SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(g) of
The Securities Exchange Act of 1934
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FLEXEMESSAGING.COM, INC.
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(Name of Small Business Issuer in its charter)
Idaho 82-0485978
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Level 27 Grosvenor Place
225 George Street
Sydney, Australia NSW 2000
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(Address of principal executive offices) (Zip code)
Issuer's telephone number: (011) 61 2 9250-8888
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Securities to be registered pursuant to Section 12(b) of the Act: none
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock
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(Title of Class)
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TABLE OF CONTENTS
Page
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PART I
Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis 10
Item 3. Description of Property 20
Item 4. Security Ownership of Certain Beneficial Owners
and Management 21
Item 5. Directors, Executive Officers, Promoters and
Control Persons 21
Item 6. Executive Compensation 24
Item 7. Certain Relationships and Related Transactions 25
Item 8. Description of Securities 25
PART II
Item 1. Market for Common Equities and Related
Stockholder Matters 27
Item 2. Legal Proceedings 27
Item 3. Changes in and Disagreements with Accountants 28
Item 4. Recent Sales of Unregistered Securities 28
Item 5. Indemnification of Directors and Officers 28
PART F/S
Financial Statements 29
PART III
Item 1. Index to Exhibits 30
Item 2. Description of Exhibits 30
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PART I
The Company cautions readers regarding certain forward-looking statements in the
following discussion and elsewhere in this document or any other statement made
by, or on the behalf of the Company, whether or not in future filings with the
Securities and Exchange Commission. Forward-looking statements are not based on
historical information but relate to future operations, strategies, financial
results or other developments. Forward-looking statements are necessarily based
upon estimates and assumptions that are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond the Company's control and many of which, with respect to future
business decisions, are subject to change. These uncertainties and contingencies
can affect actual results and could cause actual results to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Company. The Company disclaims any obligation to update forward-looking
statements.
Item 1. Description of Business
FlexEmessaging.Com, Inc. was formed under the laws of the State of Idaho on
August 29, 1957 under the name of Siler Equipment Sales, Inc. to salvage and
sell scrap metal, mine timber and related mining products (the "Company").
Thereafter, the name of the Company was changed to American Network
Technologies, Inc. on February 20, 1996, to Piazztec International, Inc. on June
18, 1997 and Siler Ventures, Inc. ("SVI") on February 23, 1998. On February 15,
1999, the Company changed its name to FlexEmessaging.Com, Inc. to better reflect
the new industry in which it now operates upon the successful reverse
acquisition of Trade Wind Group Pty Limited ("TWG"), a wholly-owned subsidiary
of Trade Wind Communications Limited, a Bermuda corporation ("TWC").
On February 5, 1999, the Company entered into a business combination with TWC to
purchase all of its business assets, consisting of the stock of TWG, in exchange
for the issuance of 8.8 million shares of common stock of the Company, thereby
completing a reverse acquisition of the Company, and with Atlantic International
Capital Holdings Ltd., a Bermuda corporation, to provide financing arrangements
of $3,660,000 through the sale of the Company's common stock pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended, (some shares have been sold utilizing private placements with the
remaining shares presently being held in escrow subject to the completion of
such private placements). Thus, any references to past accomplishments of the
Company and its financial information shall relate solely to TWG, as combined,
since SVI (now known as Flexemessaging.com, Inc.) has been inactive for several
years.
The Company is now primarily engaged in two major business segments: voice and
data systems and broadcast fax. The Company's voice and data systems segment
(hereinafter referred to as the "Voice and Data Division") is a distributor of
communication systems and data applications for financial traders and emergency
services operations. The Company's broadcast fax segment (hereinafter referred
to as the "Flexifax Division") provides customers with a global enhanced fax
broadcast service originating from the customers' desktop personal computer
("PC").
The Company presently operates through eight subsidiaries incorporated under the
laws of New South Wales, Australia and Singapore and with approximately 70
full-time employees. One of the eight subsidiaries of the acquired TWG is a
wholly-owned subsidiary called Trade Wind Marketing Pty Ltd ("TWM"), a New South
Wales, Australian corporation. The Company's above-described operating divisions
operate under TWM using the tradename of 'Flexifax Global Services' and 'Voice &
Data'. For historical reasons, Voice & Data division was previously referred to
as "Trade Center Products" in the market. The Company's principal office is
located in Sydney, Australia. The Company's assets consist of office equipment,
leasehold improvements and the value of its on-going business operations.
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Outlook
Over the next 12 months the Company plans to re-position its offerings of
products and services into a more broad-based messaging operation, reducing its
dependence the carriage of fax traffic over a fax network and focusing on
offering specific channel based value added services to customers. To facilitate
this, the Company plans to develop strategic relationships and/or partnerships
with telecommunications carriers, Internet Service Providers ("ISPs") and
companies with complementary messaging technologies or services, possibly even
potential competitors. These relationships could cover areas and activities such
as sales, product marketing, services, technology sharing, network partnering,
traffic distribution and/or service provision agreements. The Company may divest
itself of certain technologies in order to move to newer ones or seek to provide
alternative methods of global traffic distribution, thus providing more scope
for efficient and cost effective distribution of its customers messaging
traffic. The Company also plans to expand its Voice and Data Division further
into call center applications and is negotiating with IPC Information Systems
("IPC"), a New York corporation, which is a world leader in the delivery of
integrated multimedia communications solutions to the financial trading
industry, to distribute its Turret systems (defined hereinafter under Voice and
Data Division) in Australia. This will complement the Voice and Data Division
call center operations presently supplying Rockwell Electronic Commerce
("Rockwell") and related activities.
Overview
FlexiFax Division
Flexifax Global Services ("Flexifax") was initially started about 5 years ago
whereby the company saw the growing need for sending information by fax
efficiently to multiple destinations. It was envisaged that the world would be
sending their messages from the desktop rather than from the fax machine. Thus
all future development would be based on the digital environment of the desktop.
The Company purchased a software application utilizing a Tandem Computer and
enhanced its functionality and efficiency. The Company then gradually
established a global network with remote nodes, which are industrial PC's with
fax cards, in international centers such as London, New York, Hong Kong, Tokyo,
Singapore, Wellington, Auckland and most of the major cities in Australia (the
"FlexiFax Global Network" or "Global Network"). Distributors were appointed in
some countries, mainly where nodes existed. The Company also established a
minimal presence in London and Singapore.
Product Evolution
FlexiFax today is a digital fax and email broadcasting service which distributes
a document from a user's desktop to potentially thousands of recipients' fax
machines and/or PCs. The software enables stand-alone or networked PC users to
connect to the FlexiFax Global Network. The service offers a number of key
features:
|X| Broadcast directly from the desktop
|X| Minimum online sending time
|X| Fine print definition due to transmission of document in digital
format
|X| Flexible and secure list database management
|X| Web browser connection
|X| File attachment.
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The growth of fax, and especially IP fax (see below) continues and the potential
for broadcast fax in the business-to-business area is a long way from being
fully realized.
The use of e-mail and other forms of Internet-based messaging are also growing
at an even greater rate. These methods are complementary to, rather than
competitive with, fax broadcasts as each are suited to particular tasks.
Accordingly, FlexiFax now offers the capability of broadcasts that combine fax
and email addresses, with the added option of Web-browser access to its network,
leaving the choice of method to the senders, based on the customers'
preferences. The next stage of the Company's evolution is to provide a high
degree of specialist value added services across all messaging technologies and
become involved in the growth of technologies, such as e-mail management
outsourcing and e-commerce, where messaging forms are an essential part of the
service.
Market Segmentation
The large potential of the total broadcast messaging market arises from its wide
`catchment' area and also from the innovation and added value that it brings to
organizations using more conventional methods.
Users of broadcast messaging include, but are not limited to:
|X| Banks, Securities Houses and Brokers
|X| Public Relations and Marketing Companies
|X| Wholesale Distributors (e.g. Computer Products, Books, Records,
Food)
|X| Life Insurance and Superannuation Companies
|X| Shipping and Freight Forwarders
|X| Accountancy Firms
|X| Professional Associations
|X| Political and Lobby Organizations
|X| Government and near-Government Organizations
Global Service
FlexiFax uses Internet Protocol ("IP") to communicate across its Global Network
of strategically located nodes controlled by the international hub in Sydney.
The technology ensures efficient use of bandwidth, adaptability to new messaging
technologies and control of network performance. The global architecture of the
system lends itself to the establishment of local subsidiaries, branch offices
and distributors. The service is available anywhere in the world, supported by a
central 24-hour Help Desk and dedicated support teams.
Strengths for the Future.
Frost & Sullivan have estimated that global IP faxing will increase from 6
million minutes in 1997 to around 90 million minutes by the end of 2001. There
is even more rapid growth in the volume of email. FlexiFax's IP messaging
technology, combining fax and email in the same broadcast, provides a platform
springboard for becoming a broad-based global messaging company, which stands to
benefit greatly from the expansion of the market and the power of the Internet.
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Growth Record
Delivered fax minutes have risen from 280,000 in 1995 to 17 million in 1998,
with a gross margin (before commissions to distributors) of over 60%. This is
believed to be at least as good as our significant competitors.
Strategy for Future Growth
The Company's current strategy is to have a sales and support teams presence in
key regions - initially to be Europe and USA, to promote its fax broadcast
business. The Company believes that a direct presence is preferable in the major
international zones, with the distributorship model ideal for the smaller
markets. The Company recognizes that for strong growth in the future it has to
re-position itself into the broad-based electronic messaging market and focus on
specific market channels to provide value added services. The Company has to
move from its reliance on faxing technology and its use of a fax only global
network if it wants to share more in the high growth in the Internet. This will
involve the Company managing much higher volumes of client electronic messaging
business but with a lower unit cost and margin, preferably with revenue realized
on a per transaction basis. The management plans to achieve this by aligning the
Company with, and leveraging off, larger players or recognized leaders in their
field, and then providing specialist added value messaging services to them and
their customers, in addition to providing the benefits to the Company's own
customers. This will involve partnerships or even joint ventures with other
technology companies or service providers and may involve alternative methods of
global traffic distribution and change in the company's customer profile. By
repositioning in this way the Company can seize opportunities that may present
themselves to move into yet other growth areas, such as e-commerce, unified
messaging or other growing markets. This is where the Company can take advantage
of the fact that messaging technology has to be included as an essential part of
the business. The Company's growing position in call centers (See Voice and Data
Division) is expected to open new opportunities for electronic messaging,
universal messaging, messaging/E-mail outsourcing and e-commerce.
The Company thus plans to develop strategic relationships, joint ventures and/or
partnerships with telecommunications carriers, ISPs or companies with
complementary messaging technologies and services, even potential competitors.
These relationships, joint ventures or partnerships could cover areas and
activities such as sales, product marketing, services, technology sharing,
network partnering, and traffic distribution. This may include the Company
divesting itself of certain technologies in order to move to newer ones,
providing more scope for efficient and cost effective distribution of its
messaging traffic or value added services or may involve alternative methods of
global traffic distribution.
Voice and Data Systems Division
The Voice and Data Systems Division is a leading systems integrator and
distributor of data and communications applications in Australia and New
Zealand, providing effective solutions to the critical needs of clients across
many sectors. This Division has maintained operating profits since its
establishment more than 12 years ago. The Company plans to expand its
opportunities through the development of call centers. Call centers are growing
in Australia and Asia at an annual rate of 25% and there is increasing demand
for more sophisticated and cost-effective technology. This Division is ideally
situated to capitalize on this growing trend with a range of world-class
products.
As a leading systems integrator and distributor of data and communications
applications in Australia and New Zealand, this Division provides effective
solutions to the following cross sectors: stock and futures exchanges, financial
institutions, emergency service providers, government agencies, airlines, public
utilities, industrial companies and hospitals. This Division maintains a
dominant position in the financial, commercial, government and emergency
services markets as a specialist provider of leading edge communications
products, systems integration and turnkey solutions.
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The Voice and Data Systems Division has developed or supplied outstanding
products for use by its clients including:
o V Band - digital dealer board ("turret") systems (recently acquired by
IPC Systems for which the Company is negotiating to become the
Australian distributor)
o Multitone - paging, wide-area call-out systems, DECT cordless PABX
o CSK Software - Slingshot real-time data delivery via Internet/Intranets
The Division's line-up of products for the call center market comprises:
o Rockwell - ACD and Call Center Solutions
o Aspect - Voicetek "Generations" Interactive Voice Response systems
o Pipkins Inc, - "Maxima Advantage" Workforce Management software
o Witness - Quality Monitoring systems
o Webline - Web-based Telebusiness/ e-Commerce system
o Trans-Lux - electronic display systems
o Dictaphone loggers
The Division grew out of supplying voice turret systems to the financial market.
Over the past number of years it has added products to its offerings to suit the
markets addressed.
The Division has established market leadership in 'instant-access' or `turret'
voice systems in many of these key areas in Australia, with over 50% market
share in the Australian financial markets, approximately 80% in emergency
services. This is in addition to a steadily growing share of the broader
'command-control' sector including airlines, utilities, defense and other areas
of government.
Major Contracts.
Among the major contracts secured recently in the last year were:
o Jindalee Operational Radar Network (JORN) - a defense contract for
secure voice communications for the over-the-horizon radar monitoring
system.
o Qantas Airways - digital voice and radio communications for streamlined
load control operations throughout Australia New Zealand and Papua New
Guinea.
o Ambulance and Fire Brigade Services digital voice communication and
call-out systems with multi-location networking, paging and
computer-aided dispatch (CAD) systems integration.
o National Electricity Market Management Co (NEMMCO) - Operations
security communications systems. (NEMMCO is involved in the creation of
an Australia-wide electricity market.)
o Data Connections - Call Center systems including ACD, IVR and Workforce
Management.
o Parliament House, Canberra - Voice systems for Security Control Area
integrated with CCTV, perimeter door opening, intercom, lift phones and
radio channels.
o RAAF Radar Surveillance Units - secure voice communications.
o Intercapital Brokers - Turret system.
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The Future in Call Centers
The Company began its operations in this Division in 1987 with a core product
distributed from V Band Corporation, a New Jersey corporation ("V Band"), which
recently filed for protection under Chapter 11 of the US Bankruptcy Code. V Band
was acquired by its major competitor, IPC. Since then negotiations have been
undertaken between the Company and IPC regarding the Division representing IPC
in Australia.
The Company recognized, over two years ago, that it had to diversify out of the
financial market for voice turrets as the financial market was consolidating.
The market chosen to diversify into was the call center market. Call Centers are
evolving into versatile 'customer interaction centers' that facilitate contact
by telephone, e-mail via a Web site call back, or by fax. Voice and Data Systems
is targeting this stage of development (which will also offer messaging
opportunities to FlexiFax Division). The new generation of call centers provides
opportunities for sales of new systems and change-outs of older technology.
Call centers used to refer mainly to communications cost centers dealing with
large volumes of inbound calls organized around Automatic Call Distribution
(ACD) or 'queuing systems'. More recently the concept has been extended to
include varying mixes of outbound as well as inbound call handling B but call
centers are still viewed largely as systems for bulk-processing of telephone
traffic. However, business and government organizations need a variety of
systems to communicate with clients, employees, business partners and the public
and call centers are now evolving into customer interaction centers=,
facilitating contact by telephone, e-mail, Web-site call-back and fax.
Call centers can operate independently of the location of their customers, even
across international borders, and Australia is capitalizing on that flexibility.
Regional and international call centers are being installed in Australia because
of its lower staffing and establishment costs and multi-lingual workforce. An
estimated 550 call centers are now operating in Australia, employing
approximately 50,000 people with an annual expenditure of $1.2 billion. A market
study by Price Waterhouse/ACA estimated the growth of this market in Australia
at 20% annually. Other sources, such as the New South Wales Department of State
& Regional Development, put this growth at 25%. According to their 1998 report,
the greater Sydney area is home to half the international call centers operating
in the Asia Pacific region.
Call centers serve the whole spectrum of industry, finance, transport, utilities
and government and the Division has begun to extend its traditional focus on
financial and emergency services to a much larger market.
The growth and expansion of this industry has lead to a need for products and
services by call centers providing assistance and/or solutions to their strained
and growing operations. By providing such products, the Company, even as a late
entrant, can solicit any client or potential client with such product offerings,
even though that client may be using competitors equipment. As a result of the
Company's targeting initiative, the Division now represents ( together with
other distributors in many cases) Rockwell Electronic Commerce (Call Centers),
Dictaphone (Loggers) Witness (Quality monitoring systems), Translux (wall
boards), Pipkins (workforce management software) and others. The Division uses a
solution oriented approach to meet most customer technology needs.
Divisional sales for the year ended June 30, 1998 were $7.6 million, an increase
of 12% over the previous year. Gross margins were a healthy 43% (excluding lower
margins on more recently introduced products such as Multitone and Dictaphone
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which are marketed somewhat differently). Sales in the current fiscal year are
expected to be significantly lower than in fiscal 1998 in part as a result of
the IPC negotiations to acquire V Band, but an order book of over $4 million
will provide a greater than usual level of certainty for the year 2000. The
Company has moved into the call center market offering a number of products in
this area. The expansion into the call center market should be considered as a
start up business although the skills required to support these products are
similar to those already being deployed in the financial trading area.
Operational Concerns
International Operations. As the Company's operations are internationally based,
such operations are subject to numerous inherent risks beyond the Company=s
control, including political and economic conditions affecting the countries of
operation. The Company's international business activities may include
difficulties in staffing and managing international operations, currency
fluctuations and currency management issues, difficulties in collecting accounts
receivable, imposition of public sector controls, trade and tariffs
restrictions, price or exchange controls, limitations on repatriation of
earnings, foreign tax consequences and the burdens of complying with a wide
variety of foreign laws and regulations.
Suppliers/Service Providers.
Dependence on Key Suppliers - If any of the Company's key suppliers experience
difficulty in providing products in a timely manner, this could adversely effect
the Company's revenues and reputation in the market. Additionally, the failure
on the part of these suppliers to develop and manufacture or supply new or
enhanced products or software that meet or anticipate technological changes on a
timely and cost-competitive basis could have a materially adverse effect on the
Company's financial condition and results of operations.
Agreement with V Band - For the fiscal year ended June 30, 1998, sales of the V
Band products accounted for 63% of the sales of the Voice and Data Systems. IPC,
a previous competitor to V Band, has recently acquired V Band and the Company is
currently in the process of discussing with IPC the marketing of both IPC and V
Band product offerings.
Reliance on third parties - A substantial portion of the Company's total
revenues are derived from the sale of products manufactured by third parties and
the provision of professional services in connection with the sale and
maintenance of such products. As a result, any factor adversely affecting such
distribution rights or services would have a material adverse effect on the
Company's business and results of operations.
Regulations.
Enforcement of Civil Claims - The Company was incorporated under the laws of
Idaho, while the operating entities are based in Australia. Certain of its
directors and all of its officers reside, and all of its assets are located,
outside of the United States. It may not be possible for investors to effect
service of process within the United States upon the directors and officers of
the Company. It may also not be possible to enforce judgments obtained in United
States courts predicated upon the civil liability provisions of applicable
securities laws of the United States against the Company or its directors and
officers.
Change in government policies - A deterioration in economic conditions in
countries where the Company carries on business or other factors could result in
a change in government policies which may materially affect the Company's
financial position and results of operations.
Regulation of the telecommunications industry - The telecommunications industry
is subject to regulatory control. Any amendments to current regulations could
have a material adverse effect on the Company's business, results of operations
and prospects.
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Regulation of broadcast faxing and E-mailing - In recent years, legislation has
been enacted in the United States, Europe, Australia and other countries
restricting fax or E-mail broadcasting especially by businesses to private
numbers/addresses. Similar restrictions are starting to appear governing
business-to-business fax broadcasting and this may have an adverse affect on the
Company's business and results.
Competition and Competitive Business Conditions.
Competition - The Company's Voice and Data Systems segment operates in a highly
competitive environment. The markets in which the Company operates are comprised
of a substantial number of global and regional competitors, many of which have
greater financial, engineering, manufacturing and other resources than the
Company. Competing with such companies will require continued investment by the
Company in engineering, research and development, marketing and customer service
and support. There can be no assurance that the Company will have sufficient
resources to make such investments. Future profitability will depend upon
broader market penetration which the Company has yet to secure.
The fax broadcast and messaging industry is intensely competitive and served by
a wide range of companies, including major telephone service providers, ISPs in
developed countries and other companies specializing in providing fax services.
Many of these companies have significantly greater financial resources and reach
than the Company and extensive established networks. Typically, FlexiFax does
not have long-term contractual agreements with its clients and there can be no
assurance that its clients will continue to transact business with the Company
in the future. In addition, there can be no assurance that clients will not
elect to use alternatives to FlexiFax's fax or messaging communications
services, such as the Internet, to carry such communications or that companies
offering such alternatives will not develop product features or pricing policies
which are more attractive to clients than those offered by the Company. Such
competitive companies may also invite partnering or joint venture arrangements
with the Company in one country under a mutual agreement but still remain a
strong competitor to the Company in others. This could require the Company to
adapt or change out its technology to achieve such partnering or joint venture
relationships.
Reliance on computer and communications systems - The Company's business is
highly dependent on its computer and telecommunications systems and those of
others for the operation and quality of service of the FlexiFax system. The
temporary or permanent loss of all or a portion of any system, for whatever
reason, could have a materially adverse effect on the Company's business,
financial condition and results of operations.
Dependence on Telephone Services - In broadcasting faxes or other messaging
technologies, FlexiFax is highly dependent on telephone service provided by
local and long distance telephone companies in countries throughout the world.
The quality and availability of telephone service varies and in some areas is
limited. Any significant interruption in telephone service could adversely
affect the Company. Rate increases imposed by telephone companies where FlexiFax
operates nodes will increase the Company's operating expenses and could
adversely affect its financial condition and results of operations.
Dependence on Internet Service Providers (ISPs) - In using the Internet as a
receiving, transport or delivery mechanism for its messages, the service is
highly dependent on the performance of ISPs throughout the world. As message
traffic can be handed off from ISP to ISP beyond the control of the Company, any
resultant traffic loss, failure or poor performance by any ISP in the chain
could have a detrimental effect upon the service level and performance of the
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Company's service. This in turn could effect the Company's clients who may then
opt not to use the service. Although the Company will always try to use reliable
ISPs there can be no assurance that such performance problems will not occur.
Dependence on key customers - FlexiFax derives a significant portion of its
revenues from a relatively small number of customers and there and there is no
assurance that such customers will continue to provide the same levels of
revenue in the future.
Concentration of Clients in the Financial Services Industry - Historically, a
significant portion of the Company's revenues have been derived from sales to
clients in the financial services industry. If the financial services industry
suffers an economic downturn, it is likely that the Company would experience a
decline in revenues, which could have a materially adverse effect on the
Company's financial condition and results of operations.
Technology.
Lack of Patentable Technology - The Company owns no patentable technology. None
of the Company's distributorship agreements provide the Company with exclusive
proprietary technology and there can be no assurance that the Company will be
able to sustain a competitive advantage against other firms with access to the
same technology.
Dependence on unpatented proprietary know-how - Unlike certain of its
competitors, FlexiFax relies on unpatented proprietary know-how. While the
Company employs various methods to protect its know-how, such methods may not
afford complete protection and there can be no assurance that others will not
independently develop such know-how, obtain access thereto or develop a more
efficient system.
Technology Risk - The Company's ability to compete effectively is dependent upon
its ongoing significant investment in software development and
telecommunications technology. There can be no assurance that the Company will
be successful in anticipating or adapting to technological changes or in
selecting and developing new and enhanced technology on a timely basis. Future
technological advances in the continually changing telecommunications industry
may result in the availability of new services, products or methods of
electronic document delivery that could compete with the document distribution
services currently provided by FlexiFax. Moreover, decreases in the cost of
existing products or services could enable the Company's current or potential
clients to fulfill their own needs for electronic document distribution services
more cost efficiently than through the use of the Company's services. There can
be no assurance that the Company will not be adversely affected in the event of
such technological change, or that changes in technology will not enable
additional companies to offer services which could replace some or all of the
services presently offered by FlexiFax.
Item 2. Management's Discussion and Analysis
The core elements of the Company's business are messaging and communications,
represented by the Company's two operating divisions, FlexiFax and Voice and
Data Systems. The Company offers a range of quality products and solutions in
both of these markets. The expansion of digital messaging is particularly strong
and FlexiFax Division is rapidly broadening its offerings to meet customer
demand. Similarly, in the systems market, the convergence of computer technology
with telecommunications infrastructures has created a demand for ever-increasing
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functionality. The Voice and Data Systems Division markets a range of products
designed to take advantage of some of these opportunities within its targeted
niches of financial trading, command/control centers and call centers.
Management has established the following objectives for the Company over the
next 12 months:
o Re-position the Company more towards a broad based messaging service
and away from the heavy reliance on fax transmission on a proprietary
fax network.
o Identify e-commerce opportunities complementary to the messaging
services of the Company.
o Seek partnering or joint venture opportunities which will be
complementary and provide opportunities for growth.
o Expand or identify channel opportunities to service new areas and to
improve delivery or service levels in cities currently served.
o Upgrade, add features and improve the Flexifax software and move
towards a more broad based message service capability, with particular
focus on value added services rather than solely providing carriage
capability.
o Expand the Company's voice and data systems business and product range
and emphasis on call center applications and turrets.
As a result of the reverse acquisition of TWG by the Company in February 1999,
the financial information and financial statements presented herein are those of
TWG, the accounting acquirer. Thus, the financial position and results of
operation of the Company were recorded in Australian dollars, the functional
currency, and have been converted to US dollars.
Results of Operations and Financial Position for the Nine Month Period Ending
March 31, 1999
Management's discussion and analysis of operations for the nine months ended
March 31, 1999 is provided on the converted US dollar figures. References have
been made to certain figures before taking into account the effect of the
foreign currency translation adjustment where necessary.
The Voice and Data Systems division has returned a significant improvement in
performance in the nine months ending March 31, 1999. Seasonal factors and the
timing of Australian corporate and government decisions have historically caused
the profitability of Voice and Data Systems Division to be volatile. The third
quarter profit is encouraging. While globalization and the merger activity in
the finance and investment industry have resulted in a modest level of activity
in the Division's traditional sector of financial dealing rooms and exchanges,
the Division's expansion into call center integration is planned to compensate
for any reduction in revenue from traditional sources. However the call center
activity should still be considered as a start up at the present time.
The acquisition of V Band by IPC created significant uncertainty in the market
for the sale of V Band systems. This resulted in delayed or lost opportunities
for the Company. However, the Company is in negotiations with IPC to be their
distributor in Australia. If successful, this would improve the outlook for
increased sales to the financial dealing room sector compared to those achieved
during the year up to March 31, 1999.
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In January 1999, FlexiFax acquired the Australian operations of Unifi
Communications Australia Pty Ltd (formerly known as Fax International, "Unifi").
During the quarter under review, the former Australian customers of Unifi were
transferred over to the FlexiFax system. The transition has been completed
successfully.
Performance of the FlexiFax division improved in the third quarter due to a
combination of improved sales by FlexiFax's international operations and the
integration of Unifi business acquired in the quarter.
The newly opened London office is now operational in a start up phase. As part
of the strategy in positioning FlexiFax as a global broadcaster and messaging
entity, the Company has planned and is undertaking an expanded marketing plan
with a European emphasis. The current operating budget provides for significant
amounts of funds targeted at improving FlexiFax's market exposure and market
share. The European market offers good growth potential and thus an opportunity
for FlexiFax.
Combined Results of Operations for the Nine Months Ended March 31, 1999
Combined revenues of $6,472,282 for the first nine months of fiscal year 1999
ending March 31, 1999, were down from the $7,413,961 reported for the first nine
months of fiscal 1998. (March 1999 revenues were similar to March 1998 revenues
before adjusting for the foreign currency translation difference). Interest
expense was $32,764 as compared with $21,708 for the corresponding period. The
net loss amounted to $897,324 which was 9% better than the loss reported in the
corresponding period of $922,204.
FlexiFax Global Services Division
FlexiFax revenue for the first nine months of fiscal year 1999 decreased to
$2,522,403 from $2,634,789 for the corresponding period. (Sales were slightly
higher than the comparative figure before adjusting for the foreign currency
translation difference). Significant increases were recorded in overseas
locations, namely USA (67%), UK (37%), and Singapore. International sales
(derived outside of Australia) during the nine months ended March 31, 1999
increased by 53% over the corresponding period and represent 18.8% of total
revenue compared with 11.8% in the corresponding period.
Gross profit margin (after distributors' commission) for the nine-month period
was 53.0% compared with 55.6% in the corresponding period last year, due to
changes in the overall customer and traffic profiles.
Total network operating costs increased slightly from $449,336 to $460,145 as a
result of expansion of the global network and related network capacity. Selling,
general and administrative expenses increased mainly as a result of expenditures
incurred in establishing an office in London. As a result, salaries and benefits
increased from $756,545 to $872,916, while other operating expenses reduced
slightly from $488,037 to $446,357. (Other operating expenses showed a slight
increase over the prior period before adjusting for the foreign currency
translation difference.) FlexiFax operating losses increased from $572,417 to
$755,740. These losses have been magnified due to the devaluation in the
Australian dollar relative to the US dollar.
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Voice and Data Systems Division
Voice and Data revenue for the nine month period ending March 31, 1999 was
$3,949,879 down 17% from the corresponding period mainly due to a large contract
of Multitone paging equipment being concluded in the corresponding period. Due
to the project related nature of the activities, sales in this Division can vary
significantly from quarter to quarter as orders for major projects are secured.
Gross profit margin for the nine-month period was 54% as compared with 44% for
the corresponding period last year. Margins also vary from period to period and
product to product depending on the distribution method and the impact of major
contracts.
This Division has reported a profit in both the first and third quarters of
fiscal year 1999.
The Voice and Data Division's operating loss before interest for the nine months
was $56,059 as compared with a loss of $210,366 for the corresponding period
last year. Operating expenses reduced to $2,103,176 from $2,142,736. (Operating
expenses increased over the prior period, before adjusting for the foreign
currency translation difference, mainly due to the recruitment of additional
staff to enable the Division to build up its capability in call center systems
and seize integration opportunities in new markets, as well as related
expenditure in the pursuit of future revenue).
Liquidity and Capital Resources - Nine Months Ended March 31, 1999
As a result of operating losses, cash used in operating activities amounted to
$1,684,782 for the nine month period ended March 31, 1999 compared to $481,728
in the corresponding period. Accounts receivable were reduced $91,498 to
$2,053,802 at March 31, 1999.
Accounts payable and deferred revenue decreased by $1,289,011 to $2,512,790
largely as a result of payments to trade and other creditors.
Cash used in investing activities, largely consisted of the purchase of network
equipment and software developments, amounted to $238,322 for the nine months
ended March 31, 1999 compared to an inflow of $15,974 in the corresponding
period.
Cash generated from financing activities increased by $2,203,660 for the nine
months ended March 31, 1999 to $2,690,941 as a result of 300,000 shares being
issued in Flexemessaging.com Inc, a short term loan financing and a loan from
TWC.
Cash and equivalents increased by $767,837 to $1,357,714 at March 31, 1999.
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<PAGE>
Results of operations and financial position for Fiscal Years Ending June 30,
1998 and 1997
Management's discussion and analysis of operations for the years ended June 30,
1998 and 1997 are provided on converted US dollar figures. References have been
made to certain figures before taking into account the effect of the foreign
currency translation adjustment where necessary.
Combined Results of Operations
Combined revenues increased by 17% to $11,103,370 from $9,516,525 in 1997 as
continued sales growth was experienced in both the FlexiFax and Voice and Data
divisions. The Voice and Data division showed continued improvement with
operating profits before interest and tax of $133,024 as compared to $24,185 in
1997. FlexiFax showed an improved operating loss before interest and tax of
$625,520, down 40% from $1,039,220 reported in 1997, as economies of scale began
to be realized. Head Office net expenses increased due to corporate relocation
and investor relations activities. Interest expense reduced to $31,434 from
$109,950 due to repayment of debt out of the proceeds of a Canadian financing in
respect of TWC. The Company did not record any income tax expense in fiscal year
1998 due to operating losses. A net loss was recorded for the year 1998 of
$703,094 down 31% from $1,022,609 in 1997.
FlexiFax Division
FlexiFax operating revenue increased 28% to $3,462,992 from $2,700,076 in 1997.
International revenue (derived outside of Australia) increased by 100% while
domestic revenue (derived in Australia) increased by 38%. Strong growth in
international markets was achieved through greater market penetration in
existing areas as well as in new areas such as Singapore and Vancouver. The
slower growth rate experienced in the domestic market was due to a management
initiative to maximize profitability per delivered minute of all transmissions,
with such greater emphasis on margins resulting in an overall gross margin of
$1,978,083 in 1998 up 46% from $1,347,015 in 1997.
FlexiFax experienced an overall growth of 70% in volume of delivered minutes of
all transmissions. This growth necessitated expansion of network capacity
resulting in network operating costs increasing to $633,613 in 1998, up 12% from
$567,224 in 1997. The increase consisted of expenditures on equipment (leasing
costs, depreciation and maintenance) and an expansion in the fixed bandwidth
available on the network. Efficiencies in processing capacity resulted in only
$127,000 in 1998 being spent on the FlexiFax network compared to $690,000 in
1997. In 1998, selling, general and administrative expenses increased to
$1,564,228, slightly up from $1,519,780 in 1997. The increase was mainly
attributable to increased staff costs as additional technical, marketing and
customer support staff were employed. FlexiFax staff numbers increased by three
to twenty-six employees at year end. FlexiFax operating losses decreased to
$625,520 in 1998, down 40% from $1,039,220 in 1997.
Voice and Data Systems Division
Voice and Data Systems revenues increased 12% to $7,640,378 in 1998 from
$6,816,449 in 1997, in tough market conditions. The increase was attributable to
management initiatives to identify new products and market segments, as well as
increased sales of Multitone paging equipment. In March 1998, the Division
entered the call center market, being one of only two systems integrators chosen
to supply and support Rockwell call center products. The
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<PAGE>
Division also signed distribution agreements with other key suppliers so as to
offer a comprehensive suite of products to service the call center market. From
April 1998 to June 1998, revenues of $515,000 were generated. In September 1997,
the division finalized an Australian distribution agreement with Dictaphone
Corporation for the supply of Dictaphone products in the region. This yielded
revenues of $938,431. Multitone secured a significant project with the New South
Wales Fire Brigade which resulted in paging revenues of $1,298,066 in 1998 from
only $116,356 in 1997. In 1998, revenue from exports increased to $405,230 from
$177,227 in 1997 due to a specific development carried out for V Band. Service
revenues reduced to $835,880 in 1998 from $860,004 in 1997. Sales of V Band
voice systems decreased because of global consolidation of financial market
players and significant project delays.
Sales of data products increased to $328,790 as compared to $281,520 in 1997,
while sales of electronic displays decreased 24% to $444,202 from $459,765 in
1997. Gross profit margins for 1997 and 1998 were 40% and 35% respectively. The
reduction was due to sales generated from Dictaphone and Multitone products,
which command lower margins and involve a greater element of resellers and
sub-contractors. Without these sales, the gross margin on a like-for-like basis
would have increased from 40% to 43%. Selling, general and administrative
decreased to $3,001,568 in 1998 from $3,155,698 in 1997. Total numbers of Voice
and Data division staff remained at twenty-eight employees at June 30, 1998.
Voice and Data continued its improvement in operating income in 1998, with an
operating profit of $133,024 compared to $24,185 in 1997.
Liquidity and Capital Resources for Fiscal Years Ended June 30, 1998 and 1997
Cash provided from operating activities amounted to $128,257 in 1998 compared to
$222,742 used in operating activities in the corresponding period. Accounts
receivable increased $99,898 to $2,123,749 at June 30, 1998, primarily due to a
significant number of Voice and Data projects being completed in the last
quarter. FlexiFax receivables decreased to $412,620 from $587,016 in 1997,
despite a 29% increase in sales due to tight credit controls and collection
procedures.
Total current liabilities increased in 1998 due to (i) the Voice and Data
projects which were completed in the last quarter, (ii) an increase in deferred
revenue due to two large projects being confirmed near year end, (iii) an
increase in the level of operating capacity, (iv) necessary stockholdings of
Dictaphone products being carried to support Australian distributors, and (v) as
a result of withholding of payments to carriers pending correction of
significant errors on their invoices.
Cash used in investing activities, largely consisted of the disposal of certain
assets and the purchase of network equipment and software developments,
amounting to a net inflow of $21,246 in 1998 as compared to an outflow of
$699,546 in 1997.
Cash generated from financing activities decreased by $947,591 for the fiscal
year ended June 30, 1998 to $151,861 mainly as a result of repayment of loans
and a lower funding level requirement from TWC.
Cash and equivalents increased $310,358 to $589,877 at June 30, 1998.
16
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New Accounting Pronouncements
In 1997, the American Institute of Certified Public Accountants issued Statement
on Position 97-2, "Software Revenue Recognition", ("SOP 97-2") which provides
guidance on when revenue should be recognized and in what amounts for licensing,
selling, leasing or otherwise marketing computer software. It superseded SOP
91-1, "Software Revenue Recognition". It requires that if an arrangement to
deliver software or a software system does not require significant production,
modification, or customization of software, revenue should be recognized when
all of the following conditions are met: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred; (3) the vendor's fee is fixed or
determinable; (4) collectibility is probable. If the arrangement does require
significant production, modification, or customization of software, the entire
arrangement should be accounted for in conformity with ARB 45, "long-term
Construction-Type Contracts". SOP 97-2 is effective for transactions entered
into in years beginning after December 15, 1997. Adoption of this standard will
not have a material effect on the financial statements.
In April 1998, the American Institute of Certified Public accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up activities",
("SOP 98-5") which provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998 with initial adoption reported as the
cumulative effect of a change in accounting principle. Adoption of this standard
will not have a material effect on the financial statements.
In June of 1997, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standard (SFAS) 130, "Reporting Comprehensive
Income". This standard establishes guidelines for the reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distribution to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income to be reported in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS is effective for fiscal years beginning after
December 15, 1997. Adoption of this standard did not have an effect on the
financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131") which supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS 131 established standards for the way that public
companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision marker in deciding
how to allocate resources and in assessing performance. Adoption of this
standard will not have a material effect on the financial statements.
During 1998, the FASB issued SFAS 132, "Employers' Disclosures about Pensions
and Other Post retirement Benefits". This statement revised employers'
disclosures about pension and other post retirement benefit plans but does not
change measurement of recognition of those plans. SFAS 132 is effective for
fiscal years beginning after December 15, 1998. Adoption of this standard will
not have a material effect on the financial statements.
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<PAGE>
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133.
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
requires companies to recognize all derivatives contracts as either assets of
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standards on July 1, 2000 to affect its financial
statements.
Uncertainty due to the Year 2000 Issue
The Year 2000 ("Y2K") Issue arises because many computerized systems use two
digits rather than four digits to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar problems
may arise in some systems which use certain dates in 1999 to represent something
other than a date. The effects of the Year 2000 Issue may be experienced before,
on, or after January 1, 2000, and, if not addressed, the impact on operations
and financial reporting may range from minor errors to significant systems
failure which could affect an entity=s ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year 2000
Issue affecting the entity, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Company has formulated a Y2K compliance program to test the Company's
products and services for compliance. All the Company's principals who supply
products have been asked for a compliance statement. However in the
telecommunications environment, individual products may be compliant but their
operations as a whole depends on third parties over which the Company has no
control or in some cases even input.
The cost to the Company of the Y2K compliance program has not be itemized in the
financial of the company but have been written off in general operating expenses
and leasing costs (for equipment upgrade). Simulation tests have been conducted
and where problems were found necessary software and hardware applications have
been upgraded. The tests proved successful. However, it cannot be over
emphasized that the correct Y2K operation depends on all parts of the network,
including carriers, service providers, customers (and their PCs state of
readiness, etc) being Y2K compliant for perfect operation.
The Company's state of readiness for Y2K
Flexifax Division. The central Tandem hub was upgraded in both hardware and
software application, to a Tandem Computer version that Tandem supports for Y2K
compliance. This was a two stage process, the first being in 1996 and the second
stage, a series of software upgrades over the July and August 1998. On May 20,
1999, a performance test was undertaken simulating delivery performance with the
date changing over from 1999 to 2000 occurring during the test period. Traffic
tests were then carried out to prove satisfactory operation and delivery of
faxes. Flexifax utilizes many carriers around the world, and these carriers also
pass traffic to other carriers until the fax destination is reached. Correct
delivery can only be achieved if all carriers network are operational.
Flexifax's main bandwidth supplier for its leased circuits is IXnet. IXnet have
informed the Company that they are taking all necessary steps to ensure
compliance of their own equipment and the carriers that they use.
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<PAGE>
Voice and Data Division. Any software designed by the Company over the last year
has been Y2K compliant. The equipment distributed from the Company's principals
have also undergone test simulations for Y2K of the generic product. Similar
tests were not done at client's sites but the Company believes most clients are
conducting their own compliance programs.
The Y2K compliance position of following products (excluding any PCs owned or
supplied by the customer) sold to, or used in customer premises, by the Voice
and Data over the 12 months are as listed below:
V Band products - Not date dependent - Compliant
CSK Systems - Supplier certificated
Dictaphone - Supplier certificated (with one minor exception currently being
addressed)
Multitone - Supplier certificated
Rockwell (ACD and Transcend) - Supplier certificated
Voicetek - Supplier certificated
Witness Systems - Supplier certificated
Webline - Supplier certificated
NxOrc - Supplier certificated
Company designed products:
Clarity - Compliant
ASX software interface. Depends on the feed. Expected to be compliant by October
99.
Other designs and interfaces - Not date dependent.
The Flexifax billing system has been tested for compliance by simulated date
change - Compliant.
Internal Company Systems
Sybiz accounting. - Upgraded to compliant version July 1, 1999
PCs in the Company. Although there are a number of old PCs in the Company that
are not compliant (old BIOS) the Company does not believe that they will cause
any Y2K operational difficulty and if so, such will be exchanged with compliant
ones. All PCs purchased over at least a year have been compliant. Any PC used in
the Company's accounting area is Y2K compliant.
Cost of Y2K to the Company
Flexifax Division. There were a number of additional costs for changes to the
software applications by outside parties. The cost for these however were not
itemized out as other software enhancement work was aggregated into the
programming work undertaken each time. These cost therefore are included in the
monthly operating results. All other internal costs have been taken up in the
monthly payroll costs for the Flexifax Division.
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Voice and Data Division. The Company has not tracked the individual Y2K
compliance costs as they were not considered material. The work that had to be
done was primarily done by suppliers and principles. All costs were principally
related payroll costs and some non material component costs.
Worst Case Risk Scenario
Flexifax Division. The Y2K problem could affect the Company from external
parties.
1. Clients not having their systems compliant and therefore are unable to
deliver traffic for some reason.
2. The carrier or ISP network not accepting traffic.
3. The Central Building Power.
In the case of clients in (1.) above, no client represents more than 5% of the
companies monthly revenue billing. The vast majority of major users of the
Flexifax service have their own Y2K compliance programs in place. Thus, although
some companies may have problems it is unlikely all clients will. The Company
has contacted its major client users to try and ensure that any potential
problem is being addressed. The amount of traffic or transmissions sent in over
the first week in January may diminish as focus is given towards each client
Company's Y2K performance rather than distributing information by fax or e-mail.
However, historically this time of year has always been a slow time due to the
year end holidays around the world.
In the case of carriers in (2.) above, all carriers are taking Y2K seriously and
implementing compliance programs. The problem, as seen by the Company, will
involve billing rather than traffic handling performance, although this cannot
be guaranteed. In the worst case, the result is a carrier to which the Company
delivers bulk traffic fails to perform and does not accept its traffic. A
contingency plan is in place for this scenario (see below).
In the case of building power in (3.) above, there is a (automatic change over)
standby power generator, that is tested monthly, that can cover for this
eventuality.
Y2K Contingency Plan
Flexifax Division. The most difficult challenge would be to redirect traffic of
transmissions because a major carrier could not accept the traffic the Company
presents to it. To protect against this eventuality there are two main
contingency plans in place. The Flexifax technology allows for the traffic to
the network nodes around the world to be reconfigured from the central Network
Control Center in Sydney. Thus, traffic can be diverted from one node to another
and so from one carrier to another by the Network Control Center changing the
routing information in the Tandem. This allows for traffic rerouting should any
one of the Company's major carriers around the world find that they cannot
process the traffic. The Company's Bandwidth supplier is IXnet. They have a node
in the Company's Network Control Center using fiber leased from a 'tier one
carrier' in Australia. If IXnet experience problems, the Company's Network
Control Center can reroute the traffic via the fiber of a different 'tier one
carrier' in Australia to the Sydney site of a major US carrier. This US carrier
already accepts significant traffic from the Company. If the traffic load is too
great then additional nodes can be taken from other locations and made
operational in the US carrier's site.
Voice and Data Division. The worst case scenario is that one or more of the
Company's major customers experiences problems with their system's operation and
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then call on the Company to assist. Should there be too many calls of this
nature at the same time, it is possible that there will not be enough manpower
available to attend to all callers as fast as customers would like, or have come
to expect, from the Company. The telephone numbers of support staff are held
centrally and as such the maximum number of people will be made available, if
necessary.
Competition
The Company's competition is very strong and consists of large carriers, ISPs as
well as new start up industries. For Flexifax this includes Premiere
Technologies (incorporating Xpedite), NetMove (formally FaxSav), Sprint, Cable &
Wireless or other carriers or ISPs and some large media companies distributing
news releases, and some start-up companies offering "free" faxes. The
competitors for Voice and Data include British Telecom, Lucent Technologies,
Panasonic, Sony, Hanson, NEC Nortel and any company offering call center
services or solutions.
Item 3. Description of Property
All Company property is leased. The Company currently operates from the
following offices:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Australia 27th floor Grosvenor Place Head Office address for Lease
Sydney 225 George Street Sydney all companies of Trade expires on
NSW 2000 Australia Wind Communications 31 July
Limited. 2000
FlexiFax Sydney
Australia 210 George Street Voice and Data Sydney Lease
Sydney NSW 2000 Australia expires on
30 June
2000
Australia Level 7, Royal Insurance Building Flexifax Melbourne Monthly
Melbourne 440 Collins Street Voice & Data Melbourne tenancy
Melbourne Victoria 3000
Singapore 200 Telok Ayer Street Voice & Data Singapore Lease
Singapore 0106 FlexiFax Singapore expires on
31 May 2000
London 98 Curtain Road FlexiFax Global Services Monthly
London EC2A3AA UK tenancy
</TABLE>
Property occupied is currently adequate for the Company's needs.
21
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner of
more than 5% of such securities, as well as the securities of the Company
beneficially owned by all directors and officers of the Company. Unless
otherwise indicated, the shareholders listed possess sole voting and investment
power with respect to the stock shown.
Percentage of
Name Number of Stock Outstanding Stock
Skyglen Pty Limited(1)(5) 1,445,358 15.10%
Martin McCarthy(5) 230,685 2.3%
Minbura Holdings Pty (2) (5) 596,753 6.2%
Patvilt (3) (5) 1,324,910 13.8%
Frank Favretto (4) (5) 270,735 2.8%
Trade Wind Communications Limited 8,800,000 86.3%
(1) An Australian trustee company controlled by Nicholas Rowland Bird.
(2) An Australian trustee company controlled by Sion Grand
(3) An Australian trustee company controlled by Arthur Christopher Walton
(4) An Australian trustee company controlled by Frank Favretto
(5) Beneficially held through Trade Wind Communications Limited ((1)-(4)
above represent 40.2% of the 86.3% held through TWC.)
All Officers and Directors as a Group 19.1% (3 persons consisting of Skyglen
Pty Limited, Martin McCarthy
and Frank Favretto)
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934. Generally, a person is deemed to be the
beneficial owner of a security if he has the right to acquire voting or
investment power within 60 days.
(2) Unless otherwise indicated, all addresses are at the Company's office.
The balance of the Company's securities are held by approximately fifty persons.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and officers of the Company are as follows:
Name Age Position
Nicholas Bird 60 CEO, Director
Frank Favretto 47 Director
Martin McCarthy 43 Director
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Nicholas Bird is a co-founder of TWC and has extensive engineering and
managerial experience, especially in South East Asia. He graduated as Assistant
Engineer from the Cable and Wireless Engineering College in England in 1957. He
was posted by Cable and Wireless to Cocos, Penang, Zanzibar and then to
Singapore as a mux control engineer. From 1963 to 1969, Mr. Bird worked for
William Jacks & Co. in Malaysia and Singapore, first as Technical Manager and
later as Manager of Telecommunications.
In 1970, he joined Philips Telecommunications Industries, Hilversum, Holland in
their Singapore operation and was soon promoted to Regional Manager of South
East Asia for Telecommunications and Data Systems. During this time, he set up a
telecommunications factory in Singapore for PABX and application development.
Until 1981, Mr. Bird led Philips Telecommunications' Singapore operation in
becoming a market leader in most of its chosen areas, increasing annual revenues
of S$250,000 to in excess of S$20 million. He was promoted to Marketing Manager
of TMC Limited, Philip's wholly owned UK based telecommunications subsidiary,
responsible for the worldwide profitability and distribution of Philips customer
premises switching equipment of below 100 lines.
Philips transferred Mr. Bird to Australia in 1985 as its Group Product Manager,
Telecommunications and Data Systems. In this position, he was responsible for
the director of the Australian operations and for implementing a strategy to
make the Australian operations profitable. Philips approved a management buy-out
offer of its Australian operations. Mr. Bird participated in the buy-out and
founded Trade Wind Technologies Pty Ltd (formerly known as Trade Wind
Communications Pty Ltd) in December 1986. He has been a significant force in the
growth and development of TWC and he now uses his expertise for the continued
growth of the Company in the capacity of Chief Executive Officer. Mr. Bird has
been appointed as a Director to the Board of Directors of the Company.
Frank Favretto is a Chartered Accountant in Australia and is the non-executive
director of AusAsean Management Ltd., an Australian private company and Chairman
of Coms21 Limited, an Australian public company. Mr. Favretto established
Bankers Trust Australia's stockbrokerage operations in 1984 and held the
positions of Chairman and non-member director of its Australian Stock Exchange
membership from 1984 to 1991. In 1991, he became Executive Vice-President of
Bankers Trust Australia's equity underwriting committee. In this role, Mr.
Favretto gained considerable experience in private and public capital raisings.
He was appointed a Director of TWC in November, 1996 and has been appointed to
the Board of Directors of the Company since completion of the reverse
acquisition.
Martin McCarthy, was recently appointed a Director of the Company in May, 1999.
Mr. McCarthy was the President and CEO of IDD Enterprises, L.P. ("IDD") which
was recently sold to Dow Jones and Company. Mr. McCarthy has been a pioneer in
the online world for almost two decades. He has managed large organizations
which have created, commercialized and deployed leading edge technologies in the
areas of communications, information services and transactions. Prior to joining
IDD in 1988, Mr. McCarthy served as Vice President of Office Message and
Information Services at Western Union and was the youngest corporate officer in
the firm's 130 year history. Mr. McCarthy has an MBA from Harvard University.
The above listed officers and directors will serve until the next annual meeting
of the shareholders or until their death, resignation, retirement, removal, or
disqualification, or until their successors have been duly elected and
qualified. Vacancies in the existing Board of Directors are filled by majority
vote of the remaining Directors. Officers of the Company serve at the will of
the Board of Directors.
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Conflicts of Interest
Members of the Company's management are associated with other firms involved in
a range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of the Company.
Insofar as the officers and directors are engaged in other business activities,
management anticipates it will devote only a minor amount of time to the
Company's affairs.
The officers and directors of the Company are now and may in the future become
shareholders, officers or directors of other companies which may be formed for
the purpose of engaging in business activities similar to those conducted by the
Company. Accordingly, additional direct conflicts of interest may arise in the
future with respect to such individuals acting on behalf of the Company or other
entities. Moreover, additional conflicts of interest may arise with respect to
opportunities which come to the attention of such individuals in the performance
of their duties or otherwise.
The officers and directors are, so long as they are officers or directors of the
Company, subject to the restriction that all opportunities contemplated by the
Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company or
the companies in which the officers and directors are affiliated with both
desire to take advantage of an opportunity, then said officers and directors
would abstain from negotiating and voting upon the opportunity. However, all
directors may still individually take advantage of opportunities if the Company
should decline to do so. Furthermore, no officer or director of the Company has
ever promoted, is promoting or will be promoting any other blank check company
during their tenure as an officer and director of the Company. Accordingly,
there presently exists no conflict of interest in this regard. Except as set
forth above, the Company has not adopted any other conflict of interest policy
with respect to such transactions.
Item 6. Executive Compensation.
The Company does not currently compensate any executive directly. Nicholas Bird
is employed by TWG, one of the Company's operating subsidiaries, under the terms
of an employment agreement for compensation in excess of $100,000.
Board of Directors Compensation
The Company does not pay directors who are also executive officers for service
on the Board of Directors. Directors receive $1,500 per meeting and are
reimbursed for their expenses incurred in attending meetings of the Board of
Directors.
24
<PAGE>
Long-term Incentive and Pension Plans
The Company does not hold any long-term incentive or defined benefit pension
plans. In relation to the Company's subsidiary operations in Australia,
according to legislation the Company provides funds for long service leave to
which staff become eligible after 10 years continuous service. Superannuation
payments are in line with norms in the various countries that the Company and
its subsidiaries do business in.
The Company is presently reviewing the merits of establishing an incentive stock
option plan for its key executives and employees; however, no such plan has been
approved or implemented.
Other
No director or executive officer is involved in any material legal proceeding
against the Company in which he will receive a benefit from such legal
proceedings.
Employment Agreements
The Company currently has no employment agreements with any of its employees.
Certain employees have appointment letters.
Indemnification of Directors and Officers
The Company's Charter and Bylaws provide for indemnification of all directors
and officers to the full extent permitted by the Idaho Corporation Law. Under
such provisions, any director or officer who, in such capacity, is made or
threatened to be made a party to any suit or proceeding, may be indemnified if
the Board determines the director or officer acted in good faith and in a manner
the director or officer reasonably believed to be in or not opposed to the
Company's best interest. The Charter, Bylaws, and the Idaho Corporation Law
further provide that indemnification is not exclusive of any other rights to
which individuals may be entitled under the Charter, the Bylaws, any agreement,
any vote of stockholders or disinterested directors, or otherwise.
The Company has the power to purchase and maintain insurance on behalf of any
person who is or was our director, officer, employee, or agent, or is or was
serving at our request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise against any
expense, liability, or loss incurred by any person in any capacity or arising
out of his status as , whether or not we would have the power to indemnify
person against liability under Idaho law.
Item 7. Certain Relationships and Related Transactions.
There have been no related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation S-B.
Item 8. Description of Securities.
The Company's authorized capital stock consists of 20,000,000 shares of Common
Stock, par value $0.001 per share and 5,000,000 shares of Preferred Stock, par
value $0.001 per share. There are 10,200,000 Common Stock issued and outstanding
as of the date of this filing. There are no preferred stock issued or
outstanding.
25
<PAGE>
Common Stock. All shares of Common Stock have equal voting rights and, when
validly issued and outstanding, are entitled to one vote per share in all
matters to be voted upon by shareholders. The shares of Common Stock have no
preemptive, subscription, conversion or redemption rights and may be issued only
as fully-paid and non-assessable stock. Cumulative voting in the election of
directors is not permitted, which means that the holders of a majority of the
issued and outstanding stock of Common Stock represented at any meeting at which
a quorum is present will be able to elect the entire Board of Directors if they
so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any. All stock of the Company's Common Stock issued and outstanding are
fully-paid and non-assessable. Holders of the Common Stock are entitled to share
pro rata in dividends and distributions with respect to the Common Stock, as may
be declared by the Board of Directors out of funds legally available therefor.
Preferred Stock. No Preferred Stock of the Company is presently issued or
outstanding. The Preferred Stock of the Company may be issued in various series
and shall have preferences as to dividends and to liquidation rights. The Board
of Directors shall establish the specific rights, preferences, voting privileges
and restrictions of such Preferred Stock or any series thereof.
26
<PAGE>
PART II
Item 1. Market Price for Common Equity and Related Stockholder Matters.
The Company's Common Stock is quoted at the present time on the
"Over-the-Counter" Bulletin Board. The Company's Common Stock commenced trading
in April, 1999 at $3.00 per share under the symbol of "FLXM". The lowest trade
was at $2.74, while the highest trade was at $4.50. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
High Bid Low Bid Closing Bid Volume
-------- ------- ----------- ------
April $3.3750 $1.8750 $3.2500 335,582
May $4.5000 $3.0000 $4.5000 35,384
June $4.5000 $3.0000 $3.0000 86,915
July $3.2500 $2.0000 $2.7500 50,450
There are approximately 50 holders of the Company's Common Stock. From 1970 to
1984 the Company issued its common stock to various independent contractors and
employees for their services. Presently there are 10,200,000 shares of the
Company's Common Stock outstanding with 20,000,000 common stock authorized. All
of the issued and outstanding stock of the Company's Common Stock were issued
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended.
As of the date of this Form 10-SB, 10,200,000 shares of the Company's Common
Stock are eligible for sale under Rule 144 promulgated under the Securities Act
of 1933, as amended, subject to certain limitations included in said Rule. In
general, under Rule 144, a person (or persons whose stock are aggregated), who
has satisfied a one-year holding period, under certain circumstances, may sell
within any three-month period, a number of stock which does not exceed the
greater of one percent of the then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of stock without any
quantity limitation by a person who has satisfied a two-year holding period and
who is not, and has not been for the preceding three months, an affiliate of the
Company.
The Company has not paid any dividends to date and has no plans to do so in the
immediate future.
Item 2. Legal Proceedings.
There is no litigation pending or threatened by or against the Company.
27
<PAGE>
Item 3. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
Prior to April 1999, the Company was a private company with the only issuance of
shares being made pursuant to valid merger agreements and/or exchange
agreements.
On February 18, 1999, the Company sold 300,000 shares of Common Stock to three
stockholders at $2.50 per share in a private placement pursuant to Regulation D,
Section 504. On April 6, 1999, the Company sold an additional 200,000 shares of
Common Stock for $250,000.00 under the terms of a separate private placement.
Each purchaser of the securities described above has represented that he/she/it
understands that the securities acquired may not be sold or otherwise
transferred absent registration under the Securities Act or the availability of
an exemption from the registration requirements of the Securities Act, and each
certificate evidencing the securities owned by each purchaser bears or will bear
upon issuance a legend to that effect.
Item 5. Indemnification of Directors and Officers.
The Company's by-laws include provisions providing for the indemnification of
officers and directors and other persons against expenses, judgments, fines and
amounts paid in settlement in connection with threatened, pending or completed
suits or proceedings against such persons by reason of serving or having served
as officers, directors or in other capacities, except in relation to matters
with respect to which such persons shall be determined not to have acted in good
faith and in the best interests of the Company. With respect to matters as to
which the Company's officers and directors and others are determined to be
liable for misconduct or negligence, including gross negligence in the
performance of their duties to the Company, Idaho law provides for
indemnification only to the extent that the court in which the action or suit is
brought determines that such person is fairly and reasonably entitled to
indemnification for such expenses which the court deems proper.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to officers, directors or persons controlling the Company pursuant to
the foregoing, the Company has been informed that in the opinion of the U.S.
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act, and is therefore unenforceable.
In accordance with the laws of the State of Idaho, the Company's by-laws
authorize indemnification of a director, officer, employee, or agent of the
Company for expenses incurred in connection with any action, suit, or proceeding
to which he or she is named a party by reason of his having acted or served in
such capacity, except for liabilities arising from his own misconduct or
negligence in performance of his or her duty. In addition, even a director,
officer, employee, or agent of the Company who was found liable for misconduct
or negligence in the performance of his or her duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification.
28
<PAGE>
PART F/S
Financial Statements.
The following financial statements are attached hereto and filed as a part
hereof.
1) Table of Contents - Financial Statements
2) Independent Auditors' Report
3) Balance Sheets
4) Statement of Revenues and Expenses
5) Statement of Cash Flows
6) Statement of Changes in Stockholders' Equity
7) Notes to Financial Statements
29
<PAGE>
PART III
Item 1. Exhibit Index
No. Sequential
Page No.
(3) Certificate of Incorporation and Bylaws
3.1 Certificate of Incorporation and
Amendments Thereto 65
3.2 Bylaws 97
(10) Material Contracts
10.1 Merger Agreement 109
(21) Subsidiaries
21.1 List of Subsidiaries 161
(27) Financial Data Schedule
27.1 Financial Data Schedule - 9 months 162
27.2 Financial Data Schedule - 12 months 163
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
FLEXEMESSAGING.COM, INC.
(Registrant)
Date: August 13, 1999
/s/ Nicholas Bird
------------------------------
Nicholas Bird, President
31
<PAGE>
Flexemessaging.com, Inc
REPORT FOR NINE MONTHS ENDED MARCH 31, 1999
32
<PAGE>
5or financial accounting purposes, as a result of the reverse acquisition by
Flexemessaging.com, Inc. (the "Company") of the business assets of Trade Wind
Communications Limited ("TWC"), consisting of the stock of Trade Wind Group Pty
Ltd. (the "Group"), the financial statements presented herein are the combined
interim financial statements of the Group for the nine months ended March 31,
1999.
The Company has two divisions: Voice and Data Division and FlexiFax Division
operating under the tradename of FlexiFax Global Services. Voice and Data
Systems is a specialist supplier and integrator of voice communication systems
and decision support applications for dealing rooms, emergency services and
other organizations with mission-critical needs. FlexiFax Global Services
operates an enhanced fax broadcast service over a global network. FlexiFax
specializes in quality fax broadcasts generated from customers' desktops for
delivery to any destination in the world.
SCHEDULE A Financial Information
33
<PAGE>
Flexemessaging.com, Inc
Combined Balance Sheets
Note Unaudited
31 March
1999
Assets $
Current
Cash 2 1,357,714
Receivables 3 2,053,802
Inventory 4 758,984
---------
4,170,500
---------
Capital assets 5 952,139
Goodwill 6 11,762
Other 7 4,156
---------
968,057
---------
5,138,557
Liabilities and Shareholders= Equity
Current
Trade Creditors 1,080,470
Sundry creditors and accruals 9 1,202,656
Customer deposits 37,902
Unearned maintenance revenue 191,762
Current portion of lease obligations 10 9,792
Loans payable 8 1,234,568
Loans payable on securitization of debt 11 75,406
Income taxes payable 117
---------
3,832,673
---------
Non Current
Non current portion of lease obligations 10 2,351
Employee entitlements payable 120,176
---------
122,527
---------
Total Liabilities 3,955,200
---------
Shareholders' Equity
Share Capital 12 10,200
Reserves 13 3,973,626
Contributed capital
Comprehensive Income B Foreign currency
translation 14 290,543
Accumulated deficit (3,091,012)
---------
1,183,357
---------
5,138,557
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
33
<PAGE>
Combined Statements of Loss and Comprehensive Loss
<TABLE>
<CAPTION>
Note Unaudited Unaudited
31 March 31 March
1999 1998
$
<S> <C> <C>
Sales 6,472,282 7,413,961
Less:
Cost of Goods Sold 3,061,214 3,901,109
--------- ---------
Gross Profit 3,411,068 3,512,852
Operating expenses
Network operating costs 460,145 449,336
Selling, general and administrative 3,475,950 3,601,712
Depreciation 348,213 369,472
--------- ---------
Total operating expenses 4,284,308 4,420,520
--------- ---------
Loss from Operations (873,240) (907,668)
Other income/(expense)
Interest paid
- leases - -
- loans B short term (32,764) (21,708)
Interest received 8,680 7,172
--------- ---------
Loss for the period before income tax (897,324) (922,204)
Income tax expense - -
--------- ---------
Net loss (897,324) (922,204)
Other comprehensive income, net of tax
Foreign currency translation adjustments 55,379 132,703
--------- ---------
Comprehensive loss (841,945) (789,501)
Basic and diluted net loss per share (0.10) (0.11)
Stock used in computing net loss per share 8,900,000 8,800,000
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
34
<PAGE>
Combined Statements of Changes in Cash Flows
<TABLE>
<CAPTION>
Note Unaudited Unaudited
31 March 31 March
1999 1998
Cash provided/(used) by: $
Operating Activities
Operations
<S> <C> <C>
Net loss for the period (897,324) (922,204)
Items not involving cash:
Amortization 348,213 369,472
---------- ----------
(553,997) (552,732)
Increase/(decrease) from changes in:
Accounts receivable 91,498 66,706
Inventory 48,447 341,788
Accounts payable and deferred revenue (1,289,011) (326,246)
Income taxes 3 (17)
Employee entitlement payable 13,392 (11,227)
---------- ----------
(1,684,782) (481,728)
Investing Activities
Investments in:
Capital assets (238,322) 15,974
---------- ----------
(238,322) 15,974
Financing Activities
Lease liabilities repaid (7,008) (11,292)
Loan repaid (319,920)
Proceeds on issue of stock 640,000 -
Increase in loans payable 807,949 818,493
Loan from AICH 1,250,000 -
---------- ----------
2,690,941 393,982
Increase in cash 767,837 21,527
Cash at beginning of period 589,877 288,519
---------- ----------
Cash at end of period 1,357,714 310,046
---------- ----------
Supplemental non-cash investing and
financing activities
Loan converted to capital 2,699,877
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
35
<PAGE>
Notes on the Financial Statements
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Trade Wind Communications Limited (VSE:TWC) ("TWC") entered into a
business combination agreement ("Merger Agreement") with
Flexemessaging.com, Inc. (previously Siler Ventures Inc.) and Atlantic
International Capital Holdings Ltd. ("Atlantic") to complete a reverse
acquisition of Flexemessaging.com Inc and a financing arrangement of
US$3,660,000 through the sale of Flexemessaging.com, Inc. common stock
pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended. TWC owned all of the stock in Trade
Wind Group Pty Ltd (the "Group") which controlled all the business
assets.
In summary, Flexemessaging.com, Inc acquired the business assets of
TWC, consisting of the stock of the Group, in exchange for 8,800,000
shares of common stock of Flexemessaging.com, Inc. and Atlantic has
made an interim placement of 300,000 shares of common stock of
Flexemessaging.com, Inc. for US$750,000. Per the Merger Agreement,
Atlantic is expected to place the balance of the US$3,660,000 financing
through the sale of Flexemessaging.com Inc.'s common stock pursuant to
a private placement.
Flexemessaging.com, Inc. (the "Company") is incorporated under the laws
of Idaho. Its stock is traded on the Over the Counter Bulletin Board,
but is not registered with the US Securities and Exchange Commission or
the securities commission of any state. Included in the issued stock
are 600,000 shares of common stock beneficially owned by Atlantic.
These shares are held in escrow and will be subject to performance by
Atlantic under the terms of the Merger Agreement. The performance terms
have not been met and the contract is currently under review by
management.
The Group was incorporated in Australia on 6 September 1988. Its
principal activity comprises the manufacture and sale of
telecommunication equipment and providing of communication services.
The majority of sales to date have concentrated in Australia and South
East Asia; however, with the expansion of its communication services to
Europe and North America, the Group is developing a global profile.
These financial statements are stated in US dollars and have been
prepared in accordance with generally accepted accounting principles in
United States.
These financial statements present figures for the Group for the nine
months ended 31 March 1999, and for the nine months ended 31 March 1998
in respect of the income statement.
36
<PAGE>
b. Principles of Combination
The combined accounts comprise the accounts of the Group and all of its
controlled entities. The reason for the combination is that the
entities are under common control. A controlled entity is any entity
controlled by the Group. Control exists where the Group has the
capacity to dominate the decision making in relation to the financial
and operating policies of another entity so that the other entity
operates with the Group to achieve the objectives of the Group. All
material intercompany accounts and transactions have been eliminated.
Notes on the Financial Statements
c. Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business.
The Company has incurred cumulative losses to date of $3,091,012 which
includes a net loss for the current period of $897,324. The Company
anticipates raising additional capital to meet its planned operational
and expansion requirements over the remaining part of the financial
year ending June 30th 2000. Should the appropriate level of funding not
become available, then the Company will have to reduce its costs
employed in various areas including its global expansion activities,
network expansion, new channel marketing initiatives, R&D, sales and
general marketing activities to a cost level to meet the anticipated
cash needs for working capital and capital expenditure requirements.
Thereafter if the Company's operations do not begin to deliver positive
cashflows in sufficient amounts to satisfy the Company's requirements,
then it will be necessary for the Company to raise additional funds
through bank debt, equity funding, partnering with others to share
overheads, undertake appropriate divestment strategies of certain
technologies for equity or cash, or through other sources of capital.
Additional funding may not be available, or may not be available on
terms and timing acceptable to the Company, which could have a material
adverse effect on the Company's financial position, its overall
business and the result of operations.
The market for fax and messaging is very competitive and the Voice and
Data business, with its large contracts is heavily influenced by the
economic conditions existing in Australia at the time. The Company does
not expect this to change, and in fact, expects it to require even
greater effort to overcome in the future. The Company will therefore
need additional funding until it reaches significant levels of revenue
and margin to become cashflow positive.
d. Goodwill
Goodwill is recorded initially at the amount by which the purchase
price for a business or ownership interest in a controlled entity
exceeds the fair value attributed to its net tangible assets at date of
acquisition. Goodwill is amortized on a straight-line basis over a
period of 10 years.
e. Long-lived Assets
Long-lived assets, consisting principally of capital assets and
goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
37
<PAGE>
If the sum of the expected future undiscounted cash flows is less than
the carrying amount of the asset, a loss is recognized for the
difference between the fair value and the carrying value.
f. Inventories
Inventories are measured at the lower of cost and net realizable value.
Costs are assigned on a first-in first-out basis and include direct
materials, direct labor and an appropriate proportion of variable and
fixed overhead expenses.
g. Income Tax
The Company accounts for income taxes under an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns. To the extent it is more likely than not that all of the
Company's deferred tax assets will not be realized a valuation
allowance is recorded to reduce the deferred tax asset to its estimated
net realizable value.
h. Capital Assets
Capital assets are recorded at cost. Amortization is provided on owned
plant and equipment at rates between 4% and 36% using either the
straight line or diminishing balance method. Leased assets are
amortized over the term of the lease.
i. Research and Development
Research and Development expenditures are expensed as incurred.
j. Employee Benefits
Provision is made in respect of the Group's liability for annual leave
and long service leave as of the balance sheet date. Long service leave
is accrued in respect of all employees.
Contributions are made by the Group to an employee superannuation fund
and are charged as expenses when incurred. The amount contributed to
the fund was $179,382 (1998: $178,970). The Group has no other legal
obligation to provide benefits to employees on retirement.
k. Revenue Recognition
Sales revenue on contracts is recognized on a percentage of completion
basis but finalization, at which point all associated costs are billed,
is subject to acceptance of the operational capability and confirmation
of installation by the customer. Until such time, accumulated costs
(after progress billings) are held in Work in Progress (refer Note 4).
Unearned maintenance revenue represents revenue received in advance of
the period covered by the maintenance agreement. The revenue is
recognized evenly over the period covered by the maintenance agreement.
38
<PAGE>
l. Foreign Currency Transactions and Balances
The financial position and results of operations of the Company are
determined using the Australian dollar as the functional currency.
Assets and liabilities are translated at the exchange rate in effect at
each period end. Amounts on the statement of loss are translated at the
average rate of exchange prevailing during the period. Translation
adjustments arising from the use of different exchange rates from
period to period are included in the comprehensive income account in
shareholders' equity. The gains and losses from foreign currency
transactions are included in net loss.
m. Financial Instruments
The Company's and the Group's financial instruments consist of cash,
receivables, accounts payable, other loans, lease obligations and
employee entitlements payable. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair values of these financial instruments approximate
their carrying values, unless otherwise noted.
n. Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
materially differ from these estimates. The assets which required
management to make significant estimates and assumptions in determining
carrying values include plant and equipment and all other non-current
assets.
o. Loss per share
Basic earnings per share is computed by dividing the net loss by the
weighted average number of shares of common stock outstanding each
year. Diluted earnings per share is computed in a manner consistent
with that of basic earnings per share while giving effect to all
potentially dilutive common stock equivalents that were outstanding
during the period. During 1998 and up to the nine months ended 31 March
1999 there were no common stock equivalents, therefore both basic and
dilutive earnings per share were the same amounts for both periods. Net
loss per share is calculated assuming recapitalization occurred at the
beginning of the earliest period shown.
p. New Accounting Pronouncements
In 1997, the American Institute of Certified Public Accountants issued
Statement on Position 97-2, "Software Revenue Recognition", ("SOP
97-2") which provides guidance on when revenue should be recognized and
in what amounts for licensing, selling, leasing or otherwise marketing
computer software. It superseded SOP 91-1, "Software Revenue
Recognition". It requires that if an arrangement to deliver software or
a software system does not require significant production,
modification, or customization of software, revenue should be
recognized when all of the following conditions are met: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) the
vendor's fee is fixed or determinable; (4) collectibility is probable.
39
<PAGE>
If the arrangement does require significant production, modification,
or customization of software, the entire arrangement should be
accounted for in conformity with ARB 45, "long-term Construction-Type
contracts". SOP 97-2 is effective for transactions entered into in
years beginning after December 15, 1997. Adoption of this standard did
not have a material effect on the financial statements.
In April 1998, the American Institute of Certified Public accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
activities", ("SOP 98-5") which provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998 with initial adoption reported as the cumulative
effect of a change in accounting principle. Adoption of this standard
will not have a material effect on the financial statements.
In June of 1997, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standard (SFAS) 130, "Reporting
Comprehensive Income". This standard establishes guidelines for the
reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distribution to owners. Among other disclosures, SFAS No. 130 requires
that all items that are required to be recognized under current
accounting standards as components of comprehensive income to be
reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS is effective for fiscal
years beginning after December 15, 1997. Adoption of this standard did
not have an effect on the financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") which supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise. SFAS 131 established
standards for the way that public companies report information about
operating segments in annual financial statements and requires
reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes
standards for disclosures regarding products and services, geographic
areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is
available that is evaluated regularly by the chief operating decision
marker in deciding how to allocate resources and in assessing
performance. Adoption of this standard did not have an effect on the
financial statements.
During 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Post retirement Benefits". This statement revised
employers' disclosures about pension and other post retirement benefit
plans but does not change measurement of recognition of those plans.
SFAS 132 is effective for fiscal years beginning after December 15,
1998. Adoption of this standard will not have a material effect on the
financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133. "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 requires companies to recognize all derivatives contracts
as either assets of liabilities in the balance sheet and to measure
40
<PAGE>
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedging derivative with
the recognition of (i) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative
not designated as a hedging instrument, the gain or loss is recognized
in income in the period of change SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standards
on January 1, 2000 to affect its financial statements.
q. Interim Financial Statements
The combined interim financial statements included herein are stated in
US dollars and have been prepared by the Company, without audit, in
accordance with gnerally accepted accounting principles in the United
States and pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of management, are
necessary for fair presentation of the information contained therein.
It is suggested that these combined interim financial statements be
read in conjunction with the financial statements of Flexemessaging.com
Inc for the year ended 30 June 1998 and notes thereto included in the
Company's registration on Form 10-SB. The Company follows the same
accounting principles in preparation of interim reports.
Results of operations for the interim periods are not indicative of
annual results.
41
<PAGE>
31 March
1999
$
NOTE 2: CASH
Cash at bank and on deposit 1,353,352
Cash on hand 4,362
---------
1,357,714
---------
NOTE 3: RECEIVABLES
Trade debtors 1,459,280
Allowance for doubtful debts (23,022)
Other debtors 617,544
---------
2,053,802
---------
NOTE 4: INVENTORY
Raw material 312,645
Costs relating to long-term contracts 446,339
---------
758,984
---------
NOTE 5: CAPITAL ASSETS
(a) Owned
Plant, Equipment, Motor Vehicles and
Furniture and Fittings - at cost 2,467,024
Less accumulated amortization (1,534,442)
---------
932,582
---------
(b) Leased
Leased Motor Vehicles -
Capitalized lease assets 167,739
Less accumulated amortization (148,182)
---------
19,557
---------
Cost 2,634,763
Less accumulated amortization (1,682,624)
---------
Cost less accumulated amortization 952,139
---------
42
<PAGE>
31 March 1999
$
NOTE 6: GOODWILL
Goodwill 108,119
Less accumulated amortization (96,357)
---------
11,762
---------
NOTE 7: OTHER NON CURRENT ASSETS
Trademarks 5,777
Less accumulated amortization (1,619)
---------
4,156
---------
NOTE 8: LOANS PAYABLE
This loan was granted by Atlantic International Capital Holdings
Limited (AICH) and constitutes bridge financing. This loan is repayable
next quarter and is non-interest bearing.
NOTE 9: SUNDRY CREDITORS AND ACCRUALS
Sundry creditors and accruals 1,056,925
Employee entitlements 145,731
---------
1,202,656
---------
31 March
1999
$
NOTE 10: LEASE LIABILITIES
(a) Finance Leasing Commitments
Payable
- not later than one year 10,935
- later than one year but not later than 2 years 2,827
- later than 2 years but not later than 3 years -
- later than 3 years but not later than 4 years -
- later than 4 years but not later than 5 years -
-------
Minimum lease payments 13,762
Less future finance charges 1,619
-------
Total lease liability 12,143
Current portion 9,792
Non-current portion 2,351
-------
12,143
-------
Finance lease liabilities are collateralized by the underlying lease assets.
43
<PAGE>
NOTE 11: LOANS PAYABLE ON SECURITIZATION OF DEBT
In September 1997, the Company arranged a working capital-based
facility with Scottish Pacific Business Finance Limited for its
Australian domiciled customers of FlexiFax Global Services. This has
been secured by a charge over the assets of Trade Wind Marketing Pty
Ltd as well as guarantees by the Group and its subsidiaries. Interest
is charged at the highest of the prevailing rates of Westpac Banking
Corporation, Australia and New Zealand Banking Group Limited and
National Australia Bank Limited plus a margin of 2%. The original term
of this agreement was twelve months with automatic renewal. This
agreement may be terminated by Scottish Pacific Business Finance
Limited by giving one month=s notice or by the Company by giving three
month's notice.
NOTE 12: SHARE CAPITAL
<TABLE>
<CAPTION>
31 March
1999
$
Number of
Stock
<S> <C> <C>
Authorized: Ordinary stock with a par value of 20,000,000 $20,000
$ 0.001.
----------
Authorized: Preferred stock with a par value of $ 0.001. 5,000,000 $5,000
Issued: Ordinary stock with a par value of $.001 each,
fully paid 10,200,000 10,200
----------
10,200
----------
</TABLE>
NOTE 13: RESERVES
31 March
1999
Share Premium Account
Balance beginning of year 273,505
Issue of stock 746,955
Capitalization of Contributed Capital into Common Stock 2,699,877
Recapitalization 366,539
Less: Listing costs (113,250)
----------
Balance end of year 3,973,626
----------
44
<PAGE>
NOTE 14: COMPREHENSIVE INCOME B FOREIGN CURRENCY TRANSLATION
In accordance with SFAS 130, the accumulated comprehensive income comprises the
following:
31 March
1999
Accumulated comprehensive income
Balance at beginning of year 235,164
Foreign currency translation adjustments 55,379
-------
Balance at end of period 290,543
-------
NOTE 15: SEGMENTED FINANCIAL INFORMATION
The Group operates two business divisions, Voice and Data Systems and FlexiFax
Global Services. Voice and Data Systems is a specialist supplier and integrator
of voice communications systems and decision support applications for dealing
rooms, emergency services dispatch and similar operations. FlexiFax Global
Services operates an enhanced fax broadcast system. It is not considered
necessary to show geographic segmented financial information as on a materiality
basis, all revenue has been generated from Australia. The accounting principles
used to report the segment amounts is the same as that used to report the
financial statements. Segmented financial information for these two divisions
follows:
For the nine months ending 31 March 1999:
<TABLE>
<CAPTION>
Voice and FlexiFax Head Office Combined
Data
<S> <C> <C> <C> <C>
Revenue 3,949,879 2,522,403 - 6,472,282
----------------------------------------------------------
Amortization 92,571 255,642 - 348,213
----------------------------------------------------------
Segment operating profit/(loss) (56,059) (755,740) (61,441) (873,240)
----------------------------------------------------------
Identifiable assets 3,434,532 1,428,676 275,349 5,138,557
----------------------------------------------------------
</TABLE>
45
<PAGE>
For the nine months ending 31 March 1998:
<TABLE>
<CAPTION>
Voice and FlexiFax Head Office Combined
Data
<S> <C> <C> <C> <C>
Revenue 4,779,172 2,634,789 - 7,413,961
-----------------------------------------------------
Amortization 102,080 267,392 - 369,472
-----------------------------------------------------
Segment operating profit/(loss) (210,366) (572,417) (124,885) (907,668)
-----------------------------------------------------
Identifiable assets 2,260,411 1,269,999 310,300 3,840,710
-----------------------------------------------------
</TABLE>
NOTE 16: EVENTS SUBSEQUENT TO BALANCE DATE
In April 1999, the Company sold 200,000 shares of common stock for $250,000
under the terms of a private placement.
On June 11, 1999 Simon Anderson voluntarily resigned as director without
dispute.
46
<PAGE>
BDO
TO THE SHAREHOLDERS
FLEXEMESSAGING.COM, INC
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying combined balance sheets of Flexemessaging.com,
Inc as of June 30 1998 and 1997 and the related combined statements of loss and
comprehensive loss and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with Australian generally accepted
auditing standards which do not differ in any material respects from generally
accepted auditing standards 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Flexemessaging.com,
Inc at June 30, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1c to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1c. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
BDO Nelson
Parkhill
Sydney, Australia BDO NELSON PARKHILL
August 11th, 1999 CHARTERED ACCOUNTANTS
47
<PAGE>
Flexemessaging.com, Inc
REPORT FOR YEAR ENDED JUNE 30, 1998
48
<PAGE>
For financial accounting purposes, as a result of the reverse acquisition by
Flexemessaging.com, Inc. (the "Company") acquiring the business assets of Trade
Wind Communications Limited, consisting of the stock of Trade Wind Group Pty Ltd
(the "Group"), the historical financial information of the Company presented
herein is that of the Group for its fiscal year ended June 30, 1998 and June 30,
1997. As such, certain information presented herein, such as earning per share
and disclosures regarding the share capital, will not provide a comparative
basis to that of the Company post acquisition.
The Company has two divisions: Voice and Data Division and FlexiFax Division
operating under the tradename of FlexiFax Global Services. Voice and Data
Systems is a specialist supplier and integrator of voice communication systems
and decision support applications for dealing rooms, emergency services and
other organizations with mission-critical needs. FlexiFax Global Services
operates an enhanced fax broadcast service over a global network. FlexiFax
specializes in quality fax broadcasts generated from customers' desktops for
delivery to any destination in the world.
SCHEDULE A Financial Information
Audited financial statements follow
49
<PAGE>
Flexemessaging.com, Inc
Combined Balance Sheets
<TABLE>
<CAPTION>
Note 30 June 30 June
1998 1997
Assets $ $
Current
<S> <C> <C> <C>
Cash 2 589,877 288,519
Receivables 3 2,123,749 2,023,851
Inventory 4 807,431 917,028
--------- ----------
3,521,057 3,229,398
--------- ----------
Capital assets 5 1,059,543 1,300,851
Goodwill 6 19,043 36,584
Other 7 3,983 6,886
--------- ----------
1,082,569 1,344,321
--------- ----------
4,603,626 4,573,719
Liabilities and Shareholders' Equity
Current
Other loans 8 - 319,920
Trade Creditors 2,231,344 1,933,755
Sundry creditors and accruals 9 968,748 1,025,017
Customer deposits 233,913 263,296
Unearned maintenance revenue 367,796 150,885
Current portion of lease obligations 10 16,898 76,950
Loans payable on securitization of debt 11 71,748 -
Income taxes payable 114 170
--------- ----------
3,890,561 3,769,993
--------- ----------
Non Current
Non current portion of lease obligations 10 2,253 23,827
Employee entitlements payable 106,784 165,702
--------- ----------
109,037 189,529
---------- ----------
Total Liabilities 3,999,598 3,959,522
---------- ----------
Shareholders' Equity
Share Capital 12 506,515 506,515
Reserves 13 273,505 273,505
Contributed capital 14 1,782,532 1,300,873
Comprehensive income B
foreign currency translation 15 235,164 23,898
Accumulated deficit (2,193,688) (1,490,594)
---------- ----------
604,028 614,197
---------- ----------
4,603,626 4,573,719
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
50
<PAGE>
Combined Statements of Loss and Comprehensive Loss
<TABLE>
<CAPTION>
Note 30 June 30 June
1998 1997
$ $
<S> <C> <C>
Sales 11,103,370 9,516,525
Less:
Cost of Goods Sold 5,999,363 4,970,585
--------- ---------
Gross Profit 5,104,007 4,545,940
Operating Expenses
Network operating costs 633,613 567,224
Selling, general and administrative 4,699,497 4,524,264
Depreciation and amortization 451,772 378,585
--------- ---------
Total operating expenses 5,784,882 5,470,073
--------- ---------
Loss from Operations (680,875) (924,133)
Other income/(expense)
Interest paid
- leases (1,451) (10,651)
- loans B short term (29,983) (99,299)
Interest received 9,215 11,474
--------- ---------
Loss for the year before income tax (703,094) (1,022,609)
Income tax expense 16 - -
--------- ---------
Net loss (703,094) (1,022,609)
Other comprehensive income, net of tax
Foreign currency translation adjustments 211,266 53,842
--------- ---------
Comprehensive loss (491,828) (968,767)
Basic and diluted net loss per share (1.03) (1.50)
Stock used in computing net loss per share 680,800 680,800
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
51
<PAGE>
Combined Statements of Changes in Cash Flows
<TABLE>
<CAPTION>
30 June 30 June
1998 1997
$ $
Cash provided/(used) by:
Operating Activities
Operations
<S> <C> <C>
Net loss for the year (703,094) (1,022,609)
Items not involving cash:
Amortization 451,772 378,585
-------- ----------
(251,322) (644,024)
Increase/(decrease) from changes in:
Accounts receivable (99,898) (936,752)
Inventory 109,597 (481,690)
Accounts payable and other
accruals 428,848 1,709,986
Income taxes (56) (102)
Employee entitlement payable (58,918) 129,840
-------- ----------
128,251 (222,742)
-------- ----------
Investing Activities
Investments in:
Capital assets 21,246 (699,546)
-------- ----------
21,246 (699,546)
Financing Activities
Bank overdraft B repaid -- (118,081)
Loans repaid (319,920) (25,480)
Convertible note converted -- (131,095)
Lease liabilities repaid (81,626) (40,739)
Proceeds on issue of stock -- 113,974
Increase in loans payable on
securitization of debt 71,748 -
Increase in contributed capital 481,659 1,300,873
-------- ----------
151,861 1,099,452
-------- ----------
Increase in cash 310,358 177,164
Cash at beginning of year 288,519 111,355
Cash at end of year -- --
---------- ----------
589,877 288,519
-------- ----------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
52
<PAGE>
Notes on the Financial Statements
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Trade Wind Communications Limited (VSE:TWC) ("TWC") entered into a
business combination agreement ("Merger Agreement") with
Flexemessaging.com Inc. (previously Siler Ventures Inc.) and
Atlantic International Capital Holdings Ltd. ("Atlantic") to
complete a reverse acquisition of Flexemessaging.com, Inc and a
financing arrangement of US$3,660,000 through the sale of
Flexemessaging.com, Inc. common stock pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as
amended. TWC owned all of the stock in Trade Wind Group Pty Ltd (the
"Group") which controlled all the business assets.
In summary, Flexemessaging.com, Inc acquired the business assets of
TWC, consisting of the stock of the Group, in exchange for 8,800,000
shares of common stock of Flexemessaging.com, Inc. and Atlantic has
made an interim placement of 300,000 shares of common stock of
Flexemessaging.com, Inc. for US$750,000. Per the Merger Agreement,
Atlantic is expected to place the balance of the US$3,660,000
financing through the sale of Flexemessaging.com, Inc.'s common
stock pursuant to a private placement.
Flexemessaging.com, Inc (the "Company") is incorporated under the
laws of Idaho. Its stock is traded on the Over the Counter Bulletin
Board market, but is not registered with the US Securities and
Exchange Commission or the securities commission of any state.
Included in the issued stock are 600,000 shares of common stock
beneficially owned by Atlantic. These shares are held in escrow and
will be subject to performance by Atlantic under the terms of the
Merger Agreement. The performance terms have not been met and the
contract is currently under review by management.
The Group was incorporated in Australia on 6 September 1988. Its
principal activity comprises the manufacture and sale of
telecommunication equipment and the providing of communication
services. The majority of sales to date have been concentrated in
Australia and South East Asia; however, with the expansion of its
communication services to Europe and North America, the Group is
developing a global profile.
These financial statements are stated in US dollars and have been
prepared in accordance with generally accepted accounting principles
in the United States of America.
These financial statements present comparative figures for the Group
for the years ended 30 June 1997 and 30 June 1998, and include the
results of operations of Dictaphone (previously a division of TWC)
from the date of implementation, September 1997.
53
<PAGE>
b. Principles of Combination
The combined accounts comprise the accounts of the Group and all of
its controlled entities. The reason for the combination is that the
entities are under common control. A controlled entity is any entity
controlled by the Group. Control exists where the Group has the
capacity to dominate the decision making in relation to the
financial and operating policies of another entity so that the other
entity operates with the Group to achieve the objectives of the
Group. All material intercompany accounts and transactions have been
eliminated.
c. Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business.
The Company has incurred cumulative losses to date of $2,193,688
which includes a net loss for the current period of $703,094 and has
a working capital deficiency of $369,504 as at 30 June 1998. The
Company anticipates raising additional capital to meet its planned
operational and expansion requirements over the remaining part of
the financial year ending June 30th 2000. Should the appropriate
level of funding not become available, then the Company will have to
reduce its costs employed in various areas including its global
expansion activities, network expansion, new channel marketing
initiatives, R&D, sales and general marketing activities to a cost
level to meet the anticipated cash needs for working capital and
capital expenditure requirements. Thereafter if the Company's
operations do not begin to deliver positive cashflows in amounts
sufficient to satisfy the Company's cash requirements, then it will
be necessary for the Company to raise additional funds through bank
debt, equity funding, partnering with others to share overheads,
undertake appropriate divestment strategies of certain technologies
for equity or cash, or through other sources of capital. Additional
funding may not be available, or may not be available on terms and
timing acceptable to the Company, which could have a material
adverse effect on the Company's financial position, its overall
business and the result of operations.
The market for fax and messaging is very competitive and the Voice
and Data business, with its large contracts is heavily influenced by
the economic conditions existing in Australia at the time. The
Company does not expect this to change, and in fact, expects it to
require even greater effort to overcome in the future. The Company
will therefore need additional funding until it reaches significant
levels of revenue and margin to become cashflow positive.
d. Goodwill
Goodwill is recorded initially at the amount by which the purchase
price for a business or ownership interest in a controlled entity
exceeds the fair value attributed to its net tangible assets at date
of acquisition. Goodwill is amortized on a straight line basis over
a period of 10 years.
54
<PAGE>
e. Long-lived Assets
Long-lived assets, consisting principally of capital assets and
goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash
flows is less than the carrying amount of the asset, a loss is
recognized for the difference between the fair value and the
carrying value.
f. Inventories
Inventories are measured at the lower of cost and net realizable
value. Costs are assigned on a first-in first-out basis and include
direct materials, direct labor and an appropriate proportion of
variable and fixed overhead expenses.
g. Income Tax
The Company accounts for income taxes under an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns. To the extent it is more likely than not that all of the
Company's deferred tax assets will not be realized a valuation
allowance is recorded to reduce the deferred tax asset to its
estimated net realizable value.
h. Capital Assets
Capital assets are recorded at cost. Amortization is provided on
owned plant and equipment at rates between 4% and 36% using either
the straight line or diminishing balance method. Leased assets are
amortized over the term of the lease.
i. Research and Development
Research and Development expenditures are expensed as incurred.
j. Employee Benefits
Provision is made in respect of the Group's liability for annual
leave and long service leave as of the balance sheet date. Long
service leave is accrued in respect of all employees.
Contributions are made by the Group to an employee superannuation
fund and are charged as expenses when incurred. The amount
contributed to the fund was $236,954 (1997: $ 170,383). The Group
has no other legal obligation to provide benefits to employees on
retirement.
55
<PAGE>
k. Revenue Recognition
Sales revenue on contracts is recognized on a percentage of
completion basis but finalization, at which point all associated
costs are billed, is subject to acceptance of the operational
capability and confirmation of installation by the customer. Until
such time, accumulated costs (after progress billings) are held in
Work in progress (refer Note 4). Unearned maintenance revenue
represents revenue received in advance of the period covered by the
maintenance agreement. The revenue is recognized evenly over the
period covered by the maintenance agreement.
l. Foreign Currency Transactions and Balances
The financial position and results of the operations of the Company
are determined using the Australian dollar as the functional
currency. Assets and liabilities are translated at the exchange rate
in effect at each year end. Amounts on the statement of loss are
translated at the average rate of exchange prevailing during the
year. Translation adjustments arising from the use of different
exchange rates from period to period are included in the
comprehensive income account in shareholders' equity. The gains and
losses from foreign currency transactions are included in net loss.
m. Financial Instruments
The Company's and the Group's financial instruments consist of cash,
receivables, accounts payable, other loans, lease obligations and
employee entitlements payable. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair values of these financial instruments
approximate their carrying values, unless otherwise noted.
n. Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could materially differ from these estimates. The assets which
required management to make significant estimates and assumptions in
determining carrying values include plant and equipment and all
other non-current assets.
o. Loss per share
Basic earnings per share is computed by dividing the net loss by the
weighted average number of shares of common stock outstanding during
the year. Diluted earnings per share is computed in a manner
consistent with that of basic earnings per share while giving effect
to all potentially dilutive common stock equivalents that were
outstanding during the period. During 1997 and 1998 there were no
common stock equivalents, therefore both basic and dilutive earnings
per share were the same amounts for both periods.
56
<PAGE>
p. New Accounting Pronouncements
In 1997, the American Institute of Certified Public Accountants
issued Statement on Position 97-2, "Software Revenue Recognition",
("SOP 97-2") which provides guidance on when revenue should be
recognized and in what amounts for licensing, selling, leasing or
otherwise marketing computer software. It superseded SOP 91-1,
"Software Revenue Recognition". It requires that if an arrangement
to deliver software or a software system does not require
significant production, modification, or customization of software,
revenue should be recognized when all of the following conditions
are met: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the vendor=s fee is fixed or
determinable; (4) collectibility is probable. If the arrangement
does require significant production, modification, or customization
of software, the entire arrangement should be accounted for in
conformity with ARB 45, "long-term Construction-Type Contracts". SOP
97-2 is effective for transactions entered into in years beginning
after December 15, 1997. Adoption of this standard will not have a
material effect on the financial statements.
In April 1998, the American Institute of Certified Public
accountants issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up activities", ("SOP 98-5") which provides guidance
on the financial reporting of start-up costs and organization costs.
It requires costs of start-up activities and organization costs to
be expensed as incurred. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998 with initial adoption reported as
the cumulative effect of a change in accounting principle. Adoption
of this standard will not have a material effect on the financial
statements.
In June of 1997, the Financial Accounting Standards Board (FASB)
issued Statement on Financial Accounting Standard (SFAS) 130,
"Reporting Comprehensive Income". This standard establishes
guidelines for the reporting and display of comprehensive income,
its components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting from
investments by owners and distribution to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income to be reported in a financial statement that is
displayed with the same prominence as other financial statements.
SFAS is effective for fiscal years beginning after December 15,
1997. Adoption of this standard did not have an effect on the
financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") which supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise. SFAS 131
57
<PAGE>
established standards for the way that public companies report
information about operating segments in annual financial statements
and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It
also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate
financial information is available that is evaluated regularly by
the chief operating decision marker in deciding how to allocate
resources and in assessing performance. Adoption of this standard
will not have a material effect on the financial statements.
During 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Post retirement Benefits". This statement revised
employers' disclosures about pension and other post retirement
benefit plans but does not change measurement of recognition of
those plans. SFAS 132 is effective for fiscal years beginning after
December 15, 1998. Adoption of this standard will not have a
material effect on the financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133. "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 requires companies to recognize all
derivatives contracts as either assets of liabilities in the balance
sheet and to measure them at fair value. If certain conditions are
met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i)
the changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk or (ii) the earnings effect of
the hedged forecasted transaction. For a derivative not designated
as a hedging instrument, the gain or loss is recognized in income in
the period of change SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new
standards on July 1, 2000 to affect its financial statements.
<TABLE>
<CAPTION>
30 June 30 June
1998 1997
$ $
NOTE 2: CASH
<S> <C> <C>
Cash at bank and on deposit 586,129 285,970
Cash on hand 3,748 2,549
--------- ---------
589,877 288,519
--------- ---------
NOTE 3: RECEIVABLES
Trade debtors 1,883,883 1,790,493
Allowance for doubtful debts (21,875) (44,324)
Other debtors 261,741 277,682
--------- ---------
2,123,749 2,023,851
--------- ---------
NOTE 4: INVENTORY
Raw material 266,726 223,671
Costs relating to long-term contracts 540,705 693,357
--------- ---------
807,431 917,028
--------- ---------
</TABLE>
NOTE 5: CAPITAL ASSETS
<TABLE>
<CAPTION>
30 June 30 June
1998 1997
$ $
<S> <C> <C>
Furniture and Fittings - at cost 465,789 415,457
Motor Vehicles - at cost 82,830 102,810
Leasehold improvements B at cost 305,325 182,975
Less accumulated amortization (1,147,918) (983,547)
---------- ----------
1,041,201 1,200,073
(b) Leased
Leased Motor Vehicles -
Capitalized lease assets 160,750 199,996
Less accumulated amortization (142,008) (99,218)
---------- ----------
18,742 100,777
---------- ----------
Total
Cost 2,349,869 2,383,616
Less accumulated amortization (1,289,926) (1,082,765)
---------- ----------
Cost less accumulated amortization 1,059,943 1,300,851
---------- ----------
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
30 June 30 June
1998 1997
$ $
NOTE 6: GOODWILL
<S> <C> <C>
Goodwill 103,614 128,911
Less accumulated amortization (84,571) (92,327)
--------- --------
19,043 36,584
--------- --------
NOTE 7: OTHER NON CURRENT ASSETS
Trademarks 5,535 6,886
Less accumulated amortization (1,552) -
--------- --------
3,983 6,886
--------- --------
</TABLE>
NOTE 8: OTHER LOANS
With the proceeds from the public float of TWC in August 1997, the Group repaid
its obligations with respect of the loans with BLE Capital Limited, which were
due upon listing. The terms were as follows:
44,640 Management fee payable upon listing
126,480 repayable on listing or at the rate of A$15,000 per month
from 31 July 1997 if listing had not occurred by 30 June
1997.
148,800 repayable on listing or at the rate of A$10,000 per month
from 31 July 1997 if listing had not occurred by 30 June
1997.
Interest on the above loan is at the bank bill swap
reference rate plus excess of either 6% or 7% (equivalent
to 11.32% to 12.32% at 30 June 1997).
-------
319,920
-------
30 June 30 June
1998 1997
$ $
NOTE 9: SUNDRY CREDITORS AND ACCRUALS
Sundry creditors and accruals 843,974 909,592
Employee leave entitlement 124,774 115,425
--------- ---------
968,748 1,025,017
--------- ---------
60
<PAGE>
30 June 30 June
1998 1997
$ $
NOTE 10: LEASE LIABILITIES
(a) Finance Leasing Commitments
Payable
- not later than one year 17,994 81,315
- later than one year but not 2,709 25,757
later than 2 years
- later than 2 years but not later
than 3 years - -
- later than 3 years but not later
than 4 years - -
- later than 4 years but not later
than 5 years - -
------ -------
Minimum lease payments 20,703 107,072
Less future finance charges 1,552 6,296
------ -------
Total lease liability 19,151 100,776
------ -------
Current portion 16,898 76,950
Non-current portion 2,253 23,827
------ -------
19,151 100,776
------ -------
Finance lease liabilities are
collateralized by the underlying
lease assets.
(b) Operating Lease Commitments
Non-cancelable operating
leases contracted for but
not capitalized in the accounts
Payable
- not later than one year 343,039 133,738
- later than one year but not
later than 2 years 292,527 105,705
- later than 2 years but not
later than 3 years 404,149 32,267
- later than 3 years but not
later than 4 years 10,753 -
- later than 4 years but not
later than 5 years - -
--------- -------
1,050,468 271,710
--------- -------
61
<PAGE>
NOTE 11: LOANS PAYABLE ON DEBT SECURITIZATION OF DEBT
In September 1997, the Company arranged an unlimited working capital-based
facility with Scottish Pacific Business Finance Limited for its Australian
domiciled customers of FlexiFax Global Services. This has been secured by a
charge over the assets of Trade Wind Marketing Pty Ltd as well as guarantees by
the Group and its subsidiaries. Interest is charged at the highest of the
prevailing rates of Westpac Banking Corporation, Australia and New Zealand
Banking Group Limited and National Australia Bank Limited plus a margin of 2%.
The original term of this agreement was twelve months with automatic renewal.
This agreement may be terminated by Scottish Pacific Business Finance Limited by
giving one month's notice or by the Company giving three month's notice.
NOTE 12: SHARE CAPITAL
<TABLE>
<CAPTION>
30 June 30 June 30 June 30 June
1998 1997 1998 1997
Number of Number of $ $
Stock Stock
(Expressed in Australian Dollars
except for the number of stock)
<S> <C> <C> <C> <C>
Authorized: Ordinary stock with
a par value of A$1 each, 1,000,000 1,000,000 A$1,000,000 A$1,000,000
----------- -----------
Issued: Ordinary stock with a par value 680,800 680,800 506,515 506,515
of $1 each, fully paid ----------- -----------
506,515 506,515
----------- -----------
</TABLE>
NOTE 13: RESERVES
<TABLE>
<CAPTION>
Share Premium Account
<S> <C> <C>
Balance beginning of year 273,505 273,505
Movement during year - -
--------- ----------
Balance end of year 273,505 273,505
--------- ----------
</TABLE>
62
<PAGE>
NOTE 14: CONTRIBUTED CAPITAL
Loan is payable to Trade Wind Communications Limited. This loan is unsecured and
does not attract interest and there has been no timetable set for repayment.
This loan is considered to be contributed capital
30 June 30 June
1998 1997
$ $
NOTE 15: COMPREHENSIVE INCOME B FOREIGN CURRENCY TRANSLATION
In accordance with SFAS 130, the accumulated comprehensive income comprises the
following:
Accumulated comprehensive income
Balance at beginning of year 23,898 (29,944)
Foreign currency translation adjustments 211,266 53,842
---------- ---------
Balance at end of year 235,164 23,898
NOTE 16: RENT
Rent expense incurred 324,419 307,225
NOTE 17: INCOME TAX EXPENSE
Estimated tax losses available to the Group to be carried forward to future
years amount to $4,057,173 (1997: $4,197,636). These losses are not subject to
an expiry date, however, the benefits of these losses will only be obtained if:
(a) the Group derives future assessable income of a nature and of an amount
sufficient to enable the benefit from the deduction for the loss to be
realized;
(b) the Group continues to comply with the conditions for deductibility
imposed by law; and
(c) no changes in tax legislation adversely affect the Group in realizing the
benefit from the deduction for the loss.
Accumulated losses at the end of the year. (2,223,632) (1,520,538)
Prima Facie Tax Benefit B on Tax Losses @ 36
cents in $ (800,508) (547,394)
Valuation allowance 800,508 547,394
----------- -----------
- -
----------- -----------
63
<PAGE>
NOTE 18: SEGMENTED FINANCIAL INFORMATION
The Group operates two business divisions, Voice and Data Systems and FlexiFax
Global Services. Voice and Data Systems is a specialist supplier and integrator
of voice communications systems and decision support applications for dealing
rooms, emergency services dispatch and similar operations. FlexiFax Global
Services operates an enhanced fax broadcast system. It is not considered
necessary to show geographic segmented financial information as on a materiality
basis, all revenue has been generated from Australia. The accounting principles
used to report the segment amounts is the same as that used to report the
financial statements. Segmented financial information for these two divisions
follows:
For the year ending 30 June 1998
<TABLE>
<CAPTION>
Voice and FlexiFax Head Office Combined
Data
<S> <C> <C> <C> <C>
Revenue 7,640,378 3,462,992 - 11,103,370
-------------------------------------------------------
Amortization 107,558 289,536 54,678 451,772
-------------------------------------------------------
Segment operating profit/(loss) 133,024 (625,520) (188,379) (680,875)
-------------------------------------------------------
Identifiable assets 3,098,631 1,252,369 252,626 4,603,626
-------------------------------------------------------
For year ending 30 June 1997
Revenue 6,816,449 2,700,076 - 9,516,525
-------------------------------------------------------
Amortization 112,557 218,484 47,544 378,585
-------------------------------------------------------
Segment operating profit/(loss) 24,185 (1,039,220) 90,902 (924,133)
-------------------------------------------------------
Identifiable assets 2,768,414 1,618,889 186,416 4,573,719
-------------------------------------------------------
</TABLE>
NOTE 19: EVENTS SUBSEQUENT TO BALANCE DATE
On February 5, 1999, Trade Wind Communications Limited ("TWC") consummated a
business combination agreement with Flexemessaging.com, Inc. (the "Company").
The Company acquired the operating assets of TWC, consisting of the stock of
Trade Wind Group Pty Ltd ("TWG"), in exchange for 8.8 million shares of the
Company's common stock. For financial accounting purposes, this transaction will
be accounted for as a reverse takeover of the Company by TWG. Loss per share on
a pro forma basis, based on the 8.8 million shares exchanged, would have been
$(.08) and $(.012) for the years ended June 30, 1998 and 1997, respectively.
64
STATE OF IDAHO
I, PETE T. CENARRUSA, Secretary of State of the State of Idaho, hereby certify
that I am the custodian of the corporation, limited partnership, and limited
liability company records of this State.
I FURTHER CERTIFY That the annexed is a full, true and complete transcript of
articles of the corporation of FLEXEMESSAGIN.COM, INC., an Idaho Corporation,
received and filed in this office on August 29, 1957, under file number C 29478,
including all amendments filed thereto, as appears of record in this office as
of this date.
Dated: August 12, 1999
/s/ Pete T. Cenarrusa
---------------------
Secretary of State
By: /s/ Sonya Herold
--------------------
<PAGE>
STATE OF IDAHO
DEPARTMENT OF STATE
CERTIFICATE OF INCORPORATION
I, JAS H. YOUNG, Secretary of State of of the State of Idaho, and legal
custodian of the corporation records of the State of Iadho, do hereby certify
that the original of the articles of incorporation of
SILER EQUIPMENT SALES, INC.
was filed in the office of the Secretary on the 29th day of August A.D. One
Thousand Nine Hundred Fifty-seven and duly recorded on Film No. 99 of Record of
Domestic Corporations, of the State of Idaho, and that the said articles contain
the statement of facts required by Section 30- 105, Idaho Code.
I FURTHER CERTIFY, That the persons executing the articles and their
associates and successors are hereby constituted a corporation, by the name
hereinbefore stated, for perpetual existence from the date hereof, with its
registered office in this State located at Kellogg in the County of Shoebone IN
TESTIMONY WHEREOF, I have hereunto set my hand and affixed the Great Seal of the
State. Done at Boise City, the Capital of Idaho, this 29th day of August, A.D.,
1957.
Secretary of State.
<PAGE>
ARTICLES OF INCORPORATION
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, all of whom
are natural persons of full age and citizens of the United States of America,
have this day voluntarily associated ourselves together for the purpose of
forming a corporation under the laws of the State of Idaho, and we hereby
certify in writing:
I.
The name of the corporation shall be:
SILER EQUIPMENT SALES, INC.
II.
That the purpose for which this corporation is formed are:
a. To buy, sell, manufacture, repair, export, import, license, lease,
trade, exchange and generally deal in new and used machinery and equipment of
all kinds and descriptions including motor driven vehicles of every kind and
nature including but not excluding the above mentioned purposes; especially
including mining, milling, electrical and electronic equipment, devices and
appliances.
b. To buy, sell and deal in all kinds, forms and combinations of steel,
iron or other metals and to transact general steel, iron and metal jobbing,
wholesaling and retailing business including scrap metal, engines,. machinery,
equipment, materials, supplies, appliances and accessories of every kind and
nature.
c. To construct, equip and maintain garages and service stations for
the sale of petroleum products, automotive fuels and supplies of every kind and
nature.
-2-
<PAGE>
d. To construct, equip and maintain warehouses for the safe-keeping of
goods, wares or merchandise.
e. To acquire, hold, own and transfer, with proper authority, any and
all licenses, permits, franchises and agreements necessary or useful in
connection with the business of this corporation.
f. To buy, sell, hold, mortgage and encumber real and personal property
in any state or territory necessary for the proper conduct of the business of
this corporation.
g. To invest in, take over, buy, sell, pledge and exchange stock,
shares, bonds and securities of this or other companies and to issue debentures
and other evidences of indebtedness, and to manage or take over the affairs and
conduct the business of other companies under such terms and conditions as may
be beneficial to the company.
h. To do everything necessary, suitable or proper for the
accomplishment of any of the purposes or the exercise of any of the powers
hereinbefore set forth, and to every act and thing identical to or growing out
of, or connected with any of the aforesaid objects or purposes.
i. To conduct and carry on any and all business of the corporation, and
to exercise any and all corporate powers and rights in the State of Idaho, to
become qualified if necessary to conduct and carry on any and all business of
the corporation in the other states, territories and dependencies of the United
States, and in the District of Columbia, and in any and all foreign countries.
-3-
<PAGE>
III.
The amount of the capital stock shall be $100,000.00, to consist of
100,000 shares of common stock of the par value of $1.00 per share.
IV.
The location and post office address of the registered office of the
corporation in the State of Idaho is: Kellogg, Shoshone County, Idaho.
V.
The duration of said corporation is perpetual.
VI.
The number of directors of said corporation shall not be less than
three (3) nor more than five (5) in number.
VII.
The name and post office address of each of the incorporators and the
number of shares and par value of shares subscribed for by each is:
<TABLE>
<CAPTION>
Name Address No. Shares Par Value
---- ------- ---------- ---------
<S> <C> <C> <C>
Earl T. Siler Kellogg, Idaho 10 $10.00
Joss Talkington Kellogg, Idaho 10 $10.00
John J. Peacock Kellogg, Idaho 10 $10.00
</TABLE>
IN WITNESS WHEREOF, we have hereunto set our hands the 26th day of
August, 1957.
/s/ Earl T. Siler
-----------------
Earl T. Siler
-4-
<PAGE>
/s/ Joss Talkington
-------------------
Joss Talkington
/s/ John J. Peacock
-------------------
John J. Peacock
-5-
<PAGE>
STATE OF IDAHO )
: ss.
COUNTY OF SHOSHONE )
On this 26th day of August, 1957, before me, the undersigned, a Notary
Public in and for the State of Idaho, personally appeared EARL T. SILER, JESS
TALKINGTON and JOHN J. PEACOCK, known to me to be the persons whose names are
subscribed to the within and foregoing instrument and acknowledged to me that
they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ James G. Towler
-------------------
Notary Public for the State of Idaho
Residing at Kellogg, Idaho.
-6-
<PAGE>
CERTIFICATE OF APPOINTMENT
OF REGISTERED AGENT
-----------------------
KNOW ALL MEN BY THESE PRESENTS:
That Siler Equipment Sales, Inc., an Idaho corporation, pursuant to
section 30-1-12, Idaho Code, and by authority of its Board of Directors, does
hereby appoint Earl T. Siler, of P.O. Box 565, Kelogg, Idaho as its Registered
Agent in the State of Idaho, upon whom process issued by authority of or under
any law of the State of Idaho may be served.
IN WITNESS WHEREOF the corporation has caused this certificate to be
executed and verified by its President (or Vice-President) on this 29th day of
May, 1979.
SILER EQUIPMENT SALES, INC.
By: /s/ Earl T. Siler
Earl T. Siler
President
STATE OF IDAHO )
) ss.
COUNTY OF SHOSHONE )
Subscribed and sworn to before me this 29th day of May, 1979.
IN WITNESS WHEREOF, I have hereunto set
my hand and affixed my seal.
/s/ ____________________________________
Notary Public
<PAGE>
STATE OF IDAHO
DEPARTMENT OF STATE
CORPORATION REINSTATEMENT CERTIFICATE
I, PETE. T. CENARRUSA, Secretary of State of the State of Idaho, and
legal custodian of the corporation records of the State and collector of the
annual corporation tax, do hereby certify that
SILER EQUIPMENT SALES, INC.
a corporation organized and existing under and by virtue of the laws of the
State of Idaho with its principal place of business in Idaho located in Kellogg,
Idaho, forfeited on the 30th day of November, 1974, its charter or authority to
do business in the State of Idaho, because of failure to file an annual
statement and pay the corporation license tax due the State of Idaho for the
fiscal year ending June 30, 1975, as provided by Section 80-808, Idaho Code.
AND FURTHER CERTIFY That the said corporation has subsequently and on
the 13th day of January 1975, filed an annual statement and paid the corporation
license tax and said corporation is therefore registered on the records of this
office, and all the corporate rights which it enjoyed under the Constitution and
Laws of the State of Idaho prior to the date of said forfeiture, are hereby
restored.
IN TESTIMONY WHEREOF, I
have hereunto set my hand
and affixed the Great Seal
of the State. Done at Boise
City, the Capital of Idaho,
this 13th day of January
A.D., 1975.
---------------------------
Secretary of State
<PAGE>
STATE OF IDAHO
DEPARTMENT OF STATE
CERTIFICATE OF AMENDMENT
OF
SILER EQUIPMENT SALES, INC.
File Number C 29478
I, PETE T. CENARRUSA, Secretary of State of the State of Idaho, hereby
certify that duplicate originals of Articles of Amendment to the Articles of
Incorporation of SILER EQUIPMENT SALES, INC. duly executed pursuant to the
provisions of the Idaho Business Corporation Act, have been received in this
office and are found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I issue
this Certificate of Amendment to the Articles of Incorporation and attach hereto
a duplicate original of the Articles of Amendment.
Dated: February 20, 1996
/s/ Peter T. Cenarrusa
----------------------
SECRETARY OF STATE
By: /s/ Tonya Herold
--------------------
Tonya Herold
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SILER EQUIPMENT SALES, INC.
Pursuant to the provisions of the Idaho Code, the following amendment
to the Articles of Incorporation of Siler Equipment Sales, Inc., an Idaho
corporation (the "Corporation"), was adopted by the shareholders of the
Corporation on September 29, 1995, in the manner prescribed by the Idaho Code.
FIRST: The Articles of Incorporation are hereby amended by adding a new
Article VIII to read as follows:
"ARTICLE VIII
PREEMPTIVE RIGHTS
No stockholder shall have any preemptive rights to acquire the
Corporation's unissued shares and any and all such existing preemptive rights
shall be extinguished." The number of shares of the Corporation outstanding at
the time of adoption of the above amendment was 38,720, and the number of shares
entitled to vote thereon was 38,720. As to the amendment set forth above, the
number of shares consenting and voting For such amendment was 34,500, and the
number of shares voting Against such amendment was -0-.
DATED this 29th day of September, 1995.
/s/ Earl T. Siler
------------------------
Earl T. Siler, President
/s/ Elaine Bebb
------------------------
Elaine Bebb, Secretary
-2-
<PAGE>
ACKNOWLEDGEMENT
STATE OF IDAHO )
: ss
COUNTY OF SHOSHONE )
THE UNDERSIGNED, the President and Secretary respectively of Siler
Equipment Sales, Inc., a corporation organized and existing under the laws of
the State of Idaho, do hereby certify that at a Special Meeting of Shareholders
of said Corporation properly called on September 29, 1995, the foregoing
Amendment to the Articles of Incorporation of said Corporation was duly adopted
and authorized by more than fifty percent (50%) of the issued and outstanding
shares of said Corporation, which shares were properly represented and voted at
said Meeting. Also that said Meeting was held pursuant to a resolution of the
Board of Directors setting forth the amendment and directing that it be
submitted to a vote at the Meeting, and that written notice of said Special
Meeting setting forth the proposed amendment was given by first class mail to
each shareholder of record entitled to vote thereon at least ten (10) days prior
to the holding of the Meeting. The Undersigned further certify that the
foregoing Amendment correctly sets forth the amendment adopted by the
shareholders and correctly states the date of adoption thereof, the number of
shares outstanding, the number of shares voted for the number of shares voted
against such amendment.
/S/ Earl T. Siler
-----------------
EARL T. SILER, President
/s/ Elaine Bebb
---------------
Elaine Bebb, Secretary
SUBSCRIBED AND SWORN to before me this 17th day of January, 1996.
/s/ Carol Stoddard
------------------
NOTARY PUBLIC
Residing at: Kellogg
My Commission Expires:
4/3/98
-3-
<PAGE>
STATE OF IDAHO
DEPARTMENT OF STATE
CERTIFICATE OF AMENDMENT
OF
SILER EQUIPMENT SALES, INC.
File Number C 29478
I, PETER T. CENARRUSA, Secretary of State of the State of Idaho, hereby
certify that duplicate originals of Articles of Amendment to the Articles of
Incorporation of SILER EQUIPMENT SALES, INC., changing the corporate name to
AMERICAN NETWORK TECHNOLOGIES, INC., duly executed pursuant to the provisions of
the Idaho Business Corporation Act, have been received in this office and are
found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I issue
this Certificate of Amendment to the Articles of Incorporation and attach hereto
a duplicate original of the Articles of Amendment.
Dated: February 20, 1996
/s/ Peter T. Cenarrusa
----------------------
SECRETARY OF STATE
By: /s/ Tonya Herold
------------------
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SILER EQUIPMENT SALES, INC.
Pursuant to the provisions of the Idaho Code, the following amendment
to the Articles of Incorporation of Siler Equipment Sales, Inc., an Idaho
corporation (the "corporation"), was adopted by the shareholders of the
Corporation on January 25, 1996, in the manner prescribed by the Idaho Code.
FIRST: Article I of the Articles of Incorporation is hereby amended to
read as follows:
"I
The name of the Corporation shall be American Network Technologies,
Inc." SECOND: Article II of the Articles of Incorporation is hereby amended to
read as follows:
"II
The purpose of this Corporation shall be to engage in any lawful act or
activity for which a corporation may be organized under the Idaho Business
Corporation Act." THIRD: Article III of the Articles of Incorporation is hereby
amended read as follows:
-2-
<PAGE>
"III
The aggregate number of shares which the Corporation shall have
authority to issue is twenty million (20,000,000) shares of common stock, par
value One Tenth of a Cent ($.001) per share, which shares shall be
non-assessable.
The number of shares of the Corporation outstanding at the time of
adoption of the above amendments was 39,220, and the number of shares entitled
to vote thereon was 39,220. As to each of the amendments set forth above, the
number of shares consenting and voting For each such amendment was 33,570, and
the number of shares voting Against each such amendment was -0-.
Also approved at the meeting was the proposal to effect a twenty-six
shares for one share forward stock split of the shares of the Company's common
stock issued and outstanding at the time of the meeting. As a result of the
forward stock split and amendment to Article III changing the capitalization
from 100,000 shares of $1.00 par value stock to 20,000,000 shares of $.001 par
value stock, the stated capital of the corporation was reduced by $38,200 to
$1,020.
DATED this 25th day of January, 1996.
/s/ Earl T. Siler
-----------------
EARL T. SILER, President
/s/ Elaine Bebb
--------------------
ELAINE BEBB, Secretary
-3-
<PAGE>
ACKNOWLEDGEMENT
STATE OF IDAHO )
: ss
COUNTY OF SHOSHONE )
THE UNDERSIGNED, the President and Secretary respectively of Siler
Equipment Sales, Inc., a corporation organized and existing under the laws of
the State of Idaho, do hereby certify that at a Special Meeting of Shareholders
of said Corporation properly called on January 25, 1996, the foregoing Amendment
to the Articles of Incorporation for said Corporation was duly adopted and
authorized by more than fifty percent (50%) of the issued and outstanding shares
of said Corporation, which shares were properly represented and voted at said
Meeting. Also that said Meeting was held pursuant to a resolution of the Board
of Directors setting forth the amendments and directing that it be submitted to
a vote at the Meeting, and that written notice of said Special Meeting setting
forth the proposed amendments was given by first class mail to each shareholder
of record entitled to vote thereon at least twenty (20) days prior to the
holding of the Meeting. The Undersigned further certify that the foregoing
Amendment correctly sets forth the amendments adopted by the shareholders and
correctly states the date of adoption thereof, the number of shares outstanding,
the number of shares voted for and the number of shares voted against each such
amendment.
/s/ Earl T. Siler
-----------------
EARL T. SILER, President
/s/ Elaine Bebb
---------------
ELAINE BEBB, Secretary
SUBSCRIBED AND SWORN to before me this 13 day of February, 1996.
/s/ Max G. Falker
--------------------
NOTARY PUBLIC
Residing at: Kellogg
My Commission Expires:
6/8/99
-4-
<PAGE>
STATE OF IDAHO
DEPARTMENT OF STATE
CERTIFICATE OF EXCHANGE
I, PETE T. CENARRUSA, Secretary of State of the State of Idaho, hereby
certify that duplicate originals of Articles of Exchange of AMERICAN NETWORK
TECHNOLOGIES, INC., an Idaho corporation, and AMERICAN NETWORK TECHNOLOGIES,
INC., a New York corporation, duly executed pursuant to the provisions of the
Idaho Business Corporation Act, have been received in this office and are found
to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I issue
this certificate of exchange and attach hereto a duplicate original of the
Articles of Exchange.
Dated: March 18, 1996
PETE T. CENARRUSA
-----------------
SECRETARY OF STATE
By: /s/ Sally T. Clark
----------------------
Sally T. Clark
-5-
<PAGE>
ARTICLES OF EXCHANGE
OF
AMERICAN NETWORK TECHNOLOGIES, INC.
(Formerly SILER EQUIPMENT SALES, INC.)
Pursuant to the provisions of Section 30-1-74 of the Idaho Code, the
following Articles of Exchange are hereby submitted by American Network
Technologies, Inc., formerly Siler Equipment Sales, Inc. (the "Corporation"):
1. On the 24th day of January, 1996, the Corporation entered into an
Acquisition Agreement and Plan of Reorganization ("Acquisition Agreement") for
an exchange of shares whereby the Corporation acquired all the issued and
outstanding shares of capital stock of American Network Technologies, Inc., a
New York corporation, in exchange for 3,020,160 shares of the Corporation's
authorized but previously unissued Common Stock. The shares of the Corporation's
Common Stock issued pursuant to the Acquisition Agreement represent effective
control of the Corporation. Also, pursuant to the terms of the Acquisition
Agreement, the Corporation changed its corporate name to American Network
Technologies, Inc.
2. At the Special Meeting in Lieu of Annual Meeting of Shareholders of
the Corporation held January 25, 1996 (the "Meeting"), the shareholders of the
Corporation ratified the Acquisition Agreement. At the time of the Meeting, the
Corporation had issued and outstanding 39,220 shares of Common Stock. There were
33,570 shares represented at the Meeting in person and by proxy. Those shares
voting in favor of the Acquisition Agreement were 33,570, and those shares
voting against were -0-.
-6-
<PAGE>
3. Also at the Meeting, the shareholders ratified the proposals to (i)
amend the Corporation's Articles of Incorporation to change the authorized
capitalization to 20,000,000 shares of common stock, par value $.01 per share,
and (ii) to effect a forward stock split of the Corporation's Common Stock
outstanding immediately prior to the Meeting on a twenty-six (26) shares for one
(1) share basis.
DATED this 25th day of January, 1996.
SILER EQUIPMENT SALES, INC. AMERICAN NETWORK
(n/k/a AMERICAN NETWORK TECHNOLOGIES, INC.
TECHNOLOGIES, INC.)
BY:/s/ Earl T. Siler BY: /s/ Illegible
ITS: President ITS: President
BY:/s/ Elaine Bebb BY: /s/ Illegible
ITS: Secretary ITS: Secretary
-7-
<PAGE>
STATE OF IDAHO )
) ss
COUNTY OF SHOSHONE )
THE UNDERSIGNED, the President and Secretary respectively of Siler
Equipment Sales, Inc., now known as American Network Technologies, Inc., a
corporation organized and existing under the laws of the State of Idaho, do
hereby certify that at a Special Meeting in Lieu of Annual Meeting of
Shareholders of said Corporation properly called and held on January 25, 1996,
the proposal relating to the Acquisition Agreement in exchange for the issuance
of the Corporation's securities, was duly ratified and authorized by more than
fifty percent (50%) of the issued and outstanding shares of said Corporation,
which shares were properly represented and voted at said Meeting. Also that said
Meeting was held pursuant to a resolution of the Board of Directors setting
forth the terms and conditions of the exchange of shares and that written notice
of said Special Meeting setting forth the proposal was given by first class mail
to each shareholder of record entitled to vote thereon at least twenty (20) days
prior to the holding of the Meeting. The Undersigned further certify that the
foregoing correctly sets forth the Acquisition Agreement approved by the
shareholders and correctly states the date of adoption thereof, the number of
shares outstanding, the number of shares voted for and the number of shares
voted against such proposal.
/S/ Earl T. Siler
-----------------
EARL T. SILER, President
/s/ Elaine Bebb
---------------
Elaine Bebb, Secretary
SUBSCRIBED AND SWORN to before me this 27th day of February, 1996.
/s/ Carol Stoddard
------------------
NOTARY PUBLIC
Residing at: Kellogg, Idaho
My Commission Expires:
4/3/98
-8-
<PAGE>
STATE OF NY )
) ss.
COUNTY OF )
THE UNDERSIGNED, the President and Secretary respectively of American
Network Technologies, Inc., a corporation organized and existing under the laws
of the State of New York, do hereby certify that at a Special Meeting of
Shareholders of said Corporation, the transaction relating to the Acquisition
Agreement was duly and unanimously ratified and authorized by 100 shares of the
100 shares of said American Network Technologies, Inc.'s common stock
outstanding. The Undersigned further certify that the foregoing correctly sets
forth the Acquisition Agreement approved by the shareholders and correctly
states the date of adoption thereof, the number of shares outstanding, the
number of shares voted for and the number of shares voted against such proposal.
/s/ Illegible
-------------
, President
/s/ Illegible
-------------
, Secretary
I, a notary public, do hereby certify that on this 8th day of March,
1996, personally appeared before me RONALD NATHAN and _____________________,
who, being by me first duly sworn, subscribed to and declared that they are the
President and Secretary respectively of American Network Technologies, Inc., a
New York corporation, and that they signed the foregoing document as President
and Secretary of said corporation and that the statements contained therein are
true.
/s/ Illegible
-------------
NOTARY PUBLIC
Residing at: __________________
My Commission Expires:
3/20/2016
-9-
<PAGE>
STATE OF IDAHO
DEPARTMENT OF STATE
CORPORATION REINSTATEMENT CERTIFICATE
I, PETE T. CENARRUSA, Secretary of State of the State of Idaho, do
hereby certify that AMERICAN NETWORK TECHNOLOGIES, INC., file number C 29478, a
corporation organized under the laws of the State of Idaho, forfeited its
corporate powers or its right to do business in the State of Idaho on December
2, 1996.
I FURTHER CERTIFY That the corporation has on June 13, 1997, been
reinstated on the records of this office, and that its corporate powers or its
right to do business in the State of Idaho are hereby restored.
Dated: June 13, 1997
/s/ Peter T. Cenarrusa
----------------------
SECRETARY OF STATE
By: /s/ Tonya Herold
--------------------
Tonya Herold
-10-
<PAGE>
STATE OF IDAHO
DEPARTMENT OF STATE
CERTIFICATE OF AMENDMENT
OF
AMERICAN NETWORK TECHNOLOGIES, INC.
File Number C 29478
I, PETER T. CENARRUSA, Secretary of State of the State of Idaho, hereby
certify that duplicate originals of Articles of Amendment to the Articles of
Incorporation of AMERICAN NETWORK TECHNOLOGIES, INC., changing the corporate
name to PIAZZTEC INTERNATIONAL, INC., duly executed pursuant to the provisions
of the Idaho Business Corporation Act, have been received in this office and are
found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I issue
this Certificate of Amendment to the Articles of Incorporation and attach hereto
a duplicate original of the Articles of Amendment.
Dated: June 18, 1997
/s/ Peter T. Cenarrusa
----------------------
SECRETARY OF STATE
By: /s/ Tonya Herold
--------------------
Tonya Herold
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
AMERICAN NETWORK TECHNOLOGIES, INC.
Pursuant to the provisions of the Idaho Code, the following amendment
to the Articles of Incorporation of American Network Technologies, Inc., an
Idaho corporation (the "corporation"), was adopted by the shareholders of the
Corporation on June 9, 1997, in the manner prescribed by the Idaho Code.
FIRST: Article I of the Articles of Incorporation is hereby amended to
read as follows:
"I
The name of the Corporation shall be American Piazztec International,
Inc." SECOND: Article II of the Articles of Incorporation is hereby amended to
read as follows:
"III
The aggregate number of shares which the Corporation shall have
authority to issue is twenty million (20,000,000) shares of common stock, par
value One Tenth of a Cent ($.001) per share, and five million (5,000,000) shares
of preferred stock, par value One-Tenth of a Cent ($.001) per share, which
shares of preferred stock may be issued in various series and shall have
preference as to dividends and to liquidation of the Corporation. The Board of
Directors of the Corporation shall establish the specific rights, preferences,
voting privileges and restrictions of such
-2-
<PAGE>
Preferred Stock, or any series thereof. All fully paid stock of the
Corporation shall not be liable to call or assessment. Cumulative
voting shall not prevail in any election by the stockholders of this
Corporation.".
The number of shares of the Corporation outstanding at the
time of adoption of the above amendments was 1,019,720, and the number of shares
entitled to vote thereon was 1,019.720. As to each of the amendments set forth
above, the number of shares consenting and voting For each such amendment was
828,760, and the number of shares voting Against each such amendment was -0-.
DATED this 9th day of June, 1997.
/s/ MATT OTT
------------
MATT OTT, President
---------------------------
GEOFF WILLIAMS, Secretary
-3-
<PAGE>
ACKNOWLEDGEMENT
STATE OF ______________)
: ss
COUNTY OF _____________)
THE UNDERSIGNED, the President and Secretary respectively of American
Network Technologies, Inc., a corporation organized and existing under the laws
of the State of Idaho, do hereby certify that at a Special Meeting of
Shareholders of said Corporation properly called on June 9, 1997, the foregoing
Amendment to the Articles of Incorporation for said Corporation was duly adopted
and authorized by more than fifty percent (50%) of the issued and outstanding
shares of said Corporation, which shares were properly represented and voted at
said Meeting. Also that said Meeting was held pursuant to a resolution of the
Board of Directors setting forth the amendments and directing that it be
submitted to a vote at the Meeting, and that written notice of said Special
Meeting setting forth the proposed amendments was given by first class mail to
each shareholder of record entitled to vote thereon at least twenty (20) days
prior to the holding of the Meeting. The Undersigned further certify that the
foregoing Amendment correctly sets forth the amendments adopted by the
shareholders and correctly states the date of adoption thereof, the number of
shares outstanding, the number of shares voted for and the number of shares
voted against each such amendment.
/s/ MATT OTT
------------
MATT OTT, President
GEOFF WILLIAMS, Secretary
SUBSCRIBED AND SWORN to before me this ___ day of ___________, 1997.
--------------------------
NOTARY PUBLIC
Residing at: ______________
My Commission Expires:
- -------------------------
-4-
<PAGE>
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
PIAZZTEC INTERNATIONAL, INC.
THE UNDERSIGNED President and Secretary of Piazztec International,
Inc., Idaho Corporation, pursuant to the provisions of Section 30-1-61 of the
Idaho, Business Corporation Act, for the purpose of amending the Articles of
Incorporation of said Corporation, do hereby certificate as follows:
That the shareholders of said Corporation at its Special Meeting in
Lieu of Annual Meeting of Shareholders duly convened and held on the 23rd day of
February, 1998, adopted resolutions to amend the Articles of Incorporation of
the Corporation as follows:
(1) Article I of the Articles of Incorporation shall be amended to read
as follows:
"Article I
The name of the Corporation shall be Siler Ventures, Inc." The
foregoing amendments to the Articles of Incorporation were duly adopted by the
shareholders of the Corporation on the 23rd day of February, 1998.
At the date of the Meeting of Shareholders, the number of shares of the
Corporation's common stock outstanding and entitled to vote on the foregoing
amendment to the Articles of Incorporation was ten million (5,537,248). A total
of 5,305,535 shares voted FOR amendment (1) (representing approximately 96% of
the issued and outstanding shares of the Corporation) and 0 shares voted AGAINST
amendment (1) (representing approximately 0% of the issued and outstanding
shares of the Corporation).
DATED this 23rd day of February, 1998.
<PAGE>
The undersigned President of the Corporation hereby declare that the
foregoing Certificate of Amendment to the Articles of Incorporation is true and
correct to the best of their knowledge and belief.
/s/ Matt Ott /s/ Geoff Williams
- ------------ ------------------
Matt Ott, President Geoff Williams, Secretary
-2-
<PAGE>
STATE OF IDAHO
DEPARTMENT OF STATE
CORPORATION REINSTATEMENT CERTIFICATE
I, PETE T. CENARRUSA, Secretary of State of the State of Idaho, do
hereby certify that SILER VENTURES, INC., file number C 29478, a corporation
organized under the laws of the State of Idaho, was administratively dissolved
on February 10, 1999, for failure to file the required annual report form by the
date due.
I FURTHER CERTIFY That the corporation has on February 19, 1999, been
reinstated on the records of this office, and that its corporate powers or its
right to do business in the State of Idaho are hereby restored.
Dated: February 19, 1999
/s/ Peter T. Cenarrusa
----------------------
SECRETARY OF STATE
By: /s/ Lynette Dumont
----------------------
Lynette Dumont
<PAGE>
APPLICATION FOR REINSTATEMENT
TO THE SECRETARY OF STATE, STATE OF IDAHO
1. The name of the Idaho corporation applying for reinstatement
following administrative dissolution
-2-
<PAGE>
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
SILER VENTURES, INC.
THE UNDERSIGNED President and Secretary of Siler Ventures, Inc., an
Idaho Corporation, pursuant to the provisions of Section 30-1-61 of the Idaho,
Business Corporation Act, for the purpose of amending the Articles of
Incorporation of said Corporation, do hereby certificate as follows:
That the shareholders of said Corporation at its Special Meeting in
Lieu of Annual Meeting of Shareholders duly convened and held on the 23rd day of
February, 1999, adopted resolutions to amend the Articles of Incorporation of
the Corporation as follows:
(1) Article I of the Articles of Incorporation shall be amended to read
as follows:
"Article I
The name of the Corporation shall be Flexemessaging.com, Inc."
The foregoing amendments to the Articles of Incorporation were duly
adopted by the shareholders of the Corporation on the 15th day of February,
1999.
At the date of the Meeting of Shareholders, the number of shares of the
Corporation's common stock outstanding and entitled to vote on the foregoing
amendment to the Articles of Incorporation was 5,537,248. A total of 5,305,116
shares voted FOR amendment (1) (representing approximately 81% of the issued and
outstanding shares of the Corporation) and 0 shares voted AGAINST amendment (1)
(representing approximately 0% of the issued and outstanding shares of the
Corporation).
<PAGE>
Also at the Special Meeting of Shareholders, the shareholder approved a
reverse stock split on a 1-for-2 basis. This action resulted in a reduction of
$2,768.62 in the Company's stated capital.
DATED this 15th day of February, 1999.
The undersigned President of the Corporation hereby declare that the
foregoing Certificate of Amendment to the Articles of Incorporation is true and
correct to the best of their knowledge and belief.
/s/ Matt Ott
------------
Matt Ott, President
-2-
BY-LAWS
<PAGE>
BY-LAWS FOR THE REGULATION
EXCEPT AS OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION OF
PIAZZTEC INTERNATIONAL, INC.
ARTICLE I
Offices
Section 1. PRINCIPAL OFFICE. The principal office for the transaction of the and
located at 2 Norman Street, Bridgeport Connecticut 06605 The Board of Directors
is hereby granted full power and authority to change said principal office from
one location to another.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any time be
established by the board of directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
Meetings of Shareholders
Section 1. MEETING PLACE. The annual meetings of shareholders and all other
meetings of shareholders shall be held either at the principal office or at any
other place within or without the State of Idaho which may be designated either
by the board of directors, pursuant to authority hereinafter granted to said
board, or by the written consent of all shareholders entitled to vote thereat,
given either before or after the meeting and filed with the Secretary of the
corporation.
Section 2. ANNUAL MEETINGS. The annual meetings of shareholders shall be held on
the 2nd Wednesday of January each year, at the hour of 2:00 o'clock p.m. of said
day commencing with the year 1996, provided, however, that should said day fall
upon a legal holiday, then any such annual meeting of shareholders shall be held
at the same time and place on the next day thereafter ensuing which is not a
legal holiday.
Written notice of each annual meeting signed by the president or a vice
president, or the secretary, or an assistant secretary, or by such other person
or persons as the directors shall designate, shall he given to each shareholder
entitled to vote thereat, either personally or by mail or other means of written
communication, charges prepaid, addressed to such shareholder at his address
appearing on the books of the corporation or given by him to the corporation for
the purpose of notice. If a shareholder gives no address, notice shall be deemed
to have been given to him, if sent by mail or other means of written
communication addressed to the place where the principal office of the
corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each shareholder entitled thereto not less than ten
(10) nor more than sixty (60) days before each
-2-
<PAGE>
annual meeting, and shall specify the place, the day and the hour of such
meeting, and shall also state the purpose or purposes for which the meeting was
called.
Section 3 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes whatsoever, may be called at any time by the president or by
the board of directors, or by one or more shareholder holding not less than 50%
of the voting power in the corporation. Except in special cases where other
express provision is made by statute, notice of such special meetings shall be
given in the same manner as for annual meetings of shareholders. Notices of any
special meeting shall specify in addition to the place, day and hour of such
meeting, the purpose or purposes for which the meeting is called.
Section 4. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders' meeting,
annual or special. whether or not a quorum is present. may be adjourned from
time to time by the vote of a majority of the shares, the holders of which are
either present in person or represented by a proxy thereat, but in the absence
of a quorum, no other business may be transacted at any such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be necessary to
give any notice of an adjournment or of the business to be transacted at an
adjourned meeting, other than by announcement at the meeting at which such
adjournment is taken.
Section 5. ENTRY OF NOTICE. Whenever any shareholder entitled to vote has been
absent from any meeting of shareholders, whether annual or special, an entry in
the minutes to the effect that notice has been duly given shall be conclusive
and incontrovertible evidence that due notice of such meeting was given to such
shareholders, as required by law and the by-laws of the corporation.
Section 6. VOTING. At all annual and special meetings of stockholders entitled
to vote thereat, every holder of stock issued to a bona fide purchaser of the
same, represented by the holders thereof, either in person or by proxy in
writing, shall have one vote for each share of stock so held and represented at
such meetings, unless the Articles of Incorporation of the company shall
otherwise provide, in which event the voting rights, powers and privileges
prescribed in the said Articles of Incorporation shall prevail. Voting for
directors and, upon demand of any stockholder, upon any question at any meeting,
shall be by ballot.
Section 7. QUORUM. The presence in person or by proxy of the holder of a
majority of the shares entitled to vote at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
-3-
<PAGE>
Section 8. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, either annual or special, however called and noticed, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the shareholders entitled to vote, not present in person or
by proxy, sign a written Waiver of Notice, or a consent to the holding of such
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of this meeting.
Section 9. PROXIES. Every person entitled to vote or execute consents shall have
the right to do so either in person or by an agent or agents authorized by a
written proxy, executed by such person or his duly authorized agent and filed
with the secretary of the corporation; provided that no such proxy shall be
valid after the expiration of eleven (11) months from the date of its execution,
unless the shareholder executing it specifies therein the length of time for
which such proxy is to continue in force, which in no case shall exceed seven
(7) years from the date of its execution.
ARTICLE III
Section 1. POWERS. Subject to the limitations of the Articles of Incorporation
or the by-laws, and the provisions of the Idaho Statutes as to action to be
authorized or approved by the shareholders, and subject to the duties of
directors as prescribed by the by-laws, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be controlled by the board of directors. Without prejudice to such general
powers, but subject to the same limitations, it is hereby expressly declared
that the directors shall have the following powers to wit:
First -- To select and remove all the other officers, agents and
employees of the corporation, prescribe such powers and duties for them as may
not be inconsistent with law, with the Articles of Incorporation or the by-laws,
fix their compensation, and require from them security for faithful service.
Second -- To conduct, manage and control the affairs and business of
the corporation, and to make such rules and regulations therefore not
inconsistent with the law, with the Articles of Incorporation or the by-laws, as
they may deem best.
Third -- To change the principal office for the transaction of the
business of the corporation from one location to another within the same county
as provided in Article 1, Section 1, hereof; to fix and locate from time to time
one or more subsidiary offices of the corporation within or without the State of
Idaho, as provided in Article I, Section 2, hereof; to designate any place
within or without the State of Idaho for the holding of any shareholders'
meeting or meetings; and to adopt, make and use a corporate seal, and to
prescribe the forms of certificates from time to time, as in their judgment they
may deem best, provided such seal and such certificates shall at all times
comply with the provisions of law.
-4-
<PAGE>
Fourth -- To authorize the issue of shares of stock of the corporation
from time to time, upon such terms as may be lawful, in consideration of money
paid, labor done or services actually rendered, debts or securities canceled, or
tangible or intangible property actually received, or in the case of shares
issued as a dividend, against amounts transferred from surplus to stated
capital.
Fifth -- To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefore, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefore.
Sixth -- To appoint an executive committee and other committees and to
delegate to the executive committee any of the powers and authority of the board
in management of the business and affairs of the corporation, except the power
to declare dividends and to adopt, amend or repeal by-laws. The executive
committee shall be composed of one or more directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of
directors of the corporation shall not be less than two (2) and no more than
fifteen (15).
Section 3. ELECTION AND TERM OF OFFICE. The directors shall be elected at each
annual meeting of shareholders, but if any such annual meeting is not held, or
the directors are not elected thereat, the directors may be elected at any
special meeting of shareholders. All directors shall hold office until their
respective successors are elected.
Section 4. VACANCIES. Vacancies in the board of directors may be filled by a
majority of the remaining directors, though less than a quorum, or by a sole
remaining director, and each director so elected shall hold office until his
successor is elected at an annual or a special meeting of the shareholders.
A vacancy or vacancies in the board of directors shall be deemed to exist in
case of the death, resignation or removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail at any annual or
special meeting of shareholders at which any director or directors are elected
to elect the full authorized number of directors to be voted for at that
meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. If the board of directors
accept the resignation of a director tendered to take effect at a future time,
the board or the shareholders shall have the power to elect a successor to take
office when the resignation is to become effective.
Section 5. PLACE OF MEETING. Regular meetings of the board of directors shall be
held at a place within or without the State of Idaho which has been designated
from time to time by resolution of the board or by written consent of all
members of the board. In the absence of such
-5-
<PAGE>
designation regular meeting shall be held at the principal office of the
corporation. Special meetings of the board may be held either at a place so
designated, or at the principal office.
Section 6. ORGANIZATION MEETING. Immediately following each annual meeting of
shareholders, the board of directors shall hold a regular meeting for the
purpose of organization, election of officers, and the transaction of other
business. Notice of such meeting is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of
directors shall be held without call on the first Monday of each month at the
hour of 9:()() o'clock a.m. of said day; provided, however, should said day fall
upon a legal holiday, then said meeting shall be held at the same time on the
next day thereafter ensuing which is not a legal holiday. Notice of all such
regular meetings of the board of directors is hereby dispensed with.
Section 8. SPECIAL MEETINGS. Special meetings of the board of directors for any
purpose or purposes shall be called at any time by the president, or, if he is
absent or unable or refuses to act, by any vice president or by any two
directors. Written notice of the time and place of special meeting shall be
delivered personally to the directors or sent to each director by mail or other
form of written communication, charges prepaid, addressed to him at his address
as it is shown upon the records or is not readily ascertainable, at the place in
which the meetings of the directors are regularly held. In case such notice is
mailed or telegraphed, it shall be deposited in the United States mail or
delivered to the telegraph company in the place in which the principal office of
the corporation is located at least twenty-four (24) hours prior to the time of
the holding of the meeting. Such mailing, telegraphing or delivery as above
provided shall be due, legal and personal notice to such director.
Section 9. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an
adjourned meeting need not be given to absent directors, if the time and place
be fixed at the meeting adjourned.
Section 10. ENTRY OF NOTICE. Whenever any director has been absent from any
special meeting of the board of directors, an entry in the minutes to the effect
that notice has been duly given shall be conclusive and incontrovertible
evidence that due notice of such special meeting was given to such director, as
required by law and the by-laws of the corporation.
Section 11. WAIVER OF NOTICE. The transactions of any meeting of the board of
directors, however called and noticed or wherever held, shall be as valid as
though had a meeting duly held after regular call and notice, if a quorum be
present, and if, either before or after the meeting, each of the directors not
present sign a written waiver of notice or a consent to holding such meeting or
an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
-6-
<PAGE>
Section 12. QUORUM. A majority of the authorized number of directors shall be
necessary to constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present, shall be regarded as the act of the board of directors, unless a
greater number be required by law or by the Articles of Incorporation.
Section 13. ADJOURNMENT. A quorum of the directors may adjourn any directors'
meeting to meet again at a stated day and hour; provided however, that in the
absence of a quorum, a majority of the directors present at any director's
meeting, either regular or special, may adjourn from time to time until the time
fixed for the next regular meeting of the board.
Section 14. FEES AND COMPENSATION. Directors shall not receive any stated salary
for their services as directors, but by resolution of the board, a fixed fee,
with or without expenses of attendance may be allowed for attendance at each
meeting.
ARTICLE IV
Officers
Section 1. OFFICERS. The officers of the corporation shall be a president, a
secretary, and a treasurer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
3 of this Article. Officers other than president and chairman of the board need
not be directors. Any person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article, shall be chosen annually by the board of directors, and shall hold
his office until he shall resign or shall be removed or otherwise disqualified
to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The board of directors may appoint such
other officers as the business of the corporation my require, each of whom shall
hold office for such- period, have such authority and perform such duties as are
provided in the by-laws or as the board of directors may from time to time
determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the board.
-7-
<PAGE>
Any officer may resign at any time by giving written notice to the board of
directors or to the president, or to the secretary of the corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in the by-laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if there shall be
such an officer, shall, if present, preside at all meetings of the board of
directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the board of directors or prescribed by the
try-laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
given by the board of directors to the chairman of the board, if there be such
an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the chairman of the board, of it there be none, at all meetings of
the board of directors. He shall be ax-officio a member of all the standing
committees, including powers and duties of management usually vested in the
office of president of a corporation, and shall have such other powers and
duties as may be prescribed by the board of directors or the by-laws.
Section 8. VICE PRESIDENT. In the absence or disability of the president, the
vice president in order of their rank as fixed by the board of directors, or if
not ranked, the vice president designated by the board of directors, shall
perform all 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. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors
or the by-laws.
Section 9. SECRETARY. The secretary shall keep, or cause to be kept, a book of
minutes at the principal office or such other place as the board of directors
may order, of all meetings of directors and shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at the shareholders' meetings and the
proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal office, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses; the number and classes of shares held by each; the number
and date of cancellation of every certificate surrendered for cancellation.
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The secretary shall give, or cause to be given, notice of all the meetings of
the shareholders and of the board of directors required by the by-laws or by law
to be given, and he shall keep the seal of the corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or the by-laws.
Section 10. TREASURER. The treasurer shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the properties and
business assets, liabilities, receipts, disbursement, gains, losses, capital,
surplus, paid-in surplus, and surplus arising from a reduction of stated
capital, shall be classified according to source and shown in a separate
account. The books of the account shall at all times be open to inspection by
any director.
The treasurer shall deposit all moneys and other valuables in the name and to
the credit of the corporation with such depositories as may be designated by the
board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the president and directors,
whenever they request it, an account of all of his transaction as treasurer and
of the financial condition of the corporation. and shall have such other powers
and perform such other duties as may be prescribed by the board of directors or
the by-laws.
ARTICLE V
Miscellaneous
Section 1. RECORD DATE AND CLOSING STOCK BOOKS. The board of directors may fix a
time, in the future, not exceeding fifteen (15) days preceding the date of any
meeting of shareholders, and not exceeding thirty (3()) days preceding the date
fixed for the payment of any dividend or distribution, or for the allotment of
rights, or when any change or conversion or exchange of shares shall go into
effect, as a record date for the determination of the shareholders entitled to
notice of and to vote at any such meeting, or entitled to receive any such
dividend or distribution, or any such allotment of rights, or to exercise the
rights in respect to any such change, conversion or exchange of shares, and in
such case only shareholders of record on the date so affixed shall be entitled
to notice of and to vote at such meetings, or to receive such dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after any record date fixed as aforesaid. The board of directors may close the
books of the corporation against transfers of shares during the whole, or any
part of any such period.
Section 2. INSPECTION OF CORPORATE RECORDS. The share register or duplicate
share register, the books of account, and minutes of proceeding, of the
shareholders and directors shall be open to inspection upon the written demand
of any shareholder or the holder of a voting trust certificate, at any
reasonable time, and for a purpose reasonably related to his interests as a
shareholder, or as the holder of a voting trust certificate, and shall be
exhibited at any time when required by the demand of ten percent (10%) of the
shares represented at any shareholders' meeting. Such inspection may be made in
person or by an agent or attorney, and shall include the
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right to make extracts. Demand of inspection other than at a shareholders'
meeting shall be made in writing upon the president, secretary or assistant
secretary of the corporation.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
of money, notes or other evidences 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 a manner as, from time to time, shall be determined by
resolution of the board of directors.
Section 4. ANNUAL REPORT. The board of directors of the corporation shall cause
to be sent to the shareholders not later than one hundred twenty (120) days
after the close of the fiscal or calendar year an annual report.
Section 5. CONTRACT, ETC., HOW EXECUTED. The board of directors, except as in
the by-laws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract, deed or lease 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 of
directors, 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 to
render it liable for any purpose or to any amount.
Section 6. CERTIFICATES OF STOCK. A certificate or certificates for shares of
the capital stock of the corporation shall be issued to each shareholder when
any such shares are fully paid up. All such certificates shall be signed by the
president or a vice-president and the secretary or an assistant secretary, or be
authenticated by facsimiles of the signatures of the president and the written
signature of the secretary or an assistant secretary. Every certificate
authenticated by a facsimile of a signature must be counter-signed by a transfer
agent or transfer clerk. Certificates for shares may be issued prior to full
payment under such restrictions and for such purposes as the board of directors
or the by-laws may provide; provided, however, that any such certificate so
issued prior to full payment shall state the amount remaining unpaid and the
terms of payment thereof.
Section 7. REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS. The president or any
vice president and the secretary or assistant secretary of this corporation are
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 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.
Section 8. INSPECTION OF BY-LAWS. The corporation shall keep in its principal
office for the transaction of business the original or a copy of the by-laws as
amended, or otherwise altered to date, certified by the secretary, which shall
be open to inspection by the shareholders at all reasonable times during office
hours.
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ARTICLE VI
Amendments
Section 1. POWER OF SHAREHOLDERS. New by-laws may be adopted or these by-laws
may be amended or repealed by the vote of shareholders entitled to exercise a
majority of the voting power of the corporation or by the written assent of such
shareholders.
Section 2. POWER OF DIRECTORS. Subject to the right of shareholders as provided
in Section 1 of this Article VI to adopt, amend or repeal by-laws, by-laws other
than a by-law or amendment thereof changing the authorized number of directors
may be adopted, amended or repealed by the board of directors.
Section 3. ACTION BY DIRECTORS THROUGH CONSENT IN LIEU OF MEETING. Any action
required or permitted to be taken at any meeting of the board of directors or of
any committee thereof, may be taken without a meeting, if a written consent
thereto is signed by all the members of the board or of such committee. Such
written consent shall be filed with the minutes of proceedings of the board of
committee.
/s/ Edward F. Cowle
-----------------------
Edward F. Cowle, President
/s/ Deworth Williams
--------------------
Deworth Williams, Secretary
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BETWEEN:
TRADE WIND COMMUNICATIONS LIMITED
AND:
TRADE WIND GROUP PTY LIMITED
AND:
SILER VENTURES, INC.
AND:
ATLANTIC INTERNATIONAL CAPITAL HOLDINGS, LTD
MERGER AGREEMENT
WATSON MANGIONI
Corporate and Commercial Lawyers
Level 10
15 Castlereagh Street
Sydney NSW 2000
Telephone: 9231 5755
Fax: 9231 5231
DX 530 Sydney
Ref: PAV 98 246
<PAGE>
THIS MERGER AGREEMENT is made on January 1 999
BETWEEN: TRADE WIND COMMUNICATIONS LIMITED (ARBN 076 753 083) of
Level 27, Grosvenor Place, 225 George Street, Sydney, New South
Wales, 2000, Australia ("TWC");
AND: TRADE WIND GROUP PTYLIMITED (ACN 003 607 074) of Level 27,
Grosvenor Place, 225 George Street, Sydney, New South Wales, 2000
("TWG");
AND: SILER VENTURE, INC. of PO Box 100, Smelterville, Idaho 83868
United States of America ("SVI");
AND: ATLANTIC INTERNATIONAL CAPITAL HOLDINGS, LTD of Reid House
31 Church Street Hamilton Bermuda ("AICH").
RECITALS
A. TWC is the legal and beneficial owner of all of the issued share
capital of TWG.
B. TWC and SVI have agreed to complete a merger of SVI with TWG by TWC
selling and SVI buying all of the issued share capital of TWG and in
turn issuing shares to TWC on the terms and conditions of this
Agreement.
1. DEFINITIONS & INTERPRETATION
1.1 Definitions
In this Agreement:
"Accretions" means all accretions, rights or benefits of whatever kind attaching
to or arising from shares directly or indirectly including, without limitation,
all dividends or other distributions and all rights to receive any dividends or
other distributions or to receive or subscribe for shares, stock units, notes,
bonds, options or other securities;
"Affiliate" means an "affiliate" within the meaning of Rule 144 of the 1933 Act;
"AICH Agreement" means the agreement between "AICH and SVI in substantially the
form of Schedule 4;
"AICH Warranties" means the warranties given by "AICH under Clause 8.2;
"Announcement" means the announcement referred to in Clause 9.1(a);
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"Associate" has the meaning given to it in Part 1.2, Division 2 of the
Corporations Law;
"Auditor" means the auditor of TWG at the date of this Agreement;
"BCSC" means the British Columbia Securities Commission;
"Business Day" means any day (other than a Saturday or a Sunday) on which banks
are open for general banking business in Vancouver, Canada;
"Claim" against any person, means any claim, action, proceeding, demand,
judgment, damage, loss, cost, expense or liability whatever incurred or suffered
by or brought or made or recovered against the person and however arising
(whether or not presently ascertained, immediate, future or contingent);
"Completion" means:
(a) completion of the buyback of TWG Shares in accordance with Clause 3.1;
(b) the sale of 1 TWG Share by TWC to SVI and the subscription for TWG
Shares by SVI in accordance with Clause 4.1;
(c) the issue of the Merger Securities in accordance with Clause 5;
(d) entry into the Transaction Documents in accordance with Clause 7;
"Completion Date" means the date Completion takes place;
"Conditions" means the conditions specified in Clause 11;
"Confidential Information" means all trade secrets, all financial, marketing and
technical information, ideas, concepts, know-how, technology, processes and
knowledge which is confidential or of a sensitive nature, but excludes that
which is in the public domain;
"Corporations Law" means the Corporations Law (NSW);
"Dictaphone Business" means the business of distribution, service and support of
products of Dictaphone Corporation US in Australia conducted by TWC;
"Distribution" means:
(a) a dividend (which includes, without limitation, an issue of shares in
lieu of a cash dividend and credited as fully or partly paid out of
profits or reserves); and
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(b) any other distribution (which, without limitation, includes a capital
distribution, a cash distribution, a distribution of property or rights
or any other benefit whatsoever),
given or made available to any holder of SVI Shares in its capacity as such by
SVI or any other person and made, paid or credited in respect of any SVI Shares;
"Employment Agreements" means employment agreements between SVI and each of:
(a) Nick Bird;
(b) Chris Walton;
(c) Simon Anderson; and
(d) Frank Favretto,
with such remuneration and on such terms as may be recommended by the
Remuneration Committee;
"Encumbrance" means a mortgage, charge, pledge, lien, encumbrance, equity,
adverse interest, option or other third party claim;
"Exchange" means the American Stock Exchange, The NASDAQ Stock Market, Inc.
Small-Cap Market or such other exchange agreed by the Parties after the date of
this Agreement;
"Governmental Agency" means any government or any governmental, semigovernmental
or judicial entity or authority (domestic or foreign). It also includes any
self-regulatory organisation established under statute or any securities
exchange;
"Insolvency Event" means in relation to a Party:
(a) an order is made or an application is made for the winding up of the
Party and that order or application is not withdrawn or set aside by
the Completion Date;
(b) a liquidator or provisional liquidator of the Party is made or
appointed or an application is made for the appointment of a liquidator
or provisional liquidator and that application is not withdrawn or set
aside by the Completion Date;
(c) an effective resolution is passed for the winding up of the Party or a
meeting is convened for the purpose of considering any such resolutions
and that meeting has not been held by the Completion Date;
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(d) the Party is placed under any formal or informal kind of insolvency
administration or a meeting is convened for the purpose of considering
the appointment of an insolvency administrator;
(e) a receiver of the main undertaking, property or material assets of the
Party is appointed or any step is taken for the appointment of such a
receiver or execution or distress or any other process is levied or
attempted or imposed against any of the main undertaking, property or
material assets of the Party;
(f) the Party stops payment or in the opinion of the other Party stops
payment or ceases to carry on the whole or any material part of its
business or threatens to do so;
(g) an order for payment is made or judgement is entered or signed against
the Party in an amount of not less than $50,000 and is not satisfied,
stayed or set aside within 5 Business Days;
(h) the Party becomes insolvent or unable to pay its debts or (if the
Corporations Law applies in determining the matter) would be deemed to
be unable to pay its debts as and when they fall due; or
(i) a compromise or arrangement is proposed with or becomes effective in
relation to the creditors or any class of creditors of the Party or the
Party proposes a reorganization, moratorium or other administration
involving its creditors or any class of its creditors;
"Issuer Bid" means the issuer bid and share buyback referred to in Clause 14.2;
"Listing Rules" means the listing rules of VSE;
"Management Agreement" means the management agreement between TWC and TWG in
substantially the form set out in Schedule 5;
"Merger" means the transactions contemplated by this Agreement including without
limitation:
(a) the sale and purchase of TWG;
(b) the execution of the Transaction Documents; and
(c) the issue of the Merger Securities;
"Merger Information" means all information released publicly or to shareholders
of TWC in relation to the Merger;
"Merger Securities" means SVI Shares to be issued pursuant to Clause 5.2;
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<PAGE>
"1933 Act" means the Securities Act of 1933 (USA);
"1934 Act" means the Securities Exchange Act of 1934 (USA);
"Placement" means the private placement of up to 1,000,000 SVI Shares to
subscribers reasonably acceptable to TWC and "AICH to be completed within 60
days of Completion to raise gross proceeds (after deduction of all finder's
fees, agent costs and fees payable to "AICH under the "AICH Agreement) of not
less than US$3,660,000;
"Promissory Note" means a promissory note in substantially the form set out in
Schedule 6;
"Purchase Price" means the amount determined by the Auditor to be the fair
market value of the ordinary shares in the capital of TWG held by TWC
immediately prior to completion of the share buyback under Clause 3.1;
"Recipient" means a Party to which a Warranty is given.
"Related Body Corporate" of a body corporate means another body corporate which
is related to the first within the meaning of Section 50 of the Corporations
Law;
"Remuneration Committee" means the remuneration committee established by the
directors of TWC in 1998 to review the remuneration and terms of employment of
executives of the TWC Group;
"SEC" means the Securities and Exchange Commission;
"Securities Act" means the Securities Act 1985 (British Columbia);
"Security" has the meaning given in Section 92 of the Corporations Law;
"Subsidiary" has the same meaning as in Section 46 of the Corporations Law;
"SVI Shares" means shares of common stock of $0.001 par value in the capital of
SVI;
"SVI Warranties" means the warranties given by SVI under Clause 8.3;
"Tax" means any tax, levy, impost, deduction, assessment, contribution, charge,
rate, duty, withholding or other duty which is assessed or imposed under the Tax
Act and any related interest, penalty, fine, charge, fee, additional tax or
other amount assessed or imposed in relation thereto;
Transaction Documents" means:
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<PAGE>
(a) the Employment Agreements;
(b) the "AICH Agreement; and
(c) the Management Agreement;
"TWC Group" means TWC and its Subsidiaries;
"TWC Shares" means ordinary shares of $0.01 par value in the capital of TWC;
"TWC Warranties" means the warranties given by TWC under Clause 8.1;
"TWG Shares" means ordinary shares in the capital of TWG;
"VSE" means the Vancouver Stock Exchange;
"Warranting Party" means a Party who gives a Warranty; and
"Warranty" means a representation or warranty under this Agreement including,
without limitation, under Clause 8.
1.2 Interpretation
In this Agreement unless the contrary intention appears:
(a) reference to a Clause, Schedule, Annexure or Appendix is a reference to
clause of or schedule, annexure or appendix to this Agreement and
references to this Agreement include any Recital, Schedule, Annexure or
Appendix;
(b) a reference to this Agreement or another instrument includes any
variation or replacement of either of them;
(c) a reference to a statute, ordinance, code or other law includes,
without limitation, regulations and other instruments under it and
consolidations, amendments, re-enactments or replacements of any of
them;
(d) the singular includes the plural and vice versa;
(e) the word person includes a firm, a body corporate, an unincorporated
association or an authority;
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(f) a reference to a person includes a reference to the person's executors,
administrators, successors, substitutes (including, without limitation,
persons taking by novation) and assigns;
(g) an agreement, representation or warranty in favour of 2 or more persons
is for the benefit of them jointly and severally;
(h) an agreement, representation or warranty on the part of 2 or more
persons binds them jointly and severally;
(i) a reference to "$~, "US$", "dollars" means the lawful currency of the
United States of America;
(j) a reference to "A$" means the lawful currency of the Commonwealth of
Australia;
(k) a reference to a day is to be interpreted as the period of time
commencing at midnight and ending 24 hours later;
(l) a reference to time is Vancouver time;
(m) if an act prescribed under this Agreement to be done by a Party on or
by a given day is done after 5.00pm on that day, it is taken to be done
on the next day;
(n) if an event must occur on a stipulated day which is not a Business Day
then the stipulated day will be taken to be the next Business Day;
(o) "include" (in any form) when introducing a list of items does not limit
the meaning of the words to which the list relates to those items or to
items of a similar kind;
(p) a reference to "the best of the knowledge and belief" of any person
means "the best of the knowledge and belief after due inquiry where
knowledge or suspicion of a fact would prompt enquiry by a reasonable
person" of such person; and
(q) a reference to a breach of any of the Warranties includes any
representation under this Agreement by any Party being untrue.
2. OBJECTIVES
2.1 Objectives
The Parties agree that the primary objectives of the Parties in entering this
Agreement are that:
(a) SVI will acquire all the issued TWG Shares from TWC;
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(b) SVI will issue the Merger Securities to TWC;
(c) the Parties will enter into the Transaction Documents; and
(d) SVI will complete the Placement and will apply for listing and
quotation of SVI Shares on an Exchange as soon as possible after
Completion.
2.2 Timing
For the avoidance of doubt, the transactions set out in Clauses 3-5 take place
in the same order as the transactions steps are set out in Clauses 3-5.
3. TWG BUYBACK AND SHARE ISSUE
3.1 Buyback
Before Completion, TWC must sell to TWG and TWG must purchase all but one issued
TWG Share held by TWC for the Purchase Price.
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3.2 Payment of Purchase Price
On Completion, TWG must endorse the Promissory Note issued in accordance with
Clause 3.5 to TWC in full satisfaction of its obligation to pay the Purchase
Price under Clause 3.1.
3.3 SVI Application
(a) SVI applies for the issue of the number of TWG Shares determined in
Accordance with Clause 3.3(b) for the Purchase Price, agrees to be
bound by the constitution of TWG and replaceable rules applicable to
TWG and consents to the entry of its name in the register of members of
TWG.
(b) The number of TWG Shares to be issued to SVI will be equal to the
Purchase Price divided by $1.00.
3.4 Issue
TWG must allot and issue to SVI the TWG Shares in accordance with Clause 3.3 on
Completion.
3.5 Payment of Subscription Monies
SVI must satisfy its obligations to pay the subscription monies for the TWG
Shares on Completion by issuing the Promissory Note in favour of TWG.
3.6 Ranking
The TWG Shares to be allotted pursuant to this Clause 4 must rank pari passu
with all TWG Shares on issue and must be allotted free from all Encumbrances.
4. TWG SHARE SALE
4.1 Sale to SVI
On Completion, TWC must sell to SVI and SVI must purchase one TWG Share for the
fair market value of the TWG Share on the Completion Date as determined by the
Auditor.
4.2 No Encumbrances
The TWG Share must be transferred free from any Encumbrance and with all
Accretions, rights and benefits of whatever kind.
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5. SVI SHARE AND OPTION ISSUE
5.1 TWC Application
TWC applies for the issue of the 8,800,000 SVI Shares for the Purchase Price,
agrees to be bound by the articles of incorporation and bylaws of SVI and
consents to the entry of its name in the shareholder registry of SVI.
5.2 Issue
SVI must allot and issue the 8,800,000 SVI Shares in accordance with this Clause
5 on Completion.
5.3 Payment of Subscription Monies
TWC must satisfy its obligations to pay the Purchase Price on Completion by
endorsing the Promissory Note received under Clause 3.2 in favour of SVI.
5.4 Ranking
The Merger Securities to be allotted pursuant to this Clause 5 must rank pari
passu with . all SVI Shares on issue and must be allotted free from all
Encumbrances.
5.5 Option Issue
On Completion, SVI must grant options to acquire SVI Shares to the nominees of
TWC on the following terms:
(a) the maximum number of options to be granted under this Clause 5.5 is
the number determined in accordance with the following formula:
WO = 2,000,000 + TO x 8,800,000
TC
|
Where:
WO is the number of options to acquire SVI Shares to be issued under
this Clause 5.5;
TO is the greater of the number of options to acquire TWC Shares on
issue as at Completion and the value of options which the Securities
Act and the Listing Rules permit TWC to issue as at Completion; and
TC is the number of TWC Shares on issue on Completion;
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(b) the exercise price for an option to acquire SVI Shares will be the
equivalent in US$ of C$1.99 on the date of exercise; and
(c) in all other respects are on identical terms to the terms of options to
acquire TWC Shares granted to beneficiaries of the TWC Incentive Stock
Option Trust, amended as necessary to reflect the requirements of
United States Federal law or such other terms as may be agreed by TWC
and SVI.
5.6 Dictaphone Sale
(a) TWC agrees to sell and TWG agrees to buy all right, title and interest
of TWC in the Dictaphone Business for consideration of A$1.00;
(b) On Completion, TWC must assign to TWG and TWG must accept the
assignment of all right, title and interest of TWC in any contract or
other asset relating in any way to the Dictaphone Business including,
without limitation, the contract between TWC and Dictaphone Corporation
US dated 15 August 1997 and employment agreements with all current TWC
employees;
6. COMPLETION
6.1 Place
Completion will take place at 2 pm on the date 1 Business Day after the date the
last of the Conditions is satisfied or waived, at the offices of Harry Winderman
Esq. 2295 Corporate Boulevard, Suite 140, Boca Raton, Florida, 33431, United
States of America, or as the Parties may otherwise agree.
6.2 SVI Obligations
On Completion, SVI must:
(a) deliver the Promissory Note to TWG in accordance with Clause 3.5;
(b) issue and allot the Merger Securities to TWC;
(c) deliver a share certificate in respect of the Merger Securities to TWC;
(d) enter TWC in the shareholder registry of SVI;
(e) procure that the directors of SVI on Completion comprise:
a. 3 nominees of TWC being Nick Bird, Simon Anderson and Frank
Favretto;
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b. 1 nominee of "AICH and
c. 1 independent director acceptable to TWC and "AICH
(f) deliver to TWC an officers certificate in a form acceptable to TWC
confirming that immediately prior to Completion the total number of
outstanding shares of SV is not more than 500,000; and
(g) execute and deliver any other document reasonably required by a Party
which is necessary or desirable to give effect to the transactions
contemplated by Clauses #7.
6.3 TWG Obligations
On Completion TWG must:
(a) issue and allot the TWG Shares to SVI in accordance with Clause 3.4;
(b) deliver a share certificate in respect of the T W G Shares to be issued
under Clause 3.4 to SVI;
(c) enter SVI in the register of members of TWG;
(d) deliver the Promissory Note to TWC, endorsed in favour of TWC in
accordance with Clause 3.2; and
(e) execute and deliver any other document reasonably required by a Party
which is necessary or desirable to give effect to the transactions
contemplated by Clauses 3-7.
6.4 TWC Obligations
(a) On Completion, TWC must give to TWG the following documents:
a. share certificates for all TWG Shares to be transferred under Clause
3.1;
b. completed transfers of all TWG Shares to be transferred under Clause
3.1;
c. a copy of all business records maintained by TWC in respect of the
Dictaphone Business;
d. a duly executed assignment of all contracts relating to the
Dictaphone Business in favour of TWG; and
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e. any other document reasonably required by SVI which is necessary or
desirable to give effect to the transaction contemplated by Clauses
3-7.
(b) On Completion, TWC must give or make available to SVI:
a. all share certificates for the T W G Share to be transferred under
Clause 4.1;
b. an instrument of transfer in registrable form duly executed by TWC
in favour of SVI;
c. if required by SVI, the minute books, share certificate books, share
transfer ledgers and corporate seals of TWG;
d. if required by SVI, resignations in a form reasonably acceptable to
SVI of all directors and secretaries of TWG and its Subsidiaries;
e. a copy of the certificate of incorporation of TWG certified by a
secretary as being true, complete and correct;
f. a copy of the constitution of TWG, certified by a secretary as being
true, complete and correct;
g. the Promissory Note endorsed in favour of SVI in accordance with
Clause 5.3; and
h. any other document reasonably required by SVI which is necessary or
desirable to give effect to the transactions contemplated by Clauses
3-7.
(c) On or before Completion, TWC must ensure that resolutions are passed by
the board of TWG to approve the registration of the transfer of the TWG
Shares to TWG and SVI as contemplated by Clauses 3 and 4 subject to
delivery up to TWG of duly executed transfers of the TWG Shares and the
share certificates in respect of the TWG Shares and, on Completion,
must deliver to SVI a copy of that resolution certified by an officer
of TWG.
7. COMMITMENT TO ENTER INTO TRANSACTION DOCUMENTS
7.1 Employment Agreements
Completion is subject to execution of the Employment Agreements.
7.2 AICH Agreement
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Completion is subject to execution of the "AICH Agreement by SVI and "AICH.
7.3 Management Agreement
Completion is subject to execution of the Management Agreement.
7.4 Commitment
Each Party must itself enter into the Transaction Documents on Completion in
which it is named as a party and TWC must procure the execution of the
Employment Agreements by all persons named as a party other than SVI.
8. WARRANTIES, REPRESENTATIONS & INDEMNITIES
8.1 TWC Warranties
TWC gives the representations and warranties set out in Schedule 1 to each of
SVI and "AICH
8.2 AICH Warranties
"AICH gives the representations and warranties set out in Schedule 2 to TWC and
SVI.
8.3 SVI Warranties
SVI gives the representations and warranties set out in Schedule 3 to each of
TWC and "AICH I
8.4 Limitation for Knowledge
A Warranting Party is not liable to a Recipient for any Claim suffered or
incurred by it, whether directly or indirectly, in relation to any inaccuracy in
or breach of any of the Warranties if, before the date of this Agreement, that
Recipient was aware (as a result of its due diligence enquiries or disclosures
made in writing to the Recipient) of a matter and that such matter has given
rise or may thereafter give rise to the Claim.
8.5 Reliance
Each Warranting Party acknowledges that it has made and given the Warranties
with the intention of inducing the Recipient to enter into this Agreement and
that the Recipients have entered into this Agreement in full reliance on the
Warranties given by that Warranting Party.
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8.6 Timing
Each Warranting Party gives its respective Warranties on the date of this
Agreement and on the Completion Date.
8.7 Indemnity
(a) Each Warranting Party unconditionally and irrevocably undertakes to
indemnify and keep indemnified the Recipients and to hold it harmless
from and against and in an amount equal to all Claims suffered or
incurred by it whether directly or indirectly in relation to any
inaccuracy in or breach of any of the Warranties given by it.
(b) No Party is obliged to indemnify the Recipients under Clause 8.7(a) to
the extent that the Recipient of that Warranty recovers any amount of a
Claim under an insurance policy from third parties or otherwise
receives a Tax deduction, rebate or other benefit.
8.8 Threshold
(a) No Warranting Party will have any liability in respect of any Claim in
respect of a Warranty it has given unless the aggregate amount of all
Claims by a Recipient in respect of all breaches of Warranties that
Warranting Party has given in favour of that Recipient finally
adjudicated or agreed as being payable in respect of the Claims exceeds
$100,000.
(b) Once that threshold is exceeded, a Recipient of the Warranties given by
that Warranting Party will be entitled to recover the amount of any
liability to it. In determining if the threshold is exceeded, prior
Claims made against that Warranting Party under this Agreement by that
Recipient will be aggregated with the relevant Claim in question.
8.9 A Warranting Party is not liable to any Recipient for any Claim unless:
(a) written notice has been given to the Warranting Party setting out
specific details of the Claim within 12 months from the Completion
Date; and the Claim is agreed,
(b) the Claim is agreed, compromised or settled or the Recipient has issued
and served legal proceedings against the Warranting Party in respect of
the Claim within 6 months of giving notice in respect of the Claim
under Clause 8.9(a).
9. ANNOUNCEMENTS
9.1 Public Announcement & Disclosure
(a) The Parties acknowledge that, as soon as reasonably practicable after
execution of this Agreement, and in any event not later than 1 Business
Day after execution of this
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Agreement, TWC will release an announcement regarding the Merger and
the terms of the Agreement in order to satisfy its disclosure
obligations under the Listing Rules and the Securities Act.
(b) All Parties must provide to TWC and permit the disclosure of such
information relating to the business conducted by that Party which TWC
may reasonably require for the purpose of satisfying its obligations
under the Listing Rules and the Securities Act from time to time.
(c) TWC must consult with "AICH and SVI with respect to the preparation of
the Announcement and must in good faith have regard to the reasonable
requests of "AICH and SVI regarding the Announcement.
(d) In the event of dispute between TWC and "AICH and SVI regarding the
form or content of the Announcement or the requirements of the Listing
Rules and/or the Securities Act the determination of TWC regarding
disclosure will be final.
9.2 Responsibility for Merger Information
(a) The provisions of this Clause 9.2 apply where a third party makes a
Claire against a Party or their respective officers and advisers in
relation to a matter disclosed or omitted to be disclosed in the Merger
Information.
(b) TWC will be responsible for and will indemnify and hold harmless "AICH
and SVI and the directors, officers, employees, agents, representatives
and advisers of each of them from all Claims suffered or incurred to
third parties for information provided or omitted to be provided by or
on behalf of TWC for the purposes of preparing and distributing the
Merger Information.
(c) SVI will be responsible for and will indemnify and hold harmless each
of TWC and "AICH and the directors, officers, employees, agents,
representatives and advisers of TWC and "AICH from all Claims suffered
or incurred to third parties for information provided or omitted to be
provided by or on behalf of SVI for the purposes of preparing and
distributing the Merger Information.
(d) "AICH will be responsible for and will indemnify and hold harmless each
of TWC and SVI and the directors, officers, employees, agents,
representatives and advisers of TWC and SVI from all Claims suffered or
incurred to third parties for information provided or omitted to be
provided by or on behalf of "AICH for the purposes of preparing and
distributing the Merger Information.
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(e) Each Party holds the benefit of the indemnities under Clauses 9.4(b) to
9.4(d) for itself and for the benefit of its respective directors,
officers, employees, agents, representatives and advisers.
10. CONDUCT OF BUSINESS PENDING COMPLETION
10.1 General Conduct of TWC Business
Until Completion unless SVI otherwise approves (such approval not to be
unreasonably withheld or delayed), TWC must procure that the TWC Group (other
than TWC) carries on its business in the ordinary course of usual business and
in a normal, proper and efficient manner.
10.2 Consultation
Until Completion, TWG must:
(a) notify SVI as to all material decisions concerning the operation of its
business;
(b) not make any material changes to the operation of its business unless
SVI approves (such approval not to be unreasonably withheld or
delayed);
(c) provide to SVI copies of all significant reports relating to the
affairs of all members of the TWC Group prepared by or for the
management of TWC at the same time as the reports are provided to
senior management of that company or TWC; and
(d) instruct the management of each member of the TWC Group of the
requirements of this Clause 10.
10.3 Specific Matters
Until Completion, unless SKI approves (such approval not to be unreasonably
withheld or delayed) or except as contemplated by this Agreement, TWC must not
permit or suffer any member of the TWC Group (other than TWC) to:
(a) increase, reduce or otherwise alter its share capital;
(b) issue, sell, purchase, redeem or otherwise acquire any shares, other
securities or equity interests or grant any options for the issue of
any shares, other securities or equity interests;
(c) declare, make or pay any dividends, bonuses or other distributions to
shareholders;
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(d) do any act or thing or suffer or permit any omission in contravention
or breach of any of the provisions of any exchange control regulation,
taxation or revenue statute;
(e) do any act or thing or permit any omission which would make any policy
of insurance written for the benefit of any member of the TWC Group
void or voidable or do anything that would mean any existing policy is
not in full force land effect at Completion;
(f) do any act or thing the doing or suffering of which, or permit any
omission which, is or could be a breach of:
a. any industrial or similar award;
b. any determination or order of any tribunal, person or body empowered
to determine any dispute relating to the rights or duties of any member
of the TWC Group or of any trade union or member of a trade union,
pursuant to any industrial or similar award;
c. any term contained or implied in any industrial agreement between
any member of the TWC Group and any trade or labour union;
d. any term contained or implied in any agreement between any member of
the TWC Group and any of the employees of any member of the TWC Group;
or
e. which leads or is likely to or could lead to any industrial action
or cause any labour problems of whatever nature;
(g) pass any special resolution other than special resolutions to approve
all transactions in any way related to the Acquisition;
(h) enter into any hire purchase, leasing or credit sale agreement in
respect of an item the value of which exceeds $100,000;
(i) make a distribution or revaluation of assets;
(j) except in the normal and ordinary course of business or as recommended
by the Remuneration Committee, enter into any contract involving total
expenditure in excess of $100,000 or not capable of termination on 90
days notice or less or any service, employment or other agreement not
capable of termination on 30 days notice or less;
(k) except in the normal and ordinary course of business enter into any
transactions exceeding $100,000;
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(l) except in the normal and ordinary course of business, create any
encumbrances over or declare itself trustee of any asset;
(m) purchase or sell any asset for more than $100,000 or total assets for
more than $100,000 except in the normal and ordinary course of
business;
(n) make or agree to make any alteration to the remuneration or terms of
employment of any employee earning more than $100,000 per annum
otherwise than in the ordinary and normal course of business;
(o) except in the normal and ordinary course of business, assume any
liability exceeding $100,000 or give any bank guarantee;
(p) enter into any profit sharing, revenue sharing, cash flow sharing or
profit participation agreement with any person except in the ordinary
course of business;
(q) alter its constitution; or
(r) agree, whether in writing or otherwise, to do any of the above,
and TWC must ensure that no member of the TWC Group (other than TWC) takes any
of the above actions.
10.4 General Conduct of the SVI Business
Until Completion unless TWC otherwise approves (such approval not to be
unreasonably withheld or delayed), SVI must carry on its business in the
ordinary course of usual business and in a normal, proper and efficient manner.
10.5 Consultation
Until Completion, SVI must:
(a) notify TWC as to all material decisions concerning the operation of its
business;
(b) not make any material changes to the operation of its business without
the prior approval of TWC;
(c) provide to TWC copies of all significant reports relating to the
affairs of all members of SVI prepared by or for the management of SVI
at the same time as the reports are provided to senior management of
SVI; and
(d) instruct the management of SVI of the requirements of this Clause.
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10.6 Specific Matters
Until Completion, unless TWC otherwise approves (such approval not to be
unreasonably withheld or delayed) or except as contemplated by this Agreement,
SVI must not:
(a) increase, reduce or otherwise alter its share capital;
(b) issue, sell, purchase, redeem or otherwise acquire any SVI Shares or
other Securities or grant any options for the issue of SVI Shares or
issue any securities with rights of conversion to SVI Securities or
agree to do any of the foregoing;
(c) declare, make or pay any dividends, bonuses or other distributions to
shareholders;
(d) do any act or thing or suffer or permit any omission in contravention
or breach of any of the provisions of any exchange control regulation,
taxation or revenue statute;
(e) do any act or thing or permit any omission which would make any policy
of insurance written for the benefit of SVI void or voidable or do
anything that would mean any existing policy is not in full force and
effect at Completion;
(f) do any act or thing the doing or suffering of which, or permit any
omission which, is or could be a breach of:
a. any industrial or similar award;
b. any determination or order of any tribunal, person or body empowered
to determine any dispute relating to the rights or duties of SVI or of
any trade union or member of a trade union, pursuant to any industrial
or similar award;
c. any term contained or implied in any industrial agreement between
SVI and any trade or labour union;
d. any term contained or implied in any agreement between SVI and any
of the employees of SVI; or
e. which leads or is likely to or could lead to any industrial action
or cause any labour problems of whatever nature;
(g) pass any special resolution;
(h) enter into any hire purchase, leasing or credit sale agreement in
respect of an item the value of which exceeds $100,000;
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(i) make a distribution or revaluation of assets;
(j) except in the normal and ordinary course of business, enter into any
contract involving total expenditure in excess of $100,000 or not
capable of termination on a 90 days notice or less or any service,
employment or other agreement not capable of termination on 30 days
notice or less;
(k) except in the normal and ordinary course of business enter into any
transactions exceeding $100,000;
(l) except in the normal and ordinary course of business, create any
encumbrance over or declare itself trustee of any asset;
(m) purchase or sell any asset for more than $100,000 or total assets for
more than $100,000 except in the normal and ordinary course of
business;
(n) make or agree to make any alteration to the remuneration or terms of
employment of any employee earning more than $100,000 per annum
otherwise than in the ordinary and normal course of business;
(o) except in the normal and ordinary course of business assume any
liability exceeding $100,000 or give any bank guarantee;
(p) enter into any revenue sharing, cashflow sharing, profit sharing or
profit participation agreement with any person except in the ordinary
course of business;
(q) alter its articles of incorporation or bylaws; or
(r) agree, whether in writing or otherwise, to do any of the above.
10.7 Transaction Documents
(a) SVI must not, from the date of this Agreement until the earlier of
termination of this Agreement and Completion, enter into any contract
which is inconsistent with the proposed rights of TWC under the
Transaction Documents.
(b) TWC must not, and must procure that each member of the TWC Group does
not, from the date of this Agreement until the earlier of termination
of this Agreement and Completion, enter into any contract which is
inconsistent with the proposed rights of SVI under the Transaction
Documents.
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10.8 OTC Bulletin Board
Until Completion, SVI agrees that it must use its reasonable endeavours to
maintain inclusion and the quotation of SVI Shares on the OTC bulletin board.
10.9 SVI Access
Until Completion TWG must procure that its Subsidiaries allow the officers,
employees, counsel, agents, investment bankers, accountants and other
representatives of SVI to:
(a) have free and full access to their respective plant, properties, books
and records;
(b) make extracts from the copies of such books and records; and
(c) provide SVI with such additional financial and operating data and other
information as to the financial condition, results of operations,
businesses, properties, assets, liabilities or future prospects of TWG
and its Subsidiaries as SVI from time to time may reasonably request,
provided that this access does not materially interfere with the then business
operations of TWC and its Subsidiaries.
10.10 TWC Access
Until Completion, SVI must allow the officers, employees, counsel, agents,
investment bankers, accountants and other representatives of TWC to:
(a) free and full access to its plant, properties, books and records;
(b) make extracts from the copies of such books and records; and
(c) provide TWC with such additional financial and operating data and other
information as to the financial condition, results of operations,
businesses, properties, assets, liabilities or future prospects of SVI
as TWC may from time to time may reasonably request,
provided that this access does not materially interfere with the then business
operations of SVI.
10.11 Advice of Changes
Until Completion, each Party must immediately advise the other Parties in a
detailed written notice of any material fact or occurrence or any pending or
threatened occurrence of which it obtains knowledge and which:
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(a) (if existing and known at the date of this Agreement) would have been
required to be set out or disclosed in this Agreement;
(b) (if existing and known at any time prior to or at Completion) would
make the performance by any Party of a material obligation contained in
this Agreement impossible or make performance materially more difficult
than in the absence of such fact or occurrence; or
(c) (if existing and known at Completion) would cause a material condition
to any Party's obligations under this Agreement not to be fully
satisfied.
11. CONDITIONS PRECEDENT
11.1 Conditions
Completion and the conclusion of the transactions comprising the Merger
contemplated by this Agreement is conditional on:
(a) satisfaction of all requirements of the Corporations Law for completion
of the buyback of TWG Shares under Clause 3;
(b) receipt by TWC of written confirmation of approval of the Merger and
all of the transactions contemplated by this Agreement by the VSE and
the BCSC (if required);
(c) no occurrence of a material adverse change affecting the assets,
liabilities or prospects of the business of TWC or SVI between the date
of this Agreement and the Completion Date;
(d) approval of the Merger and each transaction contemplated by this
Agreement by shareholders of SVI in general meeting for all purposes
(if required by the laws of the place of incorporation of SVI);
(e) the grant of all necessary regulatory approvals for the Merger and each
transaction contemplated by this Agreement;
(f) completion of due diligence enquiries regarding TWC to the full
satisfaction of AICH and SVI;
(g) completion of due diligence enquiries regarding SVI to the full
satisfaction of each of TWC and AICH
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(h) completion of an audited consolidated balance sheet as at 30 June 1998
and profit and loss account for the period to 30 June 1998 for the TWC
Group which is acceptable to AICH and SVI in their absolute discretion,
(i) completion of an audited consolidated balance sheet as at 31 December
1999 and profit and loss account for the period to 31 December 1999 for
SVI which is acceptable to AICH and TWC in their absolute discretion;
(j) receipt by TWC of an opinion from counsel for SVI authorised to
practice in the United States of America confirming that:
a. SVI is a corporation validly existing and in good standing under the
laws of the State of Idaho, United States of America, with all
requisite corporate power and authority to own, lease, licence and use
its properties and assets and to carry on the business in which it is
engaged as at the date of this Agreement;
b. SVI is duly qualified to transact the business in which it is
engaged as at the date of this Agreement;
c. the authorised and outstanding capital stock of SVI is 1,100,000
ordinary shares of common stock (of which not more than 600,000 are
held by AICH and its Affiliates) and all the outstanding shares of
capital stock of SVI are validly authorised, validly issued, fully paid
and non-assessable; and
d. this Agreement has been duly authorised, executed and delivered by
SVI, constitutes the legal, valid and binding obligation of SVI and
(subject to applicable bankruptcy, insolvency and other laws affecting
the enforceability of creditors' rights generally) this Agreement and
each Transaction Document is enforceable as to SVI in accordance with
its terms;
(k) receipt by SVI of an opinion from counsel for TWC authorised to
practice in Bermuda confirming that:
a. TWC is a corporation validly existing and in good standing under the
laws of Bermuda, with all requisite corporate power and authority to
own, lease, licence and use its properties and assets and to carry on
the business in which it is engaged as at the date of this Agreement;
b. TWC is duly qualified to transact the business in which it is
engaged as at the date of this Agreement; and
c. this Agreement has been duly authorised, executed and delivered b,
TWC, constitutes the legal, valid and binding obligation of TWC and
(subject to applicable
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bankruptcy, insolvency and other laws affecting the enforceability of
creditors' rights generally) is enforceable as to TWC in accordance
with its terms;
(l) receipt by TWC or SVI (as the case may be) of such other documents as
that Party may reasonably request from the other party or "AICH in
order to enable that Party to determine whether the conditions to
Completion have been met or otherwise to carry out the provisions of
this Agreement or implement any transactions related to those
contemplated by this Agreement;
(m) no legal proceeding relating to or seeking to prohibit or otherwise
challenge the consummation of the transactions contemplated by this
Agreement or to obtain substantial damages with respect thereto have
been instituted or threatened;
(n) completion of a capital raising by SVI to raise net proceeds of not
less than $250,000 with the only condition to the release of the
proceeds of the raising being Completion;
(o) the total number of outstanding shares of SVI immediately prior to
Completion being not more than 1,100,000 ordinary shares (of which not
more than 600,000 are held by or on behalf of "AICH and its Affiliates)
and delivery of an officers certificate in a form acceptable to TWC
confirming this fact; and
(p) receipt by TWC of such other documents executed by AICH as TWC may
require regarding the performance of AICH's obligations under the
Consulting Agreement.
11.2 Satisfaction of Conditions
Each of the Parties must use their best endeavours to obtain the fulfilment of
the Conditions as soon as practicable.
11.3 Waiver
(a) The Conditions set out in Clauses 11.1(a)-(b) and (c) in the case of
SVI, may be waived by TWC in its absolute discretion.
(b) The Conditions set out in Clauses 11.1(c) in the case of TWC, and (d)
may be waived by SVI in its absolute discretion.
(c) All other Conditions may only be waived by agreement of the Parties.
12. TERMINATION
12.1 Termination Events
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If:
(a) any Condition is not fulfilled or waived by 13 January 1999 (or such
later date agreed by the Parties);
(b) a Party commits a material breach of this Agreement which remains
unremedied for 10 Business Days after the notice of the breach is
served on the Party in default; or
(c) an Insolvency Event occurs with respect to a Party,
then, if the Party who seeks to terminate the Agreement has complied with its
obligations under Clause 11.2 and, in the case of Clause 12.1(b) is not the
Party in breach, this Agreement may be terminated at any time before Completion
on not less than 2 Business Days notice given by that Party to the others.
12.2 Materiality
For the purposes of this Clause 12, Material means material to the decision of a
prudent intending purchaser of the business of the TWC Group or business of SVI
(as the case may be), in the circumstances of the Party not in breach, in
determining whether or not to proceed with the Acquisition on the terms and
subject to the conditions of this Agreement.
12.3 Rights on Termination
If this Agreement is terminated under this Clause 12, in addition to any other
rights, powers or remedies provided by law:
(a) each Party is released from its obligations to further perform the
Agreement except those under Clauses 13.1 and 13.2; and
(b) each Party retains the rights it has against any other Party in respect of
any past breach.
13. INTENTIONALLY DELETED
14. POST-COMPLETION UNDERTAKINGS
14.1 Application for Listing
(a) SVI must use its best endeavours to satisfy the listing requirements of
the Exchange and must promptly apply for listing of SVI and quotation
of SVI Shares on an Exchange as soon as possible and in any event
within 60 days after completion of the Placement.
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(b) Each of "AICH and TWC must provide to SVI and permit the disclosure of
all information relating to the business conducted by that Party which
SVI may reasonably require and will otherwise co-operate with SVI in
the preparation of an application for listing of SVI and quotation SVI
Shares on an Exchange including, without limitation, compliance with
continuous disclosure obligations imposed by the Exchange or the
security laws and regulations of the jurisdiction in which the Exchange
operates.
(c) Each of "AICH and TWC must promptly advise SVI if any information
provided to SVI under Clause 14.1(a) becomes inaccurate or incomplete
in any material respect and to provide the information needed to
correct that inaccuracy.
14.2 Acknowledgment
(a) TWC acknowledges that the 1933 Act, 1934 Act and "AICH may require TWC
to Accept restrictions on its ability to re-sell the Merger Securities.
(b) TWC and "AICH must use their best endeavours to negotiate the terms of
re-sale restrictions for the Merger Securities having regard to current
market practice in the securities industry in the United States of
America and the transactions contemplated by this Agreement.
(c) Any agreement reached under clause 14.1(b) must permit TWC to undertake
an exchange of Merger Securities held by TWC for the transfer and
cancellation of TWC Shares held by TWC shareholders in accordance with
the issuer bid provisions of the Securities Act and the share buy-back
provisions of the Corporations Law and may require agreement to the
imposition of comparable re-sale restrictions on those TWC shareholders
who participate in the Issuer Bid and who following completion of the
Issuer Bid would constitute an Affiliate of SVI.
15. COSTS AND STAMP DUTY
15.1 Costs
(a) Subject to Clause 15.1(b), SVI must pay all reasonable costs associated
with the preparation, negotiation and execution of this Agreement and
the Transaction Documents and related in any way to completion of the
Transactions contemplated by this Agreement including, without
limitation, legal fees on a solicitor - own client basis incurred by
TWC, TWG and AICH.
(b) The Parties acknowledge that TWC has paid up to US$5,000 to meet
expenses associated with preparation of any registration statement
required to be filed with the SEC to permit TWC to re-sell the Merger
Securities in the United States of America and admission of
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SVI to the official list of an Exchange and quotation of the Merger
Securities on an Exchange. "AICH must pay the balance of all such
costs.
15.2 Stamp Duty
SVI must bear all stamp duty payable on this Agreement and each document and/or
transaction contemplated by it.
16. INTENTIONALLY DELETED
17. INTENTIONALLY DELETED
18. NOTICES
18.1 Notices
A notice, approval, consent or other communication in connection with the
Agreement:
(a) must be in writing;
(b) must be marked for the attention of the persons specified below; and
(c) must be left at the address of the addressee, or sent by prepaid
security post (airmail if posted to or from a place outside Australia)
to the address of the addressee or sent by facsimile to the facsimile
number of the addressee which is specified in this Clause or if the
addressee notifies another address or facsimile number then to that
address or facsimile number.
The address, and facsimile of each party is:
TWC:
Address: Level 27, Grosvenor Place
25 George Street
Sydney NSW 2000
Australia
Facsimile: (612) 9250 8890
Attention: Nick Bird
SVI:
Address:
Facsimile:
Attention:
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AICH
Address: 2200 Corporate Boulevard
Suite 200, Boca Raton
Florida, 33431
United States of America
Facsimile: (1 561) 393 1485
Attention: Richard lamunno
18.2 A notice, approval, consent to other communication takes effect from
the time it is received unless a later time is specified in it.
18.3 Receipt
A letter or facsimile is taken to be received:
(a) where delivered by hand, at the time of delivery;
(b) where dispatched by facsimile transmission, 24 hours after the time
recorded on the transmitting machine unless:
a. within those 24 hours the intended recipient has informed the sender
that the transmission was received in an incomplete or garbled form; or
b. the transmission result report of the sender indicates a faulty or
incomplete transmission;
(c) where dispatched by security post, on acknowledgment of receipt by
or behalf of the recipient,
but if any delivery or receipt is on a day other than a Business Day or is later
than 4.00 pm (local time) on any day, the notice will be vacant to be received
on the next Business Day.
19. ASSIGNMENT
A Party may not assign its rights under this Agreement without the consent of
the other Party.
20. GENERAL
20.1 Exercise of Rights
A Party may exercise a right, power or remedy at its discretion, and separately
or concurrently with another right, power or remedy. A single or partial
exercise of a right, power or remedy by a Party does not prevent a further
exercise of that or of any other right, power or remedy. Failure
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by a Party to exercise or delay in exercising a right, power or remedy does not
prevent its exercise.
20.2 Waiver & Variation
A provision of or a right created under this Agreement may not be:
(a) waived except in writing signed by the Party granting the waiver; or
(b) varied except in writing signed by the Parties.
20.3 Approvals & Consents
A Party may give conditionally or unconditionally or withhold its approval or
consent in its absolute discretion unless this Agreement expressly provides
otherwise. 1 20.4 Remedies
20.4 Remedies Cumulative
Except as provided in this Agreement, the rights, powers and remedies provided
in this Agreement are cumulative with and not exclusive of the rights, powers or
remedies provided by law independently of this Agreement.
20.5 No Merger
The provisions of this Agreement do not merge on Completion.
20.6 Survival of Indemnities
Each indemnity in this Agreement is a continuing obligation, separate and
independent from the other obligations of the Parties and survives Completion
and otherwise survives termination of this Agreement.
20.7 Enforcement of Indemnities
It is not necessary for a Party to incur an expense or make payment before
enforcing a right of indemnity conferred by this Agreement.
20.8 Further Assurances
Each Party agrees, at its own expense, on the request of any other Party, to do
everything reasonably necessary to:
(a) give effect to this Agreement;
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(b) give effect to the transactions contemplated by this Agreement
including, without limitation:
a. the acquisition;
b. the execution of the Transaction Documents; and
c. the issue of securities; and
(c) to use all reasonable endeavours to cause relevant third parties to
give effect to t the transactions contemplated by Clauses 20.8(a) and
20.8(b).
20.9 No Representation or Warranties
Each Party acknowledges and represents and warrants to the other that in
entering into this Agreement it has not relied on any representations or
warranties about its subject matter given by any person except as provided in
this Agreement.
21. GOVERNING LAW
21.1 Governing Law
(a) This Agreement and the transactions contemplated by this Agreement are
governed by the law in force in the State of New South Wales.
(b) Each Party irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the courts of the State of New South Wales.
EXECUTED as an Agreement.
SIGNED by TRADE WIND )
COMMUNICATIONS LIMITED )
in the presence of )
- ------------------------------ ------------------------------
Director/Secretary Director
- ------------------------------ ------------------------------
Name (please print) Name (please print)
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SIGNED for and on behalf of )
TRADE WIND GROUP PTY )
LIMITED in the presence of : )
- ------------------------------ ------------------------------
Director/Secretary Director
- ------------------------------ ------------------------------
Name (please print) Name (please print)
SIGNED for and on behalf of )
SILER VENTURE, INC. by its )
attorney in the presence of: )
- ------------------------------ ------------------------------
President/Director Witness
- ------------------------------ ------------------------------
Name (please print) Name (please print)
SIGNED for and on behalf of )
ATLANTIC I INTERNATIONAL )
CAPITAL HOLDINGS, LTD )
by its attorney in the presence of: )
- ------------------------------ ------------------------------
Witness Director
- ------------------------------ ------------------------------
Name (please print) Name (please print)
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SCHEDULE 1
TWC Representations & Warranties
TWC represents and warrants that:
(a) TWC has been duly incorporated as a company in accordance with the laws
of the Bermuda and is validly existing under those laws;
(b) it has power to enter into and perform its obligations under this
Agreement and, on satisfaction of the Conditions, the Transaction
Documents;
(c) it has in full force and effect all authorizations necessary to enter
into this Agreement and, on satisfaction of the Conditions, the
Transaction Documents, perform its obligations under this Agreement and
the Transaction Documents and allow this Agreement and the Transaction
Documents to be enforced;
(d) its obligations under this Agreement are valid and binding and are
enforceable against it in accordance with its terms;
(e) on execution, its obligations under the Transaction Documents will be
valid and binding and will be enforceable against it in accordance with
its terms;
(f) the execution, delivery and performance of this Agreement and, on
satisfaction of the Conditions, the Transaction Documents and
compliance with the provisions of this Agreement and the Transaction
Documents by TWC will not:
a. violate any provision of law, statute, ordinance, rule or regulation
or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or any governmental body, the violation of
which would have a material adverse impact on the financial condition
or business of TWC;
b. conflict with or result in any breach of any terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or
both) a default (or give rise to any right of termination, cancellation
or acceleration) under any material agreement, document, instrument,
contract, understanding, arrangement, note, indenture, mortgage or
leases) to which TWC is a party or under which TWC or any of its assets
is bound or affected; or
c. result in the creation of lien, security interest, charge or
encumbrance upon any of the properties or assets of TWC;
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(g) it has the power and authority to own and operate its properties and
assets and to carry on its business as now conducted and is proposed to
be conducted in accordance with this Agreement;
(h) it is qualified to transact business and is in good standing in each
jurisdiction in which the failure to qualify would have a material
adverse effect on its business or properties;
(i) except as set out in this Agreement there is no action, suit,
proceeding or investigation pending or to TWC's knowledge, currently
threatened against TWC which questions the validity of this Agreement
or the Transaction Documents or the right of TWC to enter into this
Agreement or the Transaction Documents, or to consummate the
transactions contemplated by this Agreement or the Transaction
Documents, or result in any change in the current equity ownership of
TWC, nor is TWC aware that there is any basis for the foregoing. TWC is
not a party to any order, writ, injunction, judgment or decree of any
court;
(j) except as set out in TWC's Balance Sheet as at 30 June 1998 and
provided to SVI and "AICH prior to execution of this Agreement (the
~TWC Balance Sheets), TWC has not incurred any unpaid indebtedness for
money borrowed or any other liabilities, contingent or otherwise;
(k) it maintains and consistently applies and will continue to maintain and
consistently apply a standard system of accounting established and
administered in accordance with general accepted accounting principles;
(l) it has filed all tax returns and reports as required, and within the
time prescribed, by law, including without limitation, all federal,
state and local income, excise or franchise tax returns, real estate
and personal property tax returns, sales tax returns, payroll tax
returns and other tax returns or reports of a crime to be filed by it.
These returns and reports are true and correct in all material
respects;
(m) it has paid or made provision for the payment of all accrued and
un-paid taxes and other charges to which TWC is subject and which are
not currently due and payable;
(n) the income tax returns of TWC have never been audited by the Australian
Taxation Office and TWC has not agreed to an extension of the statute
of limitation with respect to any of its tax years;
(o) neither the Australian Taxation Office nor any other taxing authority
is now asserting, nor is threatening to assert against TWC any
deficiency or claim for additional taxes or interest or penalties in
connection with that such deficiency, nor does such deficiency or claim
or basis of such deficiency or claim exist;
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(p) it understands that the representations and warranties given in this
Agreement are deemed material and have been relied on by SVI and AICH
(q) no representation or warranty by TWC in this Agreement and no written
statement contained in any document, certificate or other writing
delivered by TWC to SVI or "AICH contains any untrue statement of
material fact or omits to state any material fact necessary to make
such statements, in light of the Circumstances under which they were
made, not misleading.
(r) to the best of the knowledge and belief of TWC, all information:
a. which a reasonably prudent purchaser (in the circumstances of TWC)
and its professional advisers would reasonably require for the purpose
of making an informed assessment of whether or not to proceed with the
Acquisition regarding the assets and liabilities, financial position
and profits and losses of the TWC; and
b. which has been sought by SVI or its professional advisers,
has been disclosed to TWC or its professional advisers;
(s) to the best of the knowledge and belief of TWC all information given by
TWC and its professional advisers to SVI and its professional advisers
in the course of negotiations leading to this Agreement and Completion
is true and accurate in all respects;
(t) to the best of the knowledge and belief of TWC none of the information
given by TWC and its professional advisers to SVI and its professional
advisers in the course of negotiations leading to this Agreement and
Completion is misleading in any particular, whether by omission or
otherwise.
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SCHEDULE 2
AICH Representations & Warranties
AICH represents and warrants that:
(a) AICH has been duly incorporated as a company in accordance with the
laws of the Bermuda and is validly existing under those laws;
(b) it has power to enter into and perform its obligations under this
Agreement and, on satisfaction of the Conditions, the Transaction
Documents;
(c) it has in full force and effect all authorizations necessary to enter
into this Agreement and, on satisfaction of the Conditions, the
Transaction Documents, perform its obligations under this Agreement and
the Transaction Documents and allow this Agreement and the Transaction
Documents to be enforced;
(d) its obligations under this Agreement are valid and binding and are
enforceable against it in accordance with its terms;
(e) on execution, its obligations under the Transaction Documents will be
valid and binding and will be enforceable against it in accordance with
its terms;
(f) the execution, delivery and performance of this Agreement and, on
satisfaction of the Conditions, the Transaction Documents and
compliance with the provisions of this Agreement and the Transaction
Documents by "AICH will not:
a. violate any provision of law, statute, ordinance, rule or regulation
or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or any governmental body, the violation of
which would have a material adverse impact on the financial condition
or business of "AICH
b. conflict with or result in any breach of any terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or
both) default (or give rise to any right of termination, cancellation
or acceleration), under any material agreement, document, instrument,
contract, understanding, arrangement, note, indenture, mortgage or
leases) to which "AICH is a party or under which "AICH or any of its
assets is bound or affected; or
c. result in the creation of lien, security interest, charge or
encumbrance upon any of the properties or assets of AICH;
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(g) except as set out in this Agreement there is no action, suit,
proceeding or investigation pending or to AlCH's knowledge, currently
threatened against AICH which questions the validity of this Agreement
or the Transaction Documents or the right of "AICH to enter into this
Agreement or the Transaction Documents, or to consummate the
transactions contemplated by this Agreement or the Transaction
Documents, or result in any change in the current equity ownership of
"AICH nor is "AICH aware that there is any basis for the foregoing.
"AICH is not a party to any order, writ, injunction, judgment or decree
of any court;
(h) it understands that the representations and warranties given in this
Agreement are deemed material and have been relied on by TWC and SVI;
(i) no representation or warranty by "AICH in this Agreement and no written
statement contained in any document, certificate or other writing
delivered by "AICH to TWC or SVI contains any untrue statement of
material fact or omits to state any material fact necessary to make
such statements, in light of the circumstances under which they were
made, not misleading.
(j) to the best of the knowledge and belief of "AICH all information given
by AICH and its professional advisers to TWC and its professional
advisers in the course of negotiations leading to this Agreement and
Completion is true and accurate in all respects;
(k) to the best of the knowledge and belief of "AICH none of the
information given by AICH and its professional advisers to TWC and its
professional advisers in the course of negotiations leading to this
Agreement and Completion is misleading in any particular, whether by
omission or otherwise.
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SCHEDULE 3
SVI Representations & Warranties
Each of the Principals and SVI represents and warrants that:
(a) SVI has been duly incorporated as a company in accordance with the laws
of the State of Idaho and is validly existing under those laws;
(b) it has power to enter into and perform its obligations under this
Agreement and, on satisfaction of the Conditions, the Transaction
Documents;
(c) it has in full force and effect all authorizations necessary to enter
into this Agreement and, on satisfaction of the Conditions, the
Transaction Documents, perform its obligations under this Agreement and
the Transaction Documents and allow this Agreement and the Transaction
Documents to be enforced;
(d) its obligations under this Agreement are valid and binding and are
enforceable against it in accordance with its terms;
(e) on execution, its obligations under the Transaction Documents will be
valid and binding and will be enforceable against it in accordance with
its terms;
(f) the execution, delivery and performance of this Agreement and, on
satisfaction of the Conditions, the Transaction Documents and
compliance with the provisions of this Agreement and the Transaction
Documents by SVI will not:
a. violate any provision of law, statute, ordinance, rule or regulation
or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or any governmental body, the violation of
which would have a material adverse impact on the financial condition
or business of SVI;
b. conflict with or result in any breach of any terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or
both) default (or give rise to any right of termination, cancellation
or acceleration), under any material agreement, document, instrument,
contract, understanding, arrangement, note, indenture, mortgage or
leases) to which SVI is a party or under which SVI or any of its assets
is bound or affected; or
c. result in the creation of lien, security interest, charge or
encumbrance upon any of the properties or assets of SVI;
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(g) it has the power and authority to own and operate its properties and
assets and to carry on its business as now conducted and is proposed to
be conducted in accordance with this Agreement;
(h) it is qualified to transact business and is in good standing in each
jurisdiction in which the failure to qualify would have a material
adverse effect on its business or properties;
(i) it has delivered to TWC true, correct and complete copies of its
Certificate of Incorporation and the By-Laws in effect on the date of
this Agreement;
(j) immediately prior to Completion, the authorised and outstanding capital
of SVI is 1,100,000 ordinary shares of common stock;
(k) except as disclosed in writing to TWC and "AICH prior to execution of
this Agreement there are:
a. no outstanding options, warrants, rights (including conversion or
preemptive rights) or agreements pursuant to which SVI is or may be
obligated to issue, sell or repurchase any securities of SVI;
b. no restrictions on the transfer of SVl's capital stock imposed by
its by-laws or any agreement to which SVI is a party, in the order of
any court or governmental agency to which SVI is subject, or any
statute other than those imposed by relevant state and federal
securities law;
c. no cumulative voting or pre-emptive rights for any of SVl's capital
stock;
d. no registration rights under the 1934 Act with respect to SVl's
capital stock;
e. no anti-dilution adjustment provisions or similar rights with
respect to the outstanding securities of SVI which will be triggered by
the issue of the securities contemplated by this Agreement;
f. no voting trusts or agreements, shareholders agreements, pledge
agreements, by-sell rights, rights of first offer, negotiation or
refusal or proxies or similar arrangements relating to any securities
of SVI to which SVI is a party; and
g. (vii) to the best of SVl's knowledge and belief, no options or other
rights to purchase securities from its shareholders granted by such
shareholders;
(l) it has never owned nor does it presently own or control, directly or
indirectly, any other corporation, association, or other business
entity and has never owned or controlled and does not currently own or
control, directly or indirectly, any capital stock or other
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ownership interests, directly or indirectly, in any corporation,
association, partnership, trust, joint venture, or other entity than
otherwise as envisaged under this Agreement;
(m) except as set out in this Agreement there is no action, suit,
proceeding or investigation pending or to the knowledge of SVI or the
Principals, currently threatened against SVI which questions the
validity of this Agreement or the Transaction Documents or the right of
SVI to enter into this Agreement or the Transaction Documents, or to
consummate the transactions contemplated by this Agreement or the
Transaction Documents, or result in any change in the current equity
ownership of SVI, nor is SVI or a Principal aware that there is any
basis for the foregoing. SVI is not a party to any order, writ,
injunction, judgment or decree of any court;
(n) except as set out in SVl's Balance Sheet as at 30 December 1998 (the
SVI Balance Sheet"), SVI has not incurred any unpaid indebtedness for
money borrowed or any other liabilities, contingent or otherwise;
(o) since the date of the SVI Balance Sheet, SVI has conducted no
operations;
(p) except as set forth in the SVI Balance Sheet, SVI has no liabilities,
contingent or otherwise and SVI is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
(q) it maintains and consistently applies and will continue to maintain and
consistently apply a standard system of accounting established and
administered in accordance with general accepted accounting principles;
(r) it has filed all tax returns and reports as required, and within the
time prescribed, by law, including without limitation, all federal,
state and local income, excise or franchise tax returns, real estate
and personal property tax returns, sales tax returns, payroll tax
returns and other tax returns or reports of a crime to be filed by it.
These returns and reports are true and correct in all material
respects;
(s) it has paid or made provision for the payment of all accrued and
un-paid taxes and other charges to which SVI is subject and which are
not currently due and payable;
(t) the Federal income tax returns of SVI have never been audited by the
Internal Revenue Service and SVI has not agreed to an extension of the
statute of limitation with respect to any of its tax years;
(u) neither the Internal Revenue Service nor any other taxing authority is
now asserting, nor is threatening to assert against SVI any deficiency
or claim for additional taxes or interest or penalties in connection
with that such deficiency, nor does such deficiency or claim or basis
of such deficiency or claim exist;
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(v) the stock consolidation and stock split implemented by SVI prior to
Completion to ensure the total outstanding shares of common stock of
SVI is 1,100,000 has been undertaken in accordance with the certificate
of incorporation and bylaws of SVI and is compliant in all respects
with requirements of the laws of the place of incorporation of SVI and
any other laws or regulations binding on SVI;
(w) it understands that the representations and warranties given in this
Agreement are deemed material and have been relied on by TWC and "AICH
(x) no representation or warranty by SVI in this Agreement and no written
statement contained in any document, certificate or other writing
delivered by SVI to TWC or AICH contains any untrue statement of
material fact or omits to state any material fact necessary to make
such statements, in light of the circumstances under which they were
made, not misleading.
(y) to the best of the knowledge and belief of SVI, all information,.
a. which a reasonably prudent purchaser (in the circumstances of SVI)
and its professional advisers would reasonably require for the purpose
of making an informed assessment of whether or not to proceed with the
Acquisition regarding the assets and liabilities, financial position
and profits and losses of the SVI; and
b. which has been sought by TWC or its professional advisers,
has been disclosed to SVI or its professional advisers;
(z) to the best of the knowledge and belief of SVI all information given by
SVI and its professional advisers to TWC and its professional advisers
in the course of negotiations leading to this Agreement and Completion
is true and accurate in all respects;
(aa) to the best of the knowledge and belief of SVI none of the information
given by SVI and its professional advisers to TWC and its professional
advisers in the course of negotiations leading to this Agreement and
Completion is misleading in any particular, whether by omission or
otherwise.
SCHEDULE 4
AICH Agreement
CONSULTING AGREEMENT
This Agreement is effective as of the day of January, 1999, by and
between SILER VENTURE, INC. (the "Company"), and ATLANTIC INTERNATIONAL CAPITAL
HOLDINGS, LTD., a Bermuda corporation (the "Consultant").
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WHEREAS, the Company is a publicly held company; and
WHEREAS, the Consultant is in the business of assisting public
companies in financial relations; and
WHEREAS, the Company desires to retain Consultant to provide certain
specified services for the Company, including without limitation the services
outlined on Exhibit A.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereby agree as follows:
1. Duties and Involvement
a. The Company hereby engages Consultant to provide financial and
public relations services set out below and in Exhibit A (the "Services"). Such
services will generally include advice to and consulting with the Company's
management concerning marketing surveys, investor profile information, methods
of expanding investor support and increasing investor awareness of the Company
and its products and/or services. Consultant will also provide additional
services to the Company, including broker relations, the preparation of
necessary or desirable public and private securities offering and registration
documents in consultation with the Company and format of due diligence meetings,
and attendance at conventions and trade shows and do all other things required
by the Company to enable registration of securities of the Company. Consultant
shall be responsible for all expenses incurred in connection with providing
services to the Company. Consultant shall perform finders duties in the good
faith effort to arrange the private placement of ordinary shares of Company
common stock to raise gross proceeds of not less than US$3,660,000.00, after
reduction for customary direct selling expenses ("Private Placement"). The
Private Placement shall require a minimum issue price of US$3.00 per share for
the Company's common stock other than in respect of issue referred to in Clause
2(a).
b. Consultant acknowledges that neither Consultant nor any of its
employees or affiliates is an officer, director, or agent of the Company, that
in rendering advice or recommendations to the Company it is not and will not be
responsible for any management decisions on behalf of the Company and that it is
not authorized or empowered to commit the Company to any recommendation or
course of action. The Company represents that Consultant does not have, through
stock ownership or otherwise, the power to control the Company nor to exercise
any dominating influence over its management.
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2. Term
This Agreement shall continue until twelve (12) months from date of
execution. This Agreement shall terminate prior to that date at the election of
the Company by written notice to Consultant in the event:
a. Consultant does not introduce to the Company persons or entities
that purchase a minimum of 300,000 shares of common stock of the Company at a
minimum per share price of $2.50 to provide net proceeds of not less than
$750,000 available to the Company by no later than January 31, 1999;
b. Consultant does not introduce to the Company persons or entities
that purchase a minimum 1,000,000 shares of common stock of the Company to
provide net proceeds of not less than $3,660,000 available to the Company within
70 days of the date of this Agreement or such later date as may be fixed by the
Company;
c. Consultant breaches a material term of this Agreement;
d. Any representation given by Consultant to the Company is or becomes
incorrect or misleading in a material respect; or
e. Consultant becomes unable to pay its debts as and when it falls due,
a resolution is passed or any steps are taken to wind up Consultant, an
administrator, receiver, liquidator, provisional liquidator or other external
controller is appointed to the Company or in respect of any of its assets.
3. Compensation
As total and complete consideration for the Services to be provided by
Consultant to the Company, and provided that Consultant has not materially
breached this Agreement, the Consultant or its designee shall receive:
a. Eight (8%) Percent of the net offering proceeds from the Private
Placement received by the Company from those investors introduced by
the Consultant to the Company; and
b. US$5,000.00 per month payable on the seventh day of each month
hereafter. In addition, Consultant shall be reimbursed for all
reasonable out-of-pocket expenses incurred by Consultant with respect
to the Services (other than relating to the Private Placement) provided
those expenses have been approved by the Company and Trade Wind
Communications Limited before being incurred.
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4. Services Not Exclusive
Consultant shall devote such time and effort as necessary to discharge
its duties hereunder. The Company acknowledges that Consultant is engaged in
other business activities and that it will continue such activities during the
term of this Agreement, subject to the other terms and conditions hereof shall
not be restricted from engaging in other business activities during the term of
this Agreement.
5. Confidentiality
Consultant acknowledges that it will have access to confidential
information regarding the Company and its businesses. Consultant agrees that it
will not, during or subsequent to the term of this Agreement, use, divulge,
furnish, or make accessible to any person (other than with the written
permission of the Company) any knowledge or information or plans of the Company
with respect to the Company or its businesses, including, but not limited to,
the products, financial information, ideas, and other trade secrets of the
Company, whether in the concept or development stage or being marketed by the
Company on the effective date of this Agreement or during the term hereof, and
any other information identified by the Company as confidential except as
expressly authorised by the Company.
6. Assignment
This Agreement may not be assigned by either party hereto without the
written consent of the other but shall be binding upon the successors of the
parties.
7. Representations
Consultant represents to the Company that the Consultant holds all necessary
authorizations and licences required by United States Federal or State law
necessary to enable it to undertake its obligations in accordance with this
Agreement. The Consultant acknowledges that the Company has entered into this
Agreement in reliance on this representation.
8. Indemnification
a. The Company agrees to indemnify and hold harmless Consultant and its
agents and employees against any losses, claims, damages or liabilities, joint
or several, to which Consultant or any such other person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof arise out of or
are based upon any untrue statement of any material fact contained in the
Registration Statement, any preliminary prospectus, the prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to make the statements contained
therein not misleading, and will reimburse the Consultant or any such other
person for any legal or other expenses reasonably incurred by Consultant or any
such other
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person in connection with investigating or defending any such loss, claim,
damage, liability, or action, suit or proceeding; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based, in whole or in part, upon
an untrue statement, or omission or alleged omission from the Registration
Statement, any preliminary prospectus, the prospectus, or any such amendment or
supplement, in reliance upon and in conformity with information furnished to the
Company by the Consultant. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
b. Consultant will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the Registration Statement and
each person, if any, who controls the Company within the meaning of the Act
against any losses, claims, damages or liabilities to which the Company or any
such other person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions, suits, or proceedings
in respect thereof) arise out of or are based upon any untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, the prospectus, or any amendment or supplement thereto, or arise out
of or are based on the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading to the
extent that such untrue statement or omission is made or omitted in whole or in
part in reliance upon and in conformity with information furnished to the
Company by Consultant. Consultant will reimburse any legal or other expenses
reasonably incurred by the Company or any such other person in connection with
investigating or defending any such loss, claim, damage, liability, or action,
suit or proceeding. This indemnity agreement will be in addition to any
liability which the Consultant may have.
c. Consultant will indemnify and hold harmless the Company, each of its
directors, each of its officers and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such other person may become subject,
under the Act or otherwise, in so far as such losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof) arise out of
or are based upon any breach of a representation by the Consultant under this
Agreement or any breach of an obligation of the Consultant under this Agreement.
d. Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, suit or proceeding, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party under this Section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise that
under this Section. In case any such action, suit or proceeding is brought
against any indemnified party, and it notified an indemnifying party of the
Commencement thereof, the indemnifying party will be entitled to participate
therein, and, to the extent it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such
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indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
9. Notices - All notices required or permitted to be given under with
Agreement shall be in writing and shall be deemed to have been duly given: (i)
two (2) hours after delivered personally to the party to be notified; or (ii)
five (5) business days after deposited in the U.S. mail, postage paid via
registered or certified mail, return receipt requested. Notices to the Company
shall be addressed to its president at its principal executive office and to the
Consultant et the address set forth beneath the signature line, or to such other
addresses as either party may designate upon at least ten days' notice to the
other party.
10. Entire Agreement - This Agreement contains the entire understanding and
agreement between the parties. There are no other agreements, conditions or
representations, oral or written, express or implied, with regard thereto. This
Agreement may be amended only in writing signed by both parties.
11. Non-waiver - A delay or failure by either party to exercise a right under
this Agreement, or a partial or single exercise of that right, shall not
constitute a waiver of that or any other right.
12. Headings - Headings in this Agreement are for convenience only and shall not
be use Id to interpret or construe its provisions.
13. Counterparts - This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same agreement.
14. Binding Effect - The provisions of this Agreement shall be binding upon the
parties, their successors and assigns.
15. Severability - If any provision of this Agreement or application thereof to
any . person or circumstance shall be deemed or held to be invalid, illegal, or
unenforceable to any extent, the remainder of this Agreement shall not tee
affected end the application of such affected provision shall be enforced to the
greatest extent possible under law.
16. Restrictions -
a. Company states and represents that there are no S-8 registrations in
effect or contemplated.
a. Company states and represents that there are no Regulation-S
placements in effect or contemplated.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement to be effective as of the day and year first above written.
SILER VENTURE, INC. ATLANTIC INTERNATIONAL
CAPITAL HOLDINGS, LTD.
By: /s/ Matt Ott By:/s/ Richard Iammuno
---------------- ----------------------
Matt Ott Richard Iammuno
-------- ---------------
President/Director Director
EXHIBIT A
DIRECT MAIL CAMPAIGN
The Company, with Consultant's advice, will choose one of two possible
publications for direct mail purposes. By _____________, a four page,
four color direct mail lead generation piece highlighting the Company
and benefits of owning the Company's stock will be created and mailed
to 100, 000 selected investors. This piece, printed either on heavy
gloss, includes a postage paid business reply card or an identifying
telephone number enabling investors to respond immediately. The second
is a 4-color, 2-page 250,000 piece mailing in ___________ magazine. The
magazine will highlight the Company in a familiar newsletter or
magazine format. Additionally, at the Company's option market makers
names and phone numbers may be listed directly on the mailing piece for
call-in generation. Campaign services for both choices will include
creative writing, design, artwork, printing, list rentals, mail
handling, postage, and business reply card coordination.
PUBLICATIONS
Personal Investing News
International, Money and Politics
PRINT MEDIA ADVERTISING
An advertisement, geared to both brokers and investors, will be created
and inserted in a major financial and investment related newspaper or
magazine. The emphasis is to utilize publications that target and
deliver large numbers of brokers and investors without the
prohibitively high advertising costs of the more famous media
counterparts.
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<PAGE>
OTHER SERVICES
Such other services as are reasonably intended and designed to provide
complete financial and public relations support to the Company during
the term of this agreement as contemplated under this consulting
agreement or as otherwise deemed appropriate by Consultant.
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SCHEDULE 5
Management Agreement
This Agreement is effective as of the day of January, 1999, by and
between SILER VENTURE, INC. (the "Company"), and TRADE WIND COMMUNICATIONS
LIMITED, a Bermuda corporation (the "Consultant").
WHEREAS, the Company is a publicly held company; and
WHEREAS, the Company desires to retain Consultant to provide certain
specified services for the Company, including without limitation the services
outlined on Exhibit A.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereby agree as follows:
1. Duties and Involvement
a. The Company hereby engages Consultant to provide management services
set out below (the "Services"). Such services will generally include advice to
and consulting with the Company's management concerning the conduct of a
business distributing communication systems and data applications to clients in
the financial services industry in Australia, particularly providing products
and services that facilitate the execution of purchase and sale transactions
involving securities, commodities and other financial instruments.
b. Consultant acknowledges that neither Consultant nor any of its
employees or affiliates is an officer, director, or agent of the Company, that
in rendering advice or recommendations to the Company it is not and will not be
responsible for any management decisions on behalf of the Company and that it is
not authorized or empowered to commit the Company to any recommendation or
course of action. The Company represents that Consultant does not have, through
stock ownership or otherwise, the power to control the Company nor to exercise
any dominating influence over its management.
2. Term
This Agreement shall continue until two (2) years from date of
execution. This Agreement shall terminate prior to that date at the election of
the Company by written notice to Consultant in the event:
a. Consultant breaches a material term of this Agreement;
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<PAGE>
b. Any representation given by Consultant to the Company is or becomes
incorrect or misleading in a material respect; or
c. Consultant becomes unable to pay its debts as and when it falls due,
a resolution is passed or any steps are taken to wind up Consultant, an
administrator, receiver, liquidator, provisional liquidator or other external
controller is appointed to the Company or in respect of any of its assets.
3. Compensation
As total and complete consideration for the Services to be provided by
Consultant to the Company, and provided that Consultant has not materially
breached this Agreement, the Consultant or its designee shall receive
US$5,000.00 per month payable on the seventh day of each month hereafter. In
addition, Consultant shall be reimbursed for all reasonable out-of-pocket
expenses incurred by Consultant with respect to the provided those expenses have
been approved by the Company before being incurred.
4. Services Not Exclusive
Consultant shall devote such time and effort as necessary to discharge
its duties hereunder. The Company acknowledges that Consultant is engaged in
other business activities and that it will continue such activities during the
term of this Agreement, subject to the other terms and conditions hereof.
Consultant shall not be restricted from engaging in other business activities
during the term of this Agreement.
5. Confidentiality
Consultant acknowledges that it will have access to confidential
information regarding the Company and its businesses. Consultant agrees that it
will not, during or subsequent to the term of this Agreement, use, divulge,
furnish, or make accessible to any person (other than with the written
permission of the Company) any knowledge or information or plans of the Company
with respect to the Company or its businesses, including, but not limited to,
the products, financial information, ideas, and other trade secrets of the
Company, whether in the concept or development stage or being marketed by the
Company on the effective date of this Agreement or during the term hereof, and
any other information identified by the Company as confidential except as
expressly authorised by the Company.
6. Assignment
This Agreement may not be assigned by either party hereto without the
written consent of the other but shall be binding upon the successors of the
parties.
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<PAGE>
7. Notices - All notices required or permitted to be given under with
Agreement shall be in writing and shall be deemed to have been duly given: (i)
two (2) hours after delivered personally to the party to be notified; or (ii)
five (5) business days after deposited in the U.S. mail, postage paid via
registered or certified mail, return receipt requested. Notices to the Company
shall be addressed to its president at its principal executive office and to the
Consultant at the address set forth beneath the signature line, or to such other
addresses as either party may designate upon at least ten days' notice to the
other party.
8. Entire Agreement - This Agreement contains the entire understanding
and agreement between the parties. There are no other agreements, conditions or
representations, oral or written, express or implied, with regard thereto. This
Agreement may be amended only in writing signed by both parties.
9. Non-waiver - A delay or failure by either party to exercise a right
under this Agreement, or a partial or single exercise of that right, shall not
constitute a waiver of that or any other right.
10. Headings - Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
11. Counterparts - This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same agreement.
12. Binding Effect - The provisions of this Agreement shall be binding
upon the parties, their successors and assigns.
13. Severability - If any provision of this Agreement or application
thereof to any person or circumstance shall be deemed or held to be invalid,
illegal, or unenforceable to any extent, the remainder of this Agreement shall
not be affected and the application of such affected provision shall be enforced
to the greatest extent possible under law.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement to be effective as of the day and year first above written.
SILER VENTURE, INC. TRADE WIND COMMUNICATIONS
LIMITED
By: /s/ Matt Ott By:_____________________________
Matt Ott _____________________________
President/Director
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LIST OF SUBSIDIARIES
Trade Wind Group Pty Ltd
Trade Wind Technologies Pty Ltd
Trade Wind Marketing Pty Ltd
Trade Centre Systems Holdings Pte Ltd
Trade Centre Systems Pte Ltd
Multitone Communication Systems Pty Ltd
Pacrim Communication Services Pty Ltd
Capricorn Pty Ltd
FlexiFax Global Services (UK) Limited
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10SB FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,357,714
<SECURITIES> 0
<RECEIVABLES> 2,076,824
<ALLOWANCES> (23,022)
<INVENTORY> 758,984
<CURRENT-ASSETS> 4,170,500
<PP&E> 2,634,763
<DEPRECIATION> 1,682,624
<TOTAL-ASSETS> 5,138,557
<CURRENT-LIABILITIES> (3,832,673)
<BONDS> 0
10,200
0
<COMMON> 0
<OTHER-SE> 1,173,157
<TOTAL-LIABILITY-AND-EQUITY> 5,138,557
<SALES> 6,472,282
<TOTAL-REVENUES> 6,472,282
<CGS> 3,061,214
<TOTAL-COSTS> 4,284,308
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,084
<INCOME-PRETAX> (897,324)
<INCOME-TAX> 0
<INCOME-CONTINUING> (897,324)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (897,324)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10SB FOR THE NINE MONTH PERIOD ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 589,877
<SECURITIES> 0
<RECEIVABLES> 2,145,624
<ALLOWANCES> (21,875)
<INVENTORY> 807,431
<CURRENT-ASSETS> 3,521,057
<PP&E> 2,349,869
<DEPRECIATION> 1,289,926
<TOTAL-ASSETS> 4,603,626
<CURRENT-LIABILITIES> (3,890,561)
<BONDS> 0
560,515
0
<COMMON> 0
<OTHER-SE> 97,513
<TOTAL-LIABILITY-AND-EQUITY> 4,603,626
<SALES> 11,103,370
<TOTAL-REVENUES> 11,103,370
<CGS> 5,999,363
<TOTAL-COSTS> 5,784,882
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,219
<INCOME-PRETAX> (703,094)
<INCOME-TAX> 0
<INCOME-CONTINUING> (703,094)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (703,094)
<EPS-BASIC> (1.03)
<EPS-DILUTED> (1.03)
</TABLE>
