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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
AMENDMENT NO. 1 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
THE BIGHUB.COM, INC.
(Name of small business issuer in its charter)
FLORIDA 65-0580634
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2939 Moss Rock, Suite 100
San Antonio, Texas 78230
210-979-9228
(Address and telephone number of principal executive offices)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
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DESCRIPTION OF BUSINESS
General
The BigHub.com, Inc. (the "Company" or "The BigHub.com") was organized
as a Florida corporation in February 1995, under its original name, Coordinated
Healthcare, Inc. In October 1995, pursuant to the terms of an Agreement and Plan
of Merger, Optima Medical Group of Hialeah, Inc. and Optima Medical Group of No.
Miami, Inc. were merged into the Company. Following the merger to August 1998,
the Company was a physician management company that operated primary care
medical clinics in South Florida. During this time the Company affiliated with
physicians in order to provide a full-range of high-quality, cost effective
physician services. In July 1998, the last of the Company's medical clinics was
sold in consideration for the purchaser's assumption of substantially all of the
Company's liabilities. The other medical clinic had been sold in November 1997.
The Company's prior management decided to dispose of its last medical clinic and
terminate its physician management operations because (i) competition in South
Florida was too well established, (ii) the Company was experiencing continued
operating losses and (iii) the chances of the Company becoming profitable was
not likely. Additionally, management determined that there were e-commerce
opportunities on the Internet with low costs to entry.
On July 29, 1998, the Company amended its Articles of Incorporation to
change its name to iSleuth.com, Inc. Following its name change, on August 7,
1998, the Company acquired one hundred percent (100%) of the issued and
outstanding common stock of Maverick Communications Corp., a Florida corporation
(the "Subsidiary" or "Maverick"), from I-Commerce Group, Inc. (formerly known as
SJI Group, Inc.) in exchange for one million five hundred thousand (1,500,000)
shares of the Company's common stock and one million (1,000,000) shares of the
Company's preferred stock. Maverick's primary asset at the time of the Company's
acquisition of Maverick was an option to purchase the "Internet Sleuth" meta-
search engine and related technology owned by Happy Landings, Inc. Following the
acquisition of Maverick, Maverick transferred the option to the Company, and
pursuant to the terms of an Agreement and Plan of Reorganization, the Company
exercised the option and acquired the Internet Sleuth and related technology
from Happy Landings, Inc. in exchange for two hundred thousand (200,000) shares
of the Company's common stock, One Hundred Twenty Thousand Dollars ($120,000) in
cash and the assumption of certain liabilities not to exceed Forty Thousand
Dollars ($40,000). Following the assignment of the option to the Company,
Maverick has been an inactive subsidiary. The meta-search engine was not in use
on the Internet prior to its acquisition by the Company.
On April 29, 1999, the Company changed its name to The BigHub.com, Inc.
and began to build a new management team. As discussed more fully below, the
Company is now in the process of upgrading its search engine intellectual
property and related Internet site to become a compelling destination Portal
alternative on the Internet. The meta-search engine technology as originally
purchased from Happy Landings enabled consumers to search multiple sites
concurrently, but returned the results in a serial fashion. For instance, Yahoo,
InfoSeek, AltaVista, Excite, WebCrawler, Hotbot and Lycos could all be searched
to locate "books." The results for Yahoo would be returned, followed by
AltaVista and the remaining search engines.
With respect to the Company's current upgrading efforts, the most
significant enhancement to the search engine "MegaSearch" is the ability to
return summarized results. The Company is enhancing the search engine to
summarize the top results from each search engine and return a single set of
results. Additionally, any results duplicated on multiple search engines would
be consolidated into a single response. This enhancement makes it simpler for
the consumer to locate information quickly and effectively.
Another enhancement is to implement the capability to store a consumers
profile for their favorite search engines. Consumers will then be able to search
their preferred search engines without having to make the selection each time.
Additionally, a further enhancement will be the ability to search the
fastest three search engines for a response. The Company has often found the
performance of some of the top search engines to be sluggish depending on the
time of day and load. The Company's search engine will continually track
performance and availability of the search engines in order to provide optimal
overall performance to our consumers.
The Company intends to host a array of affiliated shopping alternatives
covering many categories of general and special merchandise as well as consumer
credit and consumer insurance. The goal of the Company is to use Internet
marketing and its proprietary search engine to engage Internet users and
demonstrate to them the advantages of using the The BigHub.com, Inc. either as
their search engine of choice or their "home page" of choice.
The Meta-Search Engine
There are generally two types of Internet search engines. The standard
search engine and the meta-search engine. The standard search engine features a
large proprietary database which contains a large index of key words and the
corresponding Web site locations where those keywords can be found throughout
the millions of Web sites accessible via the Internet. An Internet user can
access a standard search engine software Web site via the Internet and can issue
a keyword search to the search engine's software. The search engine software
then searches its database for the keyword and returns to the Internet user a
list of Web site locations where the keyword can be found. These search engines
are a great tool to easily locate and research information from among the
millions of Web sites currently linked to the Internet. The standard search
engine features a proprietary database or index of keywords and corresponding
Internet Web site locations. These databases are constantly enhanced and
enlarged by so-called web-crawler software. This is software which continuously
accesses and reviews Web sites for the location of keywords. These additional
keywords and locations are then added to the database, thus increasing the
search capabilities of that particular standard search engine.
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A meta-search engine is different from a standard search engine because
it does not contain its own database of keywords and corresponding locations.
Rather, the meta-search engine taps into the power of several standard search
engines. A meta-search engine is a software program which accepts keyword search
inquiries from Internet users via the Internet and re-issues those search
inquiries, again via the Internet, to several of the popular standard Internet
search engines. The search responses received from the standard search engines
are compiled by the meta-search engine software and reported back to the
original Internet user-inquirer. The Company believes that the ability to
quickly and easily search several standard search engines at once is a
compelling and attractive alternative to the Internet user.
There are several best in class standard search engines available on the
Internet today. Unfortunately, with the explosion of new sites on the web, it is
impossible for each of them to crawl and index all the pages and information
that is currently available. Using the Company's MegaSearch engine the consumer
is able to take the best from all search engines and review them in both a
serial or summarized fashion.
Additionally, major standard search engines do experience both
performance and availability problems. A recent example is with AltaVista when
they announced their free Internet Service Provider ("ISP") services. The
AltaVista search engine was down for several hours. During this time the
Company's MegaSearch engine was still running strong. It just indicated that
AltaVista was temporarily down.
Performance issues are much more common with standard search engines on
a daily basis. In the high-speed world of the Internet, consumers want
information immediately. If they're unable to obtain it, they simply move on to
the next site. The MegaSearch engine acts as a buffer to provide the best
information to the consumer on a continual basis even when source search engines
are experiencing performance problems or are unavailable.
By aggregating the search results from all the top search engines to
provide a comprehensive set of results, the Company's MegaSearch engine will
find more search responses than the standard search engine. As indicated above,
it is difficult, if not impossible, for the top search engines to keep their
entire database updated on a daily basis. Using MegaSearch, a consumer has
access to the most up-to-date information from all the top search engines with
one single search. Although a consumer could run the search on each individual
search engine separately, this would take much more time and the results would
not be summarized nor would duplicates be eliminated.
In addition to the MegaSearch capabilities, the Company's search engine
is the only meta-search engine available today with over 2,600 categorized
specialty search engines. A consumer can navigate through 19 categories of
specialty searches ranging from Arts and Humanities, Business and Computers to
Society and Culture, Sports and Travel. A keyword search capability is also
available in order to locate a specific specialty search.
The Company's MegaSearch, combined with the categorized specialty
searches, is a unique one-two combination of searches that the Company believes
is not offered anywhere else on the Internet, which is the Company's key
differentiator and should make it attractive to consumers.
Business Expansion; Capital Growth
The Company is aggressively pursuing the spiral branding advantage of
the "Big" company affiliates, upgrading its search engine, and improving the
overall community value of its Web site. The Company will capitalize on the
"spiral branding" technique, as the meta-search engine, the Company's "Big"
affiliates, such as The BigStore.com and Biomerica, Inc. (d/b/a on the Internet
as The BigRX.com), will drive additional customer traffic to the Company's web
site. Among the "Big" Web sites, the Company will develop a search syndication
network whereby a network of Web sites will have integrated The BigHub search
engine service into their sites as well as links on other sites that will direct
consumer traffic to the Company's site. Ultimately, the Company desires to
create a single closed and gated community that meets virtually all of the
merchandise, service, and content needs of its customers. The term "single gated
and closed community" as used by the Company means that a customer can give
their name, address and credit card information just once and be able to
purchase products from any of the "Big" affiliates. This structure will be
considerably easier to use and the customer should feel safer at the same time
because they will only be giving their personal information one time.
The Company anticipates generating revenue from several sources,
including, community features and services and affiliated retail and consumer
companies operating under the group brand of the "Big". Current affiliated
companies include The BigStore.com, Inc. and Biomerica, Inc. (d/b/a The
BigRx.com), and the Company is presently negotiating an affiliation with The
BigBallot, Inc. Each entity's affiliation with the Company is pursuant to a
strategic marketing agreement, or similar contractual arrangement, with a term
ranging from three (3) to five (5) years, and customary renewal provisions.
Initially, each "Big" affiliate will pay a negotiated annual fee to the Company,
in the form of either cash or a grant of derivative securities, to be an
affiliated company branded under the "Big" label. Each "Big" affiliate will be
promoted throughout The BigHub.com Web site. The Company believes that the key
benefits to belonging to the "Big" network will be the ability to leverage
branding, marketing and user/customer information. In addition, the Company is
developing new technology which will enable it to provide customers with a
universal shopping cart which will allow customers to shop across all affiliate
Web sites in one purchase transaction. Further, affiliates will be able to
leverage certain customer information that is gathered from all affiliate Web
sites which will allow affiliates to sell precision-targeted advertising. All
"Big" affiliates will be identified on the Company's web site through the use of
banners and links.
Prior to April 30, 1999, the Company had spent approximately $250,000
for the development of the meta-search engine. The Company anticipates that it
will incur significant expenditures (approximately $6,000,000) to enhance its
meta-search engine technology and develop additional technologies.
The Company is recently concluded a private placement of its common
stock in an offering exempt from the registration requirements of the Securities
Act of 1933, as amended (the "Act"), under Section 4(2) of the Act and Rule 506
of Regulation D. The Company raised $1,500,000 in connection with this offering
from the sale of common stock to three (3) accredited investors at a price of
$5.28 per share, which represents the closing price of the Company's common
stock as reported on the OTC Bulletin Board on June 3, 1999, the date such
purchasers subscribed to purchase the shares of common stock.
As of August 31, 1999, the Company had 10 full-time employees,
consisting of the President/Chief Executive Officer, the Chief Operating Office,
the Chief Financial Officer, the Chief Technical Officer, and 6 other employees
who are sales, marketing, technology, and administrative personnel. All
employees are located in the United States.
Lack of Profitability, Potential Losses
From its inception in February 1995, through July 31, 1999, the Company
has experienced aggregate losses of $8,588,122. Further, a key element of the
Company's strategy consists of an aggressive marketing plan for its proprietary
meta-search engine and destination Portal on the Internet. This strategy may
result in continued net losses for the Company
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during this transition and expansion phase due to costs associated with
technology development and the anticipated high marketing costs for the
promotion of the Company's proprietary search engine and destination Portal in
its market area. Results of operations in the future will be influenced by
numerous factors including, among others, expansion, the Company's ability to
drive traffic to its Web site, to attract "Big" affiliates, provide superior
customer service and retain qualified personnel. The Company may incur problems,
delays, expenses and difficulties during this stage, many of which may be beyond
the Company's control. These include, but are not limited to, unanticipated
regulatory compliance, marketing problems and intense competition that may
exceed current estimates. There is no assurance that the Company will ever
operate profitably.
Management of Growth
In order to maximize potential growth in the Company's market
opportunities, the Company believes that it must expand rapidly and
significantly upon its entrance into the market place. This impetus for
expansion will place a significant strain on the Company's management,
operational and financial resources. In order to manage growth, the Company must
implement and continually improve its operational and financial systems, expand
operations, attract and retain superior management and train, manage and expand
its employee base. The Company cannot guarantee that it will effectively manage
the rapid expansion of its operations, that its systems, procedures or controls
will adequately support is operations or that the Company's management will
successfully implement its business plan. If the Company cannot effectively
manage its growth, its business, financial condition and results of operations
could suffer a material adverse effect.
The Company expects that it will require additional equity and/or credit
financing prior to becoming cash self-sufficient. The Company cannot assure you
that it will successfully negotiate or obtain additional financing, or that it
will obtain financing on terms favorable or acceptable to it. The Company does
not have any commitments for additional financing. The Company's ability to
obtain additional capital depends on market conditions, the global economy and
other factors outside its control. If the Company does not obtain adequate
financing or such financing is not available on acceptable terms, the Company's
ability to finance its expansion, develop or enhance products or services or
respond to competitive pressures would be significantly limited. The Company's
failure to secure necessary financing could have a material adverse effect on
its business, prospects, financial condition and results of operations.
Competition
The online commerce market for search engines, portals and Internet
Service Providers ("ISP's") is rapidly evolving and intensely competitive. The
Company's current or potential competitors include:
. AOL, Yahoo, Excite, MSN, AltaVista and others.
. Meta-search engines such as Byte Search, Cyber 411, Debriefing, DogPile and
Meta Crawler
. Online portals that have specialized consumer retail and consumer service
offerings, C/net's Computer Shopper, Imall, NetMarket and others.
The Company believes that the principal competitive factors in the online
commerce market are:
. Accessibility;
. Brand recognition;
. Brand selection;
. Personalized services;
. Consumer service;
. Convenience;
. Quality of editorial and other site content; and
. Reliability
Many of the Company's competitors have operating histories, large
customer bases, greater brand recognition
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and significantly greater financial, marketing and other resources. Certain of
the Company's competitors have the financial resources to devote greater
resources to marketing and promotional campaigns and to devote substantially
more resources to Web site and systems development. Increased competition may
result in reduced operating margins and a diminished brand franchise. The
Company cannot assure potential investors that the Company will compete
successfully against future competitors.
Intellectual Property and Proprietary Rights
The Company's success depends substantially upon its proprietary
technology, including its meta-search engine, related site software and database
technology. The Company will rely on a combination of trademark, copyright and
trade secret laws, as well as confidentiality agreements and technical measures
to protect its proprietary rights. Much of the Company's proprietary information
may not be patentable, and the Company does not currently possess any patents.
The Company currently has registered copyrights covering the Internet Sleuth
meta-search engine. The Company has applied to register its "BigHub" trademark
and logo and will apply to register certain other trademarks in the United
States and/or foreign jurisdictions.
Management's Discussion and Analysis of The BigHub.com, Inc's Financial
Condition and Results of Operations
Introduction
The following discussion is based upon, and should be read in
conjunction with, the audited financial statements of the Company as at and for
the years ended October 31, 1998 and 1997, together with the notes thereto, and
the unaudited financial statements of the Company as at and for the three and
nine months ended July 31, 1999 and 1998.
During the periods presented, the Company disposed of Coordinated
Healthcare, Inc. and underwent a restructuring of its core business to Internet
e-commerce. Accordingly, the Company believes that the following presentation
of comparative results of operations, while required, is not meaningful. In
addition, the Company believes that historical results are not indicative of
future results.
Results of Operations
Fiscal Year Ended October 31, 1998 Compared With the Fiscal Year Ended October
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31, 1997.
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For the year ended October 31, 1998, the Company had revenues of $6,292
and reported a loss from continuing operations of ($292,129), or ($0.35) per
share. This compares to a loss of ($161,388), or ($0.53) per share for 1997, on
revenues of $517,028. The decrease in revenue and the increase in loss from
continuing operations in Fiscal 1998 occurred because the Company disposed of
Coordinated Healthcare, Inc., its only revenue-producing business and underwent
a restructuring of its core business to Internet e-commerce. Likewise, the
restructuring activity resulted in a decrease in cost of sales from $338,714 in
the year ended October 31, 1997 to $178 for the year ended October 31, 1998.
Operating expenses increased in the year ended October 31, 1998 to
$647,068 from $320,702 in the year ended October 31, 1997, an increase of
$326,366.
Included in the net loss of ($438,787), or ($0.22) per share, for the
year ended October 31, 1998 was a net loss from discontinued operations of
($146,658) comprised of a gains from the disposal of the Coordinated Healthcare
business of $120,411 and a deferred tax benefit of $90,000, less $256,666 in
stock issued for services and $100,403 in cash loss from operations. For the
year ended October 31, 1997, the net loss was ($161,388), or ($0.53) per share.
Quarter and Nine Months Ended July 31, 1999 Compared with the Quarter and Nine
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Months Ended July 31, 1998.
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For the quarter and nine months ended July 31, 1999, the Company had
revenues of $13,483 and $15,261, respectively and reported respective losses
from operations of ($6,067,805) and ($6,916,781). This compares to losses from
operations of ($86,083) on revenues of $6,164 for each of the comparable prior
year periods. Net losses for the quarter and nine months ended July 31, 1999
were ($6,512,805) and ($7,361,781), respectively, or ($0.49) and ($0.97)
expressed in terms of loss per share. This compares to net losses of ($0.21)
and ($0.41) in the respective comparable prior year periods.
Operating expenses increased in the nine months ended July 31, 1999 to
$6,918,523 (current quarter: $6,074,118) from $90,962 in the quarter and nine
months ended July 31, 1998.
Exclusive of the asset impairment loss of $5,120,874 and income tax
expense of $445,000, the increases in operating expenses resulted from the
increase in activities of the Company with respect to upgrading its search
engine intellectual property and related Internet site as well as a significant
increase in business development activities, in contrast to the aforementioned
restructuring activities in the comparable periods in the prior. Of the overall
increases in operating expenses in the comparable periods ended July 31, 1999
and 1998, the most significant increases were in Depreciation expense, which
increased to $679,211 in the current year to date period (current quarter:
$77,419) from $755 reported in each of the comparable prior year periods, and in
General and administrative expense, which increased to $388,839 in the current
year to date period (current quarter: $73,185) from $14,558 reported in each of
the comparable prior year periods.
Liquidity and Capital Resources
During the fiscal year ended October 31, 1998, the Company's net cash
position decreased by $808. Although the Company generated $678,627 (1997:
$113,425) from financing activities, the Company's operating and investing
activities utilized net cash of $679,435 (1997: $111,973). These activities
contributed to a net working capital deficit as of October 31, 1998 of
($561,761), which is up $157,014 from ($404,747) at October 31, 1997.
During the nine months ended July 31, 1999, the Company's cash increased
by $170,661. Although the Company's operating and investing activities used net
cash of $1,394,212 the Company's financing activities generated net cash
proceeds of $1,564,873. Despite a net increase in cash, the Company reported a
net working capital (deficit) position as of July 31, 1999 of ($130,938), which
is down $430,823 from the ($561,761) reported at October 31, 1998.
During Fiscal 1998, the Company, in connection with the acquisition of
all the common stock of Maverick Communications Corporation ("MCC"), acquired an
Internet search engine and web site for a total purchase price of $5,971,584.
The purchase price was comprised of 1,500,000 shares of the Company's voting
common stock, valued at $4,031,250 and 1,000,000 shares of the Company's
preferred stock, valued at $50,000, and the assumption of an obligation to pay
an additional $1,872,600 to be comprised of $114,000 in cash and 200,000 shares
of the Company's common stock valued at $1,758,600. Additionally, an MCC
liability of $103,037 was assumed by the seller. The acquisition was accounted
for as a purchase and, accordingly, the operating results pertaining to MCC
subsequent to the date of the acquisition were included in the Company's
operating results for the year ended October 31, 1998. The total purchase price
was allocated $5,973,966 to the fair market value of the assets acquired,
including $5,971,584 for the Internet search engine and web site and $20,116 to
net deficiency in working capital.
In accordance with Statement of Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Company recorded an impairment loss on its Internet search
engine and web site as a result of a recently issued valuation of the asset as
at May 31, 1999, performed by an independent appraisal firm. During the quarter
ended July 31, 1999, management of the Company determined that $5,120,874 of the
Internet search engine and web site had been impaired. Accordingly, the Company
charged this amount to operations in the current quarter. No additional
impairment has been determined by management as of July 31, 1999.
During the nine months ended July 31, 1999, the Company sold 284,090
shares of common stock in private placement transactions for net proceeds to the
Company of $1.5 million.
The Company has incurred cumulative losses from inception through July
31, 1999 of $8,588,122 and has yet to achieve revenues sufficient to offset
direct expenses and corporate overhead. As of July 31, 1999, management does not
believe that material revenues will likely be realized by the Company for the
remainder of 1999; however, the Company expects that it will need to expend
significant funds upgrading its search engine intellectual property and related
Internet site to become a compelling destination Portal alternative on the
Internet and to develop additional sources of revenue. The Company believes that
the continuing activities associated with pursuing new sources of revenue will
necessitate a continuing material increase in selling, general and
administrative and other costs such as research and development and travel and
entertainment. In addition, the Company presently lacks sufficient cash to
fulfill its operating objectives. Accordingly, the Company has significant
additional capital requirements. The Company is actively seeking additional
capital sufficient to fund its continuing operations. No assurances can be given
that any such capital will be available, or, if available, on terms acceptable
to the Company.
Risk Factors That May Affect Future Results.
LIMITED OPERATING HISTORY; NO ASSURANCE OF PROFITABILITY OR POSITIVE
CASH FLOWS. The Company has historically generated only limited revenues.
Accordingly, the Company has a limited operating history upon which to evaluate
its current business. In addition, the Company's business model is evolving and
relies substantially upon the sale of advertising on the Web and the collection
of fees under affiliate agreements. The Company and its present affiliates are
Web companies and part of a developing industry. Many companies in the new and
rapidly evolving Web industry have demonstrated that they require considerable
cash expenditures before achieving cash flows, and display a trend of operating
losses for one to three years from inception. Although management believes that
it is possible for the Company to be profitable by the third of fourth years, no
assurances can be made. The Company's business must be considered in light of
the risks, expenses and problems frequently encountered by companies in their
early stages of development, particularly companies in new and rapidly evolving
markets such as Web advertising and e-commerce.
Specifically, such risks include, without limitation:
. the inability of the Company to maintain and increase levels of traffic
on its web sites;
. the failure of the market to adopt the Web as an advertising and
commercial medium;
. reductions in market prices for Web advertising as a result of
competition or otherwise;
. the inability of the Company to derive sufficient revenues from the co-
branded services of its web sites and the additional costs the Company
expects to incur in order to perform its obligations under certain
affiliate agreements;
. the inability of the Company to effectively integrate the technology and
operations of any acquired businesses or technologies with its
operations, or increased operating expenses as a result of any
acquisitions;
. the inability of the Company to expand its international operations,
particularly in light of the Company's limited operating experience in
the international market;
. the failure by the Company to continue to develop and extend the
BigHub.com and related brands;
. the inability of the Company to develop or acquire content for its
services;
. the inability of the Company's affiliates to generate commerce-related
revenues;
. the failure of the Company to anticipate and adapt to a developing
market;
. the introduction and development of equal or superior services or
products by competitors, particularly in light of the fact that
Microsoft and Netscape, operators of two of the most heavily-trafficked
Web sites, offer competitive services;
. government regulation;
. the inability of the Company to identify, attract, retain and motivate
qualified personnel;
. and general economic conditions.
The Company may not be able to succeed in addressing such risks.
ACQUISITIONS MAY AFFECT THE COMPANY'S BUSINESS. The Company has in the
past acquired, and may in the future acquire, businesses, technologies,
services, product lines, content databases, or access to content databases.
Acquisitions involve a number of special risks, including, among other things:
. the difficulty of assimilating the technologies, operations and
personnel of acquired companies with those of the Company;
. the potential disruption of the Company's business;
. the diversion of resources, the incurrence of acquisition-related
expenses, the write-off or amortization of intangible assets, the
assumption of unknown liabilities;
. and the inability to maintain uniform standards, controls, procedures
and policies and the impairment of relationships with employees and
strategic partners as a result of such acquisitions or the integration
of new personnel.
Any failure to successfully address these acquisition-related risks may
have a material adverse affect on the Company's business.
THE COMPANY DEPENDS ON SPONSORSHIP AGREEMENTS FOR REVENUES. The Company
anticipates deriving a portion of its revenues from third parties to provide
sponsored services and placements on the Company's Web sites. These sponsorships
typically last for a longer period of time than traditional banner advertisement
purchases. If these sponsorship arrangements do not meet the advertisers'
expectations as to new customers or increased sales or brand awareness, the
sponsors may not renew their arrangements with the Company. If the Company does
not renew its existing sponsorships or obtain new sponsors, for any reason, its
business could be adversely affected. The Company may also grant exclusivity
provisions to certain of its sponsors. These provisions may prevent the Company
from accepting additional sponsors or advertisers with respect to all or a
portion of its web sites.
RISKS ASSOCIATED WITH BANNER ADVERTISING. The Company expects to derive
a portion of its revenues from the sale of banner advertisements on its web
sites. A majority of the Company's customers purchasing banner advertisements
purchase these advertisements on a short-term basis, and many of these customers
may terminate their advertising commitments at any time without penalty.
Consequently, there can be no assurance that these customers will continue or
increase their level of advertising on the Company's web sites or that these
customers will not move their advertising to competing Web sites or to other
traditional media. Therefore, there can be no assurance that the Company will be
successful in maintaining or increasing the amount of banner advertising on the
Company's web sites, and the failure to do so would have a material adverse
affect on the Company's business.
THE COMPANY'S BUSINESS DEPENDS ON THE CONTINUED GROWTH IN INTERNET USE.
The Company operates in a new and rapidly evolving market, and its business may
be adversely affected if usage of the Internet or other online services does not
continue to grow. This growth could be hindered by a number of factors
including: the adequacy of the Internet's infrastructure to meet increased usage
demands; privacy and security concerns; and availability of cost-effective
service. Any of these issues could cause the Internet's performance or level of
usage to decline.
RISKS ASSOCIATED WITH DEVELOPING WEB ADVERTISING MARKETS. The Web as an
advertising medium has not been available for a sufficient period of time to
gauge its effectiveness as compared with traditional advertising media.
Therefore the Web is an unproven medium for advertising-supported services.
Accordingly, the Company's future operating results will depend substantially
upon the increased use of the Web for information, publication, distribution and
commerce and the emergence of the Web as an effective advertising medium.
The Company's ability to generate significant advertising revenues will
also depend on, among other things, the development of a large base of users of
the Company's services possessing demographic characteristics attractive to
advertisers, the ability of the Company to accurately measure its user base and
the ability of the Company to develop or acquire effective advertising delivery
and measurement systems. Many of the Company's advertisers have only limited
experience with the Web as an advertising medium, have not yet devoted a
significant portion of their advertising expenditures to Web-based advertising,
and may not find such advertising to be effective for promoting their products
and services relative to traditional print and broadcast media. The adoption of
Web advertising, particularly by those entities that have historically relied
upon traditional media for advertising, requires the acceptance of a new way of
conducting business and exchanging information. Entities that already have
invested substantial resources in other methods of conducting business may be
reluctant to adopt a new strategy that may limit or compete with their existing
efforts. The market for Web advertising may not continue to emerge or become
sustainable. If the market fails to develop or develops more slowly than
expected, the Company's business may be materially and adversely affected. No
standards have been widely accepted for the measurement of the effectiveness of
Web-based advertising, and there can be no assurance that such standards will
develop sufficiently to support the Web as an effective advertising medium.
Advertisers may not continue to accept the Company's or other third-party
measurements of impressions, and such measurements may contain errors. In such
event, the Company's advertising revenues may be materially adversely affected,
which may have a material adverse affect on the Company's business.
In addition, there is intense competition in the sale of advertising on
the Web, resulting in a wide range of rates quoted and a variety of pricing
models. This makes it difficult to project future levels of advertising revenues
and rates. It is also difficult to predict which pricing models will be adopted
by the industry or advertisers. For example, advertising rates based on the
number of "click-throughs", or user requests for additional information made by
clicking on the advertisement from the Company's network to the advertiser's Web
pages, instead of rates based solely on the number of impressions displayed on
users' computer screens, would materially adversely affect the Company's
revenues. As a result of these risks, the Company may not succeed in generating
significant future advertising revenues from Web-based advertising. The failure
to do so may have a material adverse affect on the Company's business.
Advertisers may also determine that banner advertising, is not an
effective or attractive advertising medium. the Company may not be able to
effectively transition to any other forms of Web advertising should they develop
and achieve market acceptance. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to a Web user's computer are
available. Widespread adoption of such software by users may have a material
adverse affect upon the commercial viability of Web advertising.
RISK OF CAPACITY CONSTRAINTS; SYSTEM FAILURES. The Company is dependent
on its ability to generate a high volume of traffic to the Company's web sites.
Accordingly, the performance of the Company's web sites is critical to the
Company's reputation, its ability to attract advertisers and to achieve market
acceptance of the Company's web sites. Any system failure that causes
interruptions in the availability of or that increases response time of the
Company's services could reduce user satisfaction and traffic to the Company's
web sites and, if sustained or repeated, would reduce the attractiveness of the
Company's web sites to advertisers and consumers. An increase in the volume of
searches conducted through the Company's web sites could strain the capacity of
the software or hardware deployed by the Company, which could lead to slower
response time or system failures. In addition, as the amount of Web pages and
traffic on the Company's services increases, there can be no assurance that the
Company's web sites will be able to scale proportionately. The Company is also
dependent upon timely feeds and downloads of information from content providers
and is dependent upon providers of Web browsers and on Internet and online
service providers and other Web site operators, which have experienced
significant outages in the past, for access to its network. In the past, Web
consumers have experienced outages, delays and other difficulties due to system
failures unrelated to the Company's systems and services. Additional
difficulties may also materially and adversely affect consumer and advertiser
satisfaction. To the extent that the capacity constraints described above are
not effectively addressed by the Company, such constraints may have a material
adverse affect on the Company's business.
Substantially all of the Company's communications hardware and certain
of its computer hardware operations are located at leased facilities in Newport
Beach, California, an area susceptible to earthquakes. The Company has
experienced system failures or outages from time to time in the past, which have
disrupted the operation of the Company's web sites. A system failure at this
location may adversely affect the performance of the Company's web sites. These
systems are also vulnerable to damage from fire, floods, earthquakes, power
loss, telecommunications failures, break-ins and similar events. In the event
that the Company seeks to replicate its systems at other locations, it would
face a number of technical challenges, particularly with respect to database
replication and the need to constantly update distributed databases, the Company
may not be able to successfully address these challenges. Although the Company
carries property insurance, it does not carry business interruption insurance.
In addition, the low coverage limits on the property insurance are likely to be
inadequate to compensate the Company for all losses that may occur. The
Company's servers are also vulnerable to computer viruses, physical or
electronic break-ins and similar disruptive problems. Computer viruses, break-
ins or other problems caused by third parties could lead to interruptions,
delays or cessations in service to users of the Company's web sites. The
occurrence of any of these risks may have a material adverse affect on the
Company's business.
Year 2000 Compliance.
- ---------------------
To the fullest extent permitted by law, the following discussion is a
---------------------------------------------------------------------
"Year 2000 Readiness Disclosure" within the meaning of the Year 2000 Information
- --------------------------------------------------------------------------------
and Readiness Disclosure Act 105 p.l. 271. Compliance with the Year 2000
- -------------------------------------------------------------------------
Information and Readiness Disclosure Act does not preclude claims for violations
- --------------------------------------------------------------------------------
of federal securities laws.
- ---------------------------
The Year 2000 problem is the result of computer programs being written
to recognize two digits rather than four to define the applicable year. This
causes computer programs to interpret a date using "00" as the year 1900 rather
than the year 2000, which could result in computer failures and miscalculations.
The effects of this issue will vary from system to system and may adversely
affect an entity's operations and its ability to prepare financial statements.
All systems and applications at TheBigHub.com are Year 2000 compliant.
This includes both servers and desktop systems and applications. The overall
infrastructure of TheBigHub.com was built starting in May 1999. We undertook
specific steps to ensure that all systems and applications acquired are Year
2000 compliant. The MetaSearch technology acquired from Isleuth was completely
reengineered and is also Year 2000 compliant. However, there can be no assurance
that the Year 2000 problem will not affect the Company by causing disruptions in
the business operations of persons with whom the Company does business, such as
customers or suppliers. Year 2000 problems could have a material adverse effect
on the Company.
If the necessary providers of power, communications and other such
providers of important services are not fully prepared for the year 2000, the
Year 2000 could have a material impact on the Company. We have no way of knowing
how the Year 2000 will affect Internet functions.
Effects of Inflation
- --------------------
The Company does not expect inflation to materially affect its results
of operations. However, it is expected that operating costs and the cost of
capital equipment to be acquired in the future may be subject to general
economic and inflationary pressures.
5
<PAGE>
DESCRIPTION OF PROPERTY
The Company currently has two (2) business offices. The Company's
principal executive office resides in San Antonio, Texas, where the Company is
being provided office space free of charge by a corporation controlled by the
Company's Chairman of the Board. The Company also has a regional office in
Newport Beach, California, where it is subleasing space from The BigStore.com,
Inc., an affiliated entity, which has a common director and certain common
officers and shareholders. The Lease is month to month at a rental of $6,568 per
month. The premises are in good condition and adequately insured. The Company
plans to open a regional office in the New York City area, which is the center
of Internet and advertising activity. Sales and marketing functions will be the
primary purpose of the regional offices.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the date hereof with
respect to the beneficial ownership of the Company's voting securities by (i)
each person known by the Company to own beneficial 5% or more of its voting
securities (ii) each director and officer of the Company and (iii) all directors
and officers as a group.
<TABLE>
<CAPTION>
Type of Security Shares Beneficially Percentage Beneficially
Owned (See Note) Owned Owned (1)
---------------- ------------------- -----------------------
<S> <C> <C> <C>
Name and Address of Beneficial Owner (2)
----------------------------------------
Stilden Company O, D............................. Common Stock 6,741,250 (2) (3) 41.86%
2939 Mossrock, Suite 100
San Antonio, TX 78230
Yucatan Holding Company.......................... Common Stock 1,937,500 (4) 12.03%
3003 Killer Bond Road
Knoxville, TN 37922
I-Commerce Group, Inc............................ Common Stock 1,400,000 (5) 8.69%
6312 Baum Drive
Knoxville, TN 37919
Patrick J. DeMicco O, D.......................... Common Stock 1,325,000 (6) 8.23%
4167 Warner Avenue, #306
Huntington Harbor, CA 92649
Frampton Investments, LLC........................ Common Stock 1,100,000 (7) 6.83%
P.O. Box 8
Huntington Beach, CA 92648
Hare Investments, LLC............................ Common Stock 1,100,000 (8) 6.83%
PMB 327
3504 Earle E. Morris Jr. Hwy
Greenville, SC 29611
Techlabs, Inc.................................... Common Stock 1,000,000 (9) 6.21%
3415 Galt Ocean Drive
Fort Lauderdale, FL 33308
Douglas Martinez O............................... Common Stock, 400,000 (10) 2.48%
3388 Via Lido
Newport Beach, CA 92663
Chet Howard O, D. ............................... Common Stock 200,000 (11) 1.24%
1005 Skyline Drive
Laguna Beach, CA 92651
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Mark Doumani O. .................. Common Stock 75,000 (12) *
10050 Highcliff Drive
Santa Ana, CA 92705
Roger Riddell D. ................. Common Stock 50,000 *
9940 Santa Monica Blvd. # 710
Beverly Hills, CA 90210
Rod Perth D. ..................... Common Stock 50,000 *
5358 Melrose Ave
Suite 300W
Hollywood, CA 90038
David Burrows O................... Common Stock 0 *
113 Aspen Lane
Costa Mesa, CA 92627-1360
All Directors and Officers as
a Group (8 Persons).............. Common Stock 8,791,250 54.6%
</TABLE>
___________________
* Indicates less than one percent (1%).
(1) Beneficial ownership is determined in accordance with the applicable rules
under the 1934 Act, including any shares of Common Stock as to which a
person has sole or shared voting or investment power. Additionally, in
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options held by that person that are currently exercisable, or become
exercisable within 60 days from the date hereof, are deemed outstanding.
However, such shares are not deemed outstanding for purposes of computing
the percentage ownership of any other person. Percentage ownership is based
on 16,105,975 shares of Common Stock outstanding.
(2) Stilden Company is controlled by Frank W. Denny, the Company's Chairman of
the Board.
(3) Includes 4,677,500 shares of Common Stock over which Stilden Company has
voting power pursuant to several irrevocable proxies granted by certain
members of management and other shareholders. The proxies generally are
effective for periods of one (1) to three (3) years from the date of grant.
(4) Jayne Dorrough is deemed to be the beneficial owner of the shares owned by
Yucatan Holding Company by virtue of her status as its sole director,
officer and shareholder. Yucatan Holding Company has granted an irrevocable
proxy to vote the 1,937,500 shares to Stilden Company, which proxy will
expire no later than April 30, 2002.
(5) J.D. Jenkins is deemed to be the beneficial owner of the shares owned by I-
Commerce Group, Inc., by virtue of his status as its Chairman and Chief
Executive Officer.
(6) Mr. DeMicco has granted an irrevocable proxy to vote the 1,325,000 shares
to Stilden Company, which proxy will expire no later than June 8, 2000.
(7) Carol Monnot is deemed to be the beneficial owner of the shares owned
by Frampton Investments, LLC, by virtue of her status as its sole manager.
(8) Barbara Hauck is deemed to be the beneficial owner of the shares owned
by Hare Investments, LLC, by virtue of here status as its sole manager.
(9) John Bennett and Thomas Taule are deemed to be the beneficial owners of the
shares owned by Techlabs, Inc., by virtue of their status as its President
and Chairman of the Board, respectively.
(10) Mr. Martinez has granted an irrevocable proxy to vote the 400,000 shares to
Stilden Company, which proxy will expire no later than June 8, 2001.
(11) Mr. Howard has granted an irrevocable proxy to vote the 200,000 shares to
Stilden Company, which proxy will expire no later than June 8, 2001.
(12) Mr. Doumani has granted an irrevocable proxy to vote the 75,000 shares to
Stilden Company, which proxy will expire no later than June 8, 2001.
7
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Management
The Company is assembling a team of managers and entrepreneurs with
experience in the areas of e-commerce, and e-tailing and a shared commitment to
its future growth and success.
The following table sets forth the names, ages, and positions of the
executive management team of The BigHub.com.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Name Position Age
<S> <C> <C>
Frank W. Denny Chairman of the Board/Director 64
Patrick J. DeMicco President/Chief Executive Officer/Director 34
Douglas Martinez Executive Vice President/Chief Operating Officer 36
Chet Howard Senior V. P., Finance/Chief Financial Officer/Secretary 56
Mark Doumani Vice President, Sales & Marketing 33
David Burrows Chief Technology Officer 41
Rod Perth Director 56
Roger Riddell Director 53
</TABLE>
Executive Management
Frank W. Denny, Chairman of the Board/Director. Mr. Denny joined The BigHub.com
in April 1999 as its Chairman of the Board and a member of the Board of
Directors. Mr. Denny had served as the President, Chief Executive Officer and
Chairman of the Board of Shopping.com, a leading U.S. Internet retail site that
was purchased by Compaq Corporation in 1999. He is also the President and CEO of
Cibolo Group, a marketing and consulting group headquartered in San Antonio,
Texas, and has served in those offices since 1991. Cibolo Group is engaged in
the sale, marketing and manufacture of general hard line retail merchandise and
provides consulting services, specializing in retail concept development and
implementation as well as mergers and acquisitions. Prior to this time, Mr.
Denny was a Founder, Chairman of the Board, President and CEO of Builders
Square, one of the largest retail home improvement warehouse operations in the
United States. Prior to Builders Square, Mr. Denny was President of W.R. Grace
Home Centers, a chain of home centers operating over 300 stores nationally. Mr.
Denny was an officer of the Home Center Institute and a charter member of the
National Home Center Congress and Exposition. He was also a founder of the Do It
Yourself Research Institute based in Indianapolis, Indiana.
Patrick J. DeMicco, President/Chief Executive Officer/Director. Mr. DeMicco
joined The BigHub.com in April 1999 as its Secretary. In July 1999 Mr. DeMicco
was elected the Company's President and Chief Executive Officer and resigned as
its Secretary. From January 1998 to March 1999, Mr. DeMicco served as Executive
Vice President of Merchandising for Shopping.com. Mr. DeMicco brings to The
BigHub.com over 16 years of retail merchandising experience. From 1987 to
January 1998, Mr. DeMicco held positions of Senior Merchandiser and Merchandise
Manager at The Home Depot where he was responsible for a multi-billion dollar
worth of inventory and where he gained extensive knowledge of vendor programs,
vendor line assortment mix, retail price points, and return on investment goals.
Mr. DeMicco's merchandising experience covered the West and East Coasts
respectively and he reported directly to the Executive Senior Vice
President.
8
<PAGE>
Douglas Martinez, Executive Vice President/Chief Operating Officer. Mr.
Martinez joined The BigHub.com in June 1999. Mr. Martinez brings to The
BigHub.com over 15 years of senior management experience in a broad range of
businesses and industries. From March 1997 to April 1999, he served as Chief
Operating Officer and a director for Integrity Online Holdings, considered the
largest filtered Internet Service Provider in the United States. Among his
various duties, Mr. Martinez was also responsible for negotiating many of the
company's technology and operating agreements, including various significant
financial transactions. Mr. Martinez also served as Senior Vice President for
RSI Home Products from 1986 to 1995, a leading manufacturer of home improvement
products, where he helped to establish RSI as an industry leader in several
product categories. Prior to RSI, Mr. Martinez, held several senior executive
positions with Price Pfister, a Black and Decker Company, including the post of
Vice President, Marketing and Sales.
Chet Howard, Senior Vice President, Finance/Chief Financial
Officer/Secretary/Director. Mr. Howard joined The BigHub.com in June 1999 as its
Chief Financial Officer. In July 1999, Mr. Howard was also elected Secretary and
appointed to the Board of Directors. Mr. Howard brings to The BigHub.com a wide
range of experience in accounting, corporate finance and management. Over the
years he has held a variety of senior financial and executive positions with
companies engaged in retail, Internet services and product distribution and
merchandising. From May 1997 to May 1999, Mr. Howard was the Chief Financial
Officer of U.S.A. Service Systems, Inc., a merchandising company. From April
1995 to May 1997, Mr. Howard owned and operated his own consulting company which
provided financial advise to small emerging companies. In addition, from June
1993 to March 1995, Mr. Howard was the Chief Financial Officer of Chilean-based
Inter-Americas Communications Corp., considered one of the first competitive
Internet access providers. In 1986, Mr. Howard co-foundered Sports Authority,
one of the nation's leading sporting goods retail chains.
Mark Doumani, Vice President of Sales & Marketing. Mr. Doumani joined The
BigHub.com in June 1999. Mr. Doumani has over 10 years experience in the start-
up and management of small to large-sized business ventures. Prior to joining
the Company, from July 1998 to June 1999, Mr. Doumani was an executive producer
for Tyrone Productions, LLC, which produced the feature film "Tyrone". From
April 1996 to July 1998, Mr. Doumani served as President and Executive Vice
President of Travelmax International, Inc., as part of the strategic
reorganization team. Travelmax specializes in the sale of travel and Internet-
related products with sales of $40 million to $50 million. From 1995 to 1998,
Mr. Doumani was the President of Mondo Diamond Entertainment, a small
entertainment company which owned cartoon animated properties. In 1992, Mr.
Doumani co-founded True Light Films, an animation production company once
selected by Animation Magazine's Who's Who in animation production. Mr. Doumani
served from 1992 to 1995 as the President and a director of True Light Films.
In 1995, Mr. Doumani developed an Internet education and Web site know as NetMax
2000. This product continues to have success in the marketplace, with first-
year sales exceeding $1 million. Mr. Doumani was also a co-founder of and, from
1989 to 1994, the Vice-President of Operations at Doumani Development
Corporation, a family-owned real estate development company specializing in
hotels, shopping centers and custom estates. He was responsible for property
acquisition, drafting agreements, and sales and marketing. He completed his
undergraduate studies at the University of California, Los Angeles, and received
his Juris Doctor from Western State University. Mr. Doumani is the managing
partner of Doumani & Grandon, a California-based law firm and a member of the
California and American Bar Association.
David Burrows, Chief Technology Officer. Mr. Burrows joined The BigHub.com in
April 1999. From 1995 to the date he joined The BigHub.com, Mr. Burrows served
as Director of IS Infrastructure Services for The Orange County Register. He
managed a staff of 60, responsible for the overall systems management of 70
computing platforms with 10 disparate operating systems, as well as desktop and
network engineering, computer operations and support desk. From 1989 to 1995,
Mr. Burrows served as Director, IS Infrastructure Services for FHP, Inc,
managing a staff responsible for the overall support and systems management of
10 computing platforms. Mr. Burrows holds extensive experience with over 24
years in multi-vendor, multi-platform environments.
Rod Perth, Director. Mr. Perth joined The BigHub.com in May 1999. Mr. Perth also
serves as President of Entertainment of Jim Henson Television Group Worldwide, a
division of Jim Henson T.V., a position he has held since May,1999. From October
1994 to July 1998, Mr. Perth was President, Entertainment, USA Networks. He
successfully led all programming efforts for both the USA Network, and the Sci-
Fi Channel. His efforts to move USA from a cable network largely dependent on
re-run programming, to a network that developed many original dramatic series as
well as movies and mini-series, allowed USA to regain its position as the number
one basic cable network. He joined USA after a productive 28 year career at CBS
Television, where he rose through the ranks by starting in the mail-room, and
eventually becoming Senior Vice-President, Late Night and including Marvel
Entertainment, Non-Network Programs. Mr.Perth is on several corporate and civic
boards, and he was named "Man of the Year" by
9
<PAGE>
The Alliance for Children, in 1996.
Roger Riddell, Director. Mr. Riddell joined The BigHub.com in May 1999. For the
past 25 years, Mr. Riddell has been the President of RNF Holding Co., and has an
extensive background in marketing, advertising, and broadcasting. RNF's client
list includes many top U.S. Companies such as Burger King, Arby's Restaurants,
Virgin Megastores, Corbett Canyon Wine, Hollywood Park and Los Alamitos
Racetracks, Lamps Plus, California Jeep Dealers Association and Mandalay Bay
Hotel. Mr. Riddell formed International Film Marketing in 1981, a Beverly Hills-
based film production and distribution company. Since its inception,
International Film Marketing has distributed over 40 films both in the U.S. and
internationally. His films include Academy Award Nominee "On Any Sunday" and
"The Endless Summer."
Dependence on Key Management
The Company's performance depends substantially on the continued services
and performance of its senior management and other key personnel. The Company's
performance also depends on its ability to retain and motivate its other
qualified officers and key employees.
REMUNERATION OF DIRECTORS AND OFFICERS
Executive Compensation
The following table sets forth information concerning the compensation of
the named executive officers for each of the Company's last three (3) fiscal
years ended October 31.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
Awards Payouts
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Fiscal Salary Bonus Compensation Award(s) Options/ Payouts Compensation
Position Year ($)/1/ ($) ($) ($) SARs (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
John Bennett, 1998 $0 $0 $0 -0- -0- -0- -0-
Director, CEO
and President (1)
Thomas Taule, 1998 * $0 -0- -0- -0- -0- -0-
Director, CFO 1997 $37,000 $0 -0- -0- -0- -0- -0-
and Secretary 1996 $58,000 $0 -0- -0- -0- -0- -0-
(1), (2)
Alfred Taule, 1998 * $0 $0 -0- -0- -0- -0-
Director and 1997 * $0 $0 -0- -0- -0- -0-
Secretary (3) 1996 * $0 $0 -0- -0- -0- -0-
</TABLE>
___________________________
(1) Messrs. Bennett and T. Taule willing tendered their resignations in May,
1999, in connection with the restructuring of the Company's management at
the direction of the Company's controlling shareholders. The restructuring
of the Company's management was an integral step in the Company's launching
of its new internet strategy.
(2) Mr. T. Taule served as the Company's President and Chief Executive Officer
during fiscal years 1997 and 1996.
(3) Mr. A. Taule resigned as a Director and Officer of the Company in August
1998.
* Denotes that annual compensation for such fiscal year was less than
$100,000.
See "Employment Agreements" below for a description of the compensation and
other benefits to be paid during fiscal year ended October 31, 1999 to the
Company's current executive officers.
Directors of the Company who are also employees do not receive cash
compensation for their services as directors or members of committees of the
Board of Directors, but are reimbursed for their reasonable expenses incurred in
connections with attending meetings of the Board of Directors or management
committees. Non-employee directors are expected to be paid a fee of $5,000 per
Board meeting attended and may be granted options to purchase shares of the
Company's Common Stock, and reimbursement for expenses.
10
<PAGE>
Stock Option Grants
During the fiscal year ended October 31, 1998, the Company did not grant
any stock options to directors, executive officers or employees. As of October
31, 1998, the only outstanding stock option was to the Company's then current
Chief Executive Officer. This outstanding stock option was not exercised and was
cancelled in April 1999 pursuant to the mutual agreement of the Company and the
Chief Executive Officer. In June 1999, the Company's Board of Directors and
shareholders adopted and approved the Company's 1999 Stock Incentive Plan (the
"Plan"). The Company has initially reserved 1,500,000 shares of common stock
under the Plan for grants to employees, directors and consultants. The shares
reserved under the Plan shall automatically be increased on January 1 of each
year, commencing on January 1, 2000, by the lesser of 300,000 shares or 1.5% of
the Company's outstanding common stock on such date. As of July 31, 1999, the
Company has granted options to purchase 535,500 shares of the Company's common
stock under the Plan. Of the options granted to date, the Company has granted to
each of Mark Doumani, Vice President, Sales & Marketing, and David Burrows,
Chief Technical Officer, an incentive stock option to purchase 56,817 shares of
the Company's common stock at an exercise price of $5.28 per share, the fair
market value of the Company's common stock on the date of grant. On the same
date, the Company also granted to each of Messrs. Doumani and Burrows a non-
statutory stock option to purchase 93,183 and 43,183 shares, respectively, of
the Company's common stock at an exercise price of $4.00 per share. On the same
date, the Company granted to each of its two (2) non-employee directors, Messrs.
Perth and Riddell, a non-statutory stock option to purchase 75,000 shares of the
Company's common stock at an exercise price of $4.00 per share. Each of the
foregoing options vests over a period of three (3) years with one-third vesting
on the first anniversary of the date of grant and the remaining two-thirds
vesting pro rata each month over a period of twenty-four months. The options
have a term of ten (10) years and expire in June 2009.
Employment Agreements
Patrick J. DeMicco ("Mr. DeMicco") has a three (3) year employment
agreement ("Term") with the Company to perform the duties of President and Chief
Executive Officer at an annual salary of $275,000 ("Base Salary") per year. In
addition to the Base Salary, the Company will pay Mr. DeMicco a one-time sign-on
bonus of $150,000, payable immediately following the Company's having closed a
private offering of a minimum of $4,000,000. In addition to the Base Salary and
the sign-on bonus, Mr. DeMicco is eligible for an annual incentive bonus
("Incentive Bonus") in an amount not to exceed one hundred percent (100%) of the
Base Salary. Seventy-five percent (75%) of the Incentive Bonus shall be based
upon goals mutually agreed upon by the Board of Directors, or a Committee of the
Board and DeMicco, and the remaining twenty-five percent (25%) will be
determined in the sole discretion of the Board or Committee. The Company will
pay to DeMicco an automobile allowance of $1,500 per month and provide all other
benefits of employment provided to the other employees of the Company holding
comparable positions within the Company, including but not limited to, paid
vacation, paid health insurance for Mr. DeMicco and his spouse, paid life
insurance to a maximum of Base Salary, keyman life insurance in the amount of
$2,000,000, paid mobile telephone expense for business use, and participation in
retirement and investment programs as instituted by the Company. If DeMicco is
terminated without cause he will receive a lump sum severance payment equal to
(i) three (3) years base salary, plus a pro rata portion of any Incentive
compensation, if any, earned for the year in which termination occurs prorated
to the date of termination, and (ii) any unreimbursed expenses accruing to the
date of termination. The Company will also continue Mr. DeMicco's benefits
through the remainder of the Term. Upon the expiration of the three (3) year
term, Mr. DeMicco's employment with the Company may be extended for successive
three (3) year periods at his option.
The Company has also entered into employment agreements with Messrs.
Martinez, Doumani and Howard. Mr. Martinez's employment agreement provides for a
two (2) year term commencing June 1999, pursuant to which Mr. Martinez has
agreed to perform the duties of Executive Vice President and Chief Operating
Officer at an initial Base Salary of $240,000 per year. In addition to the Base
Salary, the Company will pay Mr. Martinez a one-time sign-on bonus of $100,000,
payable immediately following the Company's having closed a private offering of
a minimum of $4,000,000. In addition to the Base Salary and the sign-on bonus,
Mr. Martinez is eligible for an annual incentive bonus ("Incentive Bonus") in an
amount not to exceed one hundred percent (100%) of the Base Salary. The
Incentive Bonus is based upon goals mutually agreed upon by Mr. Martinez and the
Company's President/Chief Executive Officer, with Mr. Martinez's Incentive Bonus
for each of the first two (2) years a guaranteed minimum of 25% of Mr.
Martinez's Base
11
<PAGE>
Salary. The Company will also pay to Mr. Martinez an automobile allowance of
$1,000 per month and provide all other benefits of employment provided to the
other employees of the Company holding comparable positions within the Company,
including but not limited to, paid vacation, paid health insurance for Mr.
Martinez and his spouse, paid life insurance to a maximum of Base Salary, keyman
life insurance in the amount of $2,000,000, paid mobile telephone expense for
business use, and participation in retirement and investment programs as
instituted by the Company. If Mr. Martinez is terminated without cause he would
receive a severance payment equal to (i) two (2) years Base Salary, plus a pro
rata portion of any Incentive Compensation, earned for the year in which
termination occurs prorated to the date of termination, and (ii) any
unreimbursed expenses accruing to the date of termination. The Company will also
continue Mr. Martinez's benefits through the remainder of the Term. Upon the
expiration of the two (2) year term, Mr. Martinez's employment with the Company
may be extended for successive two (2) year periods at his option.
Mr. Doumani has a two (2) year employment agreement with the Company,
commencing June 1999, to perform the duties of Vice President of Sales and
Marketing at an initial Base Salary of $175,000 per year. In addition to the
Base Salary, Mr. Doumani is eligible for an annual incentive bonus ("Incentive
Bonus") in an amount not to exceed fifty percent (50%) of the Base Salary. The
Incentive Bonus is based upon goals mutually agreed upon by Mr. Doumani and the
Company's Chief Operating Officer. In addition to the Base Salary and Incentive
Bonus, the Company has granted to Mr. Doumani an incentive stock option to
purchase 56,817 shares of the Company's common stock at an exercise price of
$5.28 per share and a non-qualified stock option to purchase 93,183 shares of
the Company's common stock at an exercise price of $4.00 per share. Each option
shall vest over a period of three (3) years, with one-third of such option
vesting on the first anniversary of the date of grant and the other two-thirds
vesting as to one-twenty fourth (1/24th) of such option each month thereafter.
The options were granted under and are subject to the terms and conditions of
the Company's 1999 Stock Incentive Plan. Mr. Doumani is also entitled to all
other benefits of employment provided to the other employees of the Company
holding comparable positions within the Company, including but not limited to,
paid vacation, paid health insurance for Mr. Doumani, his spouse and dependents,
paid life insurance to a maximum of Base Salary, paid mobile telephone expense
for business use, and participation in retirement and investment programs as
instituted by the Company. If Mr. Doumani is terminated without cause he would
receive a severance payment equal to (i) the greater of (a) the remaining Base
Salary payable through the remaining Term, or (b) twenty-four (24) months Base
Salary, plus (ii) a pro rata portion of any Incentive Compensation earned for
the year in which termination occurs prorated to the date of termination plus
(iii) any unreimbursed expenses accruing to the date of termination. The Company
will also continue Mr. Doumani's benefits through the remainder of the Term.
Mr. Howard's employment agreement provides for a two (2) year term,
commencing in June, 1999, pursuant to which Mr. Howard has agreed to perform the
duties of Senior Vice President and Chief Financial Officer at an initial base
salary of $175,000 (the "Base Salary"). In addition to the Base Salary, Mr.
Howard is eligible for an annual incentive bonus ("Incentive Bonus") in an
amount not to exceed $25,000. The Incentive Bonus is based upon goals mutually
agreed upon by Mr. Howard and the Company's Board of Directors, or a committee
of the Board of Directors. Mr. Howard is also entitled to all other benefits of
employment provided to the other employees of the Company holding comparable
positions within the Company, including but not limited to, paid vacation, paid
health insurance for Mr. Howard, his spouse and dependents, paid life insurance
to a maximum of Base Salary, paid mobile telephone expense for business use, and
participation in retirement and investment programs as instituted by the
Company. If Mr. Howard is terminated without cause he would receive a severance
payment equal to (i) the greater of (a) the remaining Base Salary payable
through the remaining term or (b) eighteen (18) months Base Salary, plus (ii) a
pro rata portion of any Incentive Compensation earned for the year in which
termination occurs prorated to the date of termination plus (iii) any
unreimbursed expenses accruing to the date of termination. The Company will also
continue Mr. Howard's benefits through the remainder of the Term.
12
<PAGE>
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company has entered into a sublease agreement with The BigStore.com,
Inc., an affiliated entity, which has a common director and common officers and
shareholders. The Lease is month to month at a rental of $6,568 per month.
The sublease arrangement may be terminated by either party upon 30 days'
prior notice. The Company is required maintain insurance in accordance with the
terms of the underlying lease and name The BigStore.com as an additional insured
on such policies. Further, the Company is required to indemnify The
BigStore.com from all claims and damages arising out of the Company's use of the
subleased property.
The Company has also entered into an affiliate agreement with The BigStore,
pursuant to which the Company has agreed to provide strategic placement of
advertising and marketing for The BigStore on the Company's website.
DESCRIPTION OF SECURITIES
Common Stock
The Company's authorized capital consists of 25,000,000 shares of Common
Stock, par value $.001 per share. Holders of shares of Common Stock are entitled
to one vote per share at all meetings of stockholders. In the event of
liquidation, dissolution or winding up of the Company, holders of the Common
Stock will be entitled to receive on a pro rata basis 99% of assets of the
Company remaining after satisfaction of all liabilities and payment of any
preferred liquidation rights with liquidation preference. As of July 31, 1999,
there were 16,105,975 shares of Common Stock issued and outstanding.
Restricted Stock
Of the 16,105,975 shares of Common Stock outstanding, 13,284,590 shares are
deemed to be restricted securities under Rule 144 under the Securities Act. In
general, under Rule 144, a person (or persons whose shares are aggregated),
including an affiliate of the Company, who has beneficially owned restricted
shares for at least one year is entitled to sell within any three-month period,
a number of shares that does not exceed, in the case of the Company, one percent
of the then outstanding shares of Common Stock, which will equal approximately
161,060 shares as of the date hereof.
Sales under Rule 144 are also subject to requirements concerning
availability of public information, manner of sale and notice requirements. Of
the 13,284,590 restricted shares referred to above, approximately 3,813,000 are
currently tradable under Rule 144 (subject to the volume limitation and other
requirements) and approximately 1,000,000 shares and 8,471,590 shares will be
tradable under Rule 144 in May 2000 and June 2000, respectively. Under Rule 144,
the volume and other restrictions expire as to non-affiliate shareholders after
such shareholders have owned the shares for a minimum of two (2) years.
Preferred Stock
The Articles of Incorporation, as amended, authorize the issuance of the
following Preferred Stock:
10,000,000 shares of Preferred Stock $.001 par value per share
25,000,000 shares of Special Preferred Stock $.001 par value per share
The Board of Directors has designated 12,500,000 shares of the Special
Preferred Stock as Class A Special Preferred Stock. The shares of Special
Preferred Stock which are not Class A Special Preferred Stock may be issued,
with a majority of shareholder approval, with designations, powers, preferences
and relative rights determined by the Board of Directors. As of July 31, 1999,
there were no shares of Preferred Stock or Special Preferred Stock, including
Class A Special Preferred Stock, issued and outstanding.
Voting Rights
Preferred Stock - Each share of Preferred Stock is entitled to one vote per
share.
Special Preferred Stock - The voting rights of the Special Preferred Stock
is to be determined at the time of issuance.
13
<PAGE>
Class A Special Preferred Stock - Each share of Class A Special
Preferred Stock is entitled to two votes per share. The Class A Special
Preferred Stock votes as a single class with the Common Stock and Preferred
Stock.
Liquidation Rights
Preferred Stock - Upon a liquidation of the Company, holders of
Preferred Stock are entitled to receive 1% of the assets of the corporation
available to the shareholders upon liquidation with the holders of the Common
Stock receiving the other 99%.
Special Preferred Stock - Liquidation rights for holders of Special
Preferred Stock shall be determined upon issuance, and may include a priority
over liquidation payments to Common Stock and other series of Preferred Stock.
Class A Special Preferred Stock - Holders of Class A Special Preferred
Stock do not share in proceeds upon liquidation of the Company.
Redemption
Preferred Stock - Preferred Stock is redeemable at the Company for one
share of common stock.
Special Preferred Stock - Redemption rights for the Special Preferred
Stock shall be determined at time of issuance.
Class A Special Preferred Stock - The Class A Special Preferred Stock
is redeemable upon terms and conditions to be determined by the Board of
Directors.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
The Company's Common Stock is traded on the over-the-counter. The
following sets forth the range of high and low bid quotations for the periods
indicated as reported by Nasdaq Trading and Market Services. Such quotations
reflect prices between dealers without retail mark-up, markdown or commission
and may not represent actual transactions and is quoted on the OTC Bulletin
Board under the symbol BHUB. The stock is thinly traded and transactions in the
stock are sporadic and infrequent.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
------------------ -------- -------
<S> <C> <C>
July 31, 1999 $16.88 $4.81
April 30, 1999 $10.13 $5.25
January 31, 1999 $21.25 $0.88
October 31, 1998 $ 9.25 $0.05
July 31, 1998 $ 0.75 $0.03
April 30, 1998 $ 1.56 $0.19
January 31, 1998 $ 2.56 $0.50
</TABLE>
There was no trading activity report for the Company's Common Stock
prior to the fiscal quarter ended January 31, 1998.
As of July 31, 1999, there were approximately 55 holders of record of
the Company's Common Stock.
14
<PAGE>
The Company has never paid a cash dividend on its Common Stock nor
does the Company anticipate paying cash dividends on its Common Stock in the
near future. It is the present policy of the Company not to pay cash dividends
on the Common Stock but to retain earnings, if any, to fund growth and
expansion. Any payment of cash dividends on the Common Stock in the future will
be dependent upon the Company's financial condition, results of operations,
current and anticipated cash requirements, plan for expansion, as well as other
factors the Board of Directors deems relevant.
Item 2. Legal Proceedings.
As of the date hereof, the Company is not a party to any material
pending legal proceeding and is not aware of any threatened legal proceeding.
Item 3. Changes in and Disagreements with Accountants.
None.
Item 4. Recent Sales of Unregistered Securities.
The following provides information concerning all sales of securities
within the last three (3) years which were not registered under the Securities
and Exchange Act of 1933:
1. In October 1997 the Company issued 11,333 (adjusted for subsequent
reverse split) shares of Common Stock to the Company's then President and Chief
Executive Officer in exchange for services pursuant to an exemption from
registration under Section 4(2) of the Securities and Exchange Act of 1933 (the
"Securities Act").
2. From July 1998 to October 1998, the Company conducted a private
placement of its Common Stock pursuant to Rule 504 of Regulation D as
promulgated by the Securities and Exchange Commission under the Securities Act.
The Company issued to eight (8) investors a total of 876,000 shares of Common
Stock at $0.15 per share in exchange for cash consideration.
3. In April 1998, the Company issued 6,855 shares of Common Stock
(adjusted for the Company's 1 for 20 reverse stock split in August 1998) for
$103,200 cash in exercise of outstanding warrants from the Company's prior
offering under Rule 504 in April 1996. The shares were issued in a private
transaction pursuant an exemption from registration under Section 4(2) of the
Securities Act.
4. During the year ended October 31, 1998, the Company issued an
aggregate of 24,833 shares of Common Stock to two (2) consultants with a value
of $352,666 in exchange for project development services and administrative
services rendered. The shares were issued pursuant an exemption from
registration under Section 4(2) of the Securities Act. Of the foregoing, 12,833
shares were issued November 11, 1997, when the Company's stock was trading at
approximately $20 per share (giving effect to the 1 for 20 reverse split) and
12,000 shares were issued October 6, 1998, when the stock was trading at $8.00
per share.
5. In August 1998, in connection with the Company's acquisition of
Maverick Communications Corp., which held the option to acquire the meta-search
engine, the Company issued 1,500,000 shares of Common Stock valued at $4,031,250
and 1,000,000 shares of Preferred Stock valued at $50,000. The shares of Common
Stock and Preferred Stock were issued pursuant to an exemption from registration
under Section 4(2) of the Securities Act.
6. In September 1998, the Company issued 200,000 shares of the
Company's Common Stock valued at $1,758,600 in connection with the acquisition
of the Internet Sleuth meta-search engine. The shares were issued pursuant an
exemption from registration under Section 4(2) of the Securities Act.
7. In December 1998, concurrent with the creation of Class A Special
Preferred Stock, the Company issued 8,250,000 shares of the Class A Special
Preferred Stock in exchange for the conversion of 5,000,000 shares of Preferred
Stock and the creation of a $1,000,000 line of credit with the Company's then
principal shareholder.
15
<PAGE>
8. In December 1998, the Company completed a private placement of its
Common Stock pursuant to Rule 504 of Regulation D as promulgated by the
Securities and Exchange Commission under the Securities Act. The Company issued
a total of 1,600,000 shares of Common Stock at $0.50 per share to four (4)
investors in exchange for the cancellation of outstanding indebtedness to the
investors. The investors had purchased the obligations from the original lender.
9. In January 1999, the Company issued an aggregate of 124,000 shares
of Common Stock at a price of $0.15 per share to 9 individuals in exchange for
legal and professional services. The shares of Common Stock sold in this
transaction represent the balance of shares from the Company's July 1998 private
placement. The issuance was exempt from registration under Rule 504 and Rule
701.
10. In April 1999, the Company offered to redeem both its outstanding
shares of Preferred Stock and outstanding shares of Class A Special Preferred
Stock, with each share being redeemed for one share of Common Stock. All
1,000,000 outstanding shares of Preferred Stock and 2,062,500 outstanding shares
of Class A Special Preferred Stock were redeemed. In connection with the
redemption, the Company issued 3,062,500 shares of Common Stock. The shares of
Common Stock were issued pursuant to an exemption from registration under
Section 4(2) of the Securities Act.
11. In June 1999, in order to reduce the voting control attendant to
the Class A Special Preferred Stock, the Company negotiated the redemption of
the remaining 6,187,500 outstanding shares of Class A Special Preferred Stock.
In connection with the redemption, each outstanding share of Class A Special
Preferred Stock was redeemed for 1.3232 shares of Common Stock, with a total of
8,187,500 shares of Common Stock being issued in connection with the redemption.
The shares of Common Stock were issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act.
12. In June 1999, the Company issued 284,090 shares of its Common
Stock at $5.28 per share in exchange for cash to three (3) accredited investors
pursuant to Rule 506 of Regulation D, as promulgated by the Securities and
Exchange Commission under the Securities Act.
Item 5. Indemnification of Directors and Officers.
The Company's Articles of Incorporation, as amended, provide that the
Company must, to the fullest extent permitted by the General Corporation Law of
the State of Florida, indemnify all persons whom it has the power to indemnify
from and against all expenses, liabilities or other matters. The Company's By-
Laws further provide that the Company shall indemnify its directors, officers
employees and agents to the fullest extent permitted by Florida law. The
indemnification provided in the By-laws is expressly deemed to not be exclusive
of any other rights to which a person seeking indemnification may otherwise be
entitled. The Company's indemnification obligation applies where the party to be
indemnified acted in good faith and in a manner such party reasonably believed
to be in, or not opposed to, the best interests of the Company. The foregoing
indemnification covers violations of federal securities laws.
In so far as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
16
<PAGE>
PART F/S
FINANCIAL STATEMENTS
See "Index to Consolidated Financial Statements" for a listing of the
consolidated financial statements filed with this Form 10-SB.
<PAGE>
PART III
Item 2. DESCRIPTION OF EXHIBITS
See "Exhibit Index"
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
THE BIGHUB.COM, INC.
Report of Independent Auditors..................................... F-1
Consolidated Balance Sheets as of October 31, 1998 and 1997........ F-2
Consolidated Statements of Operations For the Years Ended
October 31, 1998 and 1997.......................................... F-3
Consolidated Statements of Changes in Stockholders' Equity For
the Years Ended October 31, 1998 and 1997.......................... F-4
Consolidated Statements of Cash Flows For the Years Ended
October 31, 1998 and 1997.......................................... F-5
Notes to Consolidated Financial Statements......................... F-6 to F-15
Consolidated Balance Sheets as of July 3l, 1999
and October 31, 1998............................................... F-16
Consolidated Statements of Operations for the Three Months
and Nine Months Ended July 31, 1999 and July 31, 1998.............. F-17
Unaudited Consolidated Statements of Cash Flows for the
Nine Months Ended July 31, 1999 and 1998........................... F-18
Notes to Unaudited Consolidated Financial Statements............... F-19 to F-19
<PAGE>
[LETTERHEAD OF REEL & SWAFFORD, PLLC APPEARS HERE]
Report of Independent Auditors
To the Board of Directors and Stockholders
TheBigHub.com, Inc.
We have audited the accompanying consolidated balance sheets of
TheBigHub.com, Inc. (formerly iSleuth.com, Inc.) and Subsidiary as of
October 31, 1998 and 1997, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the years
then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of TheBigHub.com, Inc. and Subsidiary as of October 31, 1998 and
1997 and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ REEL & SWAFFORD, PLLC
Certified Public Accountants
Knoxville, Tennessee
July 29, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
TheBigHub.com, Inc. and Subsidiary
Consolidated Balance Sheets
October 31, 1998 and 1997
==========================================================================================================================
<S> <C> <C>
ASSETS 1998 1997
---- ----
Current Assets
Cash $ 644 $ 1,452
Accounts receivable -0- 53,400
------------------ ------------------
Total Current Assets 644 54,852
================== ==================
Property and Equipment
Internet search engine and web site (Note 6) 5,971,584 -0-
Machinery and equipment 12,364 144,688
Less: accumulated depreciation (66,618) (16,303)
------------------ ------------------
5,917,330 128,385
Deferred Tax Assets 445,000 -0-
Other Assets 1,800 90,403
------------------ ------------------
Total Assets $ 6,364,774 $ 273,640
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 14,094 $ 54,377
Accrued expenses 37,284 16,397
Bank note payable -0- 129,000
Due to related parties (Note 9) 511,027 259,825
------------------ ------------------
Total Liabilities 562,405 459,599
Stockholders' Equity
Preferred stock, $.001 par value, 10,000,000 shares
authorized; 6,000,000 shares issued and outstanding 6,000 -0-
Common stock, $.001 par value, 25,000,000 shares
authorized; 2,718,885 and 302,500 shares issued and outstanding 2,719 302
Additional paid-in capital 6,535,609 101,910
Retained earnings (Accumulated deficit) (726,959) (288,172)
------------------ ------------------
5,817,369 (185,960)
Less: Stockholder note receivable (15,000) -0-
------------------ ------------------
Total Stockholders' Equity 5,802,369 (185,960)
------------------ ------------------
$ 6,364,774 $ 273,639
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
TheBigHub.com, Inc. and Subsidiary
Consolidated Statements of Operations
Years Ended October 31, 1998 and 1997
===========================================================================================================================
<S> <C> <C>
1998 1997
---- ----
Sales $ 6,292 $ 517,028
Cost of Sales 178 338,714
------------------ ------------------
Gross Profit 6,114 178,314
Operating Expenses
Selling, general and administrative 647,068 320,702
------------------ ------------------
Operating Income (Loss) (640,954) (142,388)
Other Income (Expense):
Interest expense (6,175) (19,000)
------------------ ------------------
(6,175) (19,000)
------------------ ------------------
Income (Loss) Before Provision for Income Taxes (647,129) (161,388)
Provision for Income Taxes on Continuing Operations
Current Expense -0- -0-
Deferred Benefit 355,000 -0-
------------------ ------------------
355,000 -0-
------------------ ------------------
Income (Loss) from Continuing Operations (292,129) (161,388)
Discontinued Operations
Loss from operations of discontinued segment, net of
income tax -0- -0-
Loss from discontinued operations, net of income
tax benefit of $90,000 (146,658) -0-
------------------ ------------------
Net Income (Loss) $ (438,787) $ (161,388)
================== ==================
Basic and Diluted Earnings (Loss) per Share $ (0.22) $ (0.53)
================== ==================
Basic and Diluted Earnings (Loss) per Share from
Continuing Operations $ (0.15) $ (0.53)
================== ==================
Shares used in calculation of Earnings per Share 1,971,703 302,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
TheBigHub.com, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
Years Ended October 31, 1998 and 1997
==============================================================================================================================
Additional
Preferred Stock Common Stock Paid-In
---------------------------- -----------------------------
Shares Amount Shares Amount Capital
-------------- ----------- -------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance, November 1, 1996 $ 302,500 $ 302 $ 101,910
Net income (loss)
-------------- ----------- -------------- ------------ ----------------
Balance, October 31, 1997 302,500 302 101,910
Directors shares cancelled in
exchange for indemnification (191,333) (191) 191
Shares issued for cash in exercise
of warrants 6,885 7 103,193
Shares issued in connection with
private placement 976,000 976 145,424
Common shares exchanged for
preferred stock 5,000,000 5,000 (100,000) (100) (4,900)
Shares issued in connection with
acquisition of subsidiary and
purchase of search engine 1,000,000 1,000 1,700,000 1,700 5,837,150
Shares issued for services 24,833 25 352,641
Net income (loss)
-------------- ----------- -------------- ------------ ----------------
Balance, October 31, 1998 6,000,000 $ 6,000 2,718,885 $ 2,719 $ 6,535,609
============== =========== ============== ============ ================
<CAPTION>
=======================================================
Accumulated Stockholder
Deficit Note Total
---------------- ---------------- ----------------
Balance, November 1, 1996 $ (126,784) $ $ (24,572)
Net income (loss) (161,388) (161,388)
---------------- ---------------- ----------------
Balance, October 31, 1997 (288,172) (185,960)
Directors shares cancelled in
exchange for indemnification -0-
Shares issued for cash in exercise
of warrants 103,200
Shares issued in connection with
private placement (15,000) 131,400
Common shares exchanged for
preferred stock -0-
Shares issued in connection with
acquisition of subsidiary and
purchase of search engine 5,839,850
Shares issued for services 352,666
Net income (loss) (438,787) (438,787)
---------------- ---------------- ----------------
Balance, October 31, 1998 $ (726,959) $ (15,000)$ 5,802,369
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
TheBigHub.com, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the years ended October 31, 1998 and 1997
===================================================================================================================
1998 1997
---- ----
<S> <C> <C>
Operating Activities
Net income (loss) $ (438,787) $ (161,388)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 66,636 7,197
Deferred tax benefit (445,000) -0-
Gain on disposal of business segment (120,411) -0-
Issuance of stock for services - continuing operations 96,000 -0-
Issuance of stock for services - discontinued operations 256,666 -0-
Changes in operating assets and liabilities net of effects From
purchase of subsidiary:
Decrease (increase) in accounts receivable 5,741 (3,536)
Increase in accounts payable and accrued expenses 24,120 45,754
----------------- -----------------
Net Cash Used in Operating Activities (555,035) (111,973)
----------------- -----------------
Investing Activities
Purchase of fixed assets (10,000) -0-
Cash paid in fulfillment of option (114,000) -0-
Deposits (400) -0-
----------------- -----------------
Net Cash Provided by (Used in) Investing Activities (124,400) -0-
----------------- -----------------
Financing Activities
Proceeds from exercise of warrants and private placement 234,600 -0-
Borrowings from stockholder 447,127 104,425
Net draw on line of credit -0- 9,000
Repayments to stockholder (3,100) -0-
----------------- -----------------
Net Cash Provided by Financing Activities 678,627 113,425
----------------- -----------------
Increase (Decrease) in Cash and Cash Equivalents (808) 1,452
Cash and Cash Equivalents, beginning of period 1,452 -0-
----------------- -----------------
Cash and Cash Equivalents, end of period $ 644 $ 1,452
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All material
intercompany transactions have been eliminated.
Organization and Purpose TheBigHub.com, Inc. (The Company, a Florida
corporation) was incorporated in February 1995, under its original name,
Coordinated Healthcare, Inc. ("CHI"). In August 1998, the Company acquired a
100% interest in Maverick Communications Corporation ("MCC"), headquartered in
Knoxville, Tennessee, which owned an option to acquire a popular Internet search
engine. The operations of the Company prior to the August 1998 acquisition
reflect principally the day-to-day operations of medical clinics in the South
Florida area through July 1998, when the last of the two clinics was sold.
Pursuant to the transaction with MCC, CHI changed its name to iSleuth.com, Inc.
and adopted a plan of restructure effecting its transition from a provider of
managed health care to a provider of Internet services. In May 1999, the Company
changed its name to TheBigHub.com, Inc. and elected to change the state of its
incorporation from Florida to Delaware. See Notes 6 and 10.
Property and Equipment Property and equipment are stated at cost. Major
renewals and improvements are capitalized, while maintenance and repairs are
expensed when incurred. The cost and accumulated depreciation for property and
equipment sold, retired, or otherwise disposed of are relieved from the
accounts, and resulting gains or losses are recognized. Depreciation is computed
using the straight-line method over the estimated useful lives of depreciable
assets, generally five to seven years for machinery and equipment and 7 years
for the Internet search engine. Depreciation expense for the years ended October
31, 1998 and 1997 was $66,636 and $7,197, respectively.
The Costs of Start-Up Activities The Company has elected early implementation
of Statement of Position 98-5, Reporting on the Costs of Start-Up Activities
("SOP 98-5"), issued by the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants. Under provisions of SOP 98-
5, the Company treats costs associated with start-up activities as current year
expenses. During the year ended October 1998, the majority of the Company's
operating activities were associated with start-up activities.
Revenue Recognition Sales of goods and services and the related cost of sales
are recognized when orders are received and goods are shipped or services are
delivered. Sales for Internet advertising are recorded when earned. Accounts
receivable are periodically reviewed by management to assess collectibility.
Advertising Costs Advertising costs are expensed as incurred. Advertising costs
for the years ended October 31, 1998 and 1997 were nominal.
F-6
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Cash and Cash Equivalents The Company considers cash on hand, deposits in
banks, certificates of deposit and investments with original maturities of three
months or less to be cash and cash equivalents.
Note 1 - Summary of Significant Accounting Policies - Continued
Income Taxes Deferred income taxes are provided for temporary differences in
reporting income for financial statement and tax purposes arising primarily from
net operating loss carryforwards.
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Fair Value of Financial Instruments Cash and cash equivalents, accounts and
other receivable, accounts payable and accrued liabilities are stated at cost,
which approximates fair value because of the short term maturity of those items.
The estimated fair value of the Company's short-term borrowings approximate the
carrying value because of its recent origination and the interest rates and
terms approximate market conditions.
Earnings per Share In October 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Under SFAS 128, basic
earnings per share is based on the weighted average number of common shares
outstanding during the year, whereas diluted earnings per share also gives
effect to all dilutive potential common shares that were outstanding during the
period. Dilutive potential common shares include convertible debentures,
preferred stock and stock option plan shares.
Comprehensive Income (Loss) On November 1, 1998, the Company adopted SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income (loss) and its components in
a full set of financial statements. SFAS 130 requires only additional
disclosures in consolidated financial statements, it does not affect the
Company's financial position or results of operations. The Company does not have
any components affecting comprehensive income (loss).
Reclassifications Certain reclassifications have been made to previously issued
financial statements in order for them to conform to classifications used in
these comparative financial statements.
Note 2 Statement of Cash Flows Supplemental Disclosure
The Company was not required to pay any income taxes during the years ended
October 31, 1998 and 1997. Interest paid for the years ended October 31, 1998
and 1997 was approximately $19,300 and $19,000, respectively.
F-7
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Note 2 Statement of Cash Flows Supplemental Disclosure - Continued
Non cash transactions during the year ended October 31, 1998 consisted of the
following:
Shares issued for services - discontinued operations $ 256,666
Shares issued for services - continuing operations $ 96,000
Shares issued in exchange for note $ 15,000
Shares issued in connection with acquisition of
subsidiary and purchase of search engine $ 5,839,850
Shares issued in connection with acquisition of
search engine $ 1,758,600
There were no noncash transactions affecting cash flows during the year ended
October 31, 1997.
Note 3 - Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
Note 4 - Commitments and Contingencies
The Company has been and continues to be in the process of evaluating its
information technology infrastructure for the Year 2000 compliance. The Company
has modified certain systems to be Year 2000 compliant. The Company does not
expect that the cost to modify its information technology infrastructure to Year
2000 compliance will be material to its financial condition or results of
operations. The Company does not anticipate any material disruption in its
operations as a result of any failure by the Company to be compliant. The
Company does not currently have information concerning Year 2000 compliance
status of internet service providers or of its suppliers and customers. In the
event that any of the Company's major suppliers or customers does not
successfully and timely achieve Year 2000 compliance, the Company's business or
operations could be adversely affected.
Note 5 - Bank Note Payable
Bank note payable consisted of an obligation bearing interest at prime plus 1/4%
to a financial institution in the amount of $129,000 that matured June, 1998.
Note 6 - Acquisitions
F-8
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
As discussed in Note 1 to the financial statements, on August 10, 1998,
(Effective August 1, 1998 for accounting purposes) the Company acquired all the
common stock of MCC. The total purchase price was $5,850,813 and was comprised
of 1,500,000 shares of the Company's voting common stock, valued at $4,031,250,
and 1,000,000 shares of the Company's preferred stock, valued at $50,000, and
the assumption of an obligation to pay an additional $1,872,600 to be comprised
of
F-9
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Note 6 - Acquisitions - Continued
$114,000 in cash and 200,000 shares of the Company's common shares valued at
$1,758,600. Additionally, an MCC liability of $103,037 was assumed by the
seller. The acquisition was accounted for as a purchase and accordingly, the
operating results pertaining to MCC subsequent to the date of the acquisition
have been included in the Company's consolidated operating results. The total
purchase price was allocated $5,973,966 to the fair market value of the assets
acquired, including $5,971,584 for an Internet search engine and web site and
$20,116 to net deficiency in working capital.
A pro forma summary has not been presented since pro forma results do not differ
significantly from those reflected in the consolidated statements of operations.
Note 7 - Stockholders' Equity
In July 1998, the Company amended its charter to authorize up to 10,000,000
shares of $.001 par value preferred stock. The preferred stock's participation
rights as a class in any dividends or liquidation proceeds are limited to one
percent. Each share of preferred stock receives one vote in stockholder voting
matters. At the option of the Company, the preferred stock may be redeemed into
the Company's common shares at an exchange rate of one share of common stock for
each share of preferred stock.
The Company's charter was also amended to provide for a one for twenty (1 for
20) reverse split effective August 10, 1998 of the Company's outstanding common
stock. All per share amounts presented give effect for the reverse split. The
Company's amended charter authorizes up to 25,000,000 shares of common stock
with a new par value of $.001 per share.
Equity transactions during the Company's fiscal 1998 included:
In November 1997, the Company entered into an indemnification agreement
with its previous officers and directors in exchange for the cancellation
of 191,333 shares of the officers' and directors' common stock.
The Company issued 6,855 shares of common stock for $103,200 cash in
exercise of outstanding warrants from a prior offering. Additionally,
outstanding warrants from the prior offering for up to 40,615 shares of the
Company's common stock expired in June 1998.
In July 1998, the Company commenced a private placement limited offering
(PPLO) to sell up to 1,000,000 shares of its common stock at a share price
of $.15. Provisions of the PPLO included an anti-dilution clause which pre-
empted the effects of the subsequent stock split discussed above. At
October 31, 1998, 876,000 shares had been issued, and the balance of
124,000 shares remained available for sale. See Note 11.
F-10
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Note 7 - Stockholders' Equity - Continued
In connection with the acquisition discussed in Note 6, the Company issued
1,000,000 shares of its preferred stock and 1,500,000 of its common shares.
The Company also issued 5,000,000 shares of its preferred stock in exchange
for 100,000 shares of its common stock. In September 1998, the Company issued
200,000 shares of the Company's common stock valued at $1,758,600 in payment
of the final obligation in acquisition of an Internet search engine.
Common shares issued for services during the year ended October 31, 1998
totaled 24,833 at a value of $352,666, including 12,833 shares at $256,666 in
connection with discontinued operations.
Basic and diluted earnings per share are calculated on the weighted average
number of common shares outstanding of 1,971,703 and 302,500 in 1998 and 1997,
respectively. Dilutive potential common shares include convertible preferred
stock and shares available under the private placement discussed above.
Potential common shares are antidilutive for the years ended October 31, 1998
and 1997.
Note 8 - Income Taxes
A summary of income tax expense (benefit) for the years ended October 31, 1998
and 1997 is as follows:
1998 1997
---- ----
Federal deferred tax benefit $ (286,000) $ (54,000)
State deferred tax benefit (50,000) (9,700)
Amount included in discontinued
operations 90,000 -0-
------------ -----------
(246,000) (63,700)
Change in valuation reserve (109,000) 63,700
------------ -----------
Total Deferred Tax Benefit $ (355,000) $ -0-
Income tax benefit differed from the amounts computed by applying the U.S.
federal income tax rate of 34% to income (loss) before income taxes as a result
of state income taxes, net of federal income tax benefit.
F-11
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Note 8 - Income Taxes
Temporary differences that give rise to significant portion of the net deferred
tax asset (liability) at October 31, 1998 and 1997 are as follows:
1998 1997
---- ----
Deferred Tax Assets
Net Operating Loss Carryforwards
State $ 70,000 $ 17,000
Federal 375,000 92,000
---------- ---------
445,000 109,000
Valuation reserve -0- (109,000)
---------- ---------
Total Deferred Tax Asset $ 445,000 $ -0-
---------- ---------
In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion of all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Based upon this assessment,
the Company has not established a valuation allowance against the deferred tax
assets at October 31, 1998.
The Company has accumulated net operating losses totaling approximately
$1,160,000. These losses begin expiring in 2010. The deferred benefit of net
operating loss (NOL) carryforwards arising from prior years' activities of
approximately $109,000 was fully reserved as of October 31, 1997. For 1998, no
valuation reserve has been applied due to the change in line of business and the
market value of its search engine. Accordingly, the provision for income taxes
reflects a change in the valuation allowance of $109,000 in recognition of the
effects of the NOL carryforward existing at the beginning of the year.
Note 9 - Related Party Transactions
Transactions with related parties are as follows:
F-12
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Due to related parties: 1998 1997
---- ----
Beginning balance $ 259,825 $ 155,400
Borrowings 447,127 104,425
Obligations satisfied in connection with (192,725) -0-
discontinued operations
Repayments (3,100) -0-
---------- ---------
$ 511,127 $ 259,825
Note 9 - Related Party Transactions - Continued
From time to time during the year ended October 31, 1998, the Company has
borrowed funds for working capital purposes from its principal stockholder. As
of October 31, 1998, the Company owed the stockholder $442,727 related to these
borrowings. Such notes are assignable without the Company's consent, accrue
interest at 10% per annum with principal and interest due on demand. Interest
expense during 1998 related to these borrowings totaled $4,500.
Also, included in due to related parties at October 31, 1998 is a $67,000 note
payable to a minority stockholder of the Company. The unsecured note, bearing
interest at ten percent, is convertible into shares of the Company's restricted
common stock at $2.69 per share (50% of the post-split opening price). Related
interest expense during 1998 totaled $1,675.
At October 31, 1997 the Company was obligated to a former principal shareholder
for $177,825 plus accrued interest at 8.5%. Also at October 31, 1997, the
Company was obligated to a private trust managed by a former principal
shareholder for $82,000 and accrued interest at 8.5%. Accrued interest relating
to these obligations of approximately $16,000 is included on the balance sheet
at October 31, 1997 under the caption "Accrued expenses."
Note 10 - Discontinued Operations
In November 1997, management elected to discontinue its managed health care
operations consisting of two medical clinics. The first clinic was sold in
November 1997, and the second clinic was sold in July 1998. The Company used
November 1, 1997, as the measurement date for the disposals. The clinics were
disposed of by permitting a former officer and stockholder to assume
substantially all of the Company's then existing indebtedness. The obligations
assumed are nonrecourse to the Company.
The components of discontinued operations are as follows:
Gain on sale of segment:
Sale proceeds 0
Loss: Book value of assets at measurement date (258,640)
Add: Liabilities assumed 379,051
----------
$ 120,411
----------
Results from operations from measurement date to disposal date
Revenues 262,867
Expenses (619,936)
----------
$ (357,069)
----------
Loss on disposal of discontinued segment before tax benefit (236,658)
Tax benefit 90,000
----------
Loss on disposal of discontinued segment net of tax $ (146,658)
Net of tax the loss was ($0.07) per basic and diluted share.
F-13
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Note 11 - Subsequent Events
In December 1998, the Company amended its Articles of Incorporation to provide
authorization for 25,000,000 shares of $.001 par value special preferred stock.
Of these 25,000,000 authorized shares, 12,500,000 were designated as Class A
special preferred stock.
The special preferred stock is to receive no preference in dividend
distributions or in the event of liquidation. Each share of special preferred
stock shall receive two votes in stockholder voting
F-14
<PAGE>
================================================================================
TheBigHub.com, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended October 31, 1998 and 1997
================================================================================
Note 11 - Subsequent Events - Continued
matters. Dividend and redemption features are determinable at the discretion of
the board of directors.
All shares of Class A special preferred stock shall be anti-dilutive. In the
event the Company shall issue, re-issue or redeem any shares of Class A
preferred stock, special preferred stock, preferred stock and/or common stock,
all of the holders of Class A special preferred stock shall have "preemptive
rights" pursuant to Florida statutes.
Concurrent with the creation of the Class A special preferred stock, the Company
converted 5,000,000 shares of preferred stock into 8,250,000 shares of the Class
A special preferred stock in exchange for the creation of a $1 million line of
credit with the Company's principal shareholder.
Subsequent to October 31, 1998, the related parties extended additional credit
to the Company of approximately $239,000 and assigned their rights to the
Company obligations. See Note 9. In December 1998, the Company converted the
assigned obligations for 1,600,000 shares of common stock at a price of $.50 per
share.
In connection with the July 1998 PPLO, the Company issued 124,000 shares of its
common stock at $.15 per share in January 1999. See Note 7.
Also in April 1999, the Company redeemed all of its 1,000,000 shares of
outstanding preferred stock and 2,062,500 shares of Class A special preferred
stock in exchange for an equal number of shares of common stock.
In June 1999, the Company redeemed the remaining 6,187,500 outstanding shares of
Class A Special Preferred Stock, with each outstanding share being redeemed for
1.3232 shares of Common Stock.
In June 1999, the Company (a) established a stock incentive plan whereby
1,500,000 shares of its common stock, subject to annual increase, has been
reserved for issuance of grants to employees and (b) commenced a private
placement offering (PPO) to sell up to 1,313,629 shares of its common stock at a
share price of $5.28. Proceeds to the Company from the sale of 284,090 shares of
common stock under the PPO have totaled $1,500,000, and costs associated with
the offering are expected to approximate $100,000, resulting in approximate net
proceeds of $1,400,000. With these proceeds, the Company began an initiative to
redesign its web-sites. In furtherance of the initiative, the Company has
engaged a recognized web design and development firm specializing in portal
design. Additionally, the Company has employed ten additional internal staff
members and has assembled a team of nine officers and directors experienced in
retail and internet commerce.
F-15
<PAGE>
TheBigHub.com, Inc. and Subsidiary
Consolidated Balance Sheets
July 31, 1999 and October 31, 1998
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 171,305 $ 644
----------- ----------
Total Current Assets 171,305 644
Property and Equipment
Internet search engine and web site (Note 2) 139,810 5,971,584
Software 514,381 0
Machinery and equipment 12,364 12,364
Less: accumulated depreciation (34,929) (66,618)
----------- ----------
Net Property and Equipment 631,626 5,917,330
Deferred Tax Assets (Note 3) - 445,000
Deposits 15,800 1,800
----------- ----------
Total Assets $ 818,731 $6,364,774
=========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accrued expenses $ 203,956 $ 37,284
Accounts payable 98,287 14,094
Due to related parties - 511,027
----------- ----------
Total Liabilities 302,243 562,405
Stockholders' Equity (Deficiency)
Preferred stock, $.001 par value, 10,000,000
shares authorized; no shares issued and
outstanding (October 31, 1998: 6,000,000
shares issued and outstanding) - 6,000
Common stock, $.001 par value, 25,000,000
shares authorized; 16,105,975 shares issued
and outstanding (October 31, 1998: 2,718,885
shares issued and outstanding) 17,106 2,719
Additional paid-in capital 8,588,122 6,535,609
Accumulated deficit (8,088,740) (726,959)
Less: Stockholder note receivable - (15,000)
----------- ----------
Total Stockholders' Equity (Deficiency) 516,488 5,802,369
----------- ----------
Total Liabilities and Stockholders' Equity $ 818,731 $6,364,774
=========== ==========
</TABLE>
See the accompanying notes to these consolidated financial statements
F-16
<PAGE>
TheBigHub.com, Inc. and Subsidiary
Consolidated Statements of Operations
For the Three and Nine Months Ended July 31, 1999 and 1998
Unaudited
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
July 31, 1999 July 31, 1998 July 31, 1999 July 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SALES $ 13,483 $ 6,164 $ 15,261 $ 6,164
Costs of Sales 7,170 1,285 13,519 1,285
------------- ------------- ------------- -------------
Gross Profit 6,313 4,879 1,742 4,879
------------- ------------- ------------- -------------
OPERATING EXPENSES
Depreciation 77,419 755 679,211 755
Legal and Professional 118,829 40,714 130,722 40,714
Salaries 250,582 15,150 197,405 15,150
Travel 88,558 1,290 111,685 1,290
Web Design 230,840 18,495 179,055 18,495
Insurance 113,831 - 110,732 -
General and Administrative 73,185 14,558 388,839 14,558
Asset Impairment Loss 5,120,874 - 5,120,874 -
------------- ------------- ------------- -------------
Total Expenses 6,074,118 90,962 6,918,523 90,962
Operating Loss (6,067,805) (86,083) (6,916,781) (86,083)
Income Tax Expense (445,000) - (445,000) -
------------- ------------- ------------- -------------
Net Loss $ (6,512,805) $ (86,083) $ (7,361,781) $ (86,083)
============= ============= ============= =============
Basic and Diluted Earnings (Loss per Share) $ (0.49) $ (0.21) $ (0.97) $ (0.41)
============= ============= ============= =============
Shares used in calculation of Earnings per Share 13,282,112 407,757 7,610,238 210,030
</TABLE>
See the accompanying notes to these consolidated financial statements
<PAGE>
The BigHub.com, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended July 31, 1999 and 1998
Unaudited
<TABLE>
<CAPTION>
July 31, July 31,
1999 1998
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $(7,361,781) $ (86,083)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 679,211 755
Asset impairment loss 5,120,874 -
Change in operating assets and liabilities
Accounts receivable - 47,659
Deposits (14,000) 80,303
Deferred tax assets 445,000 -
Accounts payable and accrued liabilities 250,865 (142,191)
----------- ---------
Net cash used in operating activities (879,831) (99,557)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Software (514,381) -
Proceeds from Sale of Property and Equipment - 99,842
Other assets - (1,583)
----------- ---------
Net cash (used in) provided by investing
activities (514,381) 98,259
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 2,060,900 -
Repayment of stockholder loan (511,027) -
Proceeds from stockholder note receivable 15,000 -
----------- ---------
Net cash provided by financing activities 1,564,873 -
----------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 170,661 (1,298)
----------- ---------
CASH - BEGINNING OF PERIOD 644 1,452
----------- ---------
CASH - END OF PERIOD $ 171,305 $ 154
=========== =========
SUPPLEMENTARY INFORMATION
Interest paid $ - $ -
Income taxes paid $ - $ -
</TABLE>
See the accompanying notes to these consolidated financial statements
<PAGE>
TheBigHub.com, Inc. and Subsidiary
Notes to Unaudited Consolidated Financial Statements
For the Three and Nine Months Ended July 31, 1999 and 1998
1. Summary of significant accounting policies
Management's representation
The management of the BigHub.com, Inc. (the "Company") without audit has
prepared the financial statements included herein. Certain information and
note disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
In the opinion of the management of the Company, all adjustments considered
necessary for fair presentation of the financial statements have been
included and were of a normal recurring nature, and the accompanying
financial statements present fairly the financial position of the Company
as of July 31, 1999, the results of operations for the three and nine
months ended July 31, 1999 and 1998, and cash flows for the nine months
ended July 31, 1999 and 1998.
It is suggested that these financial statements be read in conjunction with
the Company's audited financial statements and notes for the years ended
October 31, 1998 and 1997, included in this Form 10-SB. The interim results
are not necessarily indicative of the results for a full year.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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. Specifically, estimates have been made as to
the realizability of long-lived asset and deferred tax assets. Actual
results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to previously issued financial
statements in order for them to conform to classifications used in these
comparative financial statements.
Revenue Recognition
The Company currently uses a third party to sell advertising space on its
website and recognizes revenue from click-throughs based upon reports and
payment received from the third party. Accordingly, the Company recognizes
revenue at time of receipt. The Company is presently upgrading its systems
with the capability to capture click-through information and bill
advertising revenue on a weekly basis. Revenue would then be recognized at
the time of billing.
Accounting for software costs.
As of July 31, 1999, software consists of a major financial accounting and
transaction processing package acquired for internal use only. The Company
has capitalized the asset in accordance with Statement of Position 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use" and it is being amortized on the straight-line method over a
useful life of three years.
Stock-based compensation
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-
Based Compensation," which defines a fair value based method of accounting
for stock-based compensation. However, SFAS 123 allows an entity to
continue to measure compensation cost related to stock and stock options
issued to employees using the intrinsic method of accounting prescribed by
Accounting Principles Board Opinion NO. 25 ("APB 25"), "Accounting for
Stock Issued to Employees." Entities electing to remain with the accounting
method of APB 25 must make pro forma disclosures of net income (loss), as
if the fair value method of accounting defined in SFAS 123 had been
applied. The Company has elected to account for its stock-based
compensation to employees under APB 25.
During the quarter ended July 31, 1999, the Company issued options to
employees under the qualified incentive stock option plan to purchase
171,134 shares of the Company's common stock at an exercise price of $5.28
per share, which approximated the fair market value of the Company's common
stock on the date of grant. The options vest over a three year period and
are exercisable for ten years.
During the quarter ended July 31, 1999, the Company issued options to
directors and consultants to purchase 286,366 shares of the Company's
common stock at an exercise price of $4.00 per share. The options vest over
a three year period and are exercisable for ten years. A total of
approximately $366,548 will be recognized over the vesting period, of which
$122,182 was recognized as of July 31, 1999.
F-19
<PAGE>
TheBigHub.com, Inc. and Subsidiary
Notes to Unaudited Consolidated Financial Statements
For the Three and Nine Months Ended July 31, 1999 and 1998
(continued)
2. Internet Search Engine and Web Site.
In accordance with Statement of Financial Accounting Standards No. 121,
``Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of,'' the Company recorded an impairment loss on its
Internet search as a result of a recently issued valuation of the asset as
at May 31, 1999 performed by an independent appraisal firm. During the
quarter ended July 31, 1999, management of the Company determined that
$5,120,874 of the Internet search engine and web site had been impaired.
Accordingly, the Company charged this amount to operations in the current
quarter. No additional impairment has been determined by management as of
July 31, 1999.
3. Deferred Tax Assets
In assessing the realizability of deferred tax assets, the Company
considers whether it is more likely than not that all or some portion of
all of the deferred tax assets will not be realized. Specifically, because
the value of the Internet search engine and web site has significantly
declined and because of the "change in ownership" provisions of the Tax
Reform Act of 1986, utilization of the Company's tax net operating loss
carryforwards and tax credit carryforwards may be subject to certain
utilization limitations in future periods which may cause some or all of
these carryforwards to expire before becoming available to reduce future
income tax liabilities. Accordingly, the Company, as of July 31, 1999, has
established a full valuation allowance against deferred tax assets, and has
charged the effect of the allowance to income tax expense in the current
quarter.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED
- ------ ----------- --------
<S> <C> <C>
2.1 Agreement and Plan of Merger between Optima
Medical Group of Hileah, Inc. and Optima Medical
Group of No. Miami, Inc. and Coordinated
HealthCare, Inc., dated October 16, 1995.
2.2 Articles of Merger of Optima Medical Group of
Hileah, Inc., Optima Medical Group of No. Miami,
Inc. and Coordinated HealthCare, Inc. dated
October 16, 1995.
2.3 Agreement for Purchase and Sale of Assets by
and between Coordinated Healthcare, Inc. and
ALF Realty I, Inc. dated July 15, 1998.
2.4 Agreement and Plan of Reorganization by and
between Happy Landings, Inc. and Isleuth.com, Inc.
dated September 3, 1998.
3.1 Articles of Incorporation of
Coordinated HealthCare, Inc., filed
February 16, 1995.
3.2 Articles of Amendment to Articles of
Incorporation of Coordinated HealthCare,
Inc. authorizing 5,000,000 shares of
Common Stock at a par value of $0.001
per share, filed January 17,1996.
3.3 Articles of Amendment to Articles of
Incorporation of Coordinated HealthCare,
Inc., authorizing 20,000,000 shares of
Common Stock at a par value of $0.001
per share, filed June 24, 1996.
3.4 Articles of Amendment to Articles of
Incorporation of Coordinated HealthCare,
Inc. authorizing 25,000,000 shares of
Common Stock at a par value of $0.001 per
share and 10,000 shares of Preferred Stock
at a par value of $0.001 per share, filed
July 29, 1998.
3.5 Articles of Amendment to Articles of
Incorporation of Coordinated HealthCare,
Inc., changing the name of Coordinated
Healthcare, Inc. to Isleuth.com, Inc., filed
</TABLE>
<PAGE>
<TABLE>
<S> <C>
July 29, 1998.
3.6 Articles of Amendment to Articles of
Incorporation of Isleuth.com, Inc. authorizing
25,000,000 shares of Special Preferred Stock at
a par value of $0.001 per share, filed October 15,
1998.
3.7 Articles of Amendment to Articles of
Incorporation of Isleuth.com, Inc. designating
12,500,000 shares of the Special Preferred Stock
as Class A Special Preferred Stock at a par value
of $0.001 per share, filed December 28, 1998.
3.8 Articles of Amendment to Articles of
Incorporation Isleuth.com, Inc., changing
the name of Isleuth.com, Inc. to The
BigHub.com, Inc., filed April 29, 1999.
3.9 Bylaws of the registrant.
10.1 Option Agreement by and between
Happy Landings, Inc. and Maverick Communication
Corp. dated August 3, 1998.
10.2 Stock Purchase Agreement by and between
SJI Group, Inc. and Isleuth.com, Inc. dated
August 7, 1998.
10.3 Employment Agreement by and between The
BigHub.com, Inc. and Patrick J. DeMicco
Dated July 9, 1999.
10.4 Employment Agreement by and between The
BigHub.com, Inc. and Douglas Martinez
dated June 28, 1999.
10.5 Employment Agreement by and between The
BigHub.com, Inc. and Chet Howard dated
June 14, 1999.
10.6 Employment Agreement by and between The
BigHub.com, Inc. and Mark Doumani dated
June 30, 1999.
10.7 Sublease Agreement dated June 1, 1999 between
The BigStore.com, Inc., a Delaware corporation
and The BigHub.com, Inc. a Florida corporation.*
10.8 Comarketing Agreement dated July 6, 1999 between
Deal-Time and the BigHub.com, Inc.*
10.9 Strategic Marketing Agreement entered into as of September 2, 1999
by and between the BigHub.com,Inc and Biomerica, Inc. (The
BigRx.com)
10.10 Affiliate Agreement dated September 1, 1999 by and between The
BigHub.com, Inc. and The BigStore.com, Inc.
</TABLE>
__________________________
* Being filed herewith
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
THE BIGHUB.COM, INC.
(Registrant)
Date: September 30, 1999
By: /s/ Chet Howard
------------------------------------
Chet Howard, Chief Financial Officer
<PAGE>
EXHIBIT 10.7
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease") is made as of June 1, 1999, between
The BigStore.com, Inc., a Delaware corporation, whose address is 3388 Via Lido,
Newport Beach, California 92663 ("Sublandlord") and The BigHub.com, Inc., a
Florida corporation, whose address is 3388 Via Lido, Newport Beach, California
92663 ("Subtenant").
A. Sublandlord entered into a Lease with _______________, ("Landlord")
dated _____________ herein referred to as "Lease" for certain space located at
3388 Via Lido, Newport Beach, California 92663.
B. Subtenant desires to sublease from Sublandlord the entire fourth (4th)
floor of the premises located at 3388 Via Lido, Newport Beach, California 92663
("Demised Premises"), and Sublandlord is agreeable to the making of such
sublease on the terms and conditions hereinafter set forth.
NOW THEREFORE, for good and valuable consideration received, Sublandlord
and Subtenant agree as follows:
1. SUBLEASE: TERM. Sublandlord sublets to Subtenant, who hereby subleases
from Sublandlord, the Demised Premises for a term (the "Term") beginning on June
1, 1999 and continuing thereafter month to month, unless sooner terminated in
accordance with the terms of this Sublease or the Lease ("Termination Date").
2. USE. Subtenant shall not use the Demised Premises for any purpose other
than as its corporate regional office, which use shall not be inconsistent with
the Lease.
3. RENT. Subtenant shall pay to Sublandlord during the Term hereof rental
payments in the amount of Four Thousand and Fifty Dollars ($6,568.00) per month,
payable on or before the first day of each month (herein referred to as "Rent").
In addition, Subtenant shall pay to Sublandlord its proportionate share of
taxes, costs, common area maintenance fees, utilities and other expenses
pursuant to the Lease in equal monthly installments estimated by Sublandlord
("Costs").
4. RESERVED
5. INSURANCE. Subtenant shall maintain such liability and other insurance as
is required to be maintained under the Lease, with such limits and otherwise in
accordance with such requirements as are set forth in the Lease. Sublandlord
shall be named as an additional insured on all insurance policies maintained by
Subtenant.
6. TERMS OF LEASE INCORPORATED. This Sublease is subject to all of the terms
and conditions of the Lease, each of which is hereby incorporated herein by
reference and made a part hereof, and the parties agree:
1
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(a) Subtenant shall fully and faithfully perform, with regard to the
Demised Premises, all of the duties and obligations contained in the terms,
covenants and conditions of the Lease to be performed by Sublandlord.
(b) Sublandlord, in its relations with Subtenant hereunder, shall have all
of the rights and remedies afforded to Landlord in its relations with
Sublandlord as set forth in the Lease. Without limiting the generality of the
foregoing, the consent of Sublandlord shall be required for any action of
Subtenant which, pursuant to the Lease, requires the consent of Landlord.
(c) Sublandlord is hereby released and relieved of (i) all of the
obligations of Landlord as set forth in the Lease other than any obligation to
give notice prior to exercising its rights and remedies, and (ii) any liability
to Subtenant for any default by Landlord under the Lease or any failure by
Landlord to perform any of Landlord's obligations thereunder, but Sublandlord
agrees to reasonably cooperate with Subtenant, upon the written request of
Subtenant and at Subtenant's sole expense, in enforcing any of such obligations
and causing Landlord to perform same; provided, however, that Sublandlord shall
not be liable to Subtenant in damages if, after reasonable diligence on the part
of Sublandlord, Landlord shall fail to perform such obligations.
(d) Subtenant acknowledges that the rights granted to it under this
Sublease are not in any sense greater or broader than the rights granted to
Sublandlord under the Lease.
7. MORTGAGE: ASSIGNMENT. Subtenant shall not sell, mortgage, assign or
otherwise transfer this Sublease, or sublease any part or all of the Demised
Premises, and any attempt by Subtenant to do so shall be void and of no effect.
8. ALTERATIONS. Subtenant shall not cause the Demised Premises to be altered
in any way during the Term of this Sublease.
9. TERMINATION. This Sublease shall terminate at midnight at the end of the
Termination Date without the requirement of any further notice thereof by either
party to the other.
10. NOTICES. Any notices given or required to be given by either party to the
other shall be deemed given when delivered personally or when mailed by United
States certified mail, return receipt requested, to the respective addresses set
forth above.
11. INDEMNIFICATION. Subtenant shall indemnify, defend, protect and hold
harmless Sublandlord against and from any and all claims by or on behalf of any
party arising from Subtenant's use of the Demised Premises or the conduct of its
business or from any activity, work, or thing done, permitted or suffered by
Subtenant in or about the Demised Premises, and will further indemnify, defend,
protect and hold harmless Sublandlord against and from any and all claims
arising from any breach or default on Subtenant's part in the performance of any
covenant or agreement on Subtenant's part to be performed pursuant to the terms
of this Sublease, or arising
2
<PAGE>
from any act or negligence of Subtenant, or any of its agents, contractors,
servants, employees or licensees, and from and against all costs, counsel fees,
expenses and liabilities incurred in connection with any such claim or action or
proceeding brought thereon; and in case any action or proceeding be brought
against Sublandlord by reason of any such claim, Subtenant upon notice from
Sublandlord covenants to resist or defend at Subtenant's expense such action or
proceeding by counsel reasonably satisfactory to Sublandlord. Subtenant, as a
material part of the consideration to Sublandlord, hereby assumes all risk of
damage to property in, upon or about the Demised Premises from any source and to
whomever belonging, and Subtenant hereby waives all claims in respect thereof
against Sublandlord except claims based solely on the negligence of Sublandlord,
its agents, servants or employees, and agrees to defend and save Sublandlord
harmless from and against any such claims by others.
12. RELEASE. Neither Sublandlord nor its agents or employees shall be liable
for (a) any damage to property of Subtenant or of others entrusted to employees
of Sublandlord, (b) the loss of or damage to any property of Subtenant by theft
or otherwise, (c) any injury or damage to persons or property resulting from
flood, fire, explosion, falling plaster, steam, gas, electricity, electrical
disturbance, water, rain or leaks from any part of the Demised Premises or from
the pipes, appliances or plumbing works or from the roof, street or sub-surface
or from any other place or by dampness or by any other cause of whatsoever
nature (whether similar or dissimilar to those above specified), unless caused
by or due to the negligence of Sublandlord, its agents, servants or employees,
(d) any such damage caused by operations in construction of any private, public
or quasi-public work, or (e) any latent defect in the Demised Premises.
13. COST RECOVERY. In any action involving this Sublease, the prevailing party
shall recover from the other party, in addition to any damages or other relief,
all costs (whether or not allowable as "cost" items by law) reasonably
incurred, including attorneys' and witness (expert and otherwise) fees and
costs.
14. MISCELLANEOUS.
(a) Subtenant acknowledges that it has inspected the Demised Premises and
agrees to accept them in their present condition "AS IS AND WITH ALL FAULTS."
(b) Time is of the essence of this Sublease and of the performance by
Subtenant of each and every term and condition of this Sublease and of each and
every term and condition of the Lease which the Subtenant has herein agreed to
keep and perform.
(c) This Sublease contains all of the agreements between Sublandlord and
Subtenant and may not be modified except by written instrument duly executed by
the parties.
(d) Subject to the provisions of paragraph 7, the terms and conditions of
this Sublease shall extend to and be binding upon the heirs, successors and
assigns of the respective parties.
3
<PAGE>
SUBTENANT: SUBLANDLORD:
The BigHub.com, Inc., The BigStore.com, Inc.,
a Florida corporation a Delaware corporation
By: /s/ CHET HOWARD By: /s/ TED LAVOIE
------------------------ ---------------------
Name: Chet Howard Name: Ted Lavoie
---------------------- --------------------
Title: CFO Title: CFO
---------------------- --------------------
4
<PAGE>
EXHIBIT 10.8
Co-Marketing Agreement
This Co-Marketing Agreement ("Agreement") is made and entered into as of the
6th day of the month of July in the year 1999 (the "Effective Date") by and
between DealTime.com Inc., a Delaware corporation ("DealTime.com"); and The
BigHub.com, Inc., a Delaware corporation ("BigHub").
RECITALS
WHEREAS, DealTime.com offers an Internet-based personal shopping service
(the "Service") known commercially as DealTime. The Service notifies end users
("End Users") of the availability of products and services at End User defined
price and product parameters from a number of Internet merchants, service
providers, auction sites, classifieds and other sources (collectively,
"Merchants"). The Service includes the DealTime.com Web site with product
search, notification and sourcing options, and a desktop notifier client
application ("Desktop Notifier"); and
WHEREAS, among, and in connection with, its other business activities,
BigHub maintains one or more Web sites (collectively, the "BigHub Site"); and
WHEREAS, BigHub and DealTime desire to develop, offer and maintain a co-
branded version of the Service which shall be marketed and accessed on and
through the BigHub Site; and
WHEREAS, in connection with its the maintenance and operation of the co-
branded site, BigHub wishes to host the Service on the BigHub Site.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. Distribution of Service
1.1. DealTime.com's Responsibilities. No later than thirty (30) days after
signing this Agreement, DealTime.com shall make available to BigHub a
version of the Service (the "Co-Branded Service") which shall be co-
branded with BigHub, and shall offer the Service in its entirety. The
Co-Branded Service shall (a) be primarily branded as The BigCompare.com
and made available by way of a Web site having the address of such
primary brand (the "Co-Branded Site"), (b) include logos and graphics
designed by BigHub, within boundaries established by DealTime.com and
subject to DealTime.com's prior approval, and (c) be co-branded with
DealTime.com's name or a variation thereof designated by DealTime.com,
and shall contain a logo depicting "Powered by DealTime" or similar
logo. DealTime.com shall also create a co-branded version of the Desktop
Notifier (the "Co-Branded Notifier") which shall (a) be offered and made
available in connection with the Co-Branded Site, (b) include logos and
<PAGE>
-2-
graphics designed by BigHub, within boundaries established by
DealTime.com and subject to DealTime.com's prior approval, and (c) be
co-branded with DealTime.com's name or a variation thereof designated by
DealTime.com, and shall contain a logo depicting "Powered by DealTime"
or similar logo. The Co-Branded Notifier will feature both e-commerce
events and BigHub content event announcements. Events delivered via the
Co-Branded Notifier shall be personalized with user-defined products or
content of interest. BigHub shall define and provide all personalization
parameters for all content links related to the Co-Branded Notifier. At
the request of BigHub, DealTime.com shall supply a Java Applet and/or
animated graphic service (which may be changed by DealTime.com from time
to time), with hypertext URL linking to the Co-Branded Service. BigHub
shall not alter in any manner, without the prior written consent of
DealTime.com, the Java Applet or animated graphic service supplied by
DealTime.com.
1.2. Merchants. The Co-Branded Service and the Co-Branded Site shall be
marketed, promoted and accessed on and through the BigHub Site, and will
include all Merchants recruited by DealTime.com. BigHub will have the
right to recruit Merchants in the United States and Canada to be added
to the Co-Branded Service ("BigHub Merchants"), and to accord preferred
status or rights to certain BigHub Merchants (which preferred status or
rights may include, by way of example, but not limitation, the right to
have a graphic logo button appear next to such preferred Merchant's
search results, a right of first refusal on Co-Branded Notifier
advertising, the right to participate in one-click buy options, and
similar rights and benefits). BigHub Merchants will be subject to
approval by DealTime.com, in its reasonable discretion, and, if
approved, shall enter into a Merchant agreement in form reasonably
acceptable to DealTime.com. BigHub shall use its best efforts to recruit
BigHub Merchants to DealTime.com for inclusion in the Service. In
addition, BigHub shall charge fees to Merchants in amounts not less than
those charged by DealTime.com in connection with the Service.
1.3. BigHub's Responsibilites. BigHub will be solely responsible for the
development, operation and maintenance of the BigHub Site and the Co-
Branded Site, and all content on the BigHub Site and the Co-Branded
Site. For example, but not by way of limitation, BigHub will be
responsible for (a) the technical operation of the BigHub Site and the
Co-Branded Site and related equipment; and (b) ensuring that the
contents of the BigHub Site and the Co-Branded Site are not libelous,
indecent or illegal and do not infringe on the rights (for example,
copyrights, trademarks, privacy or other personal or proprietary rights)
of any other person or entity. While this Agreement is in effect, BigHub
will not disparage DealTime.com, the DealTime.com logos, or the Service,
or display any such items in a derogatory or negative manner on the
BigHub Site or the Co-Branded Site, or offer, market or sell any product
or service that directly competes with the Service and/or the Co-Branded
Service without DealTime.com's prior written consent, which may be
withheld in DealTime.com's reasonable discretion. BigHub shall use its
best efforts to monitor statements and so-called "chat" of End Users and
others appearing on the Co-Branded Site, but shall not incur liability
<PAGE>
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to DealTime.com in connection with third party statements or chat.
BigHub will comply with the program rules established and furnished to
BigHub by DealTime.com which may be changed by DealTime.com from time to
time, and BigHub will be responsible for all expenses that BigHub incurs
in connection with the performance of BigHub's obligations under this
Agreement or the operation of the BigHub Site and/or the Co-Branded
Site. BigHub will refrain from using DealTime.com's trademarks, service
marks and logos in any manner whatsoever other than as expressly
authorized in this Agreement.
1.4. General. Subject to all of the terms and conditions of this Agreement,
DealTime.com hereby appoints BigHub, and BigHub hereby accepts
appointment, as a non-exclusive promotor of the Service to its End Users
from the BigHub Site, the Co-Branded Site and the Co-Branded Notifier,
and hereby grants to BigHub a nontransferable, limited right and license
to display DealTime.com's logo to End Users from the BigHub Site, the
Co-Branded Site and the Co-Branded Notifier, subject to the terms and
conditions of this Agreement. It is specifically understood and agreed
that no right or license is being granted to install, copy, modify, use,
sublicense or deliver the Service or the Technology (as defined herein).
1.5. Promotion to End Users; Use and Ownership of Information. No later than
fifteen (15) days after the implementation of section 1.1 above, BigHub
and DealTime.com shall promote the Co-Branded Service and the Co-Branded
Site to End Users in a coordinated manner, including, without
limitation, the preparation of jointly approved marketing materials and
mailing lists, the construction of the forum and the provision by BigHub
of prominent links to the Co-Branded Site and the Co-Branded Notifier
application on and through the BigHub Site. In addition, BigHub shall
promote the Service to End Users by featuring the DealTime.com brand on
both the BigHub Site, the Co-Branded Site and the Co-Branded Notifier.
BigHub and DealTime.com shall have equal ownership rights in and to all
End User information obtainable through any End User's use of the Co-
Branded Service. Such rights shall include, without limitation, the
right to retain and utilize all such End User information for all
business purposes, and shall survive any termination of this Agreement.
BigHub shall make best efforts to promote the Co-Branded Service and the
Co-Branded Site through all promotional channels available to it,
including but not limited to print media advertising, and public
relations.
1.6. DealTime.com's Continuing Distribution Rights. Nothing herein shall in
any way limit DealTime.com's ability to promote or make the Service
and/or the Desktop Notifier available, directly or indirectly, in any
manner, to any end-users, distributors, dealers, Merchants, VARs, OEMs
or others in the United States or world wide. The parties are
independent contractors, and nothing in this Agreement shall be
construed to create a joint venture or partnership.
1.7. Limitations. DealTime.com shall have the right, in its reasonable
discretion and without incurring any liability to BigHub, to modify the
Service at any time. Upon any such modifications, BigHub shall, within
fifteen (15) days of receipt of
<PAGE>
-4-
instructions from DealTime.com, update the BigHub Site and the Co-
Branded Site, and notify End Users, in accordance with DealTime.com's
instructions. Title to the Service, the Co-Branded Service, the Desktop
Notifier and the Co-Branded Notifier including, without limitation, the
server application and server environment, as well as the underlying
technology of the Service, the Co-Branded Service, the Desktop Notifier
and the Co-Branded Notifier (the "Technology"), and all associated
intellectual property rights therein, are and shall remain in and with
DealTime.com. Any rights not expressly granted hereunder are reserved to
DealTime.com. Except as expressly authorized herein, BigHub shall not,
and shall ensure that its employees, agents or others acting on its
behalf do not: (i) modify, translate, reverse engineer, decompile,
disassemble, create derivative works of the Technology or incorporate
all or any portion of the Technology, the Service, the Co-Branded
Service and/or the Co-Branded Notifier into other software, product or
technology; (ii) copy, distribute, disclose, market, rent, lease or
transfer to any third party the Technology, the Service, the Co-Branded
Service and/or the Co-Branded Notifier; (iii) export the Technology, the
Service, the Co-Branded Service and/or the Co-Branded Notifier in
violation of applicable export administration regulations; or (iv)
remove, alter, or cover any copyright notices, trademarks, or other
proprietary rights notices placed or embedded by DealTime.com on or in
the Technology, the Service, the Co-Branded Service and/or the Co-
Branded Notifier.
2. Revenue Sharing and Payment Terms
2.1. Revenue Sharing for Co-Branded Service. Each of DealTime.com and BigHub
shall pay the other fees in an amount equal to fifty percent (50%) of
all Net Revenues (including, without limitation, any and all preferred
Merchant fees) received by DealTime.com or BigHub, as the case may be,
which are derived from the Co-Branded Service, the Co-Branded Site or
the Co-Branded Notifier. Net Revenues shall mean all revenues received
from or in connection with the Co-Branded Service or the Co-Branded Site
by BigHub or DealTime.com other than revenue which is derived from
advertising on the Co-Branded Site or the Co-Branded Notifier, less any
applicable taxes or duties, as well as amounts refunded to advertisers,
Merchants and other third parties. Net revenue which is derived from
advertising sold by BigHub on the Co-Branded Site or the Co-Branded
Notifier shall be split sixty percent (60%) to BigHub and forty percent
(40%) to DealTime.com. Net revenue which is derived from advertising
sold by DealTime.com on the Co-Branded Site or the Co-Branded Notifier,
if any, shall be split between BigHub and DealTime.com on a negotiated,
case-by-case basis.
2.2. Terms of Payment for Net Advertising Revenue. BigHub shall submit to
DealTime.com, no later than sixty (60) days after the end of each
calendar quarter, a report of payments received from advertisers during
such calendar quarter which is derived from advertising sold by BigHub
on the Co-Branded Site or the Co-Branded Notifier or in connection with
the Co-Branded Service. Such report shall be submitted along with
payment of all amounts due from BigHub to DealTime.com in accordance
<PAGE>
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with Section 2.1 above. All payments shall be made in United States
dollars at the address first set forth above or as changed with thirty
(30) days.
2.3. Expenses. Each party shall bear its respective expenses incurred in
completing its responsibilities under this Agreement. Each party shall
have the right, at its expense (except as provided below) to audit the
other party's books and records for the purpose of verifying Net
Revenues and/or other revenues. Such audits shall be made not more than
once per year, on not less than ten (10) days written notice, during
regular business hours, by such party's independent auditors. If the
auditor's figures reflect Net Revenues and/or other revenues higher than
those reported by any party, such party shall immediately pay the
difference in the amount so owed. If the auditor's figures vary more
than 10% from the figures provided by any party, such party shall also
pay the reasonable cost of the audit.
3. Confidentiality.
3.1. Confidential Information. For purposes of this Agreement, "Confidential
Information" means: (i) all information received from the disclosing
party which relates to the disclosing party's nonpublic business
strategy, product plans, research, identity of customers or business
partners, technical data, and software or hardware designs,
specifications, or configurations; (ii) any information designated by
the disclosing party as confidential; (iii) DealTime.com's Technology;
and (iv) the terms and conditions of this Agreement.
3.2. Duty to Keep Confidential. Each party acknowledges that it may have
access to and become acquainted with the Confidential Information of the
other, the unauthorized use or disclosure of which would cause
irreparable harm and significant injury, and agrees to use the same
degree of care and discretion to avoid disclosure or dissemination of
the other party's confidential information to anyone other than those of
its employees with a need to know for purposes of this Agreement as it
uses with its own information that it does not wish to have published,
disclosed or disseminated. The parties shall not use the confidential
information for any purpose other than to further directly the purposes
of this Agreement. Neither party shall disclose the Confidential
Information of the other party to any third party without the other
party's prior written consent.
3.3. Exceptions. Neither party has any obligation to keep confidential any
information that: (i) is or becomes generally known or available by
publication, commercial use or otherwise through no fault of the
receiving party; (ii) is known and has been reduced to tangible form by
the receiving party prior to the time of disclosure and is not subject
to restriction; (iii) is independently developed by the receiving party;
(iv) is lawfully obtained from a third party who has the right to make
such disclosure; or (v) is released for publication by the disclosing
party in writing. Notwithstanding anything to the contrary, the
exclusions set forth above shall not apply to the Technology.
<PAGE>
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4. Exculpation/Limitation Of Liability.
4.1. Exculpation. DealTime.com does not represent that the Technology, the
Co-Branded Service and/or the Service are error-free. BigHub shall make
no representation or warranty concerning the Technology, the Co-Branded
Service and/or the Service. except that none of the foregoing infringe
in any material respect any valid and enforceable U.S. patent or trade
secret of which DealTime.com is aware. DEALTIME.COM MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE TECHNOLOGY AND SERVICES EXCEPT
AS CONTAINED IN THE IMMEDIATELY PRECEDING SENTENCE, AND DEALTIME.COM
SPECIFICALLY DISCLAIMS ALL WARRANTIES OR CONDITIONS REGARDING THE
TECHNOLOGY AND SERVICES INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, OR FITNESS FOR ANY PURPOSE.
4.2. Limitation of Liability. DealTime.com's liability for damages under this
Agreement (whether in contract, tort or otherwise) shall not exceed the
amounts paid by DealTime.com to BigHub during the preceding twelve (12)
months relating to the Technology or the Co-Branded Service as to which
the claim arose. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR
OTHERWISE, IN NO EVENT SHALL DEALTIME.COM BE LIABLE TO BIGHUB FOR ANY
SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER CAUSED
AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS AGREEMENT WHETHER OR
NOT ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY
FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
5. Indemnification
5.1. Indemnification by BigHub. BigHub hereby indemnifies and holds
DealTime.com harmless against any and all penalties, damages, costs,
judgments, attorneys' fees or any other expenses incurred in connection
with (a) claims against DealTime.com by any person or entity in
connection with BigHub's promotion of or inability to provide access to
the Technology, the Co-Branded Site or the Co-Branded Service; (b)
claims against DealTime.com by any person or entity in connection with
elements of the BigHub Site, the Co-Branded Site, the data or other data
services, including, without limitation, BigHub's failure to provide
access to the data or the data services in accordance with this
Agreement; (c) BigHub's modification of the Technology or the Co-Branded
Service; and (d) any misrepresentation by BigHub relating to the data,
the Technology, the Co-Branded Site or the Co-Branded Service or any
representation or warranty relating to the Technology, the Co-Branded
Site or the Co-Branded Service which is beyond the scope of the warranty
provided by DealTime.com to BigHub under this Agreement.
<PAGE>
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5.2. Indemnification by DealTime.com. DealTime.com hereby indemnifies and
holds BigHub harmless against any and all penalties, damages, costs,
judgments, attorneys' fees or any other expenses incurred by BigHub as a
result of DealTime's breach of the non-infringement warranty contained
in Section 4.1.
6. Initial Term, Renewals and Termination
6.1. Initial Term and Renewals. The initial term of this Agreement shall be
one (1) year from the Effective Date. This Agreement shall be deemed to
have been automatically renewed and extended for additional one (1) year
periods, unless written notice of termination by either party is
received from the other party 60 days prior to the end of the term.
During renewal terms, this Agreement may be terminated by either party
upon sixty (60) days prior written notice.
6.2. Termination. This Agreement may be terminated by either party upon the
material breach by the other party of any of such other party's
obligations hereunder, which breach has not been cured within thirty
(30) days after the breaching party has received written notice thereof.
6.3. Effect of Termination. Notwithstanding the termination of this Agreement
for any reason, (1) the rights and duties of the parties under Sections
3, 4 and 5 shall survive such termination and remain in full force and
effect, as well as any provisions of this Agreement that, in order to
fulfill the purposes of such provisions, need to survive the termination
or expiration of this Agreement; (2) all fees earned through the
termination date in accordance with Section 2 shall be paid within 30
days of the termination date. In the event of termination or expiration
of this Agreement, all rights granted to either party hereunder shall
immediately cease, each party shall immediately return to the other or
destroy such other party's Confidential Information, and BigHub shall
immediately return to DealTime.com all copies (including extracts,
summaries, and adaptations) of the Technology, all associated
documentation, and all other materials or media that contain or are
based on the Technology, the Co-Branded Services, the Services,, and
BigHub shall immediately cease to display the DealTime.com logo, Java
Applet and/or animated graphic service (as furnished pursuant to Section
1.1 above) on its WebSite. Notwithstanding anything herein to the
contrary, DealTime.com shall have the perpetual and unrestricted right
following termination of this Agreement to provide the Service and/or
the Desktop Notifier Service to any Merchant, End-User or other customer
or client obtained under, during the course of or in connection with
this Agreement without any further or additional compensation to BigHub.
7. Miscellaneous.
7.1. Assignment. This Agreement shall be binding upon and shall inure to the
benefit of the undersigned parties and their respective successors and
permitted assigns. BigHub may not sell, transfer, assign, or subcontract
any right or obligation set forth in this Agreement without the prior
written consent of DealTime.com.
<PAGE>
-8-
7.2. Force Majeure. Neither party shall be liable or be deemed to be in
default for any delay or failure in performance or interruption
resulting directly or indirectly from any cause or circumstance beyond
its reasonable control, including, without limitations, equipment or
telecommunications failure, labor dispute, civil unrest, war, or failure
of any third party to perform any Agreement that adversely affects such
party's ability to perform its obligations hereunder.
7.3. Compliance with Laws and Regulations. Each party shall, at its own
expense, comply with any governmental law, statute, ordinance,
administrative order, rule, or regulation relating to its duties,
obligations, and performance under this Agreement and shall procure all
governmental licenses and pay all fees and other charges required
thereby.
7.4. Governing Law; Arbitration.. This Agreement shall be governed by the
laws of the State of New York. In the event of a dispute that cannot be
resolved amicably between the parties, the dispute shall be resolved
through binding arbitration, conducted in the State of New York, by a
sole arbitrator in the English language, and in accordance with the
rules and procedures set forth by American Arbitration Association. The
sole arbitrator shall be appointed by agreement of the parties. In the
event the parties fail to agree upon the appointment of the sole
arbitrator within thirty (30) days after a notice of arbitration is
given by either party to the other, then the arbitrator shall be
selected and appointed by the American Arbitration Association. The
arbitration award and/or determination shall be final and binding and
judgment may be entered thereon in any court of competent jurisdiction.
7.5. Notices. All notices under this Agreement shall be in writing and
delivered personally or by facsimile, commercial overnight courier, or
certified or registered mail, return receipt requested, to a party at
its respective address set forth herein. Either party may change its
address by giving notice to the other party stating its desire to so
change its address.
7.6. Severability. If for any reason any provision of this Agreement shall be
deemed to be legally invalid or unenforceable, the validity of the
remainder of this Agreement shall not be affected and such provision
shall be deemed modified to the minimum extent necessary to make such
provision consistent with applicable law, and, in its modified form,
such provision shall then be enforceable and enforced.
7.7. Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter herein and
merges and supersedes all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any
rights under this Agreement, shall be effective unless in writing signed
by the party against whom it is to be enforced. Nothing express or
implied in this Agreement is intended to confer, nor shall anything
herein confer, upon any person other than the parties and the respective
successors or permitted assigns of the parties, any rights, remedies,
obligations or liabilities whatsoever.
<PAGE>
-9-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the Effective Date by the undersigned duly authorized persons.
The BigHub.com: DealTime.com:
DealTime.com Inc.
Name: /s/ PATRICK J. DEMICCO Name: /s/ DAN CIPORIN
---------------------- ---------------------
Title: CEO Title: CEO
---------------------- ---------------------
<PAGE>
EXHIBIT 10.9
STRATEGIC MARKETING AGREEMENT
THIS AGREEMENT is entered into as of the 2nd day of September, 1999 (the
"Effective Date"), by and between The BigHub.com, Inc., a Florida corporation
(the "Company"), and Biomerica, Inc., a Delaware corporation ("Biomerica"),
with reference to the following facts:
WHEREAS, the Company owns and operates a web site on the Internet at
www.thebighub.com which, among other things, is an advanced portal and contains
a metasearch engine.
WHEREAS, Biomerica desires to leverage the traffic through the Company's
website;
NOW, THEREFORE, in consideration of the covenants, agreements and
considerations herein contained, the Company and Biomerica agree as follows:
1. Services. The Company agrees that, during the Term (as defined below), it
shall provide strategic placement of advertising and marketing for Biomerica on
the Company's website, which shall include permanent, perpetual and continuous
advertising on the Company's website and continuous banners on and links from
its website to Biomerica' website (the "Services"). All advertising and banners
shall be pre-approved by Biomerica.
2. Compensation. In consideration for the Services, Biomerica shall issue to
the Company a common stock warrant to purchase 250,000 shares of Biomerica's
restricted common stock with an exercise price equal to $5.00 per share. The
Company's right to exercise the warrant shall vest pro rata over a period of
three (3) years with one-third of the shares vesting on the first, second and
third anniversaries of the date of grant; provided, however, that it shall fully
vest immediately prior to a public offering of the Company's common stock. The
warrant shall have an exercise period of five (5) years commencing on the date
that the Company shall begin providing the Services to Biomerica.
3. Representations and Warranties. Each party to this Agreement represents and
warrants to the other party that:
(a) such party has the full corporate right, power and authority to
enter into this Agreement and to perform the acts required of it hereunder;
(b) the execution of this Agreement by such party, and the
performance by such party of its obligations and duties hereunder, do not and
will not violate such party's charter documents or any agreement to which such
party is a party or by which it is otherwise bound; and
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(c) when executed and delivered by such party, this Agreement will
constitute the legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms.
4. Term and Termination.
(a) The term of this Agreement shall commence on the date that the
Services start and shall, unless sooner terminated as provided below, remain
effective for an initial term of five (5) years (the "Initial Term"). After the
Initial Term, this Agreement shall automatically be extended for successive
additional five-year periods (each an "Extension Term"), unless otherwise
terminated by either party by giving written notice to the other party of its
intent not to extend not less than thirty (30) days prior to the end of the
Initial Term or any Extension Term then in effect. As used herein, the "Term"
shall mean the Initial Term and any Extension Term(s). Within 60 days of the
prior to the expiration of the Initial Term and each Extension Term, the parties
shall negotiate in good faith the compensation to be paid to the Company for
such year.
(b) Notwithstanding the foregoing, this Agreement may be terminated
at any time by either party, effective immediately upon notice, if the other
party: (i) becomes insolvent; (ii) files a petition in bankruptcy; (iii) makes
an assignment for the benefit of its creditors; or (iv) breaches its obligations
of confidentiality set forth in Section 5 below. Either party may terminate this
Agreement, effective upon thirty (30) days notice, in the event that the other
party breaches any of its representations, warranties, covenants or agreements
contained herein which breach is not remedied within thirty (30) days following
written notice to such party.
(c) Any termination pursuant to this Section 4 shall be without any
liability or obligation of the terminating party, other than with respect to any
breach of obligations under this Agreement prior to termination. The provisions
in Sections 5 and 6 shall survive any termination or expiration of this
Agreement.
Upon any termination of this Agreement, each party shall promptly
deliver to the other party all Confidential Information (defined below) and
property belonging to the other party that is in its possession or under its
control, and neither party shall retain copies or reproductions of such
Confidential Information.
5. Confidentiality and Non-Circumvention.
(a) Each party acknowledges and agrees that it will have access to or
be provided with confidential information of the other party during the term of
this Agreement. As used herein, the term "Confidential Information" shall mean
any and all proprietary or confidential information of a party, including,
without limitation such party's business plan, business presentation or related
proprietary and financial information as well as other
2
<PAGE>
confidential or proprietary information of such party regarding such party's
business, plans, financial results and statements, markets, projected
activities, customers and results of operations, requirements and sources,
contracts, means, methods and processes of providing services, copyrights,
patents, trademarks, trade secrets, and financial information.
(b) Each party agrees to keep the Confidential Information of the
other party in the strictest confidence, and agrees that it will not, directly
or indirectly, publish or disclose, or authorize the publication or disclosure
of, or assist any third party in publishing or disclosing, any Confidential
Information to anyone other than its employees or consultants, but only to the
extent necessary for the fulfillment of its obligations under this Agreement and
subject in each such case to the such party using its best efforts to ensure
that the persons to whom Confidential Information is disclosed keep such
information confidential and do not use such Confidential Information except for
the purposes for which the disclosure is made. Each party agrees to comply with
the other party's policies and regulations, as may be reasonably established
from time to time, for the protection of its Confidential Information.
(c) Each party's confidentiality obligations shall continue with
respect to each item of Confidential Information, including after the
termination of this Agreement, until such time as such party can show that any
such item of Confidential Information (i) has legally and properly entered the
public domain through a source other than its own and through no fault of its
own, (ii) has legally and properly been received from an unrelated third party
through no breach of any agreement with the other party and without an
obligation to keep it confidential, (iii) was known to such party or was in such
party's possession prior to the receipt of such item of Confidential Information
from the other party, (vi) was independently developed by one party without
reference to the Confidential Information received hereunder.
(d) Each party acknowledges that the other party's Confidential
Information is of a special, unique and extraordinary character and for that
reason the other party will be irreparably damaged in the event that the
confidentiality or non-circumvention obligations imposed upon it, as set forth
herein, are not specifically enforced. Accordingly, each party agrees that the
other party shall be entitled, at its election, to institute and prosecute
proceedings against it, as set forth herein, in any court of competent
jurisdiction, either at law or equity, to: (a) obtain damages for breach of the
obligations hereunder; (b) enforce specific performance of said obligations, or
both. Such remedies are cumulative and not exclusive and shall be in addition to
any and all other remedies which the other party may have, at law or in equity,
in the event the a party breaches any of its obligations hereunder. The parties
hereto confirm that the covenants in this Agreement are expressly deemed to
cover acts of negligence and any inadvertent disclosure or violation of the
terms herein.
6. Independent Contractor Relationship. This Agreement shall in no way be
construed to constitute either party as a partner, joint venturer, agent, or
employee of the other party, and neither party shall act or attempt to act or
represent itself, directly or by implication, as
3
<PAGE>
a partner, joint venturer, agent or employee of the other party. Neither party
nor any of its respective employees shall have any authority to enter into
contracts, make commitments or otherwise bind the other party to any obligations
without the other party's prior written consent.
7. Miscellaneous.
(a) This Agreement contains the complete and exclusive agreement
between the parties with respect to the subject matter hereof, superseding and
replacing any and all prior agreements, communications, and understandings, both
written and oral, regarding such subject matter. This Agreement may only be
modified, or any rights under it waived, by a written document executed by both
parties.
(b) Neither this Agreement nor any of its provisions are assignable
by either of the contracting parties. This Agreement shall inure to the benefit
of and be binding upon their respective successors in interest and shall extend
to their controlled corporations, partnerships, trusts, proprietorships,
affiliates, and agents.
(c) This Agreement will be governed by and construed in accordance
with the laws of the State of California, without reference to conflicts of laws
rules, and without regard to its location of execution or performance.
(d) If any provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the maximum extent
permissible, and the other provisions of this Agreement will remain in force.
(e) All notices, requests and other communications called for by this
Agreement shall be deemed to have given upon receipt if made by mail, courier or
personal delivery, or immediately if made by telecopy or electronic (confirmed
by concurrent written notice sent first-class U.S. mail, postage prepaid):
The BigHub.com, Inc.: Biomerica, Inc.:
-------------------- ---------------
2939 Moss Rock 1533 Monrovia Avenue
Suite 100 Newport Beach, California 92663
San Antonio, Texas 78230 Facsimile: (949) 722-6674
Facsimile: (210) 979-6336 Attn: Zachary Irani, President/CEO
Attn: Patrick J. DeMicco, President/CEO
or to such other addresses as either party shall specify to the other. Notice
by any other means shall be deemed made when actually received by the party to
which notice is provided.
(f) Except for matters covered by Section 5 above, all disputes
arising out of
4
<PAGE>
or in connection with this Agreement shall be finally settled under the Rules of
American Arbitration Association ("AAA") by one or more arbitrators appointed in
accordance with said Rules. The place of arbitration shall be Orange County,
California. The parties hereby renounce any right of recourse which they may
have before the court of any jurisdiction except to obtain preliminary or
injunctive relief or enforce an award of the arbitrator.
If any award rendered by AAA in accordance with this arbitration
clause would not be capable of being executed in the jurisdiction of a party
against whom a claim for payment is made or where that party resides or carries
on business, neither the award nor the said arbitration clause shall bar a party
hereto from taking action before the courts that have jurisdiction over such
other party.
(g) In the event that any party shall bring an action or arbitration
in connection with the performance, breach or interpretation hereof, then the
prevailing party in such action, as determined by the court or other body having
jurisdiction, shall be entitled to recover from the losing party in such action,
as determined by the court or other body having jurisdiction, all reasonable
costs and expenses of litigation or arbitration, including reasonable attorneys'
fees, court costs, costs of investigation and other costs reasonably related to
such proceeding, in such amounts as may be determined in the discretion of the
court or other body having jurisdiction.
(h) The various section headings are inserted for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement or any section hereof.
(i) No failure of either party to exercise or enforce any of its
rights under this Agreement will act as a waiver of such rights.
(j) This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute a single instrument. Execution and
delivery of this Agreement may be evidenced by facsimile transmission.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first written above.
THE BIGHUB.COM, INC. BIOMERICA, INC.
By: /s/ Patrick J. DeMicco By: /s/ Zackary Irani
---------------------- ------------------
Patrick J. DeMicco Zachary Irani
President and CEO President and CEO
5
<PAGE>
EXHIBIT 10.10
AFFILIATE AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of September, 1999 (the
"Effective Date"), by and between The BigHub.com, Inc., a Florida corporation
(the "Company"), and The BigStore.com, Inc., a Delaware corporation
("BigStore"), with reference to the following facts:
WHEREAS, the Company owns and operates a web site on the Internet at
www.thebighub.com which, among other things, is an advanced portal and contains
a metasearch engine.
WHEREAS, the Company is creating a network of "Big" affiliates which,
among other things, will enable the Company and such affiliates to leverage
branding, marketing and user/consumer information.
WHEREAS, BigStore desires to become an affiliate within the Company's
network of "Big" affiliates;
NOW, THEREFORE, in consideration of the covenants, agreements and
considerations herein contained, the Company and BigStore agree as follows:
1. Services. The Company hereby agrees that BigStore shall be, during the
Term hereof, an affiliate of the Company. In this regard, it shall provide
strategic placement of advertising and marketing for the BigStore on the
Company's website, which shall include permanent, perpetual and continuous
advertising on the Company's website and continuous banners on and links from
its website to BigStore's website. All advertising and banners shall be pre-
approved by BigStore. The Company further agrees to promote BigStore throughout
the Company's website along with its other "Big" affiliates and make available
to the BigStore those services and benefits provided to the other affiliates
(the "Services"). The Company agrees that the Services shall commence concurrent
with the BigStore's official launch of its website.
2. Compensation. In consideration for the Services, BigStore agrees that,
commencing with the official launch of the BigStore's website and continuing
through the Term, it shall pay to the Company a monthly fee according to the
following schedule:
Year One Monthly Fee Year Two Monthly Fee Year Three Monthly Fee
-------------------- -------------------- ----------------------
$ 50,000 $100,000 $125,000
The monthly fee shall be due and payable in advance on the first business
day of each month. In the event that any payment due hereunder is not paid
within five (5) business days of the date due, then the Company shall have the
right to charge a five percent (5%) late fee.
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<PAGE>
3. Representations and Warranties. Each party to this Agreement represents
and warrants to the other party that:
(a) such party has the full corporate right, power and authority to
enter into this Agreement and to perform the acts required of it hereunder;
(b) the execution of this Agreement by such party, and the
performance by such party of its obligations and duties hereunder, do not and
will not violate such party's charter documents or any agreement to which such
party is a party or by which it is otherwise bound; and
(c) when executed and delivered by such party, this Agreement will
constitute the legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms.
4. Term and Termination.
(a) The term of this Agreement shall commence on the date that the
Services start and shall, unless sooner terminated as provided below or as
otherwise agreed, remain effective for an initial term of three (3) years (the
"Initial Term"). After the Initial Term, this Agreement shall automatically be
extended for successive additional three-year periods (each an "Extension
Term"), unless otherwise terminated by either party by giving written notice to
the other party of its intent not to extend not less than sixty (60) days prior
to the end of the Initial Term or any Extension Term then in effect. As used
herein, the "Term" shall mean the Initial Term and any Extension Term(s). The
compensation to be paid to the Company for each Extension Term shall be at the
current rate, unless prior to the commencement of each Extension Term, the
parties negotiate new compensation hereunder in good faith.
(b) Notwithstanding the foregoing, this Agreement may be terminated
at any time by either party, effective immediately upon notice, if the other
party: (i) becomes insolvent; (ii) files a petition in bankruptcy; (iii) makes
an assignment for the benefit of its creditors; or (iv) breaches its obligations
of confidentiality set forth in Section 5 below. Either party may terminate this
Agreement, effective upon thirty (30) days notice, in the event that the other
party breaches any of its representations, warranties, covenants or agreements
contained herein which breach is not remedied within thirty (30) days following
written notice to such party.
(c) Any termination pursuant to this Section 4 shall be without any
liability or obligation of the terminating party, other than with respect to any
breach of obligations under this Agreement prior to termination. The provisions
in Sections 5 and 6 shall survive any termination or expiration of this
Agreement.
Upon any termination of this Agreement, each party shall promptly
deliver to the
2
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other party all Confidential Information (defined below) and property belonging
to the other party that is in its possession or under its control, and neither
party shall retain copies or reproductions of such Confidential Information.
5. Confidentiality and Non-Circumvention.
(a) Each party acknowledges and agrees that it will have access to or
be provided with confidential information of the other party during the term of
this Agreement. As used herein, the term "Confidential Information" shall mean
any and all proprietary or confidential information of a party, including,
without limitation such party's business plan, business presentation or related
proprietary and financial information as well as other confidential or
proprietary information of such party regarding such party's business, plans,
financial results and statements, markets, projected activities, customers and
results of operations, requirements and sources, contracts, means, methods and
processes of providing services, copyrights, patents, trademarks, trade secrets,
and financial information.
(b) Each party agrees to keep the Confidential Information of the
other party in the strictest confidence, and agrees that it will not, directly
or indirectly, publish or disclose, or authorize the publication or disclosure
of, or assist any third party in publishing or disclosing, any Confidential
Information to anyone other than its employees or consultants, but only to the
extent necessary for the fulfillment of its obligations under this Agreement and
subject in each such case to the such party using its best efforts to ensure
that the persons to whom Confidential Information is disclosed keep such
information confidential and do not use such Confidential Information except for
the purposes for which the disclosure is made. Each party agrees to comply with
the other party's policies and regulations, as may be reasonably established
from time to time, for the protection of its Confidential Information.
(c) Each party's confidentiality obligations shall continue with
respect to each item of Confidential Information, including after the
termination of this Agreement, until such time as such party can show that any
such item of Confidential Information (i) has legally and properly entered the
public domain through a source other than its own and through no fault of its
own, (ii) has legally and properly been received from an unrelated third party
through no breach of any agreement with the other party and without an
obligation to keep it confidential, or (iii) was known to such party or was in
such party's possession prior to the receipt of such item of Confidential
Information from the other party.
(d) Each party acknowledges that the other party's Confidential
Information is of a special, unique and extraordinary character and for that
reason the other party will be irreparably damaged in the event that the
confidentiality or non-circumvention obligations imposed upon it, as set forth
herein, are not specifically enforced. Accordingly, each party agrees that the
other party shall be entitled, at its election, to institute and prosecute
proceedings against it, as set forth herein, in any court of competent
jurisdiction, either at law or equity, to:
3
<PAGE>
(a) obtain damages for breach of the obligations hereunder; (b) enforce specific
performance of said obligations, or both. Such remedies are cumulative and not
exclusive and shall be in addition to any and all other remedies which the other
party may have, at law or in equity, in the event the a party breaches any of
its obligations hereunder. The parties hereto confirm that the covenants in this
Agreement are expressly deemed to cover acts of negligence and any inadvertent
disclosure or violation of the terms herein.
6. Independent Contractor Relationship. This Agreement shall in no way be
construed to constitute either party as a partner, joint venturer, agent, or
employee of the other party, and neither party shall act or attempt to act or
represent itself, directly or by implication, as a partner, joint venturer,
agent or employee of the other party. Neither party nor any of its respective
employees shall have any authority to enter into contracts, make commitments or
otherwise bind the other party to any obligations without the other party's
prior written consent.
7. Miscellaneous.
(a) This Agreement contains the complete and exclusive agreement
between the parties with respect to the subject matter hereof, superseding and
replacing any and all prior agreements, communications, and understandings, both
written and oral, regarding such subject matter. This Agreement may only be
modified, or any rights under it waived, by a written document executed by both
parties.
(b) This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns.
(c) This Agreement will be governed by and construed in accordance
with the laws of the State of California, without reference to conflicts of laws
rules, and without regard to its location of execution or performance.
(d) If any provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the maximum extent
permissible, and the other provisions of this Agreement will remain in force.
4
<PAGE>
(e) All notices, requests and other communications called for by this
Agreement shall be deemed to have given upon receipt if made by mail, courier or
personal delivery, or immediately if made by telecopy or electronic (confirmed
by concurrent written notice sent first-class U.S. mail, postage prepaid):
The BigHub.com, Inc.: The BigStore, Inc.:
-------------------- ------------------
2939 Moss Rock 3388 Via Lido
Suite 100 Newport Beach, California 92663
San Antonio, Texas 78230 Facsimile: 949-675-5287
Facsimile: (210) 979-6336 Attn: President
Attn: Patrick J. DeMicco, President/CEO
or to such other addresses as either party shall specify to the other. Notice
by any other means shall be deemed made when actually received by the party to
which notice is provided.
(f) Except for matters covered by Section 5 above, all disputes
arising out of or in connection with this Agreement shall be finally settled
under the Rules of American Arbitration Association ("AAA") by one or more
arbitrators appointed in accordance with said Rules. The place of arbitration
shall be Orange County, California. The parties hereby renounce any right of
recourse which they may have before the court of any jurisdiction except to
obtain preliminary or injunctive relief or enforce an award of the arbitrator.
If any award rendered by AAA in accordance with this arbitration
clause would not be capable of being executed in the jurisdiction of a party
against whom a claim for payment is made or where that party resides or carries
on business, neither the award nor the said arbitration clause shall bar a party
hereto from taking action before the courts that have jurisdiction over such
other party.
(g) In the event that any party shall bring an action or arbitration
in connection with the performance, breach or interpretation hereof, then the
prevailing party in such action, as determined by the court or other body having
jurisdiction, shall be entitled to recover from the losing party in such action,
as determined by the court or other body having jurisdiction, all reasonable
costs and expenses of litigation or arbitration, including reasonable attorneys'
fees, court costs, costs of investigation and other costs reasonably related to
such proceeding, in such amounts as may be determined in the discretion of the
court or other body having jurisdiction.
(h) The various section headings are inserted for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement or any section hereof.
5
<PAGE>
(i) No failure of either party to exercise or enforce any of its
rights under this Agreement will act as a waiver of such rights.
(j) This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute a single instrument. Execution and
delivery of this Agreement may be evidenced by facsimile transmission.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first written above.
THE BIGHUB.COM, INC. THE BIGSTORE.COM, INC.
By: /s/ Patrick J. DeMicco By: /s/Tracy Nolan
----------------------- -------------------------
Patrick J. DeMicco Name: Tracy Nolan
------------------------
President and CEO Title: President/COO
-----------------------
6
