED PARTY TRANSACTIONS
In connection with our organization in October 1996, we issued
5,000,000 common shares to our founder, Mr. Eric Littman, at a price of $.001
per share. In February 1999, we hired Mr. David D'Arcangelo, currently our
Chairman of the Board, to develop the Company's current Web business. At that
time, Mr. Littman canceled, for no consideration, 4,410,000 shares of common
stock and resigned from all positions with the company.
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS
The Florida General Corporation Law provides that corporations may
include a provision in their Articles of Incorporation relieving directors of
monetary liability for breach of their fiduciary duty as directors, provided
that such provision shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful payment
of a dividend or unlawful stock purchase or redemption, or (iv) for any
transaction from which the director derived an improper personal benefit. Our
Articles of Incorporation provide that directors are not liable to the Company
or its stockholders for monetary damages for breach of their fiduciary duty as
directors to the fullest extent permitted by Florida Law. In addition to the
foregoing, our Bylaws provide that we may indemnify directors, officers,
employees or agents to the fullest extent permitted by law and we have agreed to
provide such indemnification to each of our directors.
-20-
<PAGE>
The above provisions in EntrePort's Articles of Incorporation and
Bylaws and in the written indemnity agreements may have the effect of reducing
the likelihood of derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their fiduciary duty, even though such an action, if successful, might
otherwise have benefited us and our stockholders. However, we believe that the
foregoing provisions are necessary to attract and retain qualified persons as
directors.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of EntrePort
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable.
-21-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of the date of this prospectus by
(i) each person who is known to be the beneficial owner of more than five
percent (5%) of the issued and outstanding shares of common stock, (ii) each of
our directors and executive officers and (iii) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OWNED
- ------------------------------------ -------------------------- -----------------------
<S> <C> <C>
David J. D'Arcangleo (1)(2) 2,675,334 23.0%
William A. Shue (1)(3) 1,500,000 12.6%
Tony Acone (1)(4) 175,000 1.5%
Scott Lucas(1)(5) 170,000 1.5%
All officers and directors
as a group (6) 4,520,334 37.4%
</TABLE>
- ------------------------------------------
(1) Address is 10455 Sorrento Valley Road, Suite 204, San Diego, California
92121.
(2) Includes options granted to Mr. D'Arcangelo to purchase 50,000 shares of
common stock.
(3) Includes options granted to Mr. Shue to purchase 300,000 shares of common
stock.
(4) Includes options granted to Mr. Acone to purchase 150,000 shares of common
stock.
(5) Includes options granted to Mr. Lucas to purchase 20,000 shares of common
stock. Does not include options to purchase another 20,000 shares of common
stock that are subject to vesting.
(6) Includes options granted to officers and directors to purchase an aggregate
of 520,000 shares of common stock.
-22-
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
EntrePort is authorized to issue 50,000,000 shares of common stock,
$.001 par value, of which, as of the date of this prospectus, 11,581,113 shares
are issued and outstanding. As of the date of this prospectus, there are
outstanding options, warrants and rights which, upon exercise or conversion,
entitle their holders to acquire approximately 2,067,000 shares of common stock.
Holders of shares of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders generally. The approval of
proposals submitted to stockholders at a meeting other than for the election of
directors requires the favorable vote of a majority of the shares voting, except
in the case of certain fundamental matters (such as certain amendments to the
Articles of Incorporation, and certain mergers and reorganizations), in which
cases Florida law and EntrePort's Bylaws require the favorable vote of at least
a majority of all outstanding shares. Stockholders are entitled to receive such
dividends as may be declared from time to time by the Board of Directors out of
funds legally available therefor, and in the event of liquidation, dissolution
or winding up, to share ratably in all assets remaining after payment of
liabilities. The holders of shares of common stock have no preemptive,
conversion, subscription or cumulative voting rights.
STOCK OPTION PLAN
During the fiscal year 1999, we adopted a Stock Option Plan permitting
us to grant options to employees, directors, consultants and independent
contractors. An aggregate of 4,000,000 shares of common stock may be issued
pursuant to the plan. As of the date of this prospectus, options to purchase an
aggregate of 1,679,500 shares of common stock have been issued pursuant to the
Plan.
WARRANTS
We issued 10,000 warrants to a party not affiliated with us. The
warrants are exercisable until October 2002 at an exercise price of $1.00 per
share.
In February and March 2000, we conducted a private placement of common
shares. Roth Capital Partners, Inc. acted as placement agent in connection with
that offering. As part of its compensation for acting as placement agent, we
granted to Roth Capital Partners a common stock purchase warrant entitling the
holder to purchase 377,500 shares of our common stock at an exercise price of
$2.00 per share. The warrant is presently exercisable and expires in March 2005.
DIVIDENDS
We do not anticipate the payment of cash dividends on its common stock
in the foreseeable future.
TRANSFER AGENT
The transfer agent for our common stock is American Stock Transfer &
Trust, Inc.
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock
offered hereby will be passed upon for us by Oppenheimer Wolff & Donnelly LLP,
Newport Beach, California.
-23-
<PAGE>
EXPERTS
Ernst & Young LLP, independent auditors, have audited, as set forth in
their report appearing elsewhere in this prospectus, our financial statements as
of December 31, 1999 and 1998. We have included our financial statements in the
prospectus in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.
-24-
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
In July 1999, we dismissed Barry L. Friedman, Certified Public
Accountant, as our independent auditor and appointed Ernst & Young LLP as
independent auditors. Mr. Friedman had previously audited our financial
statements as of and for the fiscal years ended December 31, 1998, 1997 and
1996. The decision to change independent auditors was approved by our Board of
Directors. During the fiscal year ended December 31, 1998 and through July 1999,
there were no disagreements between us and Mr. Friedman on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures which disagreements if not resolved to the satisfaction of
Mr. Friedman would have caused him to make reference to the subject matter of
the disagreement in connection with his reports.
Except for the explanatory paragraph included in Mr. Friedman's report
on our financial statements for the 1998, 1997 and 1996 fiscal years, relating
to substantial doubt existing about our ability to continue as a going concern,
the audit reports of Mr. Friedman on our financial statements as of December 31,
1998, 1997 and 1996 did not contain an adverse opinion or a disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, file reports, proxy
statements and other information with the SEC. Our reports, proxy statements and
other information filed pursuant to the Securities Exchange Act of 1934 may be
inspected and copied at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material can also be obtained from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the SEC maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC. The address of the SEC's Web site is
http://www.sec.gov.
We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act of 1933 with respect to the common stock offered hereby. As
permitted by the rules and regulations of the SEC, this prospectus, which is
part of the registration statement, omits certain information, exhibits,
schedules and undertakings set forth in the registration statement. Copies of
the registration statement and the exhibits are on file with the SEC and may be
obtained from the SEC's Web site or upon payment of the fee prescribed by the
SEC, or may be examined, without charge, at the offices of the SEC set forth
above. For further information, reference is made to the registration statement
and its exhibits.
-25-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ENTREPORT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................................................F-1
Balance Sheets at December 31, 1999 and 1998...........................................................F-2
Statements of Operations for the years ended December 31, 1999, 1998 and for
the period from October 4, 1996 (inception) to December 31, 1999.....................................F-3
Statements of Stockholders' Equity (Deficit) for the years ended December 31,
1999, 1998 and for the period from October 4, 1996 (inception) to December 31, 1999..................F-4
Statements of Cash Flows for the years ended December 31, 1999, 1998 and for
the period from October 4, 1996 (inception) to December 31, 1999.....................................F-5
Notes to Financial Statements..........................................................................F-6
</TABLE>
-26-
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
EntrePort Corporation
We have audited the accompanying balance sheets of EntrePort Corporation (a
development stage company) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 1999 and 1998, and for the period October 4, 1996
(inception) through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 financial position of EntrePort Corporation (a
development stage company) at December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998,
and the period October 4, 1996 (inception) through December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
San Diego, California
March 21, 2000
F-1
<PAGE>
<TABLE>
EntrePort Corporation
(a development stage company)
Balance Sheets
<CAPTION>
December 31,
1999 1998
------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,458,139 $ -
Other current assets 205,397 -
------------------------------------
Total current assets 1,663,536 -
Investment in Sportsware Technologies, Inc. 399,500 -
Property and equipment at cost, net 97,317 -
Website development costs 181,381 -
Deferred offering costs 85,194 -
Other assets 6,690 -
------------------------------------
$ 2,433,618 $ -
====================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 194,268 $ -
Accrued liabilities 263,399 800
Note payable to officer 20,000 -
------------------------------------
Total current liabilities 477,667 800
Stockholders' equity (deficit):
Common stock, $.001 par value; 50,000,000 shares authorized,
7,834,974 and 5,025,000 issued and outstanding at December 31,
1999 and 1998, respectively 7,835 5,025
Additional paid-in capital 3,845,753 -
Deficit accumulated during the development stage (1,897,637) (5,825)
------------------------------------
Total stockholders' equity (deficit) 1,955,951 (800)
------------------------------------
$ 2,433,618 $ -
====================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
EntrePort Corporation
(a development stage company)
Statements of Operations
<CAPTION>
For the Period
October 4, 1996
(inception) through
Years ended December 31, December 31,
1999 1998 1999
----------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 11,911 $ - $ 11,911
Operating Expenses:
Research and development 97,579 - 97,579
Marketing, general and administrative 1,796,990 800 1,802,815
----------------------------------------------------------
Total operating expenses 1,894,569 800 1,900,394
----------------------------------------------------------
Loss from operations (1,882,658) (800) (1,888,483)
Interest expense 9,154 - 9,154
----------------------------------------------------------
Net loss $ (1,891,812) $ (800) $ (1,897,637)
==========================================================
Net loss per common share
(basic and diluted) $ (0.31) $ -
======================================
Weighted average shares used in computing net
loss per common share
(basic and diluted) 6,068,605 5,025,000
======================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
EntrePort Corporation
(a development stage company)
Statements of Stockholders' Equity
For the years ended December 31, 1999 and 1998, and the period October 4, 1996 (inception) through December 31, 1999
<CAPTION>
Deficit
accumulated Total
Common stock Additional during the stockholders'
---------------------------- paid-in development equity
Shares Amount capital stage (deficit)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock for services at
inception of company 5,025,000 $ 5,025 $ - $ - $ 5,025
Net loss for the period ended December 31,
1997 - - - (5,025) (5,025)
-----------------------------------------------------------------------------
Balance at December 31, 1997 5,025,000 5,025 - (5,025) -
Net loss for the year ended December 31,
1998 - - - (800) (800)
-----------------------------------------------------------------------------
Balance at December 31, 1998 5,025,000 5,025 - (5,825) (800)
Common shares retired for no consideration (4,410,000) (4,410) 4,410 - -
Common shares issued for $1,600 of notes
receivable and $335,900 for services
rendered 5,400,000 5,400 332,100 - 337,500
Issuance of common stock upon conversion
of notes payable in June 1999 at $2.00 to
$3.00 per share 267,500 268 694,732 - 695,000
Issuance of common stock for $2.00 per
share in August and December 1999 for
cash, net of issuance costs of $304,185 1,384,140 1,384 2,462,711 - 2,464,095
Issuance of common stock for services
rendered 168,334 168 336,500 - 336,668
Issuance of warrants for services rendered - - 15,300 - 15,300
Net loss for the year ended December 31,
1999 - - - (1,891,812) (1,891,812)
-----------------------------------------------------------------------------
Balance at December 31, 1999 7,834,974 $ 7,835 $ 3,845,753 $ (1,897,637) $ 1,955,951
=============================================================================
</TABLE>
See accompanying notes
F-4
<PAGE>
EntrePort Corporation
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Period
October 4, 1996
(inception)
through
Years ended December 31, December 31,
1999 1998 1999
----------------------------------------------------
<S>
Operating activities <C> <C> <C>
Net loss $ (1,891,812) $ (800) $ (1,897,637)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 17,419 - 17,419
Issuance of common stock and warrants for services
rendered 421,200 - 426,225
Changes in operating assets and liabilities:
Other current assets (205,397) - (205,397)
Accounts payable 194,268 - 194,268
Accrued liabilities and other 262,599 800 263,399
Other assets (6,690) - (6,690)
----------------------------------------------------
Net cash flows used in operating activities (1,208,413) - (1,208,413)
Investing activities
Purchases of property and equipment (114,736) - (114,736)
Investment in Sportsware Technologies, Inc. (399,500) - (399,500)
Increases in website development costs (181,381) - (181,381)
----------------------------------------------------
Net cash flows used in investing activities (695,617) - (695,617)
Financing activities
Proceeds from issuance of notes payable 1,010,000 - 1,010,000
Payments of notes payable (295,000) - (295,000)
Issuance of common stock for cash, net 2,732,363 - 2,732,363
Increases in deferred offering costs (85,194) - (85,194)
----------------------------------------------------
Net cash flows provided by financing activities 3,362,169 - 3,362,169
----------------------------------------------------
Increase in cash and cash equivalents 1,458,139 - 1,458,139
Cash and cash equivalents at beginning of period - - -
----------------------------------------------------
Cash and cash equivalents at end of period $ 1,458,139 $ - $ 1,458,139
====================================================
Supplemental disclosure of non cash
financing activities
Conversion of notes payable to common stock $ (695,000) - $ (695,000)
====================================================
Supplemental information
Interest paid $ 5,081 $ - $ 5,081
====================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
EntrePort Corporation
(a development stage company)
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
EntrePort Corporation ("the Company") was incorporated in Florida on October 4,
1996. The Company is in the initial stage of operations devoting substantially
all of its efforts to the market analysis for and development of Web portals on
the Internet for purposes of offering general information, communication tools
and training to members of certain targeted Internet communities. As of December
31, 1999, the Company has not completed the development of any of its proposed
Web portals or otherwise commenced significant revenue producing operations.
Accordingly, the Company is considered to be in the development stage.
The Company had no assets or operations from the time of its incorporation until
February 1999, at which time the Company hired its current Chairman of the Board
to develop the Company's Web business. At this time, the Company's founder
canceled, for no consideration, 4,410,000 shares of Common Stock and resigned
from the Company. The Company then issued 3,800,000 shares of Common Stock, as
consideration of marketing and business plans, consulting services and cash.
REVENUE RECOGNITION
The Company recognizes revenue on membership fees ratably over the period in
which the services are performed.
CASH AND CASH EQUIVALENTS
The Company considers all investments with an original maturity of three months
or less when purchased to be cash equivalents. Cash equivalents primarily
represent funds invested in money market funds where cost equals market value.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and depreciated over the estimated
useful lives of the assets (generally three to five years) using the
straight-line method.
WEBSITE DEVELOPMENT COSTS
Website development costs are capitalized in accordance with an EITF consensus
on Issue 00-02 and amortized over the estimated useful lives of the Internet
website being developed (generally two years) using the straight-line method.
Amortization will begin upon the launch of the web site.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and related interpretations
in accounting for its employee stock options because, as discussed in Note 6,
the alternative fair value accounting provided under Financial Accounting
Standards Board Statement of Financial Accounting Standards (SFAS) No. 123,
ACCOUNTING FOR STOCK BASED COMPENSATION, requires the use of option valuation
models that were not developed for use in valuing employee stock options.
Compensation charges for options granted to non-employees has been determined in
accordance with SFAS No. 123 and EITF 96-18 as the fair value of the
consideration received or the fair value of equity instruments issued, whichever
is more reliably measured. Charges for options granted to non-employees are
periodically remeasured as the underlying options vest.
F-6
<PAGE>
EntrePort Corporation
(a development stage company)
Notes to Financial Statements (continued)
The Company has disclosed the pro forma effect of using the fair value based
method to account for its employee stock-based compensation.
NET LOSS PER SHARE
The Company computes net loss per share following SFAS No. 128, EARNINGS PER
SHARE. SFAS 128 requires the presentation of basic and diluted income (loss) per
share amounts. Under the provisions of SFAS No. 128, basic net income (loss) per
share is computed by dividing the net income (loss) available to common
shareholders for the period by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is computed
by dividing the net income (loss) for the period by the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares, composed of incremental common shares issuable upon the
exercise of stock options, are included in diluted net income (loss) per share
to the extent these shares are dilutive. Common equivalent shares are not
included in the computation of diluted net loss per share for the years ended
December 31, 1999 because the effect would be anti-dilutive.
The following table sets forth the computation of basic and diluted loss per
share for the periods presented:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1999 1998
------------------------------------
<S> <C> <C>
Numerator:
Net loss $ (1,891,812) $ (800)
Denominator:
Weighted average shares outstanding for basic
earning per share 6,068,605 5,025,000
------------------------------------
Effects of dilutive securities:
Employee stock options - -
Warrants - -
------------------------------------
Dilutive potential common shares - -
Shares used in computing diluted net income per
common share 6,068,605 5,025,000
====================================
Loss per common share, basic $ (0.31) $ -
====================================
Loss per common share, diluted $ (0.31) $ -
====================================
</TABLE>
COMPREHENSIVE LOSS
Comprehensive loss for all periods presented is the same as net loss.
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 amounts reported in the financial statements and disclosures made in
the accompanying notes to the financial statements. Actual results could differ
from those estimates.
F-7
<PAGE>
EntrePort Corporation
(a development stage company)
Notes to Financial Statements (continued)
2. SELECTED BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
December 31,
1999 1998
----------------------------------
<S>
Other current assets: <C> <C>
Due from investors $ 180,000 $ -
Prepaid expenses 21,731 -
Other current assets 3,666 -
----------------------------------
$ 205,397 $ -
==================================
The amount due from investors was collected in January 2000.
Property and equipment:
Machinery and equipment $ 106,509 $ -
Furniture and fixtures 8,227 -
----------------------------------
114,736 -
Less: accumulated depreciation (17,419) -
----------------------------------
$ 97,317 $ -
==================================
Accrued liabilities:
Officer relocation costs $ 106,600 $ -
Lease termination costs 61,058 -
Accrued settlement 37,500 -
Other accrued liabilities 58,241 800
----------------------------------
$ 263,399 $ 800
==================================
</TABLE>
3. EQUITY INVESTMENT
During 1999, the Company acquired a 5% share of Sportsware Technologies, Inc.
("STI") for cash totaling $399,500. The Company accounts for its investment in
STI under the cost method. In conjunction with the purchase, the Company was
granted an option through December 1999 to purchase all of the remaining
outstanding shares of STI for cash and common stock. The option was not
exercised by the Company and expired in December 1999. The Company also granted
stock options to STI to purchase 500,000 shares of the Company's common stock
for $.10 per share, vesting and exercisable only in the event the Company
purchased the remaining 95% of STI stock. These options were canceled in
December 1999 upon expiration of the purchase option.
4. NOTES PAYABLE
Throughout 1999, the Company issued notes payable totaling $315,000 to several
outside parties and one of the Company's officers. The notes bore interest at
rates ranging from 6.0% to 10.0% per annum. Each note was paid off prior to
December 31, 1999 with the exception of one note. The outstanding note of
$20,000 bears a rate of 8.0% and matures in July 2000.
Throughout 1999, the Company conducted a private placement sale of convertible
notes for total proceeds of $695,000. The notes bore interest at the rate of
6.0% per annum. Principal was convertible into shares of the Company's common
stock at rates of $2.00 to $3.00 per share. During 1999, the principal amount of
all notes was converted into 267,500 shares of common stock.
F-8
<PAGE>
EntrePort Corporation
(a development stage company)
Notes to Financial Statements (continued)
5. LEASE COMMITMENTS
The Company leases its corporate headquarters facility under a noncancelable
operating lease expiring on March 31, 2002. The Company also leases an unrelated
property on a month to month basis. Rent expense for these leases was
approximately $45,000, $0 and $45,000 for the years ended December 31, 1999 and
1998, and for the period October 4, 1996 (inception) through December 31, 1999,
respectively.
Future minimum payments required under the operating lease as of December 31,
1999 are as follows:
Operating
Leases
-----------------
2000 $ 26,800
2001 33,400
2002 10,000
-----------------
Total minimum lease payments $ 70,200
=================
6. STOCKHOLDERS' EQUITY
COMMON STOCK
In February 1999, the Company retired 4,410,000 shares of the Company's stock
from the original founder of the Company, for no consideration. Additionally, in
March 1999 the Company issued 5,400,000 shares of common stock to various
initial investors and key employees for cash and services.
In September 1999, the Company sold 99,710 shares of common stock for cash
proceeds of $199,420 in a private placement. In June 1999, the Company issued
267,500 shares of common stock, as a result of the conversion of convertible
notes. In December 1999, the Company issued 1,284,430 shares in a private
placement for cash proceeds of $2,568,860. The Company incurred $38,185 in
offering costs, and issued 133,334 shares of common stock to a financial
consultant in connection with the private placement (valued at $266,668). These
costs have been charged as a reduction to additional paid-in capital.
In November 1999, the Company issued 25,000 shares of common stock in
consideration for the extension of two notes payable. In December 1999, the
Company also issued 10,000 shares of common stock for Website development
services rendered. The Company expensed the costs of these services.
COMMON STOCK WARRANTS
Periodically, the Company will issue warrants to outside consultants in lieu of
stock options. During the period October 4, 1996 (inception) through December
31, 1999, the Company issued 10,000 warrants at a $1.00 exercise price. The
warrants are exercisable at December 31, 1999 and expire in October 2002. During
the year ended December 31, 1999, the Company recognized $15,300 in compensation
expense for these services.
STOCK OPTIONS
In March 1999, the Company adopted the 1999 Stock Incentive Plan (the "Plan") to
grant options to purchase common stock to eligible officers, employees,
directors, consultants and other independent advisors who provide services to
the Company. The Board has authorized and reserved an aggregate of 4,000,000
shares of common stock for issuance under the Plan. Terms of the stock option
agreements, including vesting requirements, are determined by the Board of
Directors. Options under the Plan cannot exceed a ten year term. The exercise
price of options granted under the Plan is determined by the Board, but cannot
be less than 100% of the fair market value (85% for non-qualified options) of
the common stock on the date of grant.
F-9
<PAGE>
EntrePort Corporation
(a development stage company)
Notes to Financial Statements (continued)
The following table summarizes activity under the stock option plan during the
year ended December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
-----------------------------------
<S> <C> <C>
Outstanding at December 31, 1998 - $ -
Granted 1,810,000 1.69
Exercised - -
Canceled (500,000) 0.10
--------------
Outstanding at December 31, 1999 1,310,000 $ 2.30
==============
</TABLE>
All options outstanding at December 31, 1999 are non-qualified options. The
weighted average grant date fair value of options granted during the year
totaled $1.49.
A further summary of options outstanding and exercisable as of December 31, 1999
follows:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Exercise Exercise Average Average Average
Options Range Range Exercise Remaining Options Exercise
Outstanding Low High Price Life (years) Exercisable Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
350,000 $1.00 $1.00 $1.00 4.3 350,000 $1.00
450,000 $2.00 $2.50 $2.22 3.8 75,000 $2.00
450,000 $3.00 $3.50 $3.11 4.3 - -
40,000 $4.00 $4.00 $4.00 2.9 - -
20,000 $5.00 $5.00 $5.00 2.8 20,000 $5.00
- --------------------------------------------------------------------------------------------------------
1,310,000 $1.00 $5.00 $2.30 4.0 445,000 $1.35
========================================================================================================
</TABLE>
Adjusted pro forma information regarding net loss is required by SFAS No. 123,
and has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using the Black-Scholes method with
the following weighted-average assumptions for 1999: risk-free interest rate of
6.5%, dividend yield of 0%, volatility factor of 100.0%, and an expected option
life of 3 years. Future pro forma results of operations under SFAS No. 123 may
be materially different from actual amounts reported. For purposes of adjusted
pro forma disclosures, the estimated fair value of the options are amortized to
expense over the vesting period.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-10
<PAGE>
EntrePort Corporation
(a development stage company)
Notes to Financial Statements (continued)
6. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of such options. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
For the period
October 4, 1996
(inception)
through
Years ended December 31, December 31,
1999 1998 1999
-----------------------------------------------------
<S> <C> <C> <C>
Pro forma net loss $ (1,984,329) $ (800) $ (1,990,154)
Pro forma net loss per share, basic and diluted $ (0.33) $ -
</TABLE>
SHARES RESERVED FOR FUTURE ISSUANCE
The following shares of common stock are reserved for future issuance at
December 31, 1999:
SHARES
-----------------
Stock options:
Granted and outstanding 1,310,000
Reserved for future grants 2,690,000
Warrants 10,000
-----------------
Total Reserved 4,010,000
=================
7. INCOME TAXES
Significant components of the Company's deferred tax assets as of December 31,
1999 and 1998 are shown below. A valuation allowance of $776,000 has been
recognized at December 31, 1999 to offset the net deferred tax assets as
realization of such assets is uncertain.
<TABLE>
<CAPTION>
December 31,
1999 1998
----------------------------------
<S> <C> <C>
Deferred tax assets
Net operating loss carryforward $ 760,000 -
Research and development credits 11,000 -
Other, net 5,000 -
----------------------------------
Total net deferred tax assets 776,000 -
Valuation allowance for deferred tax asset (776,000) -
----------------------------------
Net deferred tax assets $ - -
==================================
</TABLE>
At December 31, 1999, the Company has federal and California net operating loss
carryforwards of approximately $1,865,000 and $1,869,000, respectively. The
federal and California tax loss carryforwards will begin to expire in 2019 and
2007, respectively, unless previously utilized. The Company also has federal and
California research credit carryforwards of approximately $8,700 and $4,800,
respectively, which will begin to expire in 2018 unless previously utilized.
F-11
<PAGE>
EntrePort Corporation
(a development stage company)
Notes to Financial Statements (continued)
7. INCOME TAXES
Pursuant to Section 382 and 383 of the Internal Revenue Code, the annual use of
the Company's net operating loss and credit carryforwards may be limited if
cumulative changes in ownership of more than 50% occur during any three year
period. However, the Company does not believe such limitation will have a
material impact upon the utilization of these carryforwards.
8. LITIGATION
From time to time the Company is involved in legal proceedings, claims and
litigation arising in the ordinary course of business. Management believes,
however, that the ultimate outcome of all pending litigation should not have a
material adverse effect on the Company's financial position or liquidity.
9. SUBSEQUENT EVENT
In March 2000, 3,537,500 shares of common stock were issued at $2.00 per share
to private investors for net proceeds of approximately $6.1 million. In
conjunction with the offering, warrants to purchase 353,750 shares of the
Company's common stock were issued to the placement agent. The exercise price is
$2.00 per share and the warrants expire in March 2005.
F-12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Florida Statutes
Articles of Incorporation
Our Articles of Incorporation provides that the directors of the company shall
be protected from personal liability to the fullest extent permitted by law. Our
Articles of Incorporation also provide for the indemnification of our directors
and officers.
Bylaws
Our Bylaws further provide that our officers and directors shall not be liable
to us for any loss or damage suffered by us on account of any action taken by
him as an officer or director of the corporation if he acted in good faith and
in a manner reasonably believed to be in or not opposed to our best interests
and, with respect to a criminal matter, if he had no reasonable cause to believe
that his conduct was unlawful.
Indemnity Agreements
Our Articles of Incorporation provide that we may indemnify our directors and
officers to the fullest extent permitted by law and we have agreed to provide
such indemnification to our officers and directors, pursuant to written
indemnity agreements.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses incurred in
connection with the sale and distribution of the securities being registered.
All of the amounts shown are estimates except the Securities and Exchange
Commission registration fee.
Security and Exchange Commission registration fee............. $ 7,139.62
Printing and engraving expenses............................... $ 5,000.00
Legal fees and expenses....................................... $10,000.00
Accounting fees and expenses.................................. $10,000.00
Miscellaneous expenses........................................ $ 2,500.00
Total................................................. $34,639.62
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years the Company sold unregistered shares of its
Common Stock in the following transactions:
(B) In October 1996, the Company issued 5,000,000 shares of Common Stock to the
founder of the Company, at a price of $.001 per share of which 4,410,000 were
retired in March 1999. There was no underwriter involved in this issuance. The
issuance was conducted pursuant to Section 4(2) under the Securities Act of 1933
("1933 Act").
(C) In October 1996, the Company conducted a private placement of 25,000 shares
of Common Stock to 25 parties, at a price of $.001 per share. There was no
underwriter involved in the placement. The placement was conducted pursuant to
Section 4(2) of the 1933 Act.
A-1
<PAGE>
(D) In March 1999, the Company issued an aggregate of 2,800,000 shares of Common
Stock to three parties, including 2,533,334 shares to Mr. David J. D'Arcangelo,
the Company's Chairman of the Board, and 133,333 shares of Common Stock each to
two consultants to the Company, in consideration of marketing and business plans
and consulting services rendered. There was no underwriter involved in the
issuances. The issuances were conducted pursuant to Section 4(2) of the 1933
Act.
(E) In February 1999, the Company conducted a private placement of 1,000,000
shares of Common Stock to four individuals, at a price of $.001 per share. There
was no underwriter involved in the placement. The placement was conducted
pursuant to Rule 504 under the 1933 Act.
(F) During March through May 1999, the Company conducted a private placement
sale of convertible notes to six parties for the gross proceeds of $695,000. The
notes were in the aggregate principal amount of $695,000 and bore interest on
the principal amount at the rate of 6% to 10% per annum. The principal amount of
the notes were convertible into shares of Common Stock at the rate of $2.00 to
$3.00 per share. In June 1999, the holders of the notes converted the entire
principal amount into 267,500 shares of Common Stock. There was no underwriter
involved in the placement. The placement was conducted pursuant to Section 4(2)
of the 1933 Act.
(G) During the first and second quarters of 1999, the Company issued an
aggregate of 1,600,000 shares of Common Stock and options to purchase an
aggregate of 950,000 to five officers and directors of the Company. There was no
underwriter involved in the issuances. The issuances were conducted pursuant to
Section 4(2) of the 1933 Act.
(H) During the period August to January 2000, we conducted a private placement
of 1,524,430 shares of Common Stock to approximately 43 parties, at a price of
$2.00 per share. There was no underwriter involved in the placement. The
placement was conducted pursuant to Section 4(2) of the 1933 Act and Rule 506
thereunder.
(I) In November 1999, the Company issued 143,334 shares of Common Stock to a
consultant of the company in consideration of corporate finance, investor
communities and public relations consulting services. There was no underwriter
involved in the issuance. The issuance was conducted pursuant to Section 4(2) of
the 1933 Act.
(J) In February and March 2000, the Company conducted a private placement of
3,525,000 shares of Common Stock to approximately 70 parties at a price of $2.00
per share. Roth Capital Partners, Inc. acted as placement agent. As part of its
compensation for acting as placement agent, we granted to Roth Capital Partners
a common stock purchase warrant entitling the holder to purchase 377,500 shares
of common stock at an exercise price of $2.00 per share. This offering was
conducted pursuant to Section 4(2) of the 1933 Act and Rule 506 thereunder.
ITEM 27. EXHIBITS
Exhibit
No. Description
- ------- -----------
3.1 Articles of Incorporation (1)
3.2 Articles of Amendment to Articles of Incorporation dated March 24,
1999 (1)
3.3 Amended and Restated Bylaws
4.1 Specimen of Common Stock Certificate (1)
5.1 Opinion of Oppenheimer Wolff & Donnelly LLP
10.1 EntrePort Corporation 1999 Stock Option Plan (1)
10.2 Securities Purchase Agreement with MetroSplash.com, Inc. (2)
10.3 Registration Rights Agreement (2)
10.4 Employment Agreement dated March 17, 1999 with David D'Arcangelo
10.5 Employment Agreement dated March 19, 1999 with William Shue
16.1 Letter of change in Accountants(2)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Oppenheimer Wolff & Donnelly LLP (included as part of
Exhibit 5.1)
21.1 List of Subsidiaries(2)
27.1 Financial Data Schedule(2)
A-2
<PAGE>
- ------------
(1) Filed as exhibit to Registrant's Form 10-SB Registration Statement 1999
(File No. 0-26941) and incorporated herein by reference.
(2) Filed as exhibit to Registrant's 1999 Annual Report on Form 10-KSB (File
No. 0-26941) and incorporated herein by reference.
ITEM 28. UNDERTAKING.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period which offers or sales are being
made, a post-effective amendment to this registration statements:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts of events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Insofar as indemnification for the liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described herein, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange such indemnification is
against public policy as expressed in the opinion of the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by director, officers or controlling person
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
A-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for the filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on May 9, 2000.
ENTREPORT CORPORATION
By: /s/ William A. Shue
--------------------------------------------
William A. Shue
President, Chief Executive Officer and Chief
Financial Officer
By: /s/ Ronald D. Suokko
--------------------------------------------
Ronald D. Suokko
Chief Accounting Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David J. D'Arcangelo Chairman of the Board May 9, 2000
- ----------------------------------
David J. D'Arcangelo
/s/ William A. Shue Director May 9, 2000
- ----------------------------------
William A. Shue
/s/ Tony Acone Director May 9, 2000
- ----------------------------------
Tony Acone
/s/ Scott Lucas Director May 9, 2000
- ----------------------------------
Scott Lucas
</TABLE>
A-4
AMENDED AND RESTATED
BYLAWS
OF
DOGWOOD TREE CAPITAL CORP.
A FLORIDA CORPORATION
ARTICLE I
OFFICE
1.1 PRINCIPAL OFFICE. The principal office for the transaction of the
business of Dogwood Tree Capital Corp. (the "Corporation") shall be 10455
Sorrento Valley Road, Suite 204, San Diego, California 92121. The Board of
Directors (hereinafter called the "Board") is hereby granted full power and
authority to change the principal office from one location to another.
1.2 OTHER OFFICES. The Corporation may also have an office or offices
at such other place or places, either within or without the State of Florida, as
the Board may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 ANNUAL MEETINGS. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other business as may properly come before such meetings in accordance with
Section 2.11 of these Bylaws may be held at such time, date and place as the
Board shall determine by resolution.
2.2 SPECIAL MEETINGS. A special meeting of the stockholders for the
transaction of any proper business may be called at any time by the Board, the
Chairman of the Board, the Chief Executive Officer, the President or one or more
stockholders holding shares in the aggregate entitled to cast not less than ten
percent (10%) of the votes at that meeting.
2.3 PLACE OF MEETINGS. All meetings of the stockholders shall be held
at such places within or without the State of Florida, as may from time to time
be designated by the person or persons calling the respective meeting and
specified in the respective notices or waivers of notice thereof.
2.4 NOTICE OF MEETINGS.
(a) Except as otherwise required by law, written notice of
each meeting of the stockholders, whether annual or special, shall be given not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder of record entitled to vote at such meeting. If mailed,
notice is given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. Except as otherwise expressly required by law, no publication of
<PAGE>
any notice of a meeting of the stockholders shall be required. Every notice of a
meeting of the stockholders shall state the place, date and hour of the meeting,
and in the case of a special meeting, shall also state the purpose or purposes
for which the meeting is called. Notice of any meeting of stockholders shall not
be required to be given to any stockholder who shall have waived such notice and
such notice shall be deemed waived by any stockholder who shall attend such
meeting in person or by proxy, except as a stockholder who shall attend such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any adjourned
meeting of the stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
(b) Whenever notice is required to be given to any stockholder
to whom (i) notice of two consecutive annual meetings, and all notices of
meetings or of the taking of action by written consent without a meeting to such
person during the period between such two consecutive annual meetings, or (ii)
all, and at least two, payments (if sent by first class mail) of dividends or
interest on securities during a twelve-month period, have been mailed addressed
to such person at his address as shown on the records of the Corporation and
have been returned undeliverable, the giving of such notice to such person shall
not be required. Any action or meeting which shall be taken or held without
notice to such person shall have the same force and effect as if such notice had
been duly given. If any person shall deliver to the Corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
Corporation is such as to require the filing of a certificate under any of the
other sections, the certificate need not state that notice was not given to
persons to whom notice was not required to be given pursuant to this section.
2.5 QUORUM. Except as provided by law, the holders of record of one
third of the shares of stock of the Corporation entitled to be voted thereat,
present in person or by proxy, shall constitute a quorum for the transaction of
business at any meeting of the stockholders of the Corporation or any
adjournment thereof. The stockholders present at a duly called or held meeting
at which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum, and by any
greater number of shares otherwise required to take such action by applicable
law or the Articles of Incorporation. In the absence of a quorum at any meeting
or any adjournment thereof, a majority in voting interest of the stockholders
present in person or by proxy and entitled to vote thereat or, in the absence
therefrom of all the stockholders, any officer entitled to preside at, or to act
as secretary of, such meeting may adjourn such meeting from time to time. At any
such adjourned meeting at which a quorum is present any business may be
transacted which might have been transacted at the meeting as originally called.
2.6 VOTING.
(a) Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each share or fractional
share of the stock of the Corporation having voting rights on the matter in
question and which shall have been held by him and registered in his name on the
books of the Corporation:
-2-
<PAGE>
(i) on the date fixed pursuant to Section 2.10 of
these Bylaws as the record date for the determination of stockholders entitled
to notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed,
then (A) at the close of business on the day next preceding the day on which
notice of the meeting shall be given or (B) if notice of the meeting shall be
waived, at the close of business on the day next preceding the day on which the
meeting shall be held.
(b) Voting shall in all cases be subject to the provisions of
the Florida General Corporation Act and to the following provisions:
(i) Subject to Section 2.6(b)(vii), shares held by an
administrator, executor, guardian, conservator, custodian or other fiduciary may
be voted by such holder either in person or by proxy, without a transfer of such
shares into the holder's name; and shares standing in the name of a trustee may
be voted by the trustee, either in person or by proxy, but no trustee shall be
entitled to vote shares held by such trustee without a transfer of such shares
into the trustee's name.
(ii) Shares standing in the name of a receiver may be
voted by such receiver; and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in the order of the court by which such
receiver was appointed.
(iii) Subject to the provisions of the Florida
General Corporation Act, and except where otherwise agreed in writing between
the parties, a stockholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(iv) Shares standing in the name of a minor may be
voted and the Corporation may treat all rights incident thereto as exercisable
by the minor, in person or by proxy, whether or not the Corporation has notice,
actual or constructive, of the non-age, unless a guardian of the minor's
property has been appointed and written notice of such appointment given to the
Corporation.
(v) Shares standing in the name of another
corporation, domestic or foreign, may be voted by such officer, agent or
proxyholder as the bylaws of such other corporation may prescribe or, in the
absence of such provision, as the Board of Directors of such other corporation
may determine or, in the absence of such determination, by the chairman of the
board, president or any vice president of such other corporation, or by any
other person authorized to do so by the board, president or any vice president
of such other corporation. Shares which are purported to be executed in the name
of a corporation (whether or not any title of the person signing is indicated)
shall be presumed to be voted or the proxy executed in accordance with the
provisions of this subdivision, unless the contrary is shown.
-3-
<PAGE>
(vi) Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors in such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.
(vii) Shares held by the Corporation in a fiduciary
capacity, and shares of the Corporation held in a fiduciary capacity by any
subsidiary, shall not be entitled to vote on any matter, except to the extent
that the settlor or beneficial owner possesses and exercises a right to vote or
to give the Corporation binding instructions as to how to vote such shares.
(viii) If shares stand of record in the names of two
or more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a stockholder voting
agreement or otherwise, or if two or more persons (including proxyholders) have
the same fiduciary relationship respecting the same shares, unless the Secretary
of the Corporation is given written notice to the contrary and is furnished with
a copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect:
(A) If only one votes, such act binds all;
(B) If more than one vote, the act of the
majority so voting binds all;
(C) If more than one vote, but the vote is
evenly split on any particular matter, each fraction may vote the securities in
question proportionately. If the instrument so filed or the registration of the
shares shows that any such tenancy is held in unequal interests, a majority or
even split for the purpose of this section shall be a majority or even split in
interest.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting. A validly executed proxy which
does not state that it is irrevocable shall continue in full force and effect
unless revoked by the person executing it, prior to the vote pursuant thereto,
by a writing delivered to the Corporation stating that the proxy is revoked or
by a subsequent proxy executed by, or attendance at the meeting and voting in
person by the person executing the proxy; provided, however, that no such proxy
shall be valid after the expiration of three (3) years from the date of such
proxy, unless otherwise provided in the proxy. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
the Florida General Corporation Law.
(d) The vote at any meeting of the stockholders on any
question need not be written ballot, unless so directed by the chairman of the
meeting; provided, however, that any election of directors at any meeting must
be conducted by written ballot upon demand made by any stockholder or
stockholders present at the meeting before the voting begins. On a vote by
ballot each ballot shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and it shall state the number of shares voted.
-4-
<PAGE>
2.7 ACTION WITHOUT A MEETING. Any action which is required to be taken
or which may be taken at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, is signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting at which
all shares entitled to vote on that action were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the State
of Florida, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
In the case of election of directors, such a consent shall be effective only if
signed by the holders of all outstanding shares entitled to vote for the
election of directors; provided, however, that a director may be elected at any
time to fill a vacancy on the Board that has not been filled by the directors,
by the written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors. All such consents shall be filed
with the Secretary of the Corporation and shall be maintained in the corporate
records.
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered in the manner required by this section to
the Corporation, written consents signed by a sufficient number of holders or
members to take action are delivered to the Corporation by delivery to its
registered office in the State of Florida, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
Notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing within 10 days. In the event that the action which is
consented to is such as would have required the filing of a certificate under
any other section of this title, if such action had been voted on by
stockholders at a meeting thereof, the certificate filed under such other
section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written consent has been given in
accordance with this section, and that written notice has been given as provided
in this section.
2.8 LIST OF STOCKHOLDERS. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
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2.9 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board,
and which record date shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board, and which date shall not be more than ten days after the date upon which
the resolution fixing the record date is adopted by the Board. If no record date
has been fixed by the Board, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board is required, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Florida, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board and prior action by the Board is
required, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board adopts the resolution relating thereto.
If no record is fixed by the Board, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
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2.10 STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS.
(a) Business may be properly brought before an annual meeting
by a stockholder only upon the stockholder's timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than thirty (30) days nor more than sixty (60) days prior
to the meeting as originally scheduled; provided, however, that in the event
that less than forty (40) days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. For purposes of this
Section 2.11, any adjournment(s) or postponement(s) of the original meeting
shall be deemed for purposes of notice to be a continuation of the original
meeting and no business may be brought before any reconvened meeting unless such
timely notice of such business was given to the Secretary of the Corporation for
the meeting as originally scheduled. A stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, and (iv) any material interest
of the stockholder in such business. Notwithstanding the foregoing, nothing in
this Section 2.11 shall be interpreted or construed to require the inclusion of
information about any such proposal in any proxy statement distributed by, at
the direction of, or on behalf of the Board.
(b) The chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section
2.11, and if the chairman should so determine, the chairman shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be transacted.
2.11 NOTICE OF STOCKHOLDER NOMINEES.
(a) Nominations of persons for election to the Board of the
Corporation shall be made only at a meeting of stockholders and only (i) by or
at the direction of the Board or (ii) by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 2.12. Such nominations, other
than those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than thirty (30) days
nor more than sixty (60) days prior to the meeting; provided, however, that in
the event that less than forty (40) days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth (10th) day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. For purposes of this
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Section 2.12, any adjournment(s) or postponement(s) of the original meeting
shall be deemed for purposes of notice to be a continuation of the original
meeting and no nominations by a stockholder of persons to be elected directors
of the Corporation may be made at any such reconvened meeting unless pursuant to
a notice which was timely for the meeting on the date originally scheduled. Such
stockholder's notice shall set forth: (i) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to the Securities Exchange Act of 1934, as amended, (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and (ii) as to the stockholder giving the
notice (A) the name and address, as they appear on the Corporation's books, of
such stockholder, and (B) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. Notwithstanding the foregoing,
nothing in this Section 2.12 shall be interpreted or construed to require the
inclusion of information about any such nominee in any proxy statement
distributed by, at the discretion of, or on behalf of the Board.
(b) The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 2.12, and if the
chairman should so determine, the chairman shall so declare to the meeting and
the defective nomination shall be disregarded.
ARTICLE III
BOARD OF DIRECTORS
3.1 GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board.
3.2 NUMBER AND TERM OF OFFICE. The authorized number of directors shall
be no less than one (1) and no more than nine (9). The exact number of
authorized directors shall be set by resolution of the board of directors,
within the limits specified above. Directors need not be stockholders. Each
director shall hold office until the next annual meeting and until a successor
has been elected and qualified, or he resigns, or he is removed in a manner
consistent with these Bylaws.
3.3 ELECTION OF DIRECTORS. The directors shall be elected annually by
the stockholders of the Corporation and the persons receiving the greatest
number of votes in accordance with the system of voting established by these
Bylaws shall be the directors.
3.4 RESIGNATION AND REMOVAL OF DIRECTORS. Any director of the
Corporation may resign at any time by giving written notice to the Corporation.
Any such resignation shall take effect at the time specified therein, or, if the
time be not specified, it shall take effect immediately upon its receipt; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. Any or all of the directors may be removed
with or without cause if such removal is approved by the affirmative vote of a
majority of the outstanding shares entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before his term of office expires.
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3.5 VACANCIES. Except as otherwise provided in the Articles of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors or any other cause, may
be filled by a majority of the remaining directors, though less than a quorum.
Each director so chosen to fill a vacancy shall hold office until his successor
shall have been elected and qualified or until he shall resign or shall have
been removed in the manner hereinafter provided.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
3.6 PLACE OF MEETING, ETC. The Board may hold any of its meetings at
such place or places within or without the State of Florida as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting of
the Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
3.7 FIRST MEETING. The Board shall meet as soon as practicable after
each annual election of directors and notice of such first meeting shall not be
required.
3.8 REGULAR MEETINGS. Regular meetings of the Board may be held at such
times as the Board shall from time to time by resolution determine. If any day
fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as may be
required by law or specified herein, notice of regular meetings need not be
given.
3.9 SPECIAL MEETINGS. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, the President or any two or more
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegraph or cable or be delivered personally not less than
forty-eight (48) hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board shall
not be required to be given to any director who is present at such meeting,
except a director who shall attend such meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
3.10 QUORUM AND MANNER OF ACTING. Except as otherwise provided in these
Bylaws, in the Articles of Incorporation or by law, the presence of a majority
of the authorized number of directors shall be required to constitute a quorum
for the transaction of business, at any meeting of the Board, and all matters
shall be decided at any such meeting, a quorum being present, by the affirmative
votes of a majority of the directors present. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, provided any action taken is approved by at least a
majority of the required quorum for such meeting. In the absence of a quorum, a
majority of directors present at any meeting may adjourn the same from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given. The directors shall act only as a Board, and the individual directors
shall have no power as such.
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3.11 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Board or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
3.12 COMPENSATION. The directors shall receive only such compensation
for their services as directors as may be allowed by resolution of the Board.
The Board may also provide that the Corporation shall reimburse each such
director for any expense incurred by him on account of his attendance at any
meetings of the Board or Committees of the Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
3.13 COMMITTEES OF DIRECTORS.
(a) The Board may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. Any such committee, to the extent
provided in the resolution of the Board and except as otherwise limited by law,
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it;
provided, however, that no such committee shall have the power or authority to
act on behalf of the Board with regard to:
(i) the approval of any action which, under the
Florida General Corporation Act, also requires stockholders' approval or
approval of the outstanding shares;
(ii) the filling of vacancies on the Board of
Directors or in any committees;
(iii) the fixing of compensation of the directors for
serving on the Board or on any committee;
(iv) the amendment or repeal of Bylaws or the
adoption of new Bylaws;
(v) the amendment or repeal of any resolution of the
Board of Directors which by its express terms is not so amendable or repealable;
(vi) a distribution to the stockholders of the
Corporation, except at a rate or in a periodic amount or within a price range
determined by the Board of Directors; or
(vii) the appointment of any other committees of the
Board of Directors or the members thereof.
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(b) Meetings and action of committees shall be governed by,
and held and taken in accordance with, the provisions of these Bylaws dealing
with the place of meetings, regular meetings, special meetings and notice,
quorum, waiver of notice, adjournment, notice of adjournment and action without
meeting, with such changes in the context of these Bylaws as are necessary to
substitute the committee and its members for the Board of Directors and its
members, except that the time or regular meetings of committees may be
determined by resolutions of the Board of Directors. Notice of special meetings
of committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The Board of Directors or a
committee may adopt rules for the government of such committee not inconsistent
with the provisions of these Bylaws.
Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member.
3.14 OTHER COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more non-employee directors and one or more other
disinterested persons, who need not be directors, for the purpose of providing
advice to the Board regarding any matter, including but not limited to the
compensation of officers and other key employees. For the purposes of this
Section, a "disinterested person" means any person having no significant
interest in the actions of the committee, as determined by the Board. Any such
committee, to the extent provided in the resolution of the Board and except as
otherwise limited by law, shall assist the Board in exercising its powers and
authority in the management of the business and affairs of the Corporation, but
shall not itself exercise such powers and authority. Any such committee shall
keep written minutes of its meetings and report the same to the Board at the
next regular meeting of the Board. In the absence or disqualification of a
member of any such committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint any disinterested person to act at the meeting
in the place of any such absent or disqualified member. The compensation and
reimbursement of expenses of the members of any such committee shall be
determined by resolution passed by a majority of the whole Board. Neither the
payment of such compensation nor the reimbursement of such expenses shall be
construed to preclude any such member from serving the Corporation or its
subsidiaries in any other capacity and receiving compensation therefor.
3.15 CERTAIN TRANSACTIONS. In the absence of fraud, no contract or
other transaction between the Corporation and any other corporation, and no act
of the Corporation, shall in any way be affected or invalidated by the fact that
any of the directors of the Corporation are financially or otherwise interested
in, or are directors or officers of, such other corporations; and, in the
absence of fraud, any director, individually, or any firm of which any director
may be a member, may be a party to, or may be financially or otherwise
interested in, any contract or transaction of the Corporation; provided, in any
case, that the fact that he or such firm is so interested shall be disclosed or
shall have been known to the Board of Directors or committee. Any director of
the Corporation who is also a director or officer of any such other corporation
or who is so interested may be counted in determining the existence of a quorum
at any meeting of the Board of Directors of the Corporation that shall authorize
any such contract, act or transaction, and may vote thereat to authorize any
such contract, act or transaction, with full force and effect as if he were not
such director or officer of such other corporation or not so interested.
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ARTICLE IV
OFFICERS
4.1 CORPORATE OFFICERS.
(a) The officers of the Corporation shall be a Chief Executive
Officer (Chairman of the Board), a President, one or more Vice Presidents (the
number thereof and their respective titles to be determined by the Board), a
Secretary, Chief Financial Officer (Treasurer) and such other officers as may be
appointed at the discretion of the Board in accordance with the provisions of
Section 4.1(b).
(b) In addition to the officers specified in Section 4.1(a),
the Board may appoint such other officers as the Board may deem necessary or
advisable, including one or more Assistant Secretaries and one or more Assistant
Treasurers, each of whom shall hold office for such period, have such authority
and perform such duties as the Board may from time to time determine. The Board
may delegate to any officer of the Corporation or any committee of the Board the
power to appoint, remove and prescribe the duties of any officer provided for in
this Section 4.1(b).
(c) Any number of offices may be held by the same person.
4.2 ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of the
Corporation, except such officers as may be appointed in accordance with
Sections 4.1(b) or 4.5, shall be appointed annually by the Board at the first
meeting thereof held after the election of the Board. Each officer shall hold
office until such officer shall resign or shall be removed by the Board (either
with or without cause) or otherwise disqualified to serve, or the officer's
successor shall be appointed and qualified.
4.3 REMOVAL. Any officer of the Corporation may be removed, with or
without cause, at any time at any regular or special meeting of the Board by a
majority of the directors of the Board at the time in office or, except in the
case of an officer appointed by the Board, by any officer of the Corporation or
committee of the Board upon whom or which such power of removal may be conferred
by the Board.
4.4 RESIGNATIONS. Any officer may resign at any time by giving written
notice of his resignation to the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, upon receipt thereof by the Board,
President or Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
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4.5 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or other cause may be filled for the unexpired portion
of the term thereof in the manner prescribed in these Bylaws for regular
appointments or elections to such office.
4.6 CHIEF EXECUTIVE OFFICER (CHAIRMAN OF THE BOARD). The Chief
Executive Officer (Chairman of the Board) of the Corporation shall be the chief
executive officer of the Corporation, unless otherwise determined by the Board,
and shall have, subject to the control of the Board, general and active
supervision and management over the business of the Corporation and over its
several subordinate officers, assistants, agents and employees. The Chief
Executive Officer shall preside at all meetings of the stockholders and at all
meetings of the Board.
4.7 PRESIDENT. The President shall have, subject to the control of the
Board and/or the Chief Executive Officer (Chairman of the Board), general and
active supervision and management over the business of the Corporation and over
its several subordinate officers, assistants, agents and employees. The
President shall have such other powers and duties as may from time to time be
assigned to him by the Chief Executive Officer (Chairman of the Board), the
Board or as prescribed by the Bylaws. At the request of the Chief Executive
Officer (Chairman of the Board), or in the case of the absence or inability to
act of the Chief Executive Officer (Chairman of the Board) upon the request of
the Board, the President shall perform the duties of the Chief Executive Officer
(Chairman of the Board) and when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer (Chairman of
the Board).
4.8 VICE PRESIDENTS. Each Vice President shall have such power and
perform such duties as the Board may from time to time prescribe. At the request
of the President, or in the case of the President's absence or inability to act
upon the request of the Board, a Vice President shall perform the duties of the
President and when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President.
4.9 CHIEF FINANCIAL OFFICER (TREASURER). The Chief Financial Officer
(Treasurer) shall supervise, have custody of, and be responsible for all funds
and securities of the Corporation. The Chief Financial Officer (Treasurer) shall
deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected by the Board or in
accordance with authority delegated by the Board. The Chief Financial Officer
(Treasurer) shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. The Chief Financial Officer (Treasurer)
shall exercise general supervision over expenditures and disbursements made by
officers, agents and employees of the Corporation and the preparation of such
records and reports in connection therewith as may be necessary or desirable.
The Chief Financial Officer (Treasurer) shall, in general, perform all other
duties incident to the office of Chief Financial Officer (Treasurer) and such
other duties as from time to time may be assigned to the Chief Financial Officer
(Treasurer) by the Board.
4.10 SECRETARY. The Secretary shall have the duty to record the
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose. The Secretary shall see that all notices are
duly given in accordance with these Bylaws and as required by law; shall be
custodian of the seal of the Corporation and shall affix and attest the seal to
all documents to be executed on behalf of the Corporation under its seal; and,
in general, he shall perform all the duties incident to the office of Secretary
and such other duties as may from time to time be assigned to him by the Board.
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4.11 COMPENSATION. The compensation of the officers of the Corporation
shall be fixed from time to time by the Board. None of such officers shall be
prevented from receiving such compensation by reason of the fact that he is also
a director of the Corporation. Nothing contained herein shall preclude any
officer from serving the Corporation, or any subsidiary corporation, in any
other capacity and receiving proper compensation therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS,
BANK ACCOUNTS, ETC.
5.1 EXECUTION OF CONTRACTS. The Board, except as these Bylaws otherwise
provide, may authorize any officer or officers, agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any account.
5.2 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
of money, notes or other evidence of indebtedness, issued in the name of or
payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such person shall give such bond, if any, as the
Board may require.
5.3 DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board may select, or as may be
selected by any officer or officers, assistant or assistants, agent or agents,
or attorney or attorneys of the Corporation to whom such power shall have been
delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the Chief Executive Officer,
President, any Vice President or the Chief Financial Officer, (or any other
officer or officers, assistant or assistants, agent or agents or attorney or
attorneys of the Corporation who shall from time to time be determined by the
Board), may endorse, assign and deliver checks, drafts and other orders for the
payment of money which are payable to the order of the Corporation.
5.4 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time to time
authorize the opening and keeping of general and special bank accounts with such
banks, trust companies or other depositories as the Board may select or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
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ARTICLE VI
SHARES AND THEIR TRANSFER
6.1 CERTIFICATES FOR STOCK.
(a) The shares of the Corporation shall be represented by
certificates, provided that the Board may provide by resolution or resolutions
that some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board, every holder of
stock represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate, in such form as
the Board shall prescribe, signed by, or in the name of, the Corporation by the
Chief Executive Officer (Chairman of the Board), or the President or Vice
President, and by the Chief Financial Officer (Treasurer) or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation
representing the number of shares registered in certificate form. Any of or all
of the signatures on the certificates may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any such certificates, shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, such certificate
may nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue.
(b) A record shall be kept of the respective names of the
persons, firms or corporations owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 6.4.
6.2 TRANSFERS OF STOCK. Transfers of shares of stock of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by such holder's attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
6.3 REGULATIONS. The Board may make such rules and regulations as it
may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
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<PAGE>
6.4 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In any case of
loss, theft, destruction or mutilation of any certificate of stock, another may
be issued in its place upon proof of such loss, theft, destruction or mutilation
and upon the giving of a bond of indemnity to the Corporation in such form and
in such sum as the Board may direct; provided, however, that a new certificate
may be issued without requiring any bond when, in the judgment of the Board, it
is proper to do so.
6.5 PAYMENT FOR SHARES. Certificates for shares may be issued prior to
full payment under such restrictions and for such purposes as the Board may
provide; provided, however, that on any certificate issued to represent any
partly paid shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be stated.
ARTICLE VII
INDEMNIFICATION
7.1 AUTHORIZATION FOR INDEMNIFICATION. The Corporation may indemnify,
in the manner and to the full extent permitted by law, any person (or the
estate, heirs, executors, or administrators of any person) who was or is a party
to, or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
7.2 ADVANCE OF EXPENSES. Costs and expenses (including attorneys' fees)
incurred by or on behalf of a director or officer in defending or investigating
any action, suit, proceeding or investigation may be paid by the Corporation in
advance of the final disposition of such matter, if such director or officer
shall undertake in writing to repay any such advances in the event that it is
ultimately determined that he is not entitled to indemnification. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
-16-
<PAGE>
obtainable, a quorum of disinterested directors so directs) by independent legal
counsel in a written opinion, or by the stockholders, that, based upon the facts
known to the Board or counsel at the time such determination is made, (a) the
director, officer, employee or agent acted in bad faith or deliberately breached
his duty to the Corporation or its stockholders, and (b) as a result of such
actions by the director, officer, employee or agent, it is more likely than not
that it will ultimately be determined that such director, officer, employee or
agent is not entitled to indemnification.
7.3 INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article or applicable law.
7.4 NON-EXCLUSIVITY. The right of indemnity and advancement of expenses
provided herein shall not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. Any agreement for
indemnification of or advancement of expenses to any director, officer, employee
or other person may provide rights of indemnification or advancement of expenses
which are broader or otherwise different from those set forth herein.
ARTICLE VIII
MISCELLANEOUS
8.1 SEAL. The Board shall provide a corporate seal, which shall be in
the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Florida
and the year of incorporation.
8.2 WAIVER OF NOTICES. Whenever notice is required to be given by these
Bylaws or the Articles of Incorporation or by law, the person entitled to said
notice may waive such notice in writing, either before or after the time stated
therein, and such waiver shall be deemed equivalent to notice. Attendance of a
person at a meeting (whether in person or by proxy in the case of a meeting of
stockholders) shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of any regular or special meeting of the stockholders, directors
or members of a committee of directors need be specified in any written waiver
of notice.
8.3 AMENDMENTS. The original or other Bylaws of the Corporation may be
adopted, amended or repealed by the affirmative vote of a simple majority of the
holders of all the issued and outstanding shares of the Corporation.
-17-
<PAGE>
8.4 REPRESENTATION OF OTHER CORPORATIONS. The Chief Executive Officer
(Chairman of the Board), President, any Vice President or the Secretary of this
Corporation is authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
to do so by proxy or power of attorney duly executed by said officers.
8.5 STOCK PURCHASE PLANS. The Corporation may adopt and carry out a
stock purchase plan or agreement or stock option plan or agreement providing for
the issue and sale for such consideration as may be fixed of its unissued
shares, or of issued shares acquired or to be acquired, to one or more of the
employees or directors of the Corporation or of a subsidiary or to a trustee on
their behalf and for the payment for such shares in installments or at one time,
and may provide for aiding any such persons in paying for such shares by
compensation for services rendered, promissory notes, or otherwise.
Any stock purchase plan or agreement or stock option plan or agreement
may include, among other features, the fixing of eligibility for participation
therein, the class and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for, the method of
payment therefor, the reservation of title until full payment therefor, the
effect of the termination of employment and option or obligation on the part of
the Corporation to repurchase the shares, the time limits of and termination of
the plan and any other matters, not in violation of applicable law, as may be
included in the plan as approved or authorized by the Board or any committee of
the Board.
8.6 CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in the
Florida General Corporation Act shall govern the construction of these Bylaws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
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<PAGE>
C E R T I F I C A T E O F S E C R E T A R Y
-------------------------------------------
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of Dogwood
Tree Capital Corp., a Florida corporation; and
2. That the foregoing Amended and Restated Bylaws, comprising
nineteen (19) pages, constitute the Bylaws of said Corporation as duly adopted
by the board of directors of said Corporation by majority written consent
effective as of March 11, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of said Corporation effective as of March 11, 1999.
/S/ David J. D'Arcangelo
--------------------------------
David J. D'Arcangelo, Secretary
-19-
EXHIBIT 5.1
OPPENHEIMER WOLFF & DONNELLY LLP
500 Newport Center Drive
Suite 700
Newport Beach, California 92660
(949) 719-6000
(949) 719-6040 (Fax)
May 5, 2000
EntrePort Corporation
10455 Sorrento Valley Road, Suite 204
San Diego, California 92121
Re: Registration Statement on Form SB-2
-----------------------------------
Gentlemen:
As counsel for EntrePort Corporation, a Florida corporation (the
"Company"), we have examined its Certificate of Incorporation, as amended,
Bylaws and such other corporate records, documents and proceedings, and such
questions of law as we have deemed relevant for the purpose of this opinion. We
have also, as such counsel, examined the Registration Statement on Form SB-2 of
the Company as filed with the Securities and Exchange Commission, covering the
registration under the Securities Act of 1933, as amended, of a total 6,091,114
shares of $.001 par value common stock ("Common Stock"), including the exhibits
and form of Prospectus (the "Prospectus") pertaining thereto, and any amendments
thereto (collectively, the "Registration Statement").
Upon the basis of such examination, we are of the opinion that:
1. The Company is a corporation duly authorized and validly existing in
good standing under the laws of the State of Florida, with all requisite power
to conduct the business described in the Registration Statement.
2. The shares of the Company's Common Stock registered pursuant to the
Registration Statement have been duly and validly authorized and, subject to the
payment therefor pursuant to the terms contemplated in the final Prospectus,
such shares of Common Stock will be duly and validly issued as fully paid and
non-assessable securities of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ OPPENHEIMER WOLFF & DONNELLY LLP
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into, effective as
of March 17, 1999, between DOGWOOD TREE CAPITAL CORP., a Florida corporation
("Employer"), and DAVID D'ARCANGELO ("Employee").
R E C I T A L S
---------------
A. Employer desires to engage in various aspects of web development
services business, including internet based seminars and the up-sale of
miscellaneous products and services.
B. Employee desires to join the Employer as its Chairman.
C. To set forth the terms and conditions of his employment with the
Employer, the Employee desires to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, Employer and Employee, intending to
be legally bound, hereby agree as follows:
A G R E E M E N T
-----------------
1. TERM OF EMPLOYMENT. Employer hereby employs Employee, and Employee
hereby accepts employment with Employer, for a period of three (3) years
terminating April 1, 2002 ("Employment Period"); provided that this Agreement
shall be automatically renewed for successive one (1) year terms unless either
party elects not to renew this Agreement by delivering written notice of its
election to the other party no later than ninety (90) days prior to the end of
the current term. Notwithstanding anything in this Section 1 to the contrary,
this Agreement may be terminated at any time in accordance with Section 6.
2. DUTIES OF EMPLOYEE. Employee shall serve in the capacity as Chairman
of Employer at Employer's office in San Diego, California, or at such other
place as Employer may direct; provided that Employer shall not direct or cause
Employee to perform his services from an office outside of San Diego County,
California, except for periods of travel that are deemed necessary for purposes
of fulfilling Employee's responsibilities hereunder. Employee shall have the
responsibility to generally and actively supervise and manage all the business
activities and functions of the Employer and its subordinate officers, agents
and employees. Except during vacation periods or in accordance with Employer's
personnel policies covering executive leaves and reasonable periods of illness
or other incapacitation, Employee shall devote his services to Employer's
business and interests in a manner consistent with Employee's title and office
and Employer's needs for his services. Employee shall perform the duties of
<PAGE>
Employee's office and those assigned to Employee by the Employer's board of
directors with fidelity, to the best of Employee's ability, and in the best
interest of Employer. During the term of this Agreement, the Employee shall
devote his entire productive time, attention, knowledge and skill to the
business and interest of the Employer as contemplated in this Agreement. The
Employee further agrees to devote all of his skills and efforts to the
performance of, and to perform diligently and on a timely basis, such duties as
shall be assigned to the employee from time to time by the Employer's board of
directors so long as such other services and duties are not inconsistent with
any other term of this Agreement.
3. COMPENSATION OF EMPLOYEE. As compensation for Employee's services
hereunder, Employee shall receive a base salary of Eight Thousand Three Hundred
Thirty-Three Dollars and Thirty-Four Cents ($8,333.34) per month, payable in
bi-monthly installments of Four Thousand One Hundred Sixty-Six Dollars and
Sixty-Seven Cents ($4,166.67) each, or a ratable portion thereof for periods of
less than one-half month. Such salary shall be adjusted to reflect Employee's
responsibility at such time when either the Employer has raised sufficient
capital or Employer's profits can warrant such. Salary shall be adjusted to be
commensurate with chairmen of similar public organizations but shall be no less
than $200,000 per year plus company automobile. Employee shall determine the
date of such adjustments by given the Board of Directors thirty (30) days'
notice.
4. EXPENSE REIMBURSEMENTS. Employee shall be reimbursed for reasonable
and actual out-of-pocket expenses incurred by Employee in performance of
Employee's duties and responsibilities hereunder in accordance with Employer's
established personnel policy covering executive officer expense reimbursements,
as such policy may be amended, revised or otherwise changed from time to time.
Employee shall furnish proper vouchers and expense reports and shall be
reimbursed only for those expenses which shall be reimbursable.
5. VACATION, SICK LEAVE AND OTHER FRINGE BENEFITS. Employee shall be
entitled to two (2) weeks vacation per every twelve (12) month period of
employment hereunder. Employee shall also be entitled to leaves for illness or
other incapacitation as is consistent with Employee's title and Employer's needs
for Employee's services, except as otherwise provided for in Section 6.2.
Employee shall be entitled during Employee's employment hereunder to share or
participate in such medical insurance programs or other "fringe" benefit plans
or programs as shall be made available to executive officers employed by
Employer generally, in accordance with Employer's established personnel
policies, if any, or as established, amended, revised or otherwise changed from
time to time, covering executive officer employee benefits. Employer agrees to
also review Employee's performance on an annual basis for consideration of stock
options.
6. TERMINATION.
6.1 TERMINATION BY EMPLOYER FOR CAUSE. Employer may terminate
this Agreement and Employee's employment hereunder for Cause (as defined herein)
any time effective upon written notice to Employee. As used herein, the term
"Cause" shall mean:
-2-
<PAGE>
6.1.1 Habitual neglect in the performance of
Employee's material duties as set forth in Section 2 which continues uncorrected
for a period of ten (10) days after written notice thereof by Employer to
Employee; or
6.1.2 Negligence involving misfeasance or nonfeasance
by Employee in the performance of Employee's material duties as set forth in
Section 2 which continues uncorrected for a period of ten (10) days after
written notice thereof by Employer to Employee; or
6.1.3 A material breach of that certain Employee
NonDisclosure and Invention Assignment Agreement entered into by Employee.
6.1.4 Insubordination or nonfeasance by Employee of
any services or duties as may be assigned to Employee by the board of directors,
except to the extent that such services or duties would involve a violation of
law or materially expand or conflict with Employee's duties set forth in Section
2.
6.2 TERMINATION UPON DEATH OR DISABILITY. This Agreement and
Employee's employment hereunder shall terminate upon Employee's death or
Disability (as defined herein). For this purpose, "Disability" means incapacity,
whether by reason of physical or mental illness or disability, which prevents
Employee from substantially performing Employee's material duties as set forth
in Section 2 for six (6) months, or for shorter periods aggregating six (6)
months in any twelve (12) successive calendar months. Upon termination for
Disability, unless Employer shall have in force a disability insurance policy
providing for benefits in an amount at least equal to the benefits provided in
this Section 6.2, upon termination for Disability, Employer shall continue to
pay the base compensation payments pursuant to Section 3 to the Employee's court
appointed conservator until the date [three (3)] months following the effective
date of Disability. Upon termination for death, Employer shall continue to pay
the base compensation payments pursuant to Section 3 to the surviving spouse of
Employee (or if there is none to Employee's estate) until the date three (3)
months following the date of death. Termination for death shall become effective
upon the occurrence of such event and termination for Disability shall become
effective upon written notice by Employer to Employee.
6.3 EVENTS UPON TERMINATION. The termination of this Agreement
pursuant to Section 6 shall also result in the termination of all rights and
benefits of Employee under this Agreement except for any rights to compensation
accrued under Section 3 prior to the date of termination or rights to expense
reimbursement under Section 4 and, upon death of Disability as provided in
Section 6.2, the rights provided in Section 6.2 hereof.
7. EMPLOYEE'S REPRESENTATIONS. Employee represents and warrants that
Employee is free to enter into this Agreement and to perform each of the
provisions contained herein. Employee represents and warrants that Employee is
not restricted or prohibited, contractually or otherwise, from entering into and
performing this Agreement, and that Employee's execution and performance of this
Agreement is not a violation or breach of any agreement between Employee and any
other person or entity.
-3-
<PAGE>
8. INDEMNIFICATION. Employer agrees to forever indemnify and hold
Employee harmless from and against any and all liability, loss, costs, claims or
expenses (including, without limitation, reasonable attorney fees and
disbursements) arising out of or relating to any claim brought by any party
(including, without limitation, any governmental agency) relating to Employee's
employment with Employer, Employee's lawful duties and activities in respect
thereto, or the business of Employer.
9. GENERAL PROVISIONS.
9.1 SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be judicially
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be binding and enforceable.
9.2 ASSIGNMENT. Neither this Agreement nor any of the rights
or obligations of Employee or the Company hereunder shall be assignable.
9.3 NOTICES. Any notice to be given to Employer under the
terms of this Agreement shall be addressed to Employer at the address of
Employer's principal place of business, and any notice to be given to Employee
shall be addressed to Employee at his home address last shown on the records of
Employer, or at such other address as either party may hereafter designate in
writing to the other. Any notice required or permitted under this Agreement
shall be in writing and shall be deemed effective: (i) upon receipt in the event
of delivery by hand, including delivery made by private delivery or overnight
mail service where either the recipient or delivery agent executes a written
receipt or confirmation of delivery; or (ii) 48 hours after deposited in the
United States mail, registered or certified mail, return receipt requested,
postage prepaid.
9.4 WAIVER. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, or prevent that party thereafter from
enforcing each and every other provision of this Agreement.
9.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes
any and all other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by Employer and contains all
of the covenants and agreements between the parties with respect to the
employment of Employee by Employer. Each party to this Agreement acknowledges
that no representations, inducements, promises or agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf of any party,
which are not embodied herein, and that no other agreement, statement or promise
not contained in this Agreement will be effective only if it is in writing
signed by the party to be charged.
9.6 TITLES AND HEADINGS. Titles and headings to sections of
this Agreement are for the purpose of reference only and shall in no way limit,
define or otherwise affect the interpretation or construction of such
provisions.
-4-
<PAGE>
9.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"EMPLOYER"
DOGWOOD TREE CAPITAL CORP.,
a Florida corporation
By: /S/
------------------------
"EMPLOYEE"
/S/ David D'Arcangelo
---------------------------
DAVID D'ARCANGELO
-5-
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into, effective as
of March 19, 1999, between DOGWOOD TREE CAPITAL CORP., a Florida corporation
("Employer"), and WILLIAM A. SHUE ("Employee").
R E C I T A L S
---------------
A. Employer desires to engage in various aspects of web development
services business, including Internet based seminars and training and the
up-sale of miscellaneous products and services.
B. Employee desires to join the Employer as its President and Chief
Executive Officer.
C. To set forth the terms and conditions of his employment with the
Employer, the Employee desires to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, Employer and Employee, intending to
be legally bound, hereby agree as follows:
A G R E E M E N T
-----------------
1. TERM OF EMPLOYMENT. Employer hereby employs Employee, and Employee
hereby accepts employment with Employer, for a period of three (3) years
starting on April 19, 1999 and terminating April 18, 2002 ("Employment Period");
provided that this Agreement shall be automatically renewed for successive one
(1) year terms unless either party elects not to renew this Agreement by
delivering written notice of its election to the other party no later than
ninety (90) days prior to the end of the current term. Notwithstanding anything
in this Section 1 to the contrary, this Agreement may be terminated at any time
in accordance with Section 6.
2. DUTIES OF EMPLOYEE. Employee shall serve in the capacity as
President and Chief Executive Officer of Employer at Employer's office in San
Diego, California or Houston, Texas, or at such other place as Employer may
direct; provided that Employer shall not direct or cause Employee to perform his
services from an office outside of San Diego County, California, except for
periods of travel that are deemed necessary for purposes of fulfilling
Employee's responsibilities hereunder. Employee shall have the responsibility to
generally and actively supervise and manage all the business activities and
functions of the Employer and its subordinate officers, agents and employees.
Except during vacation periods or in accordance with Employer's personnel
policies covering executive leaves and reasonable periods of illness or other
incapacitation, Employee shall devote his services to Employer's business and
interests in a manner consistent with Employee's title and office and Employer's
<PAGE>
needs for his services. Employee shall perform the duties of Employee's office
and those assigned to Employee by the Employer's board of directors with
fidelity, to the best of Employee's ability, and in the best interest of
Employer. During the term of this Agreement, the Employee shall devote his
entire productive time, attention, knowledge and skill to the business and
interest of the Employer as contemplated in this Agreement. The Employee further
agrees to devote all of his skills and efforts to the performance of, and to
perform diligently and on a timely basis, such duties as shall be assigned to
the employee from time to time by the Employer's board of directors so long as
such other services and duties are not inconsistent with any other term of this
Agreement.
3. COMPENSATION OF EMPLOYEE. As compensation for Employee's services
hereunder, Employee shall receive a base salary of Eight Thousand Three Hundred
Thirty-Three Dollars and Thirty-Four Cents ($8,333.34) per month, payable in
bi-monthly installments of Four Thousand One Hundred Sixty-Six Dollars and
Sixty-Seven Cents ($4,166.67) each, or a ratable portion thereof for periods of
less than one-half month. Such salary shall be adjusted to reflect Employee's
responsibility at such time when either the Employer has raised sufficient
capital or Employer's profits can warrant such. Salary shall be adjusted to be
commensurate with presidents and chief executive officers of similar public
organizations but shall be no less than $200,000 per year plus company
automobile. Employee shall determine the date of such adjustments by given the
Board of Directors thirty (30) days' notice.
4. EXPENSE REIMBURSEMENTS. Employee shall be reimbursed for reasonable
and actual out-of-pocket expenses incurred by Employee in performance of
Employee's duties and responsibilities hereunder in accordance with Employer's
established personnel policy covering executive officer expense reimbursements,
as such policy may be amended, revised or otherwise changed from time to time.
Employee shall furnish proper vouchers and expense reports and shall be
reimbursed only for those expenses which shall be reimbursable. Expenses include
all business related travel, hotel, auto, meals, etc., including all expenses
for Employee travel between San Diego and Houston.
5. VACATION, SICK LEAVE, OTHER FRINGE BENEFITS, RELOCATION AND STOCK
OPTIONS.
5.1 VACATION, SICK LEAVE AND OTHER FRINGE BENEFITS. Employee
shall be entitled to two (2) weeks vacation per every twelve (12) month period
of employment hereunder. Employee shall also be entitled to leaves for illness
or other incapacitation as is consistent with Employee's title and Employer's
needs for Employee's services, except as otherwise provided for in Section 6.2.
Employee shall be entitled during Employee's employment hereunder to share or
participate in such medical insurance programs or other "fringe" benefit plans
or programs as shall be made available to executive officers employed by
Employer generally, in accordance with Employer's established personnel
policies, if any, or as established, amended, revised or otherwise changed from
time to time, covering executive officer employee benefits.
-2-
<PAGE>
5.2 RELOCATION. Employer agrees to pay all relocation expenses
for Employee and his immediate family to relocate from Houston to the San Diego
area. Such expenses shall follow IRS guidelines for relocation expenses and
shall include but not be limited to: closing costs on sale of Employee's
existing home in Houston, corporate purchase of existing home at fair market
value, closing costs on purchase of new home in San Diego area, moving expenses,
temporary housing, transportation, etc. Such relocation shall occur when
Employer has sufficient capital. Additionally, Employer shall equalize the
increase in the cost of housing from Houston to San Diego by loaning Employee
the difference of the cost of similar housing. Such loan shall be secured by a
second lien on the housing purchased and shall have a 15 year term with a six
percent annual interest rate. All interest shall be accrued and bonused to
Employee on an annual basis with all principal due in 15 years.
5.3 STOCK OPTIONS. Employer agrees to grant Employee 300,000
stock options at $1.00 per share to purchase Employer common stock. Such options
shall be mutually agreed and are an integral part of this Employment Agreement.
Employer agrees to also review Employee's performance on an annual basis for
consideration of additional stock options.
6. TERMINATION.
6.1 TERMINATION BY EMPLOYER FOR CAUSE. Employer may terminate
this Agreement and Employee's employment hereunder for Cause (as defined herein)
any time effective upon written notice to Employee. As used herein, the term
"Cause" shall mean:
6.1.1 Habitual neglect in the performance of
Employee's material duties as set forth in Section 2 which continues uncorrected
for a period of thirty (30) days after written notice thereof by Employer to
Employee; or
6.1.2 Material negligence involving misfeasance or
nonfeasance by Employee in the performance of Employee's material duties as set
forth in Section 2 which continues uncorrected for a period of thirty (30) days
after written notice thereof by Employer to Employee; or
6.1.3 A material breach of that certain Employee
NonDisclosure and Invention Assignment Agreement entered into by Employee.
6.1.4 Insubordination or nonfeasance by Employee of
any material services or duties as may be assigned to Employee by the board of
directors, except to the extent that such services or duties would involve a
violation of law or materially expand or conflict with Employee's duties set
forth in Section 2.
6.2 TERMINATION UPON DEATH OR DISABILITY. This Agreement and
Employee's employment hereunder shall terminate upon Employee's death or
Disability (as defined herein). For this purpose, "Disability" means incapacity,
whether by reason of physical or mental illness or disability, which prevents
Employee from substantially performing Employee's material duties as set forth
in Section 2 for six (6) months, or for shorter periods aggregating six (6)
months in any twelve (12) successive calendar months. Upon termination for
-3-
<PAGE>
Disability, unless Employer shall have in force a disability insurance policy
providing for benefits in an amount at least equal to the benefits provided in
this Section 6.2, upon termination for Disability, Employer shall continue to
pay the base compensation payments pursuant to Section 3 to the Employee's court
appointed conservator until the date six (6) months following the effective date
of Disability. Upon termination for death, Employer shall continue to pay the
base compensation payments pursuant to Section 3 to the surviving spouse of
Employee (or if there is none to Employee's estate) until the date six (6)
months following the date of death. Termination for death shall become effective
upon the occurrence of such event and termination for Disability shall become
effective upon written notice by Employer to Employee.
6.3 TERMINATION BY EMPLOYEE. Employee at his sole option may
elect to terminate this Agreement if the Company has not received two million
dollars ($2,000,000) in cash equity (purchase of common stock) on or before June
30, 1999. Employee shall give the board of directors of the Company, written
notice to terminate this Agreement by August 31, 1999 and such termination shall
become effective immediately.
6.4 EVENTS UPON TERMINATION. The termination of this Agreement
pursuant to Section 6 shall also result in the termination of all rights and
benefits of Employee under this Agreement except for any rights to compensation
accrued under Section 3 prior to the date of termination or rights to expense
reimbursement under Section 4 and, upon death of Disability as provided in
Section 6.2, the rights provided in Section 6.2 hereof.
7. EMPLOYEE'S REPRESENTATIONS. Employee represents and warrants that
Employee is free to enter into this Agreement and to perform each of the
provisions contained herein. Employee represents and warrants that Employee is
not restricted or prohibited, contractually or otherwise, from entering into and
performing this Agreement, and that Employee's execution and performance of this
Agreement is not a violation or breach of any agreement between Employee and any
other person or entity.
8. INDEMNIFICATION. Employer agrees to forever indemnify and hold
Employee harmless from and against any and all liability, loss, costs, claims or
expenses (including, without limitation, reasonable attorney fees and
disbursements) arising out of or relating to any claim brought by any party
(including, without limitation, any governmental agency) relating to Employee's
employment with Employer, Employee's lawful duties and activities in respect
thereto, or the business of Employer.
9. GENERAL PROVISIONS.
9.1 SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be judicially
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be binding and enforceable.
9.2 ASSIGNMENT. Neither this Agreement nor any of the rights
or obligations of Employee or the Company hereunder shall be assignable.
-4-
<PAGE>
9.3 NOTICES. Any notice to be given to Employer under the
terms of this Agreement shall be addressed to Employer at the address of
Employer's principal place of business, and any notice to be given to Employee
shall be addressed to Employee at his home address last shown on the records of
Employer, or at such other address as either party may hereafter designate in
writing to the other. Any notice required or permitted under this Agreement
shall be in writing and shall be deemed effective: (i) upon receipt in the event
of delivery by hand, including delivery made by private delivery or overnight
mail service where either the recipient or delivery agent executes a written
receipt or confirmation of delivery; or (ii) 48 hours after deposited in the
United States mail, registered or certified mail, return receipt requested,
postage prepaid.
9.4 WAIVER. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, or prevent that party thereafter from
enforcing each and every other provision of this Agreement.
9.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes
any and all other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by Employer and contains all
of the covenants and agreements between the parties with respect to the
employment of Employee by Employer. Each party to this Agreement acknowledges
that no representations, inducements, promises or agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf of any party,
which are not embodied herein, and that no other agreement, statement or promise
not contained in this Agreement will be effective only if it is in writing
signed by the party to be charged.
9.6 TITLES AND HEADINGS. Titles and headings to sections of
this Agreement are for the purpose of reference only and shall in no way limit,
define or otherwise affect the interpretation or construction of such
provisions.
9.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"EMPLOYEE" "EMPLOYER"
DOGWOOD TREE CAPITAL CORP.,
/s/ William A. Shue By: /S/
- ---------------------------- ------------------------
William A. Shue
-5-
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 21, 2000, in the Registration Statement (Form
SB-2) and related Prospectus of Entreport Corporation for the registration of
6,091,114 shares of its common stock.
/s/Ernst & Young LLP
San Diego, California
May 9, 2000
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,458,139
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0
0
<COMMON> 7,835
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<TOTAL-LIABILITY-AND-EQUITY> 2,433,618
<SALES> 11,911
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