As filed with the Securities and Exchange Commission on January 7, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INFOCAST CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Nevada 7371 84-1460887
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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One Richmond Street West
Suite 902
Toronto, Ontario M5H 3W4
(416) 867-1681
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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James Leech
Chief Executive Officer
InfoCast Corporation
One Richmond Street West
Suite 902
Toronto, Ontario M5H 3W4
(416) 867-1681
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Copies to:
Jeffrey S. Spindler, Esq.
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
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If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule
434, check the following box. / /
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed Maximum
Title of Each Class of Securities Amount to be Maximum Offering Aggregate Offering Amount of
to Be Registered Registered Price Per Share Price Registration Fee
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Common Stock, $.001 par value 12,452,336 $7.44(1) $92,645,380(1) $24,458.38
("Common Stock").....................
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended, based on the
average of the bid and asked prices of the Common Stock on the OTC
Bulletin Board on December 31, 1999.
-----------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JANUARY 7, 2000
Prospectus
12,452,336 Shares of Common Stock
INFOCAST CORPORATION
The information in this prospectus is not complete and may be changed.
You may not sell the Common Stock until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not an
offer to sell the Common Stock and it is not soliciting an offer to buy the
Common Stock in any state where the offer or sale is not permitted.
The selling stockholders listed on Pages 48 to 53 of this prospectus
are offering and selling up to 12,452,336 shares of Common Stock. All proceeds
from the sale of the Common Stock under this prospectus will go to the selling
stockholders. We will not receive any proceeds from the sale of such Common
Stock.
Our Common Stock is traded under the symbol "IFCC" on the OTC Bulletin
Board. The last reported sale price on the OTC Bulletin Board for our Common
Stock on December 22, 1999 was $7.75 per share.
Investing in the Common Stock involves a high degree of risk.
See "Risk Factors" beginning on page 10.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is January 7, 2000
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We will file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC"). You may read and copy any document we file at the SEC's public
reference room at the following locations:
- Main Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
- Regional Public Reference Room
75 Park Place, 14th Floor
New York, New York 10007
- Regional Public Reference Room
Northwestern Atrium Center
500 West Madison Street, Suite 1400
Chicago, Illinois 60661-2511
You may obtain information on the operation of the SEC's
public reference rooms by calling the SEC at (800) SEC-0330.
We are required to file these documents with the SEC
electronically. You can access the electronic versions of these filings on the
Internet at the SEC's web site, located at http://www.sec.gov.
We have included this prospectus in our registration statement
that we filed with the SEC (the "Registration Statement"). The Registration
Statement provides additional information that we are not required to include in
the prospectus. You can receive a copy of the entire Registration Statement as
described above. Although this prospectus describes the material terms of
certain contracts, agreements and other documents filed as exhibits to the
Registration Statement, you should read the exhibits for a more complete
description of the document or matter involved.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this prospectus are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934
and are subject to the safe harbor created thereby. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company or we "believe," "anticipate,"
"estimate," "expect" or words of similar import as they relate to the Company or
the Company's management. Similarly, statements that describe the Company's
future plans, objectives or goals are forward-looking statements. Such
forward-looking statements are subject to certain risks and uncertainties,
including those described in the section captioned "Risk Factors" below.
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TABLE OF CONTENTS
Page
Prospectus Summary................................. 7
Risk Factors....................................... 10
Use of Proceeds.................................... 17
Dividend Policy.................................... 17
Market Price of the
Registrant's Common Equity and
Related Stockholder Matters..................... 17
Selected Financial Data............................ 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................... 19
Business........................................... 25
Glossary........................................... 37
Management......................................... 39
Security Ownership of Certain Beneficial
Owners and Management........................... 44
Certain Relationships and Related Transactions..... 47
Selling Shareholders............................... 48
Description of Capital Stock....................... 54
Quantitative and Qualitative Disclosures
about Market Risk............................... 55
Plan of Distribution............................... 55
Legal Matters...................................... 56
Experts............................................ 56
Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure.......... 56
Indemnification of Directors and Officers.......... 57
Index to Financial Statements and Exhibits......... F-1
5
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[INSIDE COVER OF PROSPECTUS]
This prospectus includes trademarks of entities other than InfoCast Corporation,
which have reserved all rights with respect to their respective trademarks.
6
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PROSPECTUS SUMMARY
As used in this prospectus, unless the context otherwise requires, the
terms "we," "us" or "Company" mean InfoCast Corporation and its subsidiaries.
This summary highlights information contained elsewhere in this prospectus and
is not complete and may not contain all the information you should consider
before investing in the common stock. You should read the entire prospectus
carefully. All share and per share data in this prospectus give retroactive
effect to the stock split effected on October 19, 1998. Certain technical terms
used in this prospectus are defined in the Glossary beginning on page 37.
The Company
We are a development stage company that is in the process of developing the
infrastructure to enable us to host both our own customized and third-party
software applications that can be accessed remotely by businesses and their
employees. This infrastructure will consist of: computer hardware purchased from
third parties; software applications; and communication connections over private
and public networks, including the Internet. We plan to provide our customers
with access to our infrastructure and hosted applications on a per use basis.
Companies providing such services have recently come to be known as application
service providers or "ASPs."
Traditionally, businesses have had to purchase their own computing systems,
including hardware and software, as well as hire, train and retain highly
skilled employees to operate and maintain these systems, all of which require
significant capital and ongoing operating expenditures. By outsourcing these
functions to an application service provider, an enterprise will be able to:
o Reduce upfront and ongoing capital expenditures;
o Reduce its investment in information technology personnel;
o Access up-to-date, highly scalable, reliable and flexible
technology;
o Focus its resources on its core business by outsourcing a
non-core function; and
o Potentially shorten implementation time for new computer systems.
In order to host our customized and third-party software applications, we
plan to establish a network of strategically placed data centers, which we refer
to as information hubs or i-Hubs. We expect each installation to be implemented
on Sun Microsystems Inc. servers using Sun Solaris, Netscape and Java-related
technologies, which we believe will provide a high level of reliability,
scalability and performance. We expect that these information hubs will deliver
information to information users, including businesses and their employees and
customers worldwide, in real-time, in any format - data, voice or animation,
through satellite, cable or private or public telecommunications networks,
including the Internet. To date, we have installed two information hubs located
in Calgary and Toronto, Canada and have an agreement with AT&T Canada Long
Distance Services Company ("AT&T Canada") that allows us access to AT&T Canada's
telecommunications network to connect these information hubs to customers. Our
two information hubs became commercially operational in December 1999 and we
expect to expand these information hubs and/or install additional information
hubs across North America as needed.
We intend to host third-party software applications, as well as the
following software applications that we are in the process of developing:
o Virtual Call Center - This application will permit businesses to
service inbound and outbound customer calls at any time through a customer
service representative who can be located anywhere.
o Distance Learning - This application will permit corporate and
academic learners to access training on-line, from anywhere, at any time.
o Teleworking - This application will permit businesses to enable their
employees to work via computer from remote locations.
We are currently in the testing and demonstration phase of development
with respect to these applications and currently expect that all three
applications will be commercially available by end of the fiscal year ending
March 31, 2000.
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We are incorporated under the laws of the State of Nevada. Our
principal executive offices are located at One Richmond Street West, Suite 902,
Toronto, Ontario M5H3W4, and our telephone number at that address is (416) 867-
1681.
The Offering
Common Stock offered by the Selling
Stockholders............................... 12,452,336 shares
Common Stock outstanding................... 19,054,943 shares(1)
Use of proceeds............................ We will not receive any proceeds
from the sale of the shares of
Common Stock by the Selling
Shareholders.
Risk factors............................... An investment in the Common Stock
offered hereby involves certain
risks. See "Risk Factors."
Proposed Nasdaq SmallCap Market
symbol.................................. "IFCC"
(1) Based on information available to us as of December 22, 1999. Does not
include (i) 2,250,000 shares of Common Stock reserved for issuance upon
exercise of options that have been or may be granted under our 1998
Stock Option Plan, pursuant to which options to purchase 2,075,000
shares of Common Stock have been granted; (ii) 2,000,000 shares of
Common Stock reserved for issuance upon exercise of options that have
been or may be granted under our 1999 Stock Option Plan, pursuant to
which options to purchase 1,685,000 shares of Common Stock have been
granted; (iii) 810,000 shares of Common Stock reserved for issuance
upon exercise of other outstanding options;(iv) 307,500 shares of
Common Stock reserved for issuance upon exercise of outstanding common
stock purchase warrants to purchase such shares of Common Stock and (v)
4,816,393 shares of Common Stock to be exchanged on a one-for-one basis
for shares of InfoCast Canada Corporation. Except as otherwise
indicated, all references in this Prospectus to the number of shares of
Common Stock outstanding do not include the foregoing shares.
8
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Summary Financial Information
The summary financial data set forth below are derived from our
financial statements included elsewhere in this Registration Statement and are
qualified by reference to and should be read in conjunction with such financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Registration Statement. Our financial statements as of and for the three
months ended March 31, 1999, the year ended December 31, 1998 and the period
from July 29, 1997 (inception) to December 31, 1997 have been audited by Ernst &
Young LLP, independent certified public accountants. The information as of and
for the six months ended September 30, 1999 and 1998 and for the three months
ended March 31, 1998 is unaudited and, in the opinion of our management contains
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of our financial position and results of operations at such
dates and for such periods. The results for the six months ended September 30,
1999 are not necessarily indicative of the results for the full year. The
historical results for the periods ended December 31, 1997 and 1998, March 31,
1998 and September 30, 1998 are those of Virtual Performance Systems, our
predecessor. Such historical results are not necessarily indicative of the
results of operations to be expected in the future.
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Period from
July 29,
1997
(inception)
Year ended to
Six months ended Three months ended December 31, December
September 30, March 31, 1998 31, 1997
1999 1998 1999 1998
---- ---- ---- ---- ------------ --------
Statement of
Operations Data:
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Revenues......... $ 58,464 $ 99 $ 4,478 $ 43,446 $ 43,446 $ 3,508
Expenses......... 17,206,409 89,703 3,088,399 63,067 467,318 99,669
Net loss for
the period....... 16,613,840 89,604 3,083,921 19,621 423,872 96,161
Net loss per
share............ $0.78 $0.11 $0.27 $478.56 $0.55 $2,345
Dividends
paid............ - - - - - -
Balance Sheet Data:
Total assets..... $33,201,093 $65,524 $4,025,076 $47,510 $143,467 $28,604
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9
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS HIGHLY SPECULATIVE, INVOLVES A
HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY THOSE PERSONS WHO ARE ABLE
TO AFFORD A LOSS OF THEIR ENTIRE INVESTMENT. IN EVALUATING OUR BUSINESS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN
ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS REGISTRATION STATEMENT.
RISKS RELATING TO OUR FINANCIAL CONDITION
WE ARE A NEWLY FORMED COMPANY WITH A LIMITED OPERATING HISTORY AND NO REVENUES.
Infocast Corporation was organized in December 1997. We have a very
limited operating history upon which you can evaluate us, our future performance
and our prospects. We are in the process of developing several products and
services. We have not yet sold any of these products or services on a commercial
basis. You must consider our prospects in light of the risks, expenses, delays,
problems and difficulties frequently encountered by new businesses in an
emerging and evolving industry. One of these risks is that we may not
successfully implement our business plans, which are described in more detail
below. We may not be able to successfully deal with these risks, expenses,
delays and problems.
WE HAVE A HISTORY OF CONTINUING LOSSES AND CANNOT GUARANTEE THAT WE WILL BE
PROFITABLE.
Since our founding, we have generated no revenues and incurred losses
as follows:
o $96,161 for the period from July 29, 1997 (inception) to
December 31, 1997;
o $423,872 for the year ended December 31, 1998;
o $3,083,921 for the three month period ended March 31, 1999;
and
o $16,613,840 for the six month period ended September 30, 1999.
As a result of these losses, we had an accumulated deficit of
$20,217,794 at September 30, 1999. We continue to have losses through the date
of this Registration Statement. Since we will continue to have a high level of
operating expenses and will be required to make significant up-front
expenditures in connection with the proposed development of our business, we
will continue to incur losses for at least the next 12 months. Additionally, we
may continue to incur losses until such time, if ever, as we are able to
generate sufficient revenues to finance our operations and the costs of
continuing our expansion. We cannot assure you that we will ever be able to
generate significant revenues or achieve profitable operations. For further
information, see the financial statements and the notes thereto included
elsewhere in this Registration Statement.
WE WILL NEED ADDITIONAL FINANCING.
We will need additional financing to meet our current plans for
expansion. We currently believe that we will need additional financing of at
least $15 million over the next 12 months to fund our full development plans.
Such financing may be debt or equity financing. If we incur indebtedness or
issue debt securities, we will face risks associated with incurring substantial
indebtedness, including the risks that (i) interest rates may fluctuate and (ii)
cash flow may be insufficient to pay principal and interest on any such
indebtedness. Furthermore, we cannot assure you that we will be able to obtain
additional financing on commercially reasonable terms. We may not be able to
obtain additional financing at all. If we are unable to obtain additional
financing, our ability to meet our current plans for development and expansion
will be materially adversely affected.
WE FACE POTENTIALLY LARGE ENVIRONMENTAL LIABILITIES DUE TO OUR PAST MINING
ACTIVITIES.
Prior to 1999, our sole business was mining exploration and
development. We owned 100% of Madison Mining Corporation ("Madison") and 94% of
Gold King Mines Corporation ("Gold King"). Madison controlled 1,500 acres in the
Adler Gulch mining district in Montana, owned mining and milling equipment and
certain patented and
10
<PAGE>
unpatented mineral claims. The Madison property contained several mines which
had been productive in the past, including the Cornucopia, El Fleeda, U.S.
Grant, Bamboo Chief, St. Lawrence and Silver Bell.
Gold King owned 82% of three properties including the Gold King Mines
and the Minnehaha Mine in the mining district near Silverton, Colorado. The Gold
King properties included a lease of 212 acres of patented mineral claims,
ownership of 11 unpatented mineral claims covering 29 acres and ownership of 219
acres of fee land.
In November 1998, the voters in the State of Montana approved an
initiative to ban cyanide leach processing in that State for all new open pit
gold and silver mines and to prohibit expansion of existing mines using cyanide
leaching. In our opinion, these initiatives seriously affected our future
planned operations at our mines. In late 1998, we sold our mining-related
assets.
The mining and mineral processing industries are subject to extensive
governmental regulations for the protection of the environment. These include
regulations relating to:
o air and water quality;
o mine reclamation;
o solid and hazardous waste handling and disposal; and
o the promotion of occupational safety.
Neither our current management team nor our prior management team are
aware of any environmental liabilities faced by us. However, we could be held
responsible for any environmental liabilities relating to the mining businesses
that we sold. These liabilities could be large and could have a material adverse
effect on our business, financial condition and results of operations.
WE MAY BE SUED OVER AN UNCONSUMMATED ACQUISITION.
On May 13, 1999, we signed a share purchase agreement with a company
called Applied Courseware Technology Inc. ("ACT"). Under this agreement we were
to purchase all of the outstanding shares of ACT. Since we believe that ACT did
not satisfy its representations and warranties under the share purchase
agreement, the agreement was not consummated. ACT has indicated to us that they
believe that we unlawfully terminated the agreement, and that we possess and
have access to intellectual property belonging to ACT which they believe we have
no right to use. ACT has indicated that they expect to sue us for damages.
Whether or not determined in our favor, any litigation with ACT may be expensive
to us. Such litigation may also divert the efforts of our technical and
management personnel from productive tasks, since they will be forced to focus
on the litigation. An unfavorable decision in any litigation with ACT could have
a material adverse effect on our business, financial condition and results of
operations.
RISKS RELATING TO OUR BUSINESS
THE INDUSTRY WHICH WE ARE INVOLVED IN IS A NEW ONE, AND WE DO NOT KNOW IF OUR
PRODUCTS WILL GAIN ACCEPTANCE.
As is typically the case in an emerging industry, we face high levels
of uncertainty related to demand and market acceptance for our newly-introduced
services and products. Achieving such acceptance will require us to create
awareness and demand for our services and products, and through this to attract
customers for our products and services. We cannot assure you that we will be
able to generate such awareness or demand, or that we will be able to attract
customers. Our failure to do either will have a material adverse effect on our
business, financial condition and results of operations.
11
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WE FACE SIGNIFICANT RISKS ASSOCIATED WITH OUR GROWTH STRATEGY AND RAPID
EXPANSION AND OUR BUSINESS PLANS MAY CHANGE.
We are a newly-formed company and are still in the process of
developing our products and services. We have not yet sold any of our products
or services on a commercial basis. Our ability to implement our business plan
will substantially depend on, among other things, our ability to:
o hire and retain skilled management, financial, marketing and
other personnel;
o successfully manage growth ;
o monitor our operations,
o control our costs; and
o maintain effective quality controls.
We expect to hire an additional 25 employees and, based on customer
demand, expand the capacity of our information hub network by an additional 10
hubs over the next 12 months. We cannot assure you that we will be able to hire
and retain such personnel or that we will be able to expand such capacity. If we
are unable to do so, our growth strategy will be negatively affected. Our plans
are also subject to change as a result of a number of factors, including:
o progress or delays in the development of our technologies;
o the availability of funding on commercially reasonable terms;
o changes in market conditions relating to our products and
services; and
o competitive factors relating to our products and services.
We cannot assure you that we will be able to successfully implement our
business strategy or otherwise expand our operations. We also cannot assure you
that, if our plans do change, that we will be able to successfully implement any
new plans which we may devise.
WE HAVE NOT YET ENTERED INTO THE AGREEMENTS WITH AT&T CANADA AND COLLEGE BOREAL
ON WHICH OUR BUSINESS PLANS ARE HEAVILY DEPENDENT.
We are in the process of negotiating certain agreements with AT&T
Canada and College Boreal. Our business plans depend heavily on the benefits
which we expect to receive as a result of such agreements, as well as additional
agreements we may enter into with other network and courseware providers. We
cannot assure you that we will enter into any such agreements. If we do not
enter into such agreements, we may have to delay our plans until such time as we
enter into comparable agreements with other entities. As a result, our business,
financial condition and results of operations will be materially adversely
affected.
WE FACE A GREAT DEAL OF COMPETITION FOR OUR PRODUCTS AND OUR SERVICES.
The market for our products and services is highly competitive and the
technology involved changes very rapidly. There are many companies that act as
application service providers, offering third-party application hosting to their
customers. We do not know of any other company currently offering the virtual
call center, distance learning and telework applications being developed by us.
With respect to our distance learning application, our competition
currently consists of many companies offering learning via CD-ROM and the
Internet. With respect to the virtual call center application, our competition
currently consists of the many traditional "brick and mortar" call centers. With
respect to our telework application, our competition currently consists of those
technology companies that offer remote access to a company's central computer
system.
12
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We believe that our ability to compete depends on many factors both
within and beyond our control. These include:
o the success of our marketing and sales efforts, and those of
our competitors;
o the price and reliability of our products and services, and
those of our competitors; and
o the timing and market acceptance of the products and services
being developed by us and by our competitors.
Our competitors may quickly deploy products and e-commerce technology
that could limit our expansion. Furthermore, we expect competition in the
markets which we seek to serve to increase in the future. Many of our potential
competitors have substantially greater financial, technical and marketing
resources than we do. Increased competition could materially and adversely
affect our business, financial condition and results of operations. We cannot
assure you that we will be able to compete successfully.
WE MAY NOT BE ABLE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL.
Our ability to continue to develop and market our services and products
depends, in large part, on our ability to attract and retain qualified
personnel. Competition for such personnel is intense and we cannot assure you
that we will be able to retain and attract such personnel.
WE HAVE LIMITED INTELLECTUAL PROPERTY PROTECTION.
Our success is dependent in part on intellectual property rights,
including rights having to do with information technology. Some of this
information technology is proprietary to us. This includes:
o software developed by us that comprises the learning
management system;
o a filtering engine;
o a corporate hosted e-mail service that integrates our
filtering engine with industry standard e-mail and directory
servers from Netscape and Sun Microsystems;
o a methodology that allows us to rapidly host applications from
independent software vendors on our information hub; and
o various software integration tools.
We rely on a combination of nondisclosure agreements, technical
measures, trade secret and trademark laws to protect our proprietary rights. We
do not presently hold any patents for our existing products or services and
presently have no patent applications pending. We have entered into
confidentiality agreements with our employees and anticipate that any future
employees will also enter into such agreements. We also attempt to limit access
to and distribution of proprietary information.
We cannot assure you that the steps taken by us in this regard will be
adequate to deter misappropriation of proprietary information or that we will be
able to detect unauthorized use or take appropriate steps to enforce
intellectual property rights. We cannot assure you that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology. Further, the laws of many foreign countries do not protect
our intellectual property rights to the same extent as the laws of the United
States. If we fail to protect our proprietary information, such a failure could
have a material adverse effect on our business, financial condition and results
of operations.
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WE FACE THE RISK OF OTHER PARTIES CLAIMING THAT WE INFRINGE ON THEIR
INTELLECTUAL PROPERTY.
From time to time, other parties may assert exclusive patent,
copyright, trademark and other intellectual property rights to technologies that
we use. We may need to take legal action to defend ourselves against claimed
infringements of the rights of others or to determine the scope and validity of
the proprietary rights of others. We may also need to take legal action in the
future to enforce and protect trade secrets and other intellectual property
rights which we own. Any such legal action could be costly and cause diversion
of our management's attention, either of which could have a material adverse
effect on our business, financial condition and results of operations.
Furthermore, adverse determinations in the course of such legal action
could result in several negative consequences to us, including:
o the loss of our proprietary rights;
o the imposition of significant liabilities on us (including the
possible indemnification of our customers);
o requiring us to secure licenses from other parties; or
o preventing us from manufacturing or selling our products or
services.
Any one of these consequences could have a material adverse effect on
our business, financial condition and results of operations. We have not been a
party to any such litigation to date. However, as mentioned before, ACT has
indicated that we have access to and possess intellectual property belonging to
them, and that we have no right to use or derive any benefit from such
intellectual property.
We have not conducted a formal patent search relating generally to the
technology used in our products or services. In addition, since patent
applications in the United States are not publicly disclosed until the patent
issues and foreign patent applications generally are not publicly disclosed for
at least a portion of the time that they are pending, applications may have been
filed by other parties which, if issued as patents, would relate to our products
or services.
Software comprises a substantial portion of the technology in our
products. The scope of protection accorded to patents covering software-related
inventions is evolving and is subject to a degree of uncertainty that may
increase our risk and cost if we discover the existence of patents issued to
other parties which are related to our software products, or if other parties
assert such patents against us in the future. Patents have been granted recently
on fundamental technologies in software, and patents may issue which relate to
fundamental technologies incorporated into our products or services.
WE MAY NOT BE ABLE TO KEEP UP WITH CHANGING TECHNOLOGY.
While we employ proprietary software technology and algorithms and
conduct ongoing research and development, our future success will depend in part
upon our ability to keep pace with advancing technology and evolving industry
and changing customer requirements in a cost-effective manner. We cannot assure
you that our proprietary software technology and algorithms will not be rendered
obsolete by other technology incorporating technological advances designed by
competitors that we are unable to incorporate into our products or services in a
timely manner.
The market for our products and services is characterized by rapidly
changing technologies. The rapid development of new technologies increases the
risk that current or new competitors could develop products or services that
would reduce the competitiveness of the Company's products or services. Our
success will depend to a substantial degree upon our ability to respond to
changes in technology and customer requirements. This will require us to timely
select, develop and market new products or services and enhancements on a
cost-effective basis. The development of new, technologically advanced products
or services is a complex and uncertain process, requiring high levels of
innovation.
14
<PAGE>
The introduction of new and enhanced products or services also requires
that we manage transitions from older products or services in order to minimize
disruptions to our customers and within our business. We cannot assure you that
we will be successful in developing, introducing or managing the transition to
new or enhanced products or services. We cannot assure you that any such
products or services will be responsive to technological changes or will gain
market acceptance. Our business, financial condition and results of operations
would be materially adversely affected if we are unsuccessful, or incur
significant delays, in developing and introducing such new products, services or
enhancements.
OTHER RISKS
WE HAVE NOT AND DO NOT EXPECT TO PAY DIVIDENDS.
We have not paid cash dividends on our Common Stock since our
inception. We do not intend to pay cash dividends on our Common Stock in the
foreseeable future. We intend to reinvest earnings, if any, in the development
of our business.
WE HAVE A LIMITED TRADING MARKET, AND THE PRICE OF OUR COMMON STOCK MAY BE QUITE
VOLATILE.
There is a limited public trading market for our Common Stock on the
OTC Bulletin Board. We cannot assure you that a regular trading market for our
Common Stock will ever develop or that, if developed, it will be sustained. As
is the case with the securities of many emerging companies, the market price of
our Common Stock may also be highly volatile. Factors such as (i) our operating
results and (ii) announcements by us or our competitors of new products or
services, may significantly impact the market price of our securities.
In addition, in recent years, the stock market has experienced a high
level of price and volume volatility and market prices for the securities of
many companies have experienced wide fluctuations not necessarily related to the
operating performance of such companies. Our Common Stock may also experience
such volatility.
WE ARE SUBJECT TO FOREIGN EXCHANGE RISK ON CONVERSION OF FUNDS FROM U.S. TO
CANADIAN DOLLARS, AND VICE VERSA.
We receive the proceeds from our private placements in U.S. dollars. It
is our practice to maintain all excess cash in U.S. dollars and to invest these
funds in short term, interest bearing, U.S. dollar deposits. We convert U.S.
dollars to Canadian dollars on an as-needed basis to meet Canadian dollar
expenses. We incur a significant portion of our expenses in Canadian dollars and
therefore we are exposed to fluctuations in the foreign exchange rate between
the Canadian and U.S. dollar.
WE FACE RISKS RELATED TO THE YEAR 2000.
Certain computer hardware and software is unable to appropriately
interpret the upcoming calendar Year 2000. These systems and software refer to
years in terms of their final two digits only and may interpret the year 2000 as
the year 1900 in error. Therefore, they will need to be modified prior to the
year 2000 in order to remain functional. We have established a Year 2000 program
that involves the following steps:
o assessing our key hardware and software;
o assessing Year 2000 compliance by third parties with which we
have a material relationship;
o assessing Year 2000 compliance of our applications under
development; and
o modifying and testing hardware and software in our internal
systems, where necessary.
The majority of our hardware and software has been acquired and/or
developed within the last twelve months and a Year 2000 assessment was done
prior to its acquisition or development.
15
<PAGE>
We have completed an assessment of the hardware and software in our
core business information systems and have substantially completed any necessary
modifications. We have extended the assessment and remediation process to the
hardware and software in other information systems used in our operations. We
have also extended our assessment and remediation to other areas of our business
to include hardware and software not supported by our information systems
department. We use third-party equipment, software and content, including
non-information technology systems and embedded micro-controllers, that may not
be Year 2000 compliant.
We have contacted key vendors and suppliers and other third parties
whose systems failures could potentially have a significant impact on our
operations to determine the extent to which our systems may be vulnerable. We
were referred to the Year 2000 section of their webpages.
We believe that the assessment and remediation phases of our Year 2000
conversion program are substantially complete. We have not incurred material
costs to date for such program and do not anticipate that the total cost of such
program will have a material effect on our business, results of operations or
financial condition.
Our most reasonably likely worst case scenarios regarding the Year 2000
issue would include a hardware failure, the corruption or loss of data contained
in our internal information system, and a failure affecting our key vendors,
suppliers or customers.
We have determined that we do not need a Year 2000 contingency plan at
this time.
We cannot assure you that conversion of our hardware and software will
be successful, that key third-parties will have successful conversion programs,
that our systems do not contain undetected errors or defects associated with
Year 2000 date functions, or that other factors relating to Year 2000
compliance, including but not limited to legal action, will not have a material
adverse effect on our business, results of operations or financial condition.
CORPORATE GOVERNANCE RISKS
YOU MAY BE SUBJECT TO SUBSTANTIAL DILUTION IF THE MANY SHARES OF OUR COMMON
STOCK WHICH ARE RESERVED FOR ISSUANCE PURSUANT TO OPTIONS AND WARRANTS ARE
EXERCISED, AND WE MAY FACE DIFFICULTY OBTAINING FINANCING IN THE FUTURE AS A
RESULT OF THESE OPTIONS AND WARRANTS.
We have reserved 2,250,000 shares of Common Stock for issuance pursuant
to our 1998 Stock Option Plan, pursuant to which options to purchase 2,075,000
shares of our Common Stock at an exercise price of $1.00 per share are
outstanding.
We have also reserved 2,000,000 shares of our Common Stock for issuance
pursuant to our 1999 Stock Option Plan, pursuant to which options to purchase
1,310,000 shares of our Common Stock at an exercise price of $7.00 per share and
options to purchase 375,000 shares of our Common Stock at an exercise price of
$7.05 per share are outstanding.
We have also issued options outside such plans to purchase 810,000
shares of our Common Stock at exercise prices ranging from $7.00 to $8.25 per
share and warrants to purchase an additional 307,500 shares of our Common Stock
at exercise prices ranging from$7.00 to $8.75 per share.
The existence of the outstanding options and warrants may hinder our
efforts at obtaining future financings. In addition, the exercise of any such
options or warrants in the future could dilute the net tangible book value of
our Common Stock. Further, the holders of such options and warrants may exercise
them at a time when we would otherwise be able to obtain additional equity
capital on terms more favorable to us.
THE FUTURE ISSUANCE OF SHARES OF OUR PREFERRED STOCK MAY NEGATIVELY EFFECT
HOLDERS OF OUR COMMON STOCK.
We are authorized to issue up to 100,000,000 shares of preferred stock,
$.001 par value per share. Such preferred stock may be issued in one or more
series, on such terms and with such rights, preferences and designations as our
Board of Directors may determine. Such preferred stock may be issued without
action by stockholders.
16
<PAGE>
No shares of preferred stock are currently outstanding. However, any
future issuance of preferred stock could adversely affect the rights of the
holders of Common Stock, and therefore reduce the value of our Common Stock. In
particular, specific rights granted to future holders of preferred stock could
be used to restrict our ability to merge with or sell our assets to a
third-party, thereby preserving control of InfoCast Corporation by its present
owners.
USE OF PROCEEDS
The Selling Shareholders will receive all of the proceeds from the sale
of the shares of Common Stock offered hereby. We will not receive any of the
proceeds from the sale of the shares of the Common Stock by the selling
stockholders.
DIVIDEND POLICY
We have not paid cash dividends on our Common Stock since our
inception. We do not intend to pay cash dividends on our Common Stock in the
foreseeable future. We currently intend to reinvest earnings, if any, in the
development and expansion of our business. The declaration of dividends in the
future will be at the election of our Board of Directors and will depend upon
our earnings, capital requirements and financial position, general economic
conditions and other relevant factors.
MARKET PRICE OF THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Our Common Stock is currently traded on the OTC Bulletin Board under
the symbol "IFCC." Prior to changing our name to InfoCast Corporation on
December 31, 1998, our Common Stock traded on the OTC Bulletin Board under the
symbol "GNRS." The following table sets forth the high and low prices on the OTC
Bulletin Board for the periods indicated, as reported by the OTC Bulletin Board
(as adjusted to reflect a 2 for 1 stock split effected on October 20, 1998). The
quotations are interdealer prices without adjustment for retail markups,
markdowns or commissions and do not necessarily represent actual transactions.
These prices may not necessarily be indicative of any reliable market value.
High Low
1998
Third Quarter.................................. $0.50 $0.25
Fourth Quarter................................. $5.00 $0.19
1999
First Quarter.................................. $7.00 $4.25
Second Quarter................................. $10.13 $4.50
Third Quarter.................................. $13.00 $7.00
Fourth Quarter (through December 22, 1999)..... $8.88 $5.56
On December 22, 1999, the last reported sale price of the Common Stock
on the OTC Bulletin Board was $7.75 per share.
17
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from our
financial statements included elsewhere in this Registration Statement and are
qualified by reference to and should be read in conjunction with such financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Registration Statement. Our financial statements as of and for the three
months ended March 31, 1999, the year ended December 31, 1998 and the period
from July 29, 1997 (inception) to December 31, 1997 have been audited by Ernst &
Young LLP, independent certified public accountants. The information as of and
for the six months ended September 30, 1999 and 1998 and for the three months
ended March 31, 1998 is unaudited and, in the opinion of our management contains
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of our financial position and results of operations at such
dates and for such periods. The results for the six months ended September 30,
1999 are not necessarily indicative of the results for the full year. The
historical results for the periods ended December 31, 1997 and 1998, March 31,
1998 and September 30, 1998 are those of Virtual Performance Systems. The
historical results are not necessarily indicative of the results of operations
to be expected in the future.
<TABLE>
<CAPTION>
Period from
July 29, 1997
Year ended (inception) to
Six months ended Three months ended December 31, December
September 30, March 31, 1998 31, 1997
1999 1998 1999 1998
---- ---- ---- ---- ------------ --------------
Statement of
Operations Data:
<S> <C> <C> <C> <C> <C> <C>
Revenues.............. $ 58,464 $ 99 $ 4,478 $ 43,446 $ 43,446 $ 3,508
Expenses.............. 17,206,409 89,703 3,088,399 63,067 467,318 99,669
Net loss for the
period................ 16,613,840 89,604 3,083,921 19,621 423,872 96,161
Net loss per share.... $0.78 $0.11 $0.27 $478.56 $0.55 $2,345
Dividends paid........ - - - - - -
Balance Sheet Data:
Total assets.......... $33,201,093 $65,524 $4,025,076 $47,510 $143,467 $28,604
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The consolidated financial statements of the Company are the continuing
financial statements of Virtual Performance Systems, Inc., a development stage
company and an Ontario corporation incorporated on July 29, 1997. Virtual
Performance Systems had a 100% interest in, and subsequently merged with,
Cheltenham Technologies Corporation ("Cheltenham Technologies"), an Ontario
corporation. Virtual Performance Systems has a 100% interest in Cheltenham
Interactive Corporation ("Cheltenham Interactive"), an inactive Ontario
corporation, and Cheltenham Technologies (Bermuda) Corporation ("Cheltenham
Bermuda"), a Barbados corporation that owns certain intellectual property. On
January 29, 1999, Virtual Performance Systems acquired the net assets of the
Company (formerly known as Grant Reserve Corporation), a United States
non-operating company traded on the Nasdaq OTC Bulletin Board, which had a 100%
interest in InfoCast Canada Corporation ("InfoCast Canada"). After the
acquisition, the accounting entity continued under the name of InfoCast
Corporation. InfoCast Corporation, InfoCast Canada, Virtual Performance Systems,
Cheltenham Technologies, Cheltenham Interactive and Cheltenham Bermuda are
collectively referred to in this section as the "Company."
The following discussion should be read in conjunction with the
Company's historical financial statements and notes thereto included elsewhere
in this Registration Statement.
The following discussion includes forward looking statements. Such
forward looking statements involve risks and uncertainties, including among
other things, statements regarding the Company's anticipated costs and expenses.
Such forward looking statements contain, but are not limited to, the words
"expects," "anticipates," "intends," "predicts" and similar language. The
Company's actual results may differ significantly from those projected in the
forward looking statements. Factors that might cause future results to differ
materially from those described in the forward looking statements include, but
are not limited to, those discussed in the section entitled "Risk Factors."
OVERVIEW
The Company is a development stage company that is in the process of
developing the infrastructure to enable it to host both Company-customized and
third-party software applications that can be accessed remotely by businesses
and their employees. This infrastructure will consist of: computer hardware
purchased from third parties; software applications; and communication
connections over private and public networks, including the Internet. The
Company plans to provide its customers with access to its infrastructure and
hosted applications on a per use basis. Companies providing such services have
recently come to be known as application service providers or "ASPs."
The Company has incurred operating losses since its inception in July
1997. The Company has not yet sold any products or services on a commercial
basis and has had no revenues. The Company has sustained itself through the sale
of its Common Stock and warrants to purchase Common Stock in a series of private
placements and shareholder loans. There can be no assurance that such funds will
be available in the future if additional capital is required.
The Company acquired HomeBase Work Solutions in May 1999 in exchange
for 3,400,000 shares of InfoCast Canada, which shares are exchangeable into
Common Stock of the Company. The HomeBase Work Solutions acquisition provided
the Company with the core technology for its information hub strategy. The
acquisition also introduced the telework application and third-party application
hosting initiatives to the Company, both of which will be hosted on the
Company's information hub. The virtual call center application and distance
learning library being developed by the Company will also be hosted on the
information hub.
The Company changed its fiscal year end from December 31 to March 31.
Therefore, financial statements have been prepared for the three month
transition period ended March 31, 1999.
19
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1999 VS. SIX MONTHS ENDED SEPTEMBER 30, 1998
Consulting income decreased from $99 for the six months ended September
30, 1998 to zero for the six months ended September 30, 1999. This decrease is
due to the Company's decision to no longer provide computer programming
services.
Interest income increased from zero for the six months ended September
30, 1998 to $58,464 for the six months ended September 30, 1999. The proceeds
received from the private placements in 1999 were invested in short term
deposits which generated interest income for the Company during the six month
period ended September 30, 1999, consistent with the Company's investment policy
discussed under "Risk Factors" elsewhere in this Registration Statement.
General, administrative and selling expenses increased from $35,310 for
the six months ended September 30, 1998 to $4,023,321 for the six months ended
September 30, 1999. The consolidation of the operations of HomeBase Work
Solutions for the period May 13, 1999 to September 30, 1999 accounted for
$147,000 of the increase. The Company incurred expenses of $284,000 related to
the HomeBase Work Solutions acquisition in the form of incentive compensation
paid to three key officers of HomeBase Work Solutions. The Company had
approximately seven more employees involved in general, administrative and
selling functions in the six month period ended September 30, 1999 than for the
same period ended September 30, 1998, contributing approximately $111,000 to the
increase in expenses. The Company paid consulting fees to an additional three
consultants during the six month period ended September 30, 1999 compared to the
same period ended September 30, 1998, contributing approximately $400,000 to the
increase in general, administrative and selling expenses. Investor relations
costs of $687,000 were incurred for the six month period ended September 30,
1999, $607,700 of which was spent on national media consulting services and
financial community investor relations consulting services. Additional rent
expenses of $75,500 were incurred for the two U.S. offices that were not open in
September 1998 and the expanded Toronto office space. The Company expensed
$595,083 for warrants issued for services during the six month period ended
September 30, 1999 and expensed an additional $254,149 related to common stock
issued for services during the six month period ended September 31, 1999. The
Company incurred sales and marketing expenses related to the Call Center
Learning Solutions On-Line Inc. joint venture of $103,000 during the six month
period ended September 30, 1999.
Stock option compensation expense increased from zero for the six
months ended September 30, 1998 to $9,506,548 for the six months ended September
30, 1999. This increase is due to the amortization of the deferred compensation
amount resulting from the grant of stock options to various individuals involved
in the management of the Company.
Research and development expenses increased from $52,498 for the six
months ended September 30, 1998 to $1,783,346 for the six months ended September
30, 1999. This increase is primarily due to continued efforts to develop and
expand the Company's product offerings. The Company incurred expenses of
approximately $618,000 for services related to the electronic conversion of
courseware and the Call Center Learning Solutions On-Line joint venture up to
September 30, 1999. The Company also wrote off a $95,000 receivable from Applied
Courseware Technology in September 1999 to research and development expense. The
Company had approximately six more employees involved in research and
development functions in the six month period ended September 30, 1999 than for
the same period ended September 30, 1998, contributing approximately $129,000 to
the increase in expenses. The Company paid consulting fees to an additional six
consultants during the six month period ended September 30, 1999 compared to the
same period ended September 30, 1998, contributing approximately $178,000 to the
increase in research and development expense.
Amortization expenses increased from zero for the six months ended
September 30, 1998 to $1,863,286 for the six months ended September 30, 1999.
Amortization of the acquired intellectual property and goodwill resulting from
the acquisition of HomeBase Work Solutions accounted for the majority of the
increase in the amortization expense for the period.
20
<PAGE>
Depreciation expenses increased from $1,895 for the six months ended
September 30, 1998 to $29,908 for the six months ended September 30, 1999. This
increase is a result of the acquisition of additional capital assets between
October 1, 1998 and September 30, 1999.
Deferred income taxes increased from zero for the six months ended
September 30, 1998 to $534,105 for the six months ended September 30, 1999 as a
result of the drawdown of the deferred income tax liability created by the
purchase of HomeBase Work Solutions by the Company in respect of the difference
in the tax and accounting basis of various intellectual property assets.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
The three month period ended March 31, 1999 is a transition period in
respect of the change in the Company's fiscal year end from December 31 to March
31.
Consulting income decreased from $43,446 for the three months ended
March 31, 1998 to zero for the three months ended March 31, 1999. This decrease
is due to the Company's decision to no longer provide computer programming
services.
Interest income increased from zero for the three months ended March
31, 1998 to $4,478 for the three months ended March 31, 1999. The proceeds
received from the March 1999 private placement were invested in short term
deposits, which generated interest income for the Company during the period
ended March 31, 1999. It is the Company's policy to invest all excess cash in
U.S. dollar short term interest bearing term deposits.
General, administrative and selling expenses increased from $42,494 for
the three months ended March 31, 1998 to $635,334 for the three months ended
March 31, 1999. The majority of this increase is due to the expansion of the
Company, including an increase in the number of employees and consultants
providing services to the Company, additional rent expenses of approximately
$40,000 for the two offices in the United States, opened in late 1998 and early
1999, and the additional space required in the Toronto office and additional
travel expenses of approximately $85,000. As a result of the January 1999
reverse merger, the Company incurred investor relations costs of $151,000 during
the three month period ended March 31, 1999.
Stock option compensation expense increased from zero for the three
months ended March 31, 1998 to $2,256,938 for the three months ended March 31,
1999. This increase is due to the amortization of the deferred compensation
amount resulting from the grant of 2,250,000 stock options under the Company's
1998 Stock Option Plan to various individuals involved in the management of the
Company. These stock options were granted on February 8, 1999 at a price of
$1.00 per share, expire three years from the date of grant and are subject to a
vesting period of at least six months. As of April 19, 1999, 175,000 of these
stock options were canceled due to the termination of certain individuals and
the renegotiation of employment terms, leaving a balance outstanding of
2,075,000 options.
Research and development expenses increased from $19,703 for the three
months ended March 31, 1998 to $162,914 for the three months ended March 31,
1999. The majority of this increase is due to the continued development of the
Company's technology.
Interest and loan fees expenses increased from zero for the three
months ended March 31, 1998 to $23,562 for the three months ended March 31,
1999. The interest and loan fees resulted from a short term loan received by the
Company and repaid within the three month period ended March 31, 1999.
Amortization expenses increased from zero for the three months ended
March 31, 1998 to $4,144 for the three months ended March 31, 1999. This
increase is due to the amortization of certain intellectual property rights
related to remote banking software acquired from a company owned by a
shareholder and former officer of the Company.
Depreciation expenses increased from $870 for the three months ended
March 31, 1998 to $5,507 for the three months ended March 31, 1999. This
increase is a result of the acquisition of additional capital assets from April
1, 1998 to March 31, 1999.
21
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE 156 DAY PERIOD ENDED DECEMBER 31,
1997
Consulting income increased from $3,508 for the 156 day period ended
December 31, 1997 to $43,446 for the year ended December 31, 1998. This increase
is due to the timing of the provision of one-time computer programming services,
as the Company began providing these services at the end of 1997 and continued
to provided these services in the first calendar quarter of 1998. In early 1998
the Company discontinued providing these consulting services.
General, administrative and selling expenses increased from $47,954 for
the 156 day period ended December 31, 1997 to $375,302 for the year ended
December 31, 1998. This increase is due to the expenses being incurred for the
full year ended December 31, 1998 compared to a 156 day period ended December
31, 1997 and the continuing expansion of business operations. Consulting fees
were higher in 1998 as the Company engaged additional consultants to assist in
building the management team and enhancing the business model and infrastructure
of the Company. The Company incurred higher legal costs in 1998 as a result of
legal services rendered during 1998 for the reverse takeover transaction, as
well as for the HomeBase Work Solutions acquisition, both of which were
completed in 1999.
Research and development expenses increased from $51,257 for the 156
day period ended December 31, 1997 to $88,180 for the year ended December 31,
1998. This increase is due to the expenses being incurred for the full year
ended December 31, 1998 compared to a 156 day period ended December 31, 1997 and
the continuing expansion of the Company's research and development efforts.
Depreciation expenses increased from $458 for the 156 day period ended
December 31, 1997 to $3,836 for the year ended December 31, 1998. This increase
is a result of depreciation being incurred for the full year ended December 31,
1998 compared to a 156 day period ended December 31, 1997 and the acquisition of
additional capital assets during the year ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
INCEPTION TO SEPTEMBER 30, 1999
At September 30, 1999, the Company had cash and cash equivalents of
$5,300,965 and working capital of $4,286,298. The Company's cash and cash
equivalent position has been generated through a series of equity offerings net
of development stage expenditures. The Company has not yet generated any
significant revenues.
From its inception on July 29, 1997 to January 29, 1999, Virtual
Performance Systems issued 3,624,100 shares of Common Stock for cash proceeds of
Cdn $3,732 (or $2,540 in U.S. dollars as of September 30, 1999). Pursuant to the
reverse takeover transaction on January 29, 1999, the shareholders of Virtual
Performance Systems sold their 100% interest in Virtual Performance Systems to
the Company in consideration for 1,500,000 shares of InfoCast Canada, which
shares are exchangeable into Common Stock of the Company for no additional
consideration. Such exchangeable shares have been deemed as shares of Common
Stock of the Company because they are the economic equivalent of the Company's
Common Stock. At the time of the reverse takeover, the Company (formerly Grant
Reserve Corporation) had 13,580,000 shares of Common Stock outstanding which
continued as shares of Common Stock of the continuing entity. Subsequent to the
reverse takeover and up to September 30, 1999, the Company issued 3,023,333
shares of Common Stock at $1.50 per share in a private placement in March 1999,
60,000 shares of Common Stock in consideration for consulting services in March
1999, 420,000 shares of Common Stock at $5.00 per share in a private placement
in June 1999 and 1,720,000 shares of Common Stock at $5.50 per share in a
private placement in July, August and September 1999. The Company has raised
$14,710,000 from these private placements, net of share issuance costs.
From its inception, the Company has used $6,104,000 for operating
activities before changes in non-cash working capital balances mainly as a
result of general, administrative and selling and research and development
expenditures, net of incidental revenues. The Company used a further $1,064,000
for the purchase of capital assets and software licenses, $2,975,000 on the
purchase of distribution rights and $324,000 on the placement of deposits.
The Company relied on term loans from shareholders, directors and
officers during the period from its inception to the completion of the March
1999 private placement to fund its operations. These loans were repaid as at
June 30, 1999 from the proceeds of the private placements.
22
<PAGE>
The Company is currently raising funds through a private placement of
its shares of Common Stock. In October and November 1999, the Company received
$874,500 in consideration for 159,000 shares of Common Stock, bringing the total
gross proceeds to $10,334,550 in consideration for 1,879,000 shares of Common
Stock under this current private placement. The Company may issue up to an
additional 500,000 shares of Common Stock for an aggregate offering price of
$3,000,000 in such offering. The Company expects to use these proceeds for the
following:
o The Company plans to continue to invest in the research and
development of its telework and information hub products and
services and anticipates spending approximately $4,800,000 on
these efforts from October 1, 1999 to September 30, 2000. The
Company anticipates that it will begin earning revenue and
collecting cash from sales of the telework and information hub
products and services in the third quarter of the current
fiscal year which will help fund the cash requirements of this
division but there can be no assurance that it will do so.
o The Company will contribute approximately $540,000 from
October 1, 1999 to March 31, 2000 to fund the marketing, sales
and technical support efforts of the Call Center Learning
Solutions On-Line joint venture, of which it is a 50% owner.
The Company has entered into an agreement with Call Center
Learning Solutions Inc. to form a new corporation, Call Center
Learning Solutions On-Line. This new corporation will develop,
own and exploit courseware in an electronic format capable of
electronic distribution.
o The Company will use approximately $1,000,000 from October 1,
1999 to September 30, 2000 to enhance and complete the
development of its virtual call center application.
o The Company expects to use approximately $800,000 from October
1, 1999 to March 31, 2000 in the development and electronic
conversion of courseware for the distance learning
application.
o The Company will use the remaining capital resources to fund
possible complementary acquisitions, develop new technologies,
and other corporate and working capital needs.
At November 30, 1999, the Company had approximately $3,828,000 of cash
and cash equivalents on hand. The Company believes that this cash as well as the
additional proceeds of up to $3,000,000 expected to be received by the Company
from the completion of the current Regulation S financing by the end of January
2000 will be sufficient to support the Company's growth for approximately the
next seven months. Based on its current plans, the Company anticipates that it
will begin generating revenue within the next six months. This revenue is
expected to provide the Company with additional cash resources to support the
Company's development until approximately September 2000. In the event the
current Regulation S financing is not concluded, the Company will curtail its
development plans commencing in January 2000 and reduce expense levels
materially. In such event, the Company believes that its current cash reserves
will support limited activities until January 2001. The Company will be required
to seek additional funds and there can be no assurance that any financing will
be available on terms acceptable to the Company or at all.
On a long term basis, the Company will need to raise additional funds
through private or public financings, strategic or other relationships. In
October 1999, the Company entered into an agreement with Rothschild pursuant to
which Rothschild is to assist the Company in raising up to $50 to $75 million
over the next six months. See "Business - History of the Company." There can be
no assurance that the Company will be able to raise any additional funds.
YEAR 2000 COMPLIANCE
Certain computer hardware and software is unable to appropriately
interpret the upcoming calendar Year 2000. These systems and software refer to
years in terms of their final two digits only and may interpret the year 2000 as
the year 1900 in error. Therefore, they will need to be modified prior to the
year 2000 in order to remain functional. The Company has established a Year 2000
program that involves assessing the Company's key hardware and software,
assessing Year 2000 compliance by third parties with which the Company has a
material relationship, assessing Year 2000 compliance of the applications being
developed by the Company, and modifying and testing hardware and software in the
Company's internal systems, where necessary. The majority of the Company's
hardware and software
23
<PAGE>
has been acquired and/or developed within the last twelve months and a Year 2000
assessment was done prior to the acquisition or development.
The Company has completed an assessment of the hardware and software in
its core business information systems and has substantially completed the
necessary modifications. The Company has extended the assessment and remediation
process to the hardware and software in other information systems used in its
operations. The Company has also extended its assessment and remediation to
other areas of its business to include hardware and software not supported by
the Company's information systems department. The Company utilizes third-party
equipment, software and content, including non-information technology systems
and embedded micro-controllers that may not be Year 2000 compliant.
The Company has contacted key vendors and suppliers and other third
parties whose systems failures could potentially have a significant impact on
the Company's operations to determine the extent to which its systems may be
vulnerable and was referred to the Year 2000 section of their webpage.
The Company believes that the assessment and remediation phases of its
Year 2000 conversion program is substantially complete. The Company has not
incurred material costs to date for such program and does not anticipate that
the total cost of such program will have a material effect on its business,
results of operations or financial condition.
The most reasonably likely worst case scenarios regarding the Year 2000
issue would include a hardware failure, the corruption or loss of data contained
in the Company's internal information system, and a failure affecting the
Company's key vendors, suppliers or customers.
The Company has determined that there is no need for a Year 2000
contingency plan at this time.
There can be no assurance that conversion of the Company's hardware and
software will be successful, that key third parties will have successful
conversion programs, that the Company's systems do not contain undetected errors
or defects associated with Year 2000 date functions, or that other factors
relating to Year 2000 compliance, including but not limited to litigation, will
not have a material adverse effect on the Company's business, results of
operations or financial condition.
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BUSINESS
General
We are a development stage company that is in the process of developing
the infrastructure to enable us to host both our own customized and third-party
software applications that can be accessed remotely by businesses and their
employees. This infrastructure will consist of: computer hardware purchased from
third parties; software applications; and communication connections over private
and public networks, including the Internet. We plan to provide our customers
with access to our infrastructure and hosted applications on a per use basis.
Companies providing such services have recently come to be known as application
service providers or "ASPs."
Traditionally, businesses have had to purchase their own computing
systems, including hardware and software, as well as hire, train and retain
highly skilled employees to operate and maintain these systems, all of which
require significant capital and ongoing operating expenditures. By outsourcing
these functions to an application service provider, an enterprise will be able
to:
o Reduce upfront and ongoing capital expenditures;
o Reduce its investment in information technology personnel;
o Access up-to-date, highly scalable, reliable and flexible
technology;
o Focus its resources on its core business by outsourcing a
non-core function; and
o Potentially shorten implementation time for new computer systems.
In order to host our customized and third-party software applications,
we plan to establish a network of strategically placed data centers, which we
refer to as information hubs or i-Hubs. We expect each installation to be
implemented on Sun Microsystems Inc. servers using Sun Solaris, Netscape and
Java-related technologies, which we believe will provide a high level of
reliability, scalability and performance. We expect that these information hubs
will deliver information to information users, including businesses and their
employees and customers worldwide, in real-time, in any format - data, voice or
animation, through satellite, cable or private or public telecommunications
networks, including the Internet. To date, we have installed two information
hubs located in Calgary and Toronto, Canada and have an agreement with AT&T
Canada Long Distance Services Company ("AT&T Canada") that allows us access to
AT&T Canada's telecommunications network to connect these information hubs to
customers. Our two information hubs became commercially operational in December
1999 and we expect to expand these information hubs and/or install additional
information hubs across North America as needed.
We intend to host third-party software applications, as well as the
following software applications that we are in the process of developing:
o Virtual Call Center - This application will permit businesses to
service inbound and outbound customer calls at any time through a customer
service representative who can be located anywhere.
o Distance Learning - This application will permit corporate and
academic learners to access training on-line, from anywhere, at any time.
o Teleworking - This application will permit businesses to enable their
employees to work via computer from remote locations.
We are currently in the testing and demonstration phase of development
with respect to these applications and currently expect that all three
applications will be commercially available by end of the fiscal year ending
March 31, 2000.
We are a development stage company. Since the inception of our
predecessor, Virtual Performance Systems Inc., in July 1997, we have not sold
any products or services on a commercial basis and have had no revenues. We
incurred losses of $96,161 for the period from July 29, 1997 (inception) to
December 31, 1997, $423,872 for the year ended December 31, 1998, $3,083,921 for
the three month period ended March 31, 1999 and $16,613,840 for the six month
period ended September 30, 1999, resulting in an accumulated deficit of
$20,217,794 at September 30, 1999. Losses are continuing through the date of
this Registration Statement and we anticipate that losses will continue for the
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foreseeable future. In addition, the market for our expected services is highly
competitive and subject to rapid technological change. We expect to face
significant competition in the future. As a development stage company in a new
and rapidly evolving market, we face risks and uncertainties relating to our
ability to successfully implement our business plan, which are described in more
detail in the section entitled "Risk Factors". We may not successfully address
all of these issues.
HISTORY OF THE COMPANY
We were incorporated on December 23, 1997. Prior to 1999, our sole
business was mining and we held certain mineral interests in the United States.
Due to changes in the United States regulatory environment, our management
determined that it would be appropriate for us to sell all of our mining assets,
which represented substantially all of our assets. We completed the sale of our
mining assets in the fourth quarter of 1998. During 1998, we changed our name
from Grant Reserve Corporation to InfoCast Corporation. Prior to changing our
name and subsequent to the sale of our mining assets, we were a publicly-traded
company whose common stock was quoted on the OTC Bulletin Board under the symbol
"GNRS" without any ongoing business operations. During the year ended December
31, 1998, we issued 5,000,000 pre-split shares of Common Stock to Sheridan
Reserve Incorporated for the acquisition of two mining interests and in April
1998 issued 1,000,000 pre-split units at a price of $0.50 per unit in a private
placement financing pursuant to Rule 504 of Regulation D of the Securities Act
of 1933, as amended. Each unit consisted of one pre-split share of Common Stock
and one pre-split Common Stock purchase warrant with an exercise price of $0.50
per share exercisable before December 31, 1998. The $500,000 issue price of the
units was satisfied through the receipt of cash proceeds of $260,000 and the
settlement of a non-interest bearing note of $240,000 that was due from us to
Sheridan Reserve Incorporated.
On October 13, 1998, our shareholders voted to effect a two-for-one
stock split that increased the number of outstanding shares of Common Stock from
6,000,000 to 12,000,000 and increased the number of outstanding Common Stock
purchase warrants from 1,000,000 to 2,000,000. Accordingly, the exercise price
of the Common Stock purchase warrants was reduced to $0.25 per share.
Subsequently, 1,580,000 of the Common Stock purchase warrants were exercised at
$0.25 each for cash proceeds of $395,000. The remaining 420,000 Common Stock
purchase warrants expired.
On January 29, 1999, we consummated the acquisition of all of the
voting capital stock of Virtual Performance Systems, Inc., a Canadian
corporation, for 1,500,000 shares of InfoCast Canada Corporation, our
wholly-owned subsidiary ("InfoCast Canada"), which are exchangeable on a
one-for-one basis for shares of our Common Stock. Virtual Performance Systems,
Inc. was a development stage company that was developing solutions to permit
businesses to service inbound and outbound customer calls at any time through a
customer service representative who can be located anywhere and to permit
corporate and academic learners to access training on-line, from anywhere, at
any time. The consolidated financial statements of the Company are the
continuing financial statements of Virtual Performance Systems, Inc.
In March 1999, we consummated a private placement financing pursuant to
which we issued 2,767,334 shares of Common Stock for an aggregate offering price
of $4,151,001 pursuant to Regulation S of the Securities Act of 1933, as
amended.
In March 1999, we consummated a private placement financing pursuant to
which we issued 265,002 shares of Common Stock for an aggregate offering price
of $397,503 pursuant to Regulation D of the Securities Act of 1933, as amended.
Pursuant to an agreement dated December 15, 1998, as amended by a
letter agreement dated March 12, 1999, between us and ITC Learning Corporation,
we purchased from ITC Learning Corporation the distribution rights for all
current and future ITC Learning Corporation education and training products in
consideration for $975,000 in respect of the first 150,000 user licenses and
based on a shared revenue formula for user licenses in excess of 150,000. We
paid the first $500,000 of the initial $975,000 purchase price in March 1999 and
the final $475,000 of the initial $975,000 purchase price in April 1999.
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Pursuant to an agreement dated March 22, 1999, we issued 60,000 shares
of Common Stock to Thomson Kernaghan & Co. Limited, a financial investment
consulting firm, for assistance in securing additional financing over the
following year.
In May 1999, we formed a new company along with Call Center Learning
Solutions. The new company is named Call Center Learning Solutions On-Line,
Inc., and it is owned 50/50 by both parties. Call Center Learning Solutions
Online, Inc. expects to initially convert and market 11 browser-based
interactive multimedia courses over a 12-month period. Call Center Learning
Solutions has developed 29 instructor-led courses that cover substantially all
aspects of call center operation. Their training programs have been delivered to
over 5,000 businesses worldwide. Our agreement with Call Center Learning
Solutions provides for courseware conversion, hosting on our information hub and
deployment of the courseware to the global market electronically.
On May 13, 1999, we acquired all of the outstanding common shares of
HomeBase Work Solutions Ltd. HomeBase Work Solutions, headquartered in Calgary,
Alberta, Canada, was developing a solution to permit businesses to enable their
employees to work from remote locations via computers. The purchase price was
satisfied by the issuance of 3,400,000 shares of InfoCast Canada, our
subsidiary. The InfoCast Canada shares are exchangeable on a one-for-one basis
for shares of our Common Stock.
In June and October 1999, we issued warrants to purchase 25,000 and
12,500 shares of Common Stock at an exercise price of $7.00 and $8.75 per share,
respectively, to the Poretz Group, an investor relations consulting firm, in
consideration for on-going investor relations consulting services, including
reviewing our public releases, setting up meetings between us and members of the
investment banking community and developing our public image.
In June 1999, in return for consulting services in respect of the
development of our virtual call center application and for the InfoCast
corporate name, we issued warrants to purchase an aggregate of 50,000 shares of
Common Stock at an exercise price of $7.00 per share to each of Tsun Chow, Armin
Roeseler, Paul Prabhaker and John J. Malley.
In June 1999, we entered into a memorandum of understanding with Willow
CSN (Canada) Inc. to launch Canada's first commercial call center with remotely
located customer service representatives.
In June 1999, we entered into an agreement with ITC Learning
Corporation pursuant to which we will become ITC Learning Corporation's
exclusive distance learning technology distributor for the delivery of
educational material for the State of California for consideration of
$2,000,000. We paid this amount in three installments in August, September and
October 1999.
On June 24, 1999, we consummated a private placement financing pursuant
to which we issued 420,000 shares of Common Stock and warrants to purchase
70,000 shares of Common Stock at an exercise price of $7.00 per share for an
aggregate offering price of $2,100,000 pursuant to Regulation D of the
Securities Act of 1933, as amended.
From July to December 22, 1999, we issued 1,879,000 shares of Common
Stock in a private placement financing for an aggregate offering price of
$10,334,550 pursuant to Regulation S of the Securities Act of 1933, as amended.
We may issue up to an additional 500,000 shares of Common Stock for an aggregate
offering price of $3,000,000 pursuant to such offering.
In October 1999, we issued options to purchase 60,000 shares of Common
Stock at an exercise price of $8.25 per share to Howard Nichol, an investor
relations consultant, for services which included assisting us with
communications with and presentations to stock brokers, analysts and private and
institutional investors, providing access to the financial media and introducing
us to potential acquisition or alliance opportunities.
In October 1999, we entered into a non-exclusive investment banking and
financial advisory services agreement with N.M. Rothschild & Sons Canada Limited
and N.M. Rothschild & Sons (Washington) L.L.C. (together "Rothschild"). Pursuant
to the agreement, Rothschild will provide us with financial advisory services
relating primarily to advice with respect to possible acquisitions, mergers,
business combinations, strategic alliances and the raising of up to $50 to $75
million in an equity financing, and will undertake other related tasks as
specified from time to time by our senior management. In consideration for its
services, Rothschild shall be entitled to a monthly work fee of
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$50,000, payable by us monthly in arrears to Rothschild. In the event a
Transaction (as defined below) is implemented during the term of Rothschild's
engagement, or within a period of one year after the termination of Rothschild's
engagement under the agreement on which Rothschild worked or with a party
identified by Rothschild during the term of the agreement, we will pay a further
fee of 3% of the value of the Transaction (the "Performance Fee") to Rothschild
in recognition of Rothschild's contribution to such Transaction. For the
purposes of the agreement, "Transaction" means any acquisition, merger, alliance
or business combination which involves us and which shall be valued for purposes
of the Performance Fee to include any debt incurred or assumed by the purchaser
or parties in the combination and any shares issued or to be issued as part of
the consideration for any possible transaction. In the event there is a private
placement or sale of our securities during the term of the agreement other than
pursuant to a Transaction, Rothschild, as the agent for the offering, will be
paid a commission on the total value of the proceeds raised. Any commission
Rothschild will receive as an agent with respect to any such sale of securities
will be determined at the time of such transaction and will be consistent with
current industry norms. The agreement shall commence as of the date Rothschild
notifies us of its completion of satisfactory due diligence. Thereafter, either
party may terminate the agreement at any time, with or without cause, by giving
the other party 15 days written notice.
BACKGROUND
The ability to deliver information to anyone, anywhere and at any time,
remains the cornerstone objective of today's communications systems. This is the
case whether that information is transmitted over a private or public network
(including the Internet), via computers, telephone and/or satellite.
We believe that rapid growth of the Internet, electronic commerce and
corporate intranets is an indication that companies and individuals are
continuing to increase their use of corporate and home-based systems to send and
receive ever more complex information.
The technological dilemma facing suppliers of information, and those
wanting to receive it, is the inability of the various networks, operating
systems, communication protocols and communications systems to interface
seamlessly. This situation is analogous to people from different countries with
different languages all trying to communicate at once without benefit of
translation.
A business opportunity exists in the near term for the deployment of
technology that links different network infrastructures so that information can
be either: (i) accessed remotely in near real-time across dedicated networks; or
(ii) reduced with regard to the fidelity and resolution of its content and then
accessed through the Internet.
As a development stage application service provider, our focus is on
developing the infrastructure to enable customers to access the best software
applications via a standard web browser and Internet access without regard to
geographical point of origin, underlying network architecture or personal
computer make or model.
OUR INFORMATION HUBS
In order to host our customized and third-party software applications,
we are developing a network of strategically placed data centers, which we refer
to as information hubs or i-Hubs. We expect each installation to be implemented
on Sun Microsystems servers using Sun Solaris, Netscape and Java-related
technologies, which we believe will provide a high level of reliability,
scalability and performance. To date, we have completed the installation of two
information hubs based on the following server platforms:
Calgary, Canada:
o One Sun Microsystems Enterprise 10,000 server
o Five Sun Microsystems Netra T-1 servers
o Two Sun Microsystems Enterprise 250 servers
o Two Sun Microsystems 450 servers
Toronto, Canada:
o Four Compaq 450 servers
o Five Sun Microsystems Netra T-1 servers
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We are in the process of testing and validating the equipment and
associated systems. Both information hubs were commercially operational as of
December 1999, and we expect to expand these information hubs and/or install
additional information hubs across North America as needed. There can be no
assurance that we will be able to complete the development of its network of
information hubs as scheduled or at all because we may not be able to (i) raise
the additional funds required to complete such development, (ii) enter into
agreements with appropriate hardware and network providers, and (iii) attract
and retain technologically skilled employees.
In addition to the hosting servers, we anticipate that each operational
information hub will provide customers with the following:
o physical security;
o uninterruptable power supply with optional generator backup;
o disaster recovery plan;
o guaranteed quality of service levels;
o help desk support;
o highly reliable Internet access; and
o network monitoring and supervision.
To execute our information hub strategy, we either have established, or
are currently negotiating to establish the following strategic relationships:
Sun Microsystems, Inc. We have negotiated an agreement with Sun
Microsystems pursuant to which we have been designated under Sun Microsystems'
ServiceProvider.com(TM) program. Under this agreement, we have no minimum
financial commitments, but are entitled to purchase equipment from Sun
Microsystems at a minimum prescribed discount from Sun Microsystems' list
prices. We believe that there are approximately 12 companies participating in
the ServiceProvider.com(TM) program, all of which are located outside of Canada.
The program does not include any exclusivity arrangements. As a participant in
this program, we now have access to preferential pricing and service treatment
from Sun Microsystems, as well as:
o a recognized network and Internet computer alliance with
worldwide service and support;
o a stable operating system environment, further enabled by the
networking capability of Sun Microsystems' Java programming
language and environment;
o a clear and distinctive processing performance that meets the
challenges of network computing;
o solid communication tools and programs to support global network
connectivity;
o Internet firewall technology that provides support users with
seamless access; and
o professionals worldwide who can support complex network designs
and problems.
AT&T Canada We have entered into a non-binding letter of understanding
with AT&T Canada that provides that the parties will endeavor to negotiate and
execute the following agreements: (i) a development and supply agreement whereby
we would supply software learning products for co-marketing with AT&T Canada;
(ii) a telecommunications agreement whereby AT&T Canada would provide the
telecommunications services necessary to facilitate the delivery of such
products to customers and (iii) a cooperative marketing agreement whereby the
parties would work jointly to market and promote future products and services.
In addition, we are currently negotiating an arrangement that would define how
both AT&T Canada and InfoCast Corporation will offer the virtual call center
application being developed by us to AT&T Canada's customers. To date, we have
entered into the telecommunications agreement with AT&T Canada, which defines
pricing levels. We do not have any financial commitments pursuant to such
agreement. We will negotiate the remaining agreements once our distance learning
application becomes commercially available, which we expect will occur by March
31, 2000. We cannot assure you that we will reach any such other agreements.
Such agreements with AT&T Canada would provide us with:
o a relationship with a recognized global telecommunications
provider;
o connectivity between our information hubs and the information
users;
o a marketing channel to access potential customers; and
o access to North American and international call center markets.
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OUR CUSTOMIZED SOFTWARE APPLICATIONS
VIRTUAL CALL CENTER APPLICATION
The traditional method of providing customer support has been to
establish a call center whereby customer service representatives, located in a
central "brick and mortar" facility, respond to incoming client inquiries or
make outgoing calls via telephone banks. Typically, call centers are used for
help desk functions, telemarketing, catalog order taking and debt collection.
Traditional call centers are generally limited by the following:
o physical limitations with respect to the number of customer
service agents able to work based on the telephone lines and
desks available, which in turn limits the volume of calls that
can be handled;
o employee dissatisfaction and high turnover;
o high operational costs; and
o difficult to staff for cycles in call frequency.
We believe that outsourcing of call centers is gaining popularity in
North America and Europe and there is emerging a number of firms offering call
center outsourcing and management.
The virtual call center application we are developing would enable
customer service representatives to be located anywhere, without having to be
present at a central "brick and mortar" facility, and would allow a caller or
customer to reach a trained customer service representative at any time, from
almost anywhere. The customer service representative would also be able, if
necessary, to have secure access to a merchant's in-house database. Customer
data would be protected by a dedicated (non-shared) network that uses password
access and firewalls to provide security, yet would be fully accessible via a
computer network or through a toll-free dial up service.
Our concept of a virtual call center is predicated on the ability to
provide the communication software that allows the customer service
representative, the buyer and the vendor to be linked together in real-time via
computers. The application that we are developing would enable a high volume of
inbound customer calls to be routed (without the caller knowing where the call
is going) to a customer service representative who could be located anywhere,
and who would answer and service the call. The customer service representative
would be able to accept calls, immediately access the merchant's database,
locate the appropriate product/service and process the caller's request
immediately. The virtual call center application that we are developing is
expected to provide the necessary communications linkage and speed to allow all
three parties to interact in real-time.
We expect that, when completed, our virtual call center application
will provide the technology that: (i) converts a call from analog (voice) to
digital (information) so it can be transported over a data line; (ii) routes a
call from the caller to the appropriate customer service representative based on
the needs of the caller and skills and availability of the customer service
representative (for example, a caller may indicate his or her preference for a
customer service representative that speaks a certain language and if such a
representative is available, the call will be routed to such a representative);
(iii) provides the customer service representative with access to the business'
database, including both product and caller specific information; and (iv)
converts the call back into analog so the caller can communicate with the
customer service representative, all of which would take place in a secure,
supervised environment. We will use Voice Over-IP technology to convert calls
from analog to digital and back again. While we do not intend to develop the
Voice Over-IP software itself, we believe we can successfully select appropriate
vendors and implement such technology. The application that we are developing
would also support automated call distribution (routing) and interactive voice
response (choosing options by pressing touch tone numbers on a phone), as well
as forward-looking call center technologies such as unified messaging (combining
voice mail, e-mail and facsimile) and web-based help desks.
The essential elements of the virtual call center application that we
are developing include:
o skills-based routing, which routes calls to the appropriate
customer service representative based on predetermined
parameters, such as language;
o secure access to a business' database, including both customer
specific and product information;
o conversion of the call to and from digital and analog; and
o training and supervision of customer service representatives.
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The virtual call center application that we are developing is expected
to result in the support of multiple customers with a single customer service
representative from any geographical location. This would result in: (i) the
customer service representative not being limited to a traditional
"brick-and-mortar" call center building and (ii) the application enabling a
single customer service representative to service multiple vendors and access
corporate data from each vendor, regardless of any security measures, such as
firewalls, which the vendor may have selected as its corporate standard.
Virtual call centers would allow customer service representatives to
work from home, resulting in lower costs and greater employee satisfaction.
Using our technology, we expect that virtual call centers will be able to
provide all the features of a traditional call center, while reducing capital
and human resource overhead. Accordingly, businesses would be able to service
existing and new clients with better cost structures, while both enhancing
levels of service and reducing costly employee turnover.
We are currently in the testing and demonstration phase of development
with respect to our virtual call center application and currently expect that
such application will be commercially available by end of the fiscal year ending
March 31, 2000. There can be no assurance that we will be able to complete the
development of our virtual call center application as scheduled or at all
because we may not be able to (i) raise the additional funds required to
complete such development and (ii) attract and retain technologically skilled
employees. In addition, there can be no assurance that a substantial market for
our virtual call center application will develop and grow.
DISTANCE LEARNING APPLICATION
Traditionally, in order for a business to provide training to its
employees, the business would bring an on-site instructor to the business'
offices and hold instructor-led classes. The drawbacks of holding such classes
include the difficulty and cost of assembling employees in a physical space and
the loss of productive work time. More recently, instructor-led training has
been augmented through the use of video conferencing, which has saved the
expense of physically assembling trainees, but still has many of the same
drawbacks as live on-site classes.
During the multimedia training boom of the early 1990's, CD-ROM became
the de-facto standard for content delivery. Businesses would purchase sufficient
software licenses to cover the number of employees to be trained. Each trainee
would then install a CD-ROM containing the course material on his or her
computer and commence the training on an individual basis. One problem with
CD-ROMs is that they do not permit the customization required by large,
technologically sophisticated and globally oriented companies. Additionally,
CD-ROM training does not provide the sense of community and shared learning
offered by the conventional classroom environment. While CD-ROMs increase
flexibility in terms of where and when employees can be trained, CD-ROMs do not
provide any interaction, monitoring or feedback, or the ability to customize
programs.
The factors driving people and businesses to seek training include:
o business requirements for staff to be certified in certain
technologies in order to assure performance and productivity;
o corporate downsizing, resulting in increased training
requirements for ex-staff as well as for employees who perform
multiple job tasks that require knowledge of various jobs;
o the proliferation of computers and networks throughout all
levels of organizations, increasing the number of employees
who need training; and
o the continuous introduction and evolution of new technologies,
contributing to the need for continuing education.
The distance learning application that we are developing will enable
learners to access digital content through a standard browser interface.
Trainees will be able to interact with subject matter to enhance and support
their learning endeavors. By having the tools to interact with career and
instructional experts, 24 hours a day, seven days a week, through e-mail, chat
rooms and other real-time collaborative tools across the Internet or a dedicated
network, we believe we will be able to offer a higher level of service, compared
to our potential competitors. We believe that through the distance learning
application we are developing, a business will be able to train its employees
with the best features of live training courses without the associated drawbacks
and at a much lower cost.
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An important component of the distance learning application that we are
developing is the learning management system. The learning management system
consists of proprietary software developed by us that will support multiple
corporations and learning organizations that offer course content on-line. The
software was designed from the ground up with role-based security (different
users have access to different aspects of the network), multiple language
support and multi-enterprise billing and tracking facilities. Acting as a
"security blanket" around the content, the learning management system will
permit other organizations to embed their web-based training content without
fear of losing intellectual property over the Internet and still permit that
organization's employees to remotely access their training.
The distance learning application that we are developing would provide
access to:
o a group of tutors who are expert in their field and who would
give guidance to learners in real time;
o a team that gives learners guidance with career development;
o a library of high quality courses in single units or as part
of a curriculum; and
o software tools to help busy faculty members develop or
customize courses rapidly.
Our distance learning application is expected to deliver skills-based
interactive multimedia content to corporate, academic and retail learners. We
expect the distance learning application to differentiate itself from other
training methodologies by delivering a complete learning solution over any
network, including the Internet. We expect that the technology we are developing
will provide content vendors with confidence that their intellectual property
will not be compromised and will allow self-paced learning to maximize personal
and career success of learners over their lifetime. We expect the distance
learning application to support the learner with live on-line telephone coaching
within a standard Internet browser (i.e., Netscape Navigator or Internet
Explorer) and enable the learner to access a browser for interactive learning,
producing a more collaborative learning experience. In addition, we expect the
application to enhance conventional classroom-based and current distance
learning delivery methods.
We expect that the software we are developing will support the distance
learning initiatives of third-parties, including the "AT&T Canada Learning
Partner Program(TM)". The objective of the AT&T Canada Learning Partner
Program(TM) is to be a leader for real-time interactive electronic delivery of
distance learning to corporate and academic organizations and their respective
end-users. We expect that our technology will act as the enabling technology for
this initiative to permit distance education over any electronic medium.
In addition, we expect that our relationship with AT&T Canada will
provide us with access to AT&T Canada's customer base to launch our distance
learning application, beginning in Canada. As a component of the AT&T Canada
Learning Partner Program(TM), we have entered into an agreement with College
Boreal of Sudbury (Ontario) Canada to provide academic support and market course
content for distribution using our software and infrastructure. Pursuant to the
agreement, College Boreal is to provide us and/or our clients with non-exclusive
educational services and we are to utilize such services in connection with the
AT&T Canada Learning Partner ProgramTM from December 10, 1998 to December 9,
2001, which term shall be automatically renewed unless terminated by either
party upon 90 days notice at any time after December 9, 2001. Pricing, revenue,
structure, financing, schedule of payments and budgets for the specific products
and services are to be covered by a separate agreement to be negotiated by the
parties. We cannot assure you that we will enter into such an agreement. College
Boreal, headquartered in Sudbury, Ontario, has seven campuses in Northern
Ontario, each connected to the largest telecommunications network among academic
institutions in Canada, which currently services the needs of the francophone
community in Northern Ontario. This program would provide access to interactive
learning anywhere, anytime for both corporate and academic studies and blend
electronic learning and on-line support utilizing browser-enabled applications
being developed by us and distributed over AT&T Canada's advanced fiber optic
and digital microwave network.
We have also entered into agreements with ITC Learning Corporation
pursuant to which we purchased from ITC Learning Corporation the distribution
rights for all current and future ITC Learning Corporation education and
training products and will become ITC Learning Corporation's exclusive distance
learning technology distributor for the delivery of educational material for the
State of California. Pursuant to an agreement dated December 15, 1998, as
amended by a letter agreement dated March 12, 1999, between us and ITC Learning
Corporation, we purchased from ITC Learning Corporation the distribution rights
for all current and future ITC Learning Corporation education and training
products in consideration for $975,000 in respect of the first 150,000 user
licenses and based on a shared revenue formula for user licenses in excess of
150,000. We paid the first $500,000 of the initial $975,000 purchase
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price in March 1999 and the final $475,000 of the initial $975,000 purchase
price in April 1999. In June 1999, we entered into an agreement with ITC
Learning Corporation pursuant to which we will become ITC Learning Corporation's
exclusive distance learning technology distributor for the delivery of
educational material for the State of California for consideration of
$2,000,000. We paid this amount in three installments in August, September and
October 1999. In addition, we formed a new company along with Call Center
Learning Solutions named Call Center Learning Solutions On-Line, Inc., which is
owned 50/50 by both parties. Call Center Learning Solutions Online, Inc. expects
to initially convert and market 11 browser-based interactive multimedia courses
over a 12-month period. Call Center Learning Solutions has developed 29
instructor-led courses that cover substantially all aspects of call center
operation. Our agreement with Call Center Learning Solutions provides for
courseware conversion, hosting on our information hub and deployment of the
courseware to the global market electronically.
We are currently in the testing and demonstration phase of development
with respect to our distance learning application and currently expect that such
application will be commercially available by the end of the fiscal year ending
March 31, 2000. There can be no assurance that we will be able to complete the
development of our distance learning application as scheduled or at all because
we may not be able to (i) raise the additional funds required to complete such
development, (ii) enter into agreements with appropriate content and network
providers and (iii) attract and retain technologically skilled employees. In
addition, we cannot assure you that a substantial market for our distance
learning application will develop and grow.
TELEWORKING APPLICATION
Working through the use of remote access is no longer merely an option
in many types of work. Instead, remote access has become a necessary feature in
competitive sales, customer relationship management and flexible work programs.
We are developing the software and network infrastructure to connect individuals
working from their homes with their corporate offices. We will seek to make this
system reliable, secure and highly accessible so that it can provide complete
management and administration to individuals who need to connect to corporate
data resources. We expect that the teleworking application we are developing
will provide:
o the ability to connect telecommuters with their offices over
high-speed, secure data and voice networks;
o psychological profiling conducted through a 70-item
questionnaire to assess an individual's ability to work well
from home, which questionnaire will be compared to a database
of similar information on successful teleworkers;
o a single source solution that supplies the hardware, software,
furniture and telecommuting training to enhance an employee's
ability to work from home; and
o ongoing monitoring and mentoring, evaluation, coaching and
training certification.
We plan to enter into agreements with third parties to provide hardware
and furniture as part of our product offerings. We expect to offer a customized
bundled solution that will provide all the components, including "best of breed"
software from third-party suppliers, to implement a successful telework program.
We are currently in the testing and demonstration phase of development
with respect to our teleworking application and currently expect that such
application will be commercially available by end of the fiscal year ending
March 31, 2000. There can be no assurance that we will be able to complete the
development of our teleworking application as scheduled or at all because we may
not be able to (i) raise the additional funds required to complete such
development and (ii) attract and retain technologically skilled employees. In
addition, there can be no assurance that a substantial market for our
teleworking application will develop and grow.
HOSTING THIRD-PARTY SOFTWARE APPLICATIONS
In addition to its customized applications, we intend to host
third-party applications. We expect that our information hubs will permit
businesses to outsource certain components of their computing systems, including
e-mail messaging, remote backup of databases, software development and testing
platforms. By outsourcing these components, businesses would not have to own or
manage their own complex computer systems. This would also provide businesses
access to up-to-date, highly scalable, reliable and flexible technology that
they might otherwise not be able to afford due to the high capital costs
involved and the necessity of hiring, training and retaining experienced
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computer personnel. We believe that businesses will employ selective information
technology outsourcing to increase competitiveness or gain access to new
resources and skills.
We expect to host third-party applications and convert them to support
e-commerce. For example, we are in the process of converting the conventional
client-server architecture of Applied Terravision Systems Inc., an oil and gas
financial software vendor, so that it can be hosted on one of our information
hubs. Applied Terravision Systems' customers will then be able to access these
software applications from their offices using a standard web browser. We are in
the process of negotiating similar third-party application hosting arrangements.
However, there can be no assurance that we will enter into any such agreements.
While we are still testing and refining our ability to host third-party
applications, as of December 1999 we were able to host such applications
commercially. There can be no assurance that we will be able to host third-party
applications because we may not be able to (i) complete the development of our
infrastructure or (ii) successfully convert our customers' client/server
architecture so that we can be hosed on our information hubs. In addition, there
can be no assurance that a substantial market for the hosing of third-party
applications will develop and grow.
MARKETING AND SALES STRATEGY
Our marketing strategy will be to bundle our services with the existing
products and services of companies such as AT&T Canada, with whom we have an
agreement; Sun Microsystems, Inc. under the ServiceProvider.com(TM) program; and
companies whose third-party applications we will host. We believe that the
existing customer relationships will provide us with a sales advantage. We will
employ a small direct sales force of approximately 12 salespeople with both
selling and technical expertise, to support the initiatives of these companies
as well as to focus on a limited number of targeted customers/niche markets. In
addition, we plan to market our services through attendance at tradeshows,
advertising and articles in industry periodicals, referrals from customers and
our website.
To date, we have had no sales.
A major component of our marketing and sales strategy is the pricing
structure for our services which will be offered to customers on a per-use
basis, which will allow customers the ability to pay only for what they use,
thus converting a fixed cost into a variable one. We believe that this flexible
pricing strategy will be very attractive to potential customers.
COMPETITION
The market for our products and services is highly competitive and
subject to rapid technological change There are many companies that act as
application service providers, offering third-party application hosting to their
customers, including U.S. Internetworking Inc., FutureLink Corp. and Corio Inc.
Our management does not know of any other company currently offering the virtual
call center, distance learning and telework applications being developed by
InfoCast Corporation. With respect to the distance learning application that we
are developing, competition currently consists of many companies offering
learning via CD-ROM and the Internet, including SmartForce, DigitalThink, Inc.
and click2learn.com, inc. With respect to the virtual call center application
that we are developing, competition currently consists of the many traditional
brick and mortar call centers, including Convergis Corp. and APAC Customer
Services Inc. With respect to the telework application that we are developing,
competition currently consists of those technology companies that offer remote
access to a company's central computer system, including TManage Inc. and
Rhythms Net Connections. We believe that our ability to compete depends on many
factors both within and beyond our control, including the success of our
marketing and sales efforts of and those of our competitors, the price and
reliability of our products and services and those of our competitors and the
timing and market acceptance of our products and services and those of our
competitors. Competitors may quickly deploy products and e-commerce technology
that could limit our expansion. We expect competition to increase in the future.
Many of our potential competitors have substantially greater financial,
technical and marketing resources than we do. Increased competition could
materially and adversely affect our business, financial condition and results of
operations. We cannot assure you that we will be able to compete successfully.
See "Risk Factors" for a description of the risks of the Company's competition.
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INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
Our success is dependent in part on intellectual property rights,
including information technology, some of which is proprietary to us such as our
software that comprises the learning management system, a filtering engine, a
corporate hosted e-mail service that integrates our filtering engine with
industry standard e-mail and directory servers from Netscape and Sun
Microsystems, a methodology that allows us to rapidly host applications from
independent software vendors on our information hub, and various software
integration tools. We rely on a combination of nondisclosure agreements,
technical measures, trade secret and trademark laws to protect our proprietary
rights. We do not presently hold any patents for our existing products or
services and presently have no patent applications pending. We have entered into
confidentiality agreements with most of our employees, and anticipate that any
future employees will also enter into such agreements. We also attempt to limit
access to and distribution of proprietary information. There can be no assurance
that the steps taken by us in this regard will be adequate to deter
misappropriation of proprietary information or that we will be able to detect
unauthorized use or take appropriate steps to enforce intellectual property
rights. In addition, there can be no assurance that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology. Further, the laws of many foreign countries do not protect
our intellectual property rights to the same extent as the laws of the United
States. Our failure to protect our proprietary information could have a material
adverse effect on our business, financial condition and results of operations.
From time to time, third parties may assert exclusive patent,
copyright, trademark and other intellectual property rights to technologies that
are used by us. We may need to take legal action to defend ourselves against
claimed infringements of the rights of others or to determine the scope and
validity of the proprietary rights of others. We may also need to take legal
action to enforce and protect our trade secrets and our other intellectual
property rights. Any such litigation could be costly and cause diversion of
management's attention, either of which could have a material adverse effect on
our business, financial condition and results of operations. Adverse
determinations in such litigation could result in the loss of our proprietary
rights, subject us to significant liabilities (including possible
indemnification of our customers), require us to secure licenses from third
parties or prevent us from manufacturing or selling our products or services,
any one of which could have a material adverse effect on our business, financial
condition and results of operations. We have not been a party to any such
litigation to date. However, Applied Courseware Technology Inc. ("ACT") has
indicated that we have access to and possess intellectual property belonging to
ACT and that we have no right to use or derive any benefit from such
intellectual property. See "Risk Factors". We have not conducted a formal patent
search relating generally to the technology used in our products or services. In
addition, since patent applications in the United States are not publicly
disclosed until the patent issues and foreign patent applications generally are
not publicly disclosed for at least a portion of the time that they are pending,
applications may have been filed which, if issued as patents, would relate to
our products or services. Software comprises a substantial portion of the
technology in our products. The scope of protection accorded to patents covering
software-related inventions is evolving and is subject to a degree of
uncertainty that may increase the risk and cost to us if we discover the
existence of third-party patents related to our software products or if such
patents are asserted against us in the future. Patents have been granted
recently on fundamental technologies in software, and patents may issue which
relate to fundamental technologies incorporated into our products or services.
While we employ proprietary software technology and algorithms and
conduct ongoing research and development, our future success will depend in part
upon our ability to keep pace with advancing technology, evolving industry and
changing customer requirements in a cost-effective manner. There can be no
assurance that our proprietary software technology and algorithms will not be
rendered obsolete by other technology incorporating technological advances
designed by competitors that we are unable to incorporate into our products or
services in a timely manner.
The market for products and services is characterized by rapidly
changing technologies. The rapid development of new technologies increases the
risk that current or new competitors could develop products or services that
would reduce the competitiveness of our products or services. Our success will
depend to a substantial degree upon our ability to respond to changes in
technology and customer requirements. This will require the timely selection,
development and marketing of new products or services and enhancements on a
cost-effective basis. The development of new, technologically advanced products
or services is a complex and uncertain process, requiring high levels of
innovation. The introduction of new and enhanced products or services also
requires that we manage transitions from older products or services in order to
minimize disruptions. There can be no assurance that we will be successful in
developing, introducing or managing the transition to new or enhanced products
or services or that any such products
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or services will be responsive to technological changes or will gain market
acceptance. Our business, financial condition and results of operations would be
materially adversely affected if we were to be unsuccessful, or to incur
significant delays, in developing and introducing such new products, services or
enhancements.
EMPLOYEES
At November 30, 1999, we had 43 full-time employees. None of our
employees is represented by a collective bargaining agreement nor have we
experienced any work stoppage. We consider our relations with our employees to
be good.
PROPERTIES
Our operational headquarters are located in 2,190 square feet of leased
office space in Chicago, Illinois and we have additional offices located in
5,404 square feet of leased office space in Toronto, Ontario. HomeBase Work
Solutions has offices located in 6,400 square feet of leased office space in
Calgary, Canada. Our lease in Toronto, Ontario expires in November 2000, our
lease in Chicago, Illinois expires in March 2002 and the HomeBase Work Solutions
lease in Calgary expires in August 2005. Along with our subsidiaries, we also
lease other facilities that are not material to our business. We believe that
our existing facilities are adequate for our needs for the foreseeable future
and that if we need additional space, it will be available on favorable terms.
LEGAL PROCEEDINGS
We signed a share purchase agreement dated May 13, 1999 with Applied
Courseware Technology Inc. ("ACT") whereby we were to purchase all of the
outstanding shares of ACT. As a result of the failure of ACT to satisfy its
representations and warranties under the share purchase agreement and the lapse
of the escrow agreement dated May 10, 1999 (as amended by the extension
agreement dated June 29, 1999), the share purchase agreement was not consummated
or completed. ACT has indicated to us that ACT believes we unlawfully terminated
the share purchase agreement and have access to and possesses intellectual
property belonging to ACT and that we have no right to use or derive any benefit
from it. ACT has indicated that it expects to commence an action against us for
damages. Whether or not determined in our favor, any litigation with ACT could
result in significant expense to us and divert our the efforts of our technical
and management personnel from productive tasks. An unfavorable decision in any
litigation with ACT could have a material adverse effect on our business,
financial condition and results of operations. See "Risk Factors."
We are not currently involved in any other material legal proceedings.
From time to time, however, we may be subject to claims and lawsuits arising in
the normal course of business.
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GLOSSARY
Application Service Provider (ASP): An application service provider is
a company that offers individuals or enterprises electronic access to
application programs and related services that would otherwise have to
be located in their own personal or enterprise computers.
Architecture: In the context of computers, servers and networks,
architecture is a term applied to both the process and the outcome of
thinking out and specifying the overall structure, logical components,
and the logical interrelationships of a computer, a server, their
operating systems, and a network.
Automated Call Distribution: Automated Call Distribution involves the
use of a telephone facility that manages incoming calls and handles
them based on the number called and an associated database of handling
instructions. Companies offering sales and service support use this
function to validate callers, make outgoing responses or calls, forward
calls to the right party, allow callers to record messages, gather
usage statistics, balance the use of phone lines, and provide other
services.
Browser: A program that allows a person to read hypertext. A browser
gives some means of viewing the contents of nodes (or "pages") and
navigating from one node to another. Netscape Navigator is an example
of a browser for the World Wide Web.
Call Center: A call center is a central place where customer and other
telephone calls are handled by an organization, usually with some
amount of computer automation. Typically, a call center has the ability
to handle a considerable volume of calls at the same time, to screen
calls and forward them to someone qualified to handle them, and to log
calls. Call centers tend to be used by large organizations that use the
telephone to sell or service products and services.
CD-ROM: CD-ROM technology is a format and system for recording,
storing, and retrieving electronic information on a compact disk that
is read using a laser optical drive.
Distance Learning: A type of education where students work on their own
at home or at the office and communicate with faculty and other
students via e-mail, electronic forums, videoconferencing and other
forms of computer-based communication.
Firewall: A firewall is a set of related programs, located on the
server functioning as an entry point into a network, that protects the
resources of that network from users from other networks.
Information Technology (IT): Information Technology is an umbrella term
used to describe all forms of technology used to create, store,
exchange, and use information in its various forms
Interactive Voice Response: Interactive voice response "gives data a
voice." By using the touch tones on a telephone keypad, or in some
cases, the spoken voice, a caller can request, manipulate, and in some
cases modify data that resides on a "host" database somewhere. Typical
applications include: banking by phone, checking airline reservations
by phone, checking credit card balance by phone and registering for
college courses by phone. The technology is "interactive" because the
user is prompted for information by the system. For example, in a
banking by phone application, the system will ask a caller to enter its
account number from the telephone keypad. After the caller enters its
number, the system interacts with the caller further by giving the
caller additional options.
Interface: A boundary across which two systems communicate. An
interface might be a hardware connector used to link to other devices
or it might be a convention used to allow communication between two
software systems. Often there is some intermediate component between
the two systems that connects their interfaces together.
Java: Java is a programming language expressly designed for use on the
Internet. Java can be used to create complete applications that may run
on a single computer or be distributed among servers and clients in a
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network. It can also be used to build small application modules, or
applets, for use as part of a web page. Applets make it possible for a
web page user to interact with the page.
Netra T-1 Server: A computer server developed by Sun Microsystems Inc.
which is designed for and aimed specifically at the needs of Internet
and application service providers.
Network: Any system designed to provide one or more access paths for
communications between users at different geographic locations.
Communications networks may be designed for voice, text, data,
facsimile image and/or video. They may feature limited access (private
networks) or open access (public networks) and will employ whatever
switching and transmission technologies are appropriate.
Operating System (OS): An operating system is the program that, after
being initially loaded onto the computer, manages all the other
programs in a computer. Examples of operating systems include DOS and
Windows.
Server: A server is a computer program that provides services to other
computer programs in the same or other computers. The computer that a
server program runs in is frequently referred to as a server (though it
may contain a number of server and client programs).
Sun Solaris: Sun Solaris is Sun Microsystems Inc.'s version of the UNIX
operating system, including networking software, a windows environment
and a graphical user interface.
Telework: Telework is the use of telecommunications technology to work
outside the traditional office or workplace, usually at home or while
traveling.
Unified Messaging: The communication application that combines e-mail,
voicemail and facsimile.
Virtual: The term virtual means the quality of effecting something
without actually being that something.
Virtual Private Network (VPN): A virtual private network is a private
data network that makes use of the public telecommunication
infrastructure, maintaining privacy through the use of various security
procedures such as data encryption.
Voice Over-IP (VoIP): Voice Over Internet Protocol is a term used for a
set of facilities and programs that manage the delivery of voice
information, such as telephone calls, over the Internet.
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MANAGEMENT
The directors and executive officers of the Company, and their ages and
positions with the Company will be as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------------------- -------- ----------------------------------
<S> <C> <C>
Darcy Galvon 43 Co-Chairman of the Board, Director
A. Thomas Griffis 58 Co-Chairman of the Board, Director
James Leech 52 President, CEO and Director
Herve Seguin 49 Chief Financial Officer
Jennifer Scoffield 29 Vice President, Finance and Administration
Carl Stevens 53 President, Virtual Call Centers and e-Learning
Michael Sheehan 58 Executive Vice President, Virtual Call Center, Director
James Hines 34 Executive Vice President, Director
Christopher Rouse 31 Vice President of Marketing
Richard Shannon 54 President and CEO of HomeBase Work Solutions Ltd.
Alexander "Sandy" Walsh 33 Chief Technology Officer
George Shafran 73 Director
</TABLE>
The officers of the Company are elected by the Board of Directors at
the first meeting after each annual meeting of the Company's stockholders, and
hold office until their death, until they resign or until they have been removed
from office. No committees of the Board of Directors have been established to
date.
The following is a brief summary of the background of each director and
executive officer of the Company:
Mr. Galvon has been Co-Chairman and a director of the Company since May
13, 1999. In 1986, Mr. Galvon founded Sun MicroSystems, Inc.'s Western Canada
office in Calgary, Alberta, where he was responsible for covering the
transportation, utilities, education, manufacturing, retail, entertainment and
software developers in Calgary and the entire province of Saskatchewan. From
1995 to the present, Mr. Galvon served as a director of Sun Computer Systems
Inc. Alberta Ltd. and HomeBase Work Solutions Ltd., which was acquired by the
Company in May 1999, and is currently a subsidiary of the Company. Mr. Galvon is
also a director of Facet Petroleum Solutions, Inc., with which HomeBase Work
Solutions has entered into a licensing and distribution agreement. He is also
Chairman of the Board of HomeBase Work Solutions.
Mr. Griffis has been the Chairman of the Board and a director of the
Company since January 12, 1999 and a Co-Chairman since May 13, 1999. Since 1986,
Mr. Griffis has been the founder and sole owner of Griffis International
Limited, a management consulting and business development firm. Griffis
International Limited has focused its activities on the structuring, financing
and management of emerging companies, particularly in the natural resource and
high-tech sectors.
Mr. Leech has been President, Chief Executive Officer and a director of
the Company since September 4, 1999. From 1996 until September 1999, Mr. Leech
was Vice Chairman and Director at Kasten Chase Applied Research Limited, a
publicly-traded data networking and wireless technology company, where he was
responsible for corporate strategy, finance, administration and production. From
1993 to 1996, Mr. Leech was President, Chief Executive Officer and Director of
Disys Corporation, a publicly-traded wireless technology company, which was
later merged into Kasten Chase Applied Research Limited.
Mr. Seguin has been the Chief Financial Officer of the Company since
January 4, 2000. From 1993 to 1999, Mr. Seguin was the Vice President of Finance
and the Chief Financial Officer of Promis Systems Corporation Ltd. (now PRI
Automation, Inc.), a software development company, where he assisted in several
rounds of public equity financing.
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Ms. Scoffield has been the Vice President, Finance and Administration
of the Company since July 7, 1999. From February 1997 to June 1999, Ms.
Scoffield held various positions at PRI Automation Inc. (formerly Promis Systems
Corporation Ltd.), a software development company, most recently as Director,
Financial Projects. From August 1996 to January 1997, Ms. Scoffield was Manager
of Finance for Pet Valu Canada, Inc., a retail pet supply company. From August
1993 to August 1996, Ms. Scoffield was an accountant with Ernst & Young in the
Entrepreneurial Services group where she obtained her Chartered Accountant
designation.
Mr. Stevens has been President of Virtual Call Centers and e-Learning
since December 1999. From February 1997 to November 1999, Mr. Stevens held
various positions at ITC Learning Corporation, most recently as President and
Chief Executive Officer. From 1971 to November 1996, Mr. Stevens held a number
of positions at IBM, most recently as Program Director for the Public Sector. In
that capacity, Mr. Stevens was responsible for the sale of personal computers to
the higher education, kindergarten, grammar school and high school markets, as
well as to federal, state and local governments.
Mr. Sheehan has been Executive Vice President of the Company's virtual
call center division since July 6, 1999 and a director of the Company since
January 12, 1999. He served as the Chief Executive Officer of the Company from
January 12, 1999 to July 6, 1999. From 1960 to 1998, Mr. Sheehan held a number
of positions at AT&T, most recently as Director of Call Center Solutions for
AT&T Labs. At AT&T, Mr. Sheehan was responsible for managing the building of
complex telecommunication systems and networks and helped create strategic
marketing plans for introducing new AT&T services and products.
Mr. Hines has been the Executive Vice President of the Company since
September 4, 1999 and a director of the Company since January 12, 1999. He was
the President of the Company from January 12, 1999 to September 3, 1999. From
1996 to November 1998, Mr. Hines was President of Lasso Communications Inc., an
international affiliate of the Grey Worldwide Network of advertising companies.
Lasso is a marketing communications company aimed at developing e-commerce web
sites and concepts to support more advanced interaction between merchants and
buyers. From 1994 to 1996, Mr. Hines was Vice President of TransActive
Communications Inc., a company that marketed smart cards.
Mr. Rouse has been the Vice President of Marketing of the Company since
October 1999. From October 1998 to October 1999, Mr. Rouse was Director of Field
Marketing for Hummingbird Communications, a producer of business intelligence
products. Mr. Rouse's responsibilities included, among other things, worldwide
sales strategy training, product training and account consulting. From April
1997 to October 1998, Mr. Rouse was a marketing manager for Hummingbird
Communications. From July 1996 to April 1997, Mr. Rouse was a webmaster and a
marketing writer for Andyne Computing, an independent software vendor. From 1990
to July 1996, Mr. Rouse was assistant editor for Kingston This Week, a
newspaper.
Mr. Shannon has been the President and Chief Executive Officer of
HomeBase Work Solutions Ltd. since March 1999. Since 1990, Mr. Shannon has been
a founding shareholder and managing director of Baycor Capital, Inc., a merchant
bank based in Calgary, Alberta, as well as a founding shareholder and director
of Nevada Bob's Canada Inc., a publicly-traded golf retailer with 85 company
stores and 200 franchised stores located in 10 countries.
Mr. Walsh has been the Chief Technology Officer of the Company since
May 1999. From March 1998 to April 1999, Mr. Walsh was Director of Research and
Development - Business Intelligence Group for Hummingbird Communications Ltd., a
data networking company where he led product conceptualization and architectural
design and worked with industry partners to integrate complementary
technologies. From March 1994 to February 1998, Mr. Walsh was Project Lead for
Andyne Computing Limited, a data networking company of Kingston, Ontario. Prior
to joining Andyne Computing Limited, Mr. Walsh held various positions in the
software design field.
Mr. Shafran has been a director of the Company since February 8, 1999.
Mr. Shafran has been the President of Geo. P. Shafran & Associates, Inc., a
management, marketing and investment consulting firm, for at least the last five
years. Mr. Shafran serves as Senior Consultant for The High Performance Group
and as an associate with the Technical Analysis Corporation. Mr. Shafran is
vice-chairman of The Heritage Bank and a director of NVR Mortgage, Missing Kids,
International and is chairman of the Advisory Board of the AAA Potomac. Mr.
Shafran also serves as a consultant to various other companies. He currently
serves on President Clinton's Legislative Council of the U.S. Chamber of
Commerce and on the Board of the National Capital Chapter of the American Red
Cross.
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EXECUTIVE COMPENSATION
William R. Wilson was the Company's Chief Executive Officer during the
year ended December 31, 1998. He received no compensation for his service as the
Company's Chief Executive Officer. Michael Sheehan was the Company's Chief
Executive Officer from January 12, 1999 to July 6, 1999. Mr. Sheehan earned
$18,750 from January 12, 1999 to March 31, 1999 for his service as Chief
Executive Officer. Mr. Leech became the Company's Chief Executive Officer on
September 4, 1999. See "Management - Employment Agreements." No executive
officer received compensation of a least $100,000 during the most recently
completed fiscal year. No stock options were granted to any executive officer in
1998.
STOCK OPTION PLANS
In 1998, the Company adopted a stock option plan (the "1998 Stock
Option Plan") pursuant to which 2,250,000 shares of Common Stock have been
reserved for issuance upon the exercise of options designated as either (i)
options intended to constitute incentive stock options under the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), or (ii) nonqualified stock
options. Incentive stock options and nonqualified stock options may be granted
to employees of the Company.
The purpose of the 1998 Stock Option Plan is to encourage stock
ownership by officers and other key employees and consultants and advisors of
the Company. The 1998 Stock Option Plan is administered by the Board of
Directors of the Company. The Board, within the limitations of the 1998 Stock
Option Plan, determines the persons to whom options will be granted, the number
of shares to be covered by each option, the option purchase price per share and
the manner of exercise, and the time, manner and form of payment upon exercise
of an option.
The Company granted no stock options in the year ended December 31,
1998 and there were no option exercises in the year ended December 31, 1998. No
stock options were outstanding at December 31, 1998. As of December 30, 1999,
2,075,000 options were outstanding under the 1998 Stock Option Plan at an
exercise price of $1.00 per share.
The Company's 1999 Stock Option Plan (the "1999 Stock Option Plan") was
approved by the Board of Directors of the Company on April 1, 1999 and by the
stockholders of the Company on July 29, 1999. The purpose of the 1999 Stock
Option Plan is to create additional incentives for the Company's employees,
directors and others who perform substantial services to the Company by
providing an opportunity to purchase shares of the Common Stock pursuant to the
exercise of options granted under the 1999 Stock Option Plan. The Company may
grant options that qualify as incentive stock options under Section 422 of the
Code, and non-qualified stock options. Incentive stock options may be granted to
employees (including officers and directors who are employees). Non-qualified
stock options may be granted to employees, officers, directors, independent
contractors and consultants of the Company. As of December 30, 1999, 2,000,000
shares were reserved for issuance under the 1999 Stock Option Plan and 1,310,000
options had been granted at an exercise price of $7.00 per share, and 375,000
options had been granted at an exercise price of $7.05 per share.
The maximum number of shares that may be subject to options granted
under the 1999 Stock Option Plan to any individual in any calendar year may not
exceed 800,000 and the method of counting such shares shall conform to any
requirements applicable to "performance-based" compensation under Section 162(m)
of the Code. It is intended that compensation realized upon the exercise of an
option granted under the 1999 Stock Option Plan will thereupon be regarded as
"performance-based" under Section 162(m) of the Code and that such compensation
may be deductible without regard to the limits of Section 162(m) of the Code.
The Board of Directors or the Compensation Committee thereof composed
of two or more non-management directors that are "non-employee directors" within
the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended, and "outside directors" within the meaning of Section 162(m) of the
Code, is authorized to administer the 1999 Stock Option Plan in a manner that
complies with Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
The Board of Directors or Compensation Committee determines which eligible
individuals are granted options and the terms of such options including the
exercise price, number of shares subject to the option and the vesting and
exercisability thereof; provided, the maximum term of an incentive stock option
granted under the 1999 Stock Option Plan may not exceed five years.
41
<PAGE>
The exercise price of an incentive stock option granted under the 1999
Stock Option plan must equal at least 100% of the fair market value of the
subject stock on the date of grant and the exercise price of all non-qualified
stock options must equal at least 80% of the fair market value of the subject
stock on the date of grant; provided, however, that if an option granted to the
Company's Chief Executive Officer or to any of the Company's other four most
highly compensated officers is intended to qualify as "performance-based"
compensation under Section 162(m) of the Code, the exercise price must equal at
least 100% of the fair market value of the subject stock on the date of grant.
With respect to any participant who owns more than 10% of the voting power of
the Common Stock of the Company, the exercise price of any option granted must
equal at least 110% of the fair market value on the date of grant. The aggregate
fair market value on the date of grant of the stock for which incentive stock
options are exercisable for the first time by an employee of the Company during
any calendar year may not exceed $100,000.
Options shall become exercisable at such times and in such installments
as the Board of Directors or Compensation Committee shall provide. Non-qualified
and incentive stock options granted under the 1999 Stock Option Plan are not
transferable other than by will or the laws of descent or distribution, and each
option that has not yet expired is exercisable only by the recipient during such
person's lifetime, or for 12 months thereafter by the person or persons to whom
the option passes by will or the laws of descent or distribution. The 1999 Stock
Option Plan may be amended at any time by the Board of Directors, although
certain amendments require stockholder approval. The 1999 Stock Option Plan will
terminate on April 8, 2009, unless earlier terminated by the Board of Directors.
EMPLOYMENT AGREEMENTS
James Leech is employed by the Company pursuant to an employment
agreement dated as of August 5, 1999. The agreement provides that Mr. Leech's
employment with the Company shall continue unless it is terminated by either
party in accordance with the terms of the agreement. The agreement provides for
an initial base salary of Cdn $330,000 (or $224,500 in U.S. dollars as of
September 30, 1999) per annum, a minimum bonus of Cdn $30,000 (or $20,400 in
U.S. dollars as of September 30, 1999) for the period ending March 31, 2000 and
a minimum bonus of Cdn $50,000 (or $34,000 in U.S. dollars as of September 30,
1999) for each twelve-month period thereafter during the term of the agreement.
Mr. Leech's salary shall be annually reviewed and may be increased at the
discretion of the Board of Directors.
The agreement also provides that if Mr. Leech is terminated other than
for "cause," he shall receive the base salary provided for under the agreement
through the date of termination, plus a lump sum payment equal to twice his
annual base salary and bonus. He will also receive his accrued bonus, continue
to participate in certain benefit plans for the 24 months following such
termination and any options issued to Mr. Leech will immediately vest. If Mr.
Leech's employment is terminated due to death or "disability," he shall be paid
the base salary under the agreement until the date of termination and receive a
pro rata payment for all bonuses (calculated as the greater of the bonus which
would be paid under the Company's bonus plan on the basis that targets were met
and 50% of Mr. Leech's base salary), as well as any benefits accrued until the
date of termination and any options issued to Mr. Leech will immediately vest.
"Cause" is defined as a wilful refusal on the part of Mr. Leech to perform the
services required of him under the agreement (including the wilful and
intentional withholding of services thereunder), any breach of Mr. Leech's
fiduciary duties to the Company likely to cause material harm to the Company,
fraud or any conviction for a felony or indictable offense or any crime
involving moral turpitude or any of theft or dishonesty relating to a matter
material to the Company, provided that a wilful refusal to perform the services
required under the agreement will constitute cause only if Mr. Leech fails to
terminate the relevant actions or cure the relevant failure to act and remedy
any harm therefrom within 10 business days after receipt of written notice of
such wrongful act, failure to act or harm from the Company. "Disability" is
defined as the eligibility of Mr. Leech for long term disability benefits under
the disability insurance provided by the Company.
In the event Mr. Leech is terminated within 24 months of a "change of
control" of the Company, Mr. Leech shall receive a payment equal to three times
his annual base salary and bonus. He will also receive his accrued bonus,
continue to participate in certain benefit plans for 36 months following such
termination and any options issued to Mr. Leech will immediately vest. "Change
of control" is defined as (i) the direct or indirect sale, lease, exchange or
other transfer of all or substantially all (50% or more) of the assets of the
Company to any person or entity or group of persons or entities acting jointly
or in concert as a partnership or other group (a "Group of Persons"); (ii) the
merger, consolidation or other business combination of the Company with or into
another corporation with the effect that the shareholders of the Company
immediately following the merger, consolidation or other business combination,
hold 50%
42
<PAGE>
or less of the combined voting power of the then outstanding securities of the
surviving corporation of such merger, consolidation or other business
combination ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors; (iii) the
replacement of a majority of the Board of Directors of the Company or of any
committee of the Board of Directors of the Company in any given year as compared
to the directors who constituted the Board of Directors of the Company or such
committee at the beginning of such year, and such replacement shall not have
been approved by the Board of Directors of the Company, as the case may be, as
constituted at the beginning of such year; (iv) a person or Group of Persons
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases, merger, consolidation or other business
combination, or otherwise, have become the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
securities of the Company representing 20% or more of the combined voting power
of the then outstanding securities of such corporation ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors; or (v) the voluntary liquidation, dissolution or
winding-up of the Company in connection with which a distribution is made to the
holders of the Company's common shares.
In addition, on June 1, 1999, Mr. Leech was granted options to purchase
750,000 shares of Common Stock at an exercise price of $7.00. Such options are
currently exercisable as to 250,000 shares and become exercisable as to an
additional 250,000 shares on September 4, 2000 and as to the remaining 250,000
shares on September 4, 2001.
Herve Seguin is employed by the Company pursuant to an employment
agreement dated as of December 6, 1999. The agreement provides that Mr. Seguin's
employment with the Company shall continue unless it is terminated by either
party in accordance with the terms of the agreement. The agreement provides for
an initial base salary of Cdn $200,000 (or $138,570 in U.S. dollars as of
December 31, 1999) per annum as well as a bonus of not less than 50% of Mr.
Seguin's annual base salary. Mr. Seguin's salary shall be annually reviewed and
may be increased at the discretion of the Board of Directors.
The agreement also provides that if Mr. Seguin is terminated other than
for "cause," he shall receive the base salary provided for under the agreement
through the date of termination, plus a lump sum payment equal to his annual
base salary. Further, any options issued to Mr. Seguin will immediately vest. If
Mr. Seguin's employment is terminated due to death or "disability," he shall be
paid the base salary under the agreement until the date of termination and
receive a pro rata payment for all bonuses (calculated at 50% of Mr. Seguin's
base salary) and incentive plans to the date of termination, as well as any
benefits accrued until the date of termination and any rights pursuant to a
share option plan governing options issued to Mr. Seguin, which options shall
immediately accelerate and vest. "Cause" is defined as any act which constitutes
"cause" at law, any violation by Mr. Seguin of any material instructions, rules
or practices of the Company, a failure to comply with any provisions of his
employment agreement (including the withholding of services thereunder), any
breach of Mr. Seguin's fiduciary duties to the Company likely to cause harm to
the Company, fraud or any conviction for a felony or indictable offense or any
crime involving moral turpitude or any of theft or dishonesty relating to a
matter material to the Company. "Disability" is defined as the eligibility of
Mr. Seguin for long term disability benefits under the disability insurance
provided by the Company.
In the event Mr. Seguin is terminated within 24 months of a "change of
control" of the Company, Mr. Seguin shall receive his base salary through the
date of termination as well as a lump sum amount equal to 1.5 times his annual
base salary. Further, any options issued to Mr. Seguin will immediately
accelerate and vest. "Change of control" is defined as (i) the acquisition by
any person, entity or group of persons or entities acting jointly or in concert,
of voting securities of the Company or rights or options to acquire voting
securities of the Company or securities convertible into or exchangeable for
voting securities of the Company or any combination thereof such that after the
completion of the acquisition such person, entity or group would be entitled to
exercise 50.1% or more of the total number of votes entitled to be cast at a
meeting of shareholders of the Company; or (ii) the sale by the Company of all
or substantially all of the property or assets of the Company; or (iii) a
reorganization, plan of arrangement or merger resulting in the circumstances set
out in (i) or (ii) above.
In addition, on December 8, 1999, Mr. Seguin was granted options to
purchase 350,000 shares of Common Stock at an exercise price of $7.05 per share.
Such options are currently exercisable as to 116,667 shares and become
exercisable as to an additional 116,667 shares on January 4, 2001 and as to the
remaining 116,666 shares on January 4, 2002.
43
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 22, 1999 with
respect to the beneficial ownership of Common Stock by (i) each person known by
the Company to own beneficially more than 5% of the Common Stock, (ii) each
executive officer of the Company, (iii) each Director of the Company and (iv)
all Directors and executive officers as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Number of Shares Percentage
Owner(1) Beneficially Owned of Class(2)
-------- ------------------ -----------
<S> <C> <C>
Darcy Galvon 617,000(3) 3.14%
A. Thomas Griffis 9,204,997(4) 32.57%
James Leech 9,250,000(5) 32.68%
Michael Sheehan 9,350,000(6) 32.92%
James Hines 9,350,000(7) 32.92%
Richard Shannon 309,993(8) 1.60%
George Shafran 9,100,000(9) 32.32%
Alexander Walsh 9,200,000(10) 32.56%
Herve Seguin 116,667(11) *
Jennifer Scoffield 116,667(12) *
Carl Stevens 83,334(13) *
Christopher Rouse 100,000(14) *
Treetop Capital Inc. 9,000,000(15) 32.08%
c/o Griffis International
1 Richmond Street West,
Suite 901, Toronto,
Ontario M5H3W4
Don Jeffrey 9,925,749(16) 34.25%
Sheridan Reserve 99%
Incorporated
181 University Avenue,
Suite 2110, Toronto,
Ontario M5H3M7 1,000,000 4.
All officers and 11,798,658 38.24%
directors as a group
(12 persons)
</TABLE>
- -------------------------
* Less than one percent (1%) of outstanding Common Stock.
(1) Except as otherwise indicated, the address for each of the named
individuals is c/o InfoCast Corporation, 1 Richmond Street West, Suite
902, Toronto, Ontario, Canada M5H 3W4.
44
<PAGE>
(2) Except as otherwise indicated, the stockholders listed in the table
have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. Pursuant to the rules and
regulations of the Securities and Exchange Commission, shares of Common
Stock that an individual or group has a right to acquire within sixty
(60) days pursuant to the exercise of warrants or options are deemed to
be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person
shown in the table.
(3) Represents (i) 517,000 shares to be issued in exchange for outstanding
exchangeable shares of Virtual Performance Systems and (ii) 100,000
shares issuable upon exercise of options granted to Mr. Galvon under
the 1998 Stock Option Plan.
(4) Represents (i) 124,997 shares to be issued in exchange for outstanding
exchangeable shares of Virtual Performance Systems by Griffis
International Limited, of which Mr. Griffis, the Chairman of the Board
of the Company, owns 100%, (ii) 100,000 shares issuable upon exercise
of options granted to Mr. Griffis under the 1998 Stock Option Plan and
(iii) 9,000,000 shares held by Treetop Capital Inc. ("Treetop"), of
which Griffis International Limited is a shareholder. Mr. Griffis and
Griffis International Limited have no control over Treetop or power to
direct Treetop's voting or disposition of its interest in the Company
other than with respect to 1,020,000 shares of which Griffis
International Limited is the beneficial owner. Thus, Mr. Griffis
disclaims beneficial ownership with respect to 7,980,000 of the shares
of the Company's Common Stock owned by Treetop. Treetop expects to
distribute in the near future the shares it holds in the Company on a
pro rata basis to Treetop's shareholders. Virtual Performance Systems
was acquired by the Company on January 29, 1999. Such exchangeable
shares are exchangeable at any time for the shares of Common Stock of
the Company on a share for share basis.
(5) Represents (i) 250,000 shares issuable upon exercise of options granted
to Mr. Leech in June 1999 and (ii) 9,000,000 shares held by Treetop of
which Mr. Leech is an option holder. Mr. Leech has no control over
Treetop or power to direct Treetop's voting or disposition of its
interest in the Company other than with respect to 300,000 shares of
which he is the beneficial owner. Thus, Mr. Leech disclaims beneficial
ownership with respect to 8,700,000 of the shares of the Company's
Common Stock owned by Treetop. Treetop expects to distribute in the
near future the shares it holds in the Company on a pro rata basis to
Treetop's shareholders.
(6) Represents (i) 350,000 shares issuable upon exercise of options granted
to Mr. Sheehan under the 1998 Stock Option Plan and (ii) 9,000,000
shares held by Treetop, of which Mr. Sheehan is a shareholder. Mr.
Sheehan has no control over Treetop or power to direct Treetop's voting
or disposition of its interest in the Company other than with respect
to 200,000 shares of which he is the beneficial owner. Thus, Mr.
Sheehan disclaims beneficial ownership with respect to 8,800,000 of the
shares of the Company's Common Stock owned by Treetop. Treetop expects
to distribute in the near future the shares it holds in the Company on
a pro rata basis to Treetop's shareholders.
(7) Represents (i) 350,000 shares issuable upon exercise of options granted
to Mr. Hines under the 1998 Stock Option Plan and (ii) 9,000,000 shares
held by Treetop, of which Mr. Hines is a shareholder. Mr. Hines has no
control over Treetop or power to direct Treetop's voting or disposition
of its interest in the Company other than with respect to 630,000
shares of which he is the beneficial owner. Thus, Mr. Hines disclaims
beneficial ownership with respect to 8,370,000 of the shares of the
Company's Common Stock owned by Treetop. Treetop expects to distribute
in the near future the shares it holds in the Company on a pro rata
basis to Treetop's shareholders.
(8) Includes (i) 219,993 shares to be issued in exchange for outstanding
shares of InfoCast Canada and (ii) 90,000 shares issuable upon exercise
of options granted to Mr. Shannon under the 1999 Stock Option Plan.
(9) Represents (i) 100,000 shares issuable upon exercise of options granted
to Mr. Shafran under the 1998 Stock Option Plan and (ii) 9,000,000
shares held by Treetop, of which Mr. Shafran is a shareholder. Mr.
Shafran has no control over Treetop or power to direct Treetop's voting
or disposition of its interest in the Company other than with respect
to 250,000 shares of which he is the beneficial owner. Thus, Mr.
Shafran disclaims beneficial ownership with respect to 8,750,000 of the
shares of the Company's Common Stock owned by
45
<PAGE>
Treetop. Treetop expects to distribute in the near future the shares it
holds in the Company on a pro rata basis to Treetop's shareholders.
(10) Represents (i) 200,000 shares issuable upon exercise of options granted
to Mr. Walsh under the 1999 Stock Option Plan and (ii) 9,000,000 shares
held by Treetop, of which Mr. Walsh is a shareholder. Mr. Walsh has no
control over Treetop or power to direct Treetop's voting or disposition
of its interest in the Company other than with respect to 300,000
shares of which he is the beneficial owner. Thus, Mr. Walsh disclaims
beneficial ownership with respect to 8,700,000 of the shares of the
Company's Common Stock owned by Treetop. Treetop expects to distribute
in the near future the shares it holds in the Company on a pro rata
basis to Treetop's shareholders.
(11) Represents 116,667 shares issuable upon exercise of options granted to
Mr. Seguin under the 1999 Stock Option Plan.
(12) Represents 116,667 shares issuable upon exercise of options granted to
Ms. Scoffield under the 1999 Stock Option Plan.
(13) Represents 83,334 shares issuable upon exercise of options granted to
Mr. Stevens under the 1999 Stock Option Plan.
(14) Represents 100,000 shares issuable upon exercise of options granted to
Mr. Rouse under the 1999 Stock Option Plan.
(15) Represents shares to be distributed to its shareholders on a pro rata
basis in the near future.
(16) Represents (i) 825,749 shares to be issued in exchange for outstanding
exchangeable shares of Virtual Performance Systems by Mr. Jeffrey, (ii)
100,000 shares issuable upon exercise of options granted to Mr. Jeffrey
under the 1998 Stock Option Plan, and (iii) 9,000,000 shares held by
Treetop, of which Mr. Jeffrey or his wholly-owned company is a
shareholder. Mr. Jeffrey has no control over Treetop or power to direct
Treetop's voting or disposition of its interest in the Company other
than with respect to 1,479,000 shares of which he is the beneficial
owner. Thus, Mr. Jeffrey disclaims beneficial ownership with respect to
7,521,000 of the shares of the Company's Common Stock owned by Treetop.
Virtual Performance Systems was acquired by the Company on January 29,
1999. Such shares are exchangeable, at any time for the shares of
Common Stock of the Company on a share for share basis. Treetop expects
to distribute in the near future the shares it holds in the Company on
a pro rata basis to Treetop's shareholders.
46
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the six months ended September 30, 1999, the Company paid
consulting fees to A. Thomas Griffis, the Co-Chairman of the Board of the
Company, who is the sole owner of Griffis International Limited, in the amount
of Cdn $150,000 (or $102,045 in U.S. dollars as of September 30, 1999) for
financial and management consulting services rendered. The Company will continue
to pay a monthly consulting fee of Cdn $15,000 (or $10,200 in U.S.
dollars as of September 30, 1999) while services are being rendered.
During the six months ended September 30, 1999, the Company paid
consulting fees to Don Jeffrey, a shareholder beneficially owning greater than
5% of the outstanding shares of the Company, in the amount of Cdn $105,000 (or
$71,400 in U.S. dollars as of September 30, 1999) for consulting services
related to business development and advice on potential acquisitions, including
introducing the Company to HomeBase Work Solutions Ltd. and Applied Courseware
Technology and identifying potential customers.
During the six months ended September 30, 1999, the Company paid
consulting fees totaling $80,000 and accrued an additional $20,000 to George
Shafran, a director of the Company, for consulting services related to business
development and advice on potential acquisitions, including introducing the
Company to an acquisition candidate and attending numerous sales calls with
potential customers. The Company will continue to pay a monthly consulting fee
of $10,000 while services are being rendered.
During the six months ended September 30, 1999, the Company paid
incentive compensation fees to Darcy Galvon, its Co-Chairman of the Board, of
Cdn $140,000 (or $95,250 in U.S. dollars as of September 30, 1999) in connection
with the Company's acquisition of HomeBase Work Solutions.
From July 29, 1997 to March 31, 1999, the Company received cash
advances from View Media, a company controlled by Don Jeffrey, a shareholder
beneficially owning approximately 12.6% of the outstanding shares of the
Company, totaling approximately $109,000. The Company repaid such advances prior
to June 30, 1999.
Darcy Galvon, Co-Chairman of the Board of the Company, is a Director of
Facet Petroleum Solutions, Inc. Pursuant to a licensing and distribution
agreement dated March 30, 1999 between HomeBase Work Solutions and Facet
Petroleum Solutions Inc., HomeBase Work Solutions acquired the exclusive right
in the telework market to distribute Facet Petroleum's Telework Operational Data
Store software for a period of two years in consideration for 6,910 common
shares of HomeBase valued at Cdn $200,678 (or $136,500 in U.S. dollars as of
September 30, 1999). Facet Petroleum received 25,000 shares of Common Stock of
the Company in exchange for the 6,910 HomeBase Work Solutions shares as a result
of the acquisition of HomeBase Work Solutions by the Company on May 13, 1998.
47
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
owned and the total number of shares owned by each of the Selling Shareholders
being registered hereunder. All share data gives retroactive effect to a 2-for-1
stock split declared by the Board of Directors on October 19, 1998.
<TABLE>
<CAPTION>
Shares Beneficially
Owned After Offering
--------------------
Amount and Amount and
Nature of Number of Shares Nature of Percentage
Name of Beneficial Holder Ownership(1) Offered Hereby Ownership of Class
- ------------------------- ------------ -------------- --------- --------
<S> <C> <C> <C>
Greystoke Corp. 10,000 10,000 0 *
Lloyds Bank PLC 25,000 25,000 0 *
Murdoch & Company 25,000 25,000 0 *
Lockhart Associates 30,000 30,000 0 *
Advantor UK 33,334 33,334 0 *
FHM Capital Bahamas, Inc. 75,000 75,000 0 *
Pershing Keen Nominees Limited 40,000 40,000 0 *
Spartan Industries, Ltd. 40,000 40,000 0 *
564077 Alberta Limited 44,000 44,000 0 *
Bank Julius Baer & Co. SA 50,000 50,000 0 *
Cerro Capital Alliance 280,000 280,000 0 *
Dave Rackham 78,600(34) 50,000 28,600 *
Nelson River Resources Ltd. 50,000 50,000 0 *
Rio Skyline A.V.V. 50,000 50,000 0 *
Denise Petican 65,000 65,000 0 *
St. Andrews Properties Limited 270,000(2) 270,000 0 *
Shadow Rock Holdings, Inc. 75,000 75,000 0 *
Fallingbrook Investments Ltd. 85,000 85,000 0 *
Ackley Financial Limited 200,000 200,000 0 *
Christian Kolster 200,000(35) 200,000 0 *
The Cuttyhunk Fund Limited 400,000 400,000 0 *
Gale M. Goldner 3,500 3,500 0 *
Russell D. Goldner 6,500 6,500 0 *
Canadian Advantage LP 760,000 760,000 0 *
Jeffrey & Renee Spindler 10,000(3) 5,000 5,000 *
Douglas W. Fitzgerald & Amy Ladd 10,000 10,000 0 *
Marc Schinderman 10,000 10,000 0 *
David Olson 10,000 10,000 0 *
Robert L. Frome 13,334(4) 13,334 0 *
Gary L. Roberts 20,000 20,000 0 *
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Owned After Offering
--------------------
Amount and Amount and
Nature of Number of Shares Nature of Percentage
Name of Beneficial Holder Ownership(1) Offered Hereby Ownership of Class
- ------------------------- ------------ -------------- --------- --------
<S> <C> <C> <C>
Alan DeClerck 30,000 30,000 0 *
George & Angela Shafran 33,334(5) 33,334 0 *
Tom Shafran 33,334(6) 33,334 0 *
Paul Kalvin 100,000 100,000 0 *
839814 Alberta Ltd. 100,000(7) 100,000 0 *
Thompson Kernaghan & Co. Limited 480,000(8) 420,000 60,000 *
Advanced Systems Computer 500,742(7)(36) 211,000 289,742 1.50%
Consultants Inc.
Dorian Allum 5,000(7) 5,000 0 *
Bank of Bermuda Limited 7,500(7) 7,500 0 *
Benitz & Partners 40,000(7) 40,000 0 *
Wayne Bester 63,330(7)(9) 13,330 50,000 *
Rene Bornais 5,000(7) 5,000 0 *
Cabo Frio Investments A.V.V. 412,000(7) 412,000 0 *
Larry Carpenter 8,000(7) 8,000 0 *
Brian Castledine 5,000(7) 5,000 0 *
Elia Crespo 225,000(7)(10) 100,000 125,000 *
Ernesto Crespo 355,000(7)(11) 355,000 0 *
J.E. Britt Dysart 5,000(7) 5,000 0 *
Enehune Resources Ltd. 6,000(7) 6,000 0 *
George German 10,000(7) 10,000 0 *
Randy Gillies 44,000(7) 44,000 0 *
Roger S. Glassco 10,000(7) 10,000 0 *
Grafmar Ltd. 20,000(7) 20,000 0 *
Griffis International Limited 1,244,977(7)(12) 1,020,000 224,997 1.17%
Elizabeth D. Griffis 30,000(7)(13) 30,000 0 *
John Griffis 40,000(7)(14) 40,000 0 *
R.J. Griffis 30,000(7)(15) 30,000 0 *
Scott Griffis 40,000(7)(16) 40,000 0 *
Susan Griffis 40,000(7)(17) 40,000 0 *
W.J. Griffis 5,000(7)(18) 5,000 0 *
Scott Grim 375,000(7)(37) 100,000 275,000 1.42%
Michael Gruber 520,000(7)(19) 270,000 250,000 1.30%
Rob Hannah 5,000(7) 5,000 0 *
Steve Headford 200,000(7) 200,000 0 *
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Owned After Offering
--------------------
Amount and Amount and
Nature of Number of Shares Nature of Percentage
Name of Beneficial Holder Ownership(1) Offered Hereby Ownership of Class
- ------------------------- ------------ -------------- --------- --------
<S> <C> <C> <C>
James Hines 980,000(7)(20) 630,000 350,000 1.80%
Jerry Hook 30,000(7) 30,000 0 *
International Goldfields Limited 531,000(7) 531,000 0 *
TREG Ventures, LLC 300,000(7)(21) 300,000 0 *
Adam Jeffrey 25,000(7)(22) 25,000 0 *
Clarke Jeffrey 50,000(7)(23) 50,000 0 *
David Jeffrey 25,000(7)(24) 25,000 0 *
Don Jeffrey 1,627,165(7)(25) 633,680 993,485 4.96%
Sarah Jeffrey 25,000(7)(26) 25,000 0 *
Alex Lambert 20,000(7) 20,000 0 *
David Lambert 20,000(7) 20,000 0 *
Librion Group Inc. 425,000(7) 425,000 0 *
Living His Way Ltd. 145,000(7) 145,000 0 *
Bill Love 28,347(7)(38) 18,000 10,347 *
Merle MacTavish 20,000(7) 20,000 0 *
Robyn McCullough 5,000(7) 5,000 0 *
Melbourne Investments Ltd. 250,000(7) 250,000 0 *
Jason Merrill 25,000(7) 25,000 0 *
Pam Merrill 300,000(7) 300,000 0 *
Michael F. Mikuska 66,660(7) 66,660 0 *
Norm Moffat 10,000(7) 10,000 0 *
Mohawk Management Ltd. 90,000(7) 90,000 0 *
Moran S.A. 130,000(7) 130,000 0 *
A.R. Deane Nesbitt 27,500(7) 27,500 0 *
O'Connor Revocable Trust 8,000(7) 8,000 0 *
Brian Paul 10,000(7) 10,000 0 *
J. Pfeffer 50,000(7) 50,000 0 *
Elizabeth Ptak 10,000(7)(27) 5,000 5,000 *
Garry F. Rasko and Terry Rasko 6,000(7) 6,000 0 *
R. Roy 20,000(7) 20,000 0 *
John Rybinski 6,000(7) 6,000 0 *
Seine Finance S.A. 30,000(7) 30,000 0 *
George Shafran 350,000(7)(28) 250,000 100,000 *
Michael Sheehan 550,000(7)(29) 200,000 350,000 1.80%
Dan Skaling 28,347(7)(38) 18,000 10,347 *
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Owned After Offering
--------------------
Amount and Amount and
Nature of Number of Shares Nature of Percentage
Name of Beneficial Holder Ownership(1) Offered Hereby Ownership of Class
- ------------------------- ------------ -------------- --------- --------
<S> <C> <C> <C>
The Poretz Group 62,500(7)(30) 25,000 37,500 *
Dino Titaro 10,000(7) 10,000 0 *
Treetop Capital Inc. 300,000(7)(31) 300,000 0 *
Robert W. Tretiak 3,330(7) 3,330 0 *
Edward Turner 470,607(7)(32) 180,000 290,607 1.50%
View Media International Corporation 322,103(7)(39) 200,000 122,103 *
Robert Wade 10,000(7) 10,000 0 *
Alexander (Sandy) Walsh 500,000(7)(33) 300,000 200,000 1.04%
Watchman Capital Corp. 200,000(7)(40) 200,000 0 *
Dennis Wood 20,000(7) 20,000 0 *
Juliana Yung 5,000(7) 5,000 0 *
Agnes Zarska 5,000(7) 5,000 0 *
Zipco Inc. 255,210(7)(41) 100,000 155,210 *
</TABLE>
- ---------
* Less than 1% of outstanding Common Stock.
(1) Based on 19,054,943 shares of Common Stock issued and outstanding as of
December 22, 1999. Unless otherwise noted, we believe that all persons
named in the table have sole investment power with respect to all
shares of Common Stock beneficially owned by them. Under the federal
securities laws, a person is deemed to be the beneficial owner of
securities that can be acquired by that person within 60 days from the
date hereof upon the conversion of convertible securities or the
exercise of warrants or options. We have assumed for each person that
any exercisable and convertible securities that are held by that person
(but not those held by any other person) and that are exercisable or
convertible within 60 days from the date hereof have been exercised or
converted and that after the offering, all underlying shares set forth
under "Number of Shares Offered Hereby" have been sold. Except where
noted, none of the selling stockholders has had any position, office or
other material relationship with the Company other than as a
shareholder during the past three years.
(2) Consists of 70,000 shares of Common Stock held by St. Andrews
Properties Limited directly, and 200,000 held indirectly through
Treetop Capital, Inc. Treetop Capital, Inc. currently intends to
distribute the shares of the Company which it holds to its shareholders
in the near future.
(3) Mr. Spindler is a partner in the law firm of Olshan Grundman Frome
Rosenzweig & Wolosky LLP, the Company's counsel in the preparation of
this Registration Statement.
(4) Mr. Frome is a partner in the law firm of Olshan Grundman Frome
Rosenzweig & Wolosky LLP, the Company's counsel in the preparation of
this Registration Statement.
(5) Mr. Shafran is a director of the Company.
(6) Mr. Shafran is the son of George Shafran, a director of the Company.
51
<PAGE>
(7) This shareholder holds shares in Treetop Capital Inc., which in turn
holds shares of the Company. Treetop Capital Inc. currently intends to
distribute the shares of InfoCast Corporation which it holds to its
shareholders in the near future.
(8) Thompson Kernaghan & Co. Limited is a financial investment consulting
firm retained by the Company.
(9) Mr. Bester is Chief Information Officer of Homebase Work Solutions, a
wholly owned subsidiary of the Company.
(10) Ms. Crespo is the Assistant Secretary of the Company.
(11) Mr. Crespo is the father of Ms. Crespo, the Company's Assistant
Secretary.
(12) Griffis International Limited is an entity affiliated with and
controlled by A. Thomas Griffis, the Company's Co-Chairman of the
Board. Includes 124,997 exchangeable shares of InfoCast Canada
Corporation exchangeable into Common Stock of the Company. Also
includes 100,000 options exercisable for Common Stock of the Company
granted to A. Thomas Griffis under the Company's 1998 Stock Option
Plan.
(13) Ms. Griffis is the wife of A. Thomas Griffis, the Company's Co-Chairman
of the Board.
(14) Mr. Griffis is the son of A. Thomas Griffis, the Company's Co-Chairman
of the Board.
(15) Mr. Griffis is the brother of A. Thomas Griffis, the Company's
Co-Chairman of the Board.
(16) Mr. Griffis is the son of A. Thomas Griffis, the Company's Co-Chairman
of the Board.
(17) Ms. Griffis is the daughter of A. Thomas Griffis, the Company's
Co-Chairman of the Board.
(18) Mr. Griffis is the cousin of A. Thomas Griffis, the Company's
Co-Chairman of the Board.
(19) Mr. Gruber is an employee of the Company.
(20) Mr. Hines is an Executive Vice President and Director of the Company.
(21) TREG Ventures, LLC is 100% owned by Karen Irwin, the wife of Mr.
Stephen Irwin. Mr. Irwin is of counsel at Olshan Grundman Frome
Rosenzweig & Wolosky LLP, the Company's counsel in the preparation of
this Registration Statement. Mr. Irwin disclaims beneficial ownership
of these shares.
(22) Mr. Jeffrey is the son of Don Jeffrey.
(23) Mr. Jeffrey is the father of Don Jeffrey.
(24) Mr. Jeffrey is the son of Don Jeffrey.
(25) Mr. Jeffrey is deemed to own more than 10% of the Company's issued and
outstanding Common Stock.
(26) Ms. Jeffrey is the daughter of Don Jeffrey.
(27) Ms. Ptak is an employee of the Company.
(28) Mr. Shafran is a director of the Company.
52
<PAGE>
(29) Mr. Sheehan is Executive Vice President, Virtual Call Center, and a
director of the Company.
(30) The Poretz Group is an investor relations consulting firm retained by
the Company.
(31) Treetop Capital Inc. holds 9,000,000 shares of the Company's Common
Stock, which it plans to distribute in the near future to its
shareholders.
(32) Mr. Turner is the Company's Senior Vice President for Business
Development.
(33) Mr. Walsh is the Company's Chief Technology Officer.
(34) Includes 28,600 exchangeable shares of InfoCast Canada Corporation
exchangeable into the Company's Common Stock.
(35) Mr. Kolster is the owner and an employee of OY C&M Capital AB. The
Company paid fees to OY C&M Capital AB. related to a private placement
of the Company's Common Stock completed between July and December 1999.
(36) Includes 289,742 exchangeable shares of InfoCast Canada Corporation
exchangeable into the Company's Common Stock.
(37) Includes 25,000 exchangeable shares of InfoCast Canada Corporation
exchangeable into the Company's Common Stock.
(38) Includes 10,347 exchangeable shares of InfoCast Canada Corporation
exchangeable into the Company's Common Stock.
(39) View Media International Corporation is a company controlled by Don
Jeffrey.
(40) Watchman Capital Corp. is a company controlled by Don Jeffrey.
(41) Don Jeffrey is a shareholder of Zipco Inc.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of our capital stock does
not purport to be complete and is subject to, and qualified in its entirety by,
the provisions of our Certificate of Incorporation, as amended, and the Amended
and Restated Bylaws that are referenced as exhibits to this Registration
Statement and by provisions of applicable law.
COMMON STOCK
We are presently authorized to issue up to 100,000,000 shares of Common
Stock, $.001 par value per share. As of December 22, 1999, there were 19,054,943
shares of Common Stock outstanding, not including 4,816,393 shares of InfoCast
Canada Corporation exchangeable on a one-for-one basis for shares of our Common
Stock. The holders of Common Stock are entitled to one vote for each share held
of record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of Preferred Stock which may from time to time be outstanding, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by our Board of Directors out of funds legally available therefor, and, upon the
liquidation, dissolution or winding up of InfoCast Corporation, are entitled to
share ratably in all assets remaining after payment of liabilities and payment
of accrued dividends and liquidation preference on the Preferred Stock, if any.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities.
PREFERRED STOCK
We are presently authorized to issue up to 100,000,000 shares of
preferred stock, $.001 par value per share. Such preferred stock may be issued
in one or more series, on such terms and with such rights, preferences and
designations as our Board of Directors may determine. Such preferred stock may
be issued without action by stockholders. No shares of preferred stock are
currently outstanding. However, any future issuance of preferred stock could
adversely affect the rights of the holders of Common Stock, and therefore reduce
the value of our Common Stock. In particular, specific rights granted to future
holders of preferred stock could be used to restrict our ability to merge with
or sell our assets to a third-party, thereby preserving control of InfoCast
Corporation by its present owners.
OPTIONS AND WARRANTS
There are currently outstanding options to purchase 2,075,000 shares of
Common Stock at an exercise price of $1.00 per share, options and warrants to
purchase an additional 2,355,000 shares of Common Stock at an exercise price of
$7.00 per share, options to purchase an additional 375,000 shares of Common
Stock at an exercise price of $7.05 per share, options to purchase an additional
60,000 shares of Common Stock at any exercise price of $8.25 per share and
warrants to purchase an additional 12,500 shares of Common Stock at an exercise
price of $8.75 per share.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our Common Stock is Corporate
Stock Transfer, Denver, Colorado.
54
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to immaterial levels of market risks with respect to
changes in foreign currency exchange rates and interest rates. Market risk is
the potential loss arising from adverse changes in market rates and prices, such
as foreign currency exchange and interest rates. To the extent that we
consummate financings outside of Canada, we receive proceed in currency other
than the Canadian dollar. Most of our operating expenses are incurred in
Canadian dollars. Thus, our results of operations will tend to be adversely
affected if there is a strong Canadian dollar. We do not enter into derivatives
or other financial instruments for trading or speculative purposes, nor do we
enter into financial instruments to manage and reduce the impact of changes in
foreign currency exchange rates.
PLAN OF DISTRIBUTION
This Prospectus covers 12,452,336 shares of the Company's Common Stock.
All of the Common Stock offered hereby is being sold by the Selling
Shareholders. Certain of the securities covered by this Prospectus may be sold
under Rule 144 instead of under this Prospectus. The Company will realize no
proceeds from the sale of the Common Stock by the Selling Shareholders.
The distribution of the Common Stock by the Selling Shareholders is not
subject to any underwriting agreement. The Selling Shareholders may sell the
Common Stock offered hereby from time to time in transactions on one or more
exchanges, in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices relating to prevailing
market prices or at negotiated prices. In addition, from time to time the
Selling Shareholders may engage in short sales, short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives thereof, and may sell and deliver the Common Stock in connection
therewith.
From time to time the Selling Shareholders may pledge their Common
Stock pursuant to the margin provisions of customer agreements with brokers.
Upon a default by a Selling Shareholder, the broker may offer and sell the
Common Stock.
Such transactions may be effected by selling the Common Stock to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers of the Common Stock for whom such broker-dealers may act
as agents or to whom they sell as principals, or both (which compensation as to
a particular broker-dealer might be in excess of the customary commissions). The
Selling Shareholders and any broker-dealers that participate with them in the
distribution of the Common Stock may be deemed to be underwriters within the
meaning of Section 2(11) of the Securities Act and any commissions received by
them and any profit on the resale of the Common Stock may be deemed to be
underwriting commissions or discounts under the Securities Act. The Selling
Shareholders will pay any transaction costs associated with effecting any sales
that occur.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with by the Company and
the Selling Shareholders.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any person engaged in the
distribution of the Common Stock may not simultaneously engage in market-making
activities with respect to the Company's Common Stock for a period of two
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, the Selling Shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6, 10b-6A and 10b-7, which
provisions may limit the timing of the purchases and sales of shares of Common
Stock by the Selling Shareholders.
The Selling Shareholders are not restricted as to the price or prices
at which they may sell their Common Stock. Sales of such shares may have an
adverse effect on the market price of the Common Stock.
55
<PAGE>
The Company has agreed to pay all fees and expenses incident to the
registration of the Common Stock, except selling commissions and fees and
expenses of counsel or any other professionals or other advisors, if any, to the
Selling Shareholders.
This Prospectus also may be used, with the Company's consent, by donees
or other transferees of the Selling Shareholders, or by other persons acquiring
the Common Stock under circumstances requiring or making desirable the use of
this Prospectus for the offer and sale of such shares.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be
passed upon for the Company by Olshan Grundman Frome Rosenzweig & Wolosky LLP,
New York, New York. Certain members of Olshan Grundman Frome Rosenzweig &
Wolosky LLP own shares of Common Stock of the Company and/or own options to
purchase shares of Common Stock of the Company. TREG Ventures, LLC owns 300,000
shares of Common Stock of the Company indirectly through its shareholdings in
Treetop Capital, Inc. TREG Ventures, LLC is 100% owned by Karen Irwin, the wife
of Stephen Irwin. Mr. Irwin is of counsel to Olshan Grundman Frome Rosenzweig &
Wolosky LLP.
EXPERTS
The consolidated financial statements of InfoCast Corporation as of
March 31, 1999, December 31, 1998 and December 31, 1997 and for the three-month
period ended March 31, 1999, the year ended December 31, 1998, the 156-day
period ended December 31, 1997 and the period from July 29, 1997 to March 31,
1999, and the financial statements of Homebase Work Solutions Ltd. as of March
31, 1999 and December 31, 1998 and for the three-month period ended March 31,
1999 and the 101-day period ended December 31, 1998 included in this prospectus
have been included in reliance upon the reports of Ernst & Young, LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Ernst & Young LLP were appointed auditors of InfoCast Corporation on
February 8, 1999 and have audited the consolidated financial statements of
Virtual Performance Systems since its inception on July 29, 1997 to March 31,
1999. Prior to January 29, 1999, Jackson & Rhodes P.C. were the auditors for
InfoCast Corporation , formerly Grant Reserve Corporation ("InfoCast" or the
"Company"). Pursuant to a share purchase agreement dated January 29, 1999, the
shareholders of Virtual Performance Systems sold their 100% interest in Virtual
Performance Systems to InfoCast in consideration for 1,500,000 exchangeable
shares of InfoCast Canada, a wholly-owned subsidiary of InfoCast. The InfoCast
Canada shares are exchangeable into shares of Common Stock of InfoCast for no
additional consideration. In addition, the shareholders of Virtual Performance
Systems also purchased a further 9,000,000 shares of Common Stock InfoCast from
InfoCast's former controlling shareholder, Sheridan Reserve Incorporated, in
consideration for a nominal cash amount. As a result of these two transactions,
the shareholders of Virtual Performance Systems effectively acquired 10,500,000
shares of Common Stock of InfoCast, which represents a controlling interest of
approximately 70% (60% excluding the exchangeable shares). This transaction was
considered an acquisition of InfoCast (the accounting subsidiary/legal parent)
by Virtual Performance Systems (the accounting parent/legal subsidiary) and was
accounted for as a purchase of the net assets of InfoCast by Virtual Performance
Systems because InfoCast had no business operations or operating assets at the
time of acquisition. The consolidated financial statements of the Company are
issued under the name of InfoCast, but are a continuation of the financial
statements of the accounting acquirer, Virtual Performance Systems. Ernst &
Young LLP, therefore, continue as auditors for the Company.
The Company believes, and has been advised by Jackson & Rhodes P.C.
that it concurs in such belief, that, during the year ended December 31, 1997
and subsequent thereto, InfoCast and Jackson & Rhodes P.C. did not have any
disagreement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of Jackson & Rhodes P.C.,
56
<PAGE>
would have caused it to make reference in connection with its report on
InfoCast's financial statements to the subject matter of the disagreement.
No report of Jackson & Rhodes P.C. on InfoCast's financial statements
for either of the past two fiscal years contained an adverse opinion, a
disclaimer or opinion or a qualification or was modified as to uncertainty,
audit scope or accounting principles. During such fiscal periods, there were no
"reportable events" within the meaning of Item 304(a)(1) of Regulation S-K
promulgated under the Securities Act of 1933, as amended.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Neither the Company's Certificate of Incorporation, as amended, nor its
Amended and Restated Bylaws provide for the indemnification of its officers and
directors. Under Nevada's General Corporation Law, the Company may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the Company (such as a shareholder derivative suit), by reason of the fact
that such person is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise. Such indemnification may extend to expenses,
including attorneys' fees, judgments, fines and amount paid in settlement
actually and reasonable incurred by such person in connection with the action,
suit or proceeding if he acted in good faith and in a manner which he reasonable
believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. Indemnification may not be made for any claim, issue
or matter as to which such a person has been adjudged by a court to be liable to
the Company or for amounts paid in settlement to the Company, unless the court
in which the action or suit was brought, or another court of competent
jurisdiction, determines that in view of all the circumstances, the person is
fairly and reasonably entitled to be indemnified for such expenses.
There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification is
being sought, and the Company is not aware of any pending or threatened
litigation that may result in claims for indemnification by any officer,
director, employee or other agent.
The Company is in the process of purchasing Directors and Officers
liability insurance to defend and indemnify directors and officers who are
subject to claims made against them for their actions and omissions as directors
and officers of the Company.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
57
<PAGE>
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
INFOCAST CORPORATION, formerly Virtual Performance Systems Inc., a development
stage company
<S> <C>
Report of Independent Certified Public Accountants............................................................F-4
Consolidated Balance Sheets as of March 31, 1999, December 31, 1998 and 1997..................................F-5
Consolidated Statements of Operations and Comprehensive Loss for the three
months ended March 31, 1999 and 1998, the year ended December 31, 1998, the
period from July 29, 1997 (inception) to December 31, 1997 and the period
from July 29, 1997 (inception) to March 31, 1999.........................................................F-6
Consolidated Statements of Cash Flows for the three months ended March 31, 1999
and 1998, the year ended December 31, 1998, the period from July 29, 1997
(inception) to December 31, 1997 and the period from July 29, 1997
(inception) to March 31, 1999............................................................................F-7
Consolidated Statements of Changes in Stockholders' Equity as of December 31,
1997 and 1998 and March 31, 1999.........................................................................F-8
Notes to Consolidated Financial Statements....................................................................F-9
Consolidated Balance Sheet as of September 30, 1999 (unaudited)...............................................F-24
Consolidated Statements of Operations and Comprehensive Loss for
the six months ended September 30, 1999 and 1998 and for
the period from July 27, 1997(inception) to September 30, 1999 (unaudited)...............................F-25
Consolidated Statements of Cash Flow for the six months ended September 30, 1999
and 1998 and for the period from July 27, 1997 (inception) to
September 30,1999 (unaudited)............................................................................F-26
Consolidated Statements of Changes in Stockholders' Equity as of March 31, 1999
and September 30, 1999 (unaudited).......................................................................F-27
Notes to Consolidated Financial Statements....................................................................F-28
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
HOMEBASE WORK SOLUTIONS LTD.
<S> <C>
Report of Independent Certified Accountants....................................................................F-37
Balance Sheets as at March 31, 1999 and December 31, 1998......................................................F-38
Statements of Loss and Accumulated Development Stage Deficits for the three
months ended March 31, 1999, the 101 day period ended December 31, 1998
and the period from September 22, 1998 (inception) to March 31, 1999......................................F-39
Statements of Cash Flows for the three months ended March 31, 1999, the 101 day
period ended December 31, 1998 and the period from September 22,
1998 (inception) to March 31, 1999........................................................................F-40
Notes to Financial Statements..................................................................................F-41
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
INFOCAST CORPORATION PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
Basis of Presentation..........................................................................................F-49
Pro-Forma Consolidated Statement of Operations for the six-month period ended
September 30, 1999, the three-month period ended March 31, 1999 and the
year ended December 31, 1998.............................................................................F-50
Pro-Forma Adjustments..........................................................................................F-53
</TABLE>
F-3
<PAGE>
AUDITORS' REPORT
To the Directors of
InfoCast Corporation
We have audited the consolidated balance sheets of InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company] as of
March 31, 1999, December 31, 1998 and December 31, 1997 and the related
consolidated statements of operations and comprehensive loss, cash flows and
changes in stockholders' equity for the three month period ended March 31, 1999,
the year ended December 31, 1998, the 156 day period ended December 31, 1997 and
the period from July 29, 1997 to March 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of InfoCast Corporation as of March 31, 1999, December 31,
1998 and December 31, 1997 and the consolidated results of its operations and
its cash flows for the periods then ended in conformity with accounting
principles generally accepted in the United States.
Toronto, Canada,
April 21, 1999 [except for Note 9[b] which is as of /s/ Ernst & Young LLP
May 13, 1999 and Note 9[d] which is as of Chartered Accountants
October 27, 1999].
F-4
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED BALANCE SHEETS
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
As of As of As of
March 31, December 31, December 31,
1999 1998 1997
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current
<S> <C> <C> <C>
Cash and cash equivalents 3,092,445 25,595 301
Accounts receivable 19,416 9,693 16,286
Due from InfoCast Corporation [the acquired
entity] [note 5] -- 25,020 --
Due from Applied Courseware Technology
(A.C.T.) Inc. [note 9[d]] 139,299 -- --
Due from Homebase Work Solutions Ltd.
[note 9[b]] 99,529 -- --
Prepaid expenses and refundable deposits 21,404 15,225 38
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 3,372,093 75,533 16,625
- ------------------------------------------------------------------------------------------------------------------------------------
Capital assets, net [note 4] 107,392 18,908 11,954
Distribution rights deposit [note 9[c]] 500,000 -- --
Intellectual property, net [note 3] 45,591 49,026 25
- ------------------------------------------------------------------------------------------------------------------------------------
4,025,076 143,467 28,604
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities 354,694 117,109 13,518
Note payable to InfoCast Corporation [the acquired
entity] [note 5] -- 250,000 --
Due to directors, officers and stockholders [note 6] 177,270 273,025 109,545
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 531,964 640,134 123,063
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies [notes 9 and 11]
Stockholders' equity (deficiency)
Common stock [100,000,000 authorized and
18,172,333 issued and outstanding] [note 7] 16,672 -- --
Additional paid-in-capital [note 7] 16,925,017 2,443 70
Deferred compensation [note 7] (9,858,932) -- --
Accumulated other comprehensive loss 14,309 20,923 1,632
Accumulated development stage deficit (3,603,954) (520,033) (96,161)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficiency) 3,493,112 (496,667) (94,459)
- ------------------------------------------------------------------------------------------------------------------------------------
4,025,076 143,467 28,604
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-5
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Period from Cumulative
Three months Three months July 29, 1997 from
ended ended Year ended [inception] to inception to
March 31, March 31, December 31, December 31, March 31,
1999 1998 1998 1997 1999
$ $ $ $ $
[unaudited]
REVENUE
<S> <C> <C> <C> <C> <C>
Consulting income [note 8] -- 43,446 43,446 3,508 46,954
Interest income 4,478 -- -- -- 4,478
- --------------------------------------------------------------------------------------------------------------------------------
4,478 43,446 43,446 3,508 51,432
- --------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General, administrative and selling 635,334 42,494 375,302 47,954 1,058,590
Stock option compensation [note 7] 2,256,938 -- -- -- 2,256,938
Research and development 162,914 19,703 88,180 51,257 302,351
Interest and loan fees 23,562 -- -- -- 23,562
Amortization 4,144 -- -- -- 4,144
Depreciation 5,507 870 3,836 458 9,801
- --------------------------------------------------------------------------------------------------------------------------------
3,088,399 63,067 467,318 99,669 3,655,386
- --------------------------------------------------------------------------------------------------------------------------------
Net loss for the period (3,083,921) (19,621) (423,872) (96,161) (3,603,954)
Translation adjustment (6,614) (1,227) 19,291 1,632 14,309
- --------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss for the period (3,090,535) (20,848) (404,581) (94,529) (3,589,645)
- --------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 11,583,995 41 768,301 41 2,198,607
- --------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share $ (0.27) $(478.56) $(0.55) $(2,345.40) $(1.64)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-6
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF CASH FLOWS
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Period from
Three months Three months July 29, Cumulative
ended ended Year ended [inception] to inception to
March 31, March 31, December 31, December 31, March 31,
1999 1998 1998 1997 1999
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
[unaudited]
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net loss for the period (3,083,921) (19,621) (423,872) (96,161) (3,603,954)
Add items not affecting cash
Stock option compensation 2,256,938 -- -- -- 2,256,938
Common stock issued for services 10,180 -- -- -- 10,180
Amortization 4,144 -- -- -- 4,144
Depreciation 5,507 870 3,836 458 9,801
- ------------------------------------------------------------------------------------------------------------------------------------
(807,152) (18,751) (420,036) (95,703) (1,322,891)
Changes in non-cash working capital balances
Accounts receivable (9,723) (19,501) 6,593 (16,286) (19,416)
Prepaid expenses and refundable deposits (6,179) (61) (15,187) (38) (21,404)
Accounts payable and accrued liabilities 173,306 10,999 103,591 13,518 290,415
Bank overdraft -- 9,263 -- -- --
Due from InfoCast Corporation [the acquired
entity] prior to acquisition -- -- (25,020) -- (25,020)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (649,748) (18,051) (350,059) (98,509) (1,098,316)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (93,659) (325) (11,644) (12,412) (117,715)
Distribution rights deposit (500,000) -- -- -- (500,000)
Due from Homebase Work Solutions Ltd. (99,529) -- -- -- (99,529)
Due from Applied Courseware Technology (A.C.T.) Inc. (139,299) -- -- -- (139,299)
Acquisition of InfoCast Corporation 87 -- -- -- 87
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (832,400) (325) (11,644) (12,412) (856,456)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in note payable to InfoCast Corporation
[the acquired entity] -- -- 250,000 -- 250,000
Increase (decrease) in due to directors, officers
and stockholders (95,755) 19,346 114,476 109,545 128,266
Receipt of short-term unsecured loan 400,000 -- 70,000 -- 470,000
Payment of short-term unsecured loan (400,000) -- (70,000) -- (470,000)
Cash advance from InfoCast Corporation
[the acquired entity] prior to acquisition 146,900 -- -- -- 146,900
Cash proceeds from issuance of share capital, net 4,505,508 -- 2,373 45 4,507,926
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 4,556,653 19,346 366,849 109,590 5,033,092
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash during the period 3,074,505 970 5,146 (1,331) 3,078,320
Effect of foreign exchange rate changes on cash balances (7,655) (1,271) 20,148 1,632 14,125
Cash and cash equivalents, beginning of period 25,595 301 301 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 3,092,445 -- 25,595 301 3,092,445
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information
Interest and lending fees paid during the period 23,562 -- -- -- 23,562
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-7
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
[U.S. dollars, U.S. GAAP]
Accumulated
Accumulated other Additional
Common development comprehensive paid-in
shares stage deficit loss capital
# $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deemed common shares issued for intellectual properties
[note 1[b]] 14 -- -- 25
Deemed common shares issued for cash [note 1[b]] 27 -- -- 45
Net loss for the period -- (96,161) -- --
Translation adjustment -- -- 1,632 --
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of December 31, 1997 41 (96,161) 1,632 70
Deemed common shares issued for cash [note 1[b]] 1,499,959 -- -- 2,373
Net loss for the period -- (423,872) -- --
Translation adjustment -- -- 19,291 --
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of December 31, 1998 1,500,000 (520,033) 20,923 2,443
Acquisition of InfoCast by VPS [note 1[b]] 13,580,000 -- -- 294,108
Common shares issued for cash 3,032,333 -- -- 4,545,468
Share issuance costs -- -- -- (42,992)
Common shares issued for consulting services 60,000 -- -- 337,740
Granting of stock options -- -- -- 11,788,250
Amortization of deferred compensation -- -- -- --
Net loss for the period -- (3,083,921) -- --
Translation adjustment -- -- (6,614) --
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as of March 31, 1999 18,172,333 (3,603,954) 14,309 16,925,017
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Common stock Total
Deferred issued and stockholders'
compensation outstanding equity
$ $ $
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deemed common shares issued for intellectual properties
[note 1[b]] -- -- 25
Deemed common shares issued for cash [note 1[b]] -- -- 45
Net loss for the period -- -- (96,161)
Translation adjustment -- -- 1,632
- ---------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of December 31, 1997 -- -- (94,459)
Deemed common shares issued for cash [note 1[b]] -- -- 2,373
Net loss for the period -- -- (423,872)
Translation adjustment -- -- 19,291
- ---------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of December 31, 1998 -- -- (496,667)
Acquisition of InfoCast by VPS [note 1[b]] -- 13,580 307,688
Common shares issued for cash -- 3,032 4,548,500
Share issuance costs -- -- (42,992)
Common shares issued for consulting services (337,800) 60 --
Granting of stock options (11,788,250) -- --
Amortization of deferred compensation 2,267,118 -- 2,267,118
Net loss for the period -- -- (3,083,921)
Translation adjustment -- -- (6,614)
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding as of March 31, 1999 (9,858,932) 16,672 3,493,112
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-8
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
1. BASIS OF ACCOUNTING
[a] Nature of operations and continuing entity
These consolidated financial statements are the continuing financial statements
of Virtual Performance Systems Inc. ["VPS"] [a development stage company], an
Ontario corporation which was incorporated on July 29, 1997. VPS has a 100%
interest in Cheltenham Technologies Corporation ["Cheltenham Technologies"], an
Ontario corporation, and Cheltenham Interactive Corporation ["Cheltenham
Interactive"], an inactive Ontario corporation. Cheltenham Technologies has a
100% interest in Cheltenham Technologies (Bermuda) Corporation ["Cheltenham
Bermuda"], a Barbados corporation which owns certain intellectual properties. On
January 29, 1999, VPS acquired the net assets of InfoCast Corporation [formerly
Grant Reserve Corporation] ["InfoCast"], a United States non-operating company
traded on the NASDAQ OTC Bulletin Board which had a 100% interest in InfoCast
Canada Corporation ["InfoCast Canada"]. After the acquisition, the accounting
entity continued under the name of InfoCast Corporation [note 1[b]].
InfoCast, InfoCast Canada, VPS, Cheltenham Technologies, Cheltenham Interactive
and Cheltenham Bermuda are collectively referred to as the "Company". The
Company is a development stage technology company engaged in the research and
development of information delivery technologies.
The functional currency of VPS, Cheltenham Technologies, Cheltenham Interactive,
Cheltenham Bermuda and InfoCast Canada is the Canadian dollar. However, for
reporting purposes, the Company has adopted the United States dollar as its
reporting currency. Accordingly, the Canadian dollar balance sheets of these
companies have been translated into United States dollars at the rates of
exchange at the respective period ends, while transactions during the periods
and share capital amounts have been translated at the weighted average rates of
exchange for the respective periods and the exchange rate at the date of the
transaction, respectively. Gains and losses arising from these translation
adjustments are included in comprehensive loss.
[b] Reverse acquisition of InfoCast Corporation
Pursuant to a share purchase agreement dated January 29, 1999, the shareholders
of VPS sold their 100% interest in VPS to InfoCast in consideration for
1,500,000 exchangeable shares of InfoCast Canada, a wholly-owned subsidiary of
InfoCast. The InfoCast Canada exchangeable shares are convertible into common
shares of InfoCast at no additional consideration. In addition, the shareholders
of VPS also purchased a further 9 million common shares of InfoCast from
InfoCast's former controlling shareholder, Sheridan Reserve Incorporated, in
consideration for a nominal cash amount. As a result of these two transactions,
the shareholders of VPS effectively acquired 10,500,000 common shares of
InfoCast which represents a controlling interest of approximately
F-9
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
70% [60% excluding the exchangeable shares]. This transaction is considered an
acquisition of InfoCast [the accounting subsidiary/legal parent] by VPS [the
accounting parent/legal subsidiary] and has been accounted for as a purchase of
the net assets of InfoCast by VPS in these consolidated financial statements
because InfoCast had no business operations or operating assets at the time of
the acquisition.
These consolidated financial statements are issued under the name of InfoCast,
but are a continuation of the financial statements of the accounting acquirer,
VPS. VPS's assets and liabilities are included in the consolidated financial
statements at their historical carrying amounts. Figures presented to January
29, 1999 are those of VPS. For purposes of the acquisition, the fair value of
the net assets of InfoCast of $307,688 is ascribed to the 13,580,000 previously
outstanding common shares of InfoCast deemed to be issued in the acquisition as
follows:
$
- --------------------------------------------------------------------------------
Cash 87
Note receivable from VPS 396,900
Payable to VPS (25,020)
Accounts payable (64,279)
- --------------------------------------------------------------------------------
Purchase price 307,688
- --------------------------------------------------------------------------------
Prior to the acquisition on January 29, 1999, the deemed number of outstanding
shares of InfoCast is equal to the 1,500,000 exchangeable shares of InfoCast
Canada that were issued to the shareholders of VPS in the acquisition. These
shares have been allocated to the changes in the combined issued and outstanding
and additional paid-in-capital common stock of VPS to January 29, 1999 as
follows:
<TABLE>
<CAPTION>
Deemed
InfoCast shares VPS shares Amount
# # $
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Issued for intellectual properties [note 3] 14 35 25
Issued for cash 27 65 45
- ----------------------------------------------------------------------------------------------------------
Outstanding as of December 31, 1997 41 100 70
Issued for cash 1,499,959 3,624,000 2,373
- ----------------------------------------------------------------------------------------------------------
Outstanding as of December 31, 1998
and January 29, 1999 prior to acquisition 1,500,000 3,624,100 2,443
- ----------------------------------------------------------------------------------------------------------
</TABLE>
F-10
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
The combined issued and outstanding and additional paid-in-capital common stock
of the continuing consolidated entity as of January 29, 1999 is computed as
follows:
<TABLE>
<CAPTION>
$
- ---------------------------------------------------------------------------------------
<S> <C>
Existing share capital of VPS as of January 29, 1999 prior to acquisition 2,443
Ascribed value of the acquired common shares of InfoCast 307,688
- ---------------------------------------------------------------------------------------
Share capital of InfoCast [formerly VPS] as of January 29, 1999 310,131
- ---------------------------------------------------------------------------------------
</TABLE>
The number of outstanding shares of InfoCast [formerly VPS] as of January 29,
1999 is computed as follows:
Number
of shares
- --------------------------------------------------------------------------------
Deemed share capital of InfoCast [formerly VPS] as of
January 29, 1999 prior to acquisition 1,500,000
Shares of InfoCast deemed issued by VPS 13,580,000
- --------------------------------------------------------------------------------
Shares of InfoCast [formerly VPS] as of January 29, 1999 15,080,000
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are summarized as follows:
Principles of consolidation
These consolidated financial statements include the accounts of InfoCast and its
subsidiaries, all of which are wholly-owned. Intercompany accounts and
transactions have been eliminated upon consolidation.
Cash and cash equivalents
Cash and cash equivalents represent cash and short-term investments with a
maturity date of less than three months when acquired.
Change in year end
The Company changed its year end to March 31 from December 31.
F-11
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Capital assets
Capital assets are recorded at cost less accumulated depreciation. If it is
determined that a capital asset is not recoverable over its estimated useful
life, the capital asset will be written down to its fair value. Maintenance and
repairs are charged to expenses as incurred. Gains and losses on the disposition
of capital assets are included in income. Depreciation is provided on a
declining balance basis using the following annual rates:
Computer equipment 30%
Office equipment 20%
Leasehold improvements 20%
Intellectual property
Acquired intellectual property is recorded at cost and represents proprietary
rights to certain information delivery technologies. The capitalized costs of
the intellectual property is amortized on a straight-line basis over its
estimated useful life of 3 years. If it is determined that an investment in
intellectual property is not recoverable over its estimated useful life, the
intellectual property will be written down to its fair value.
Distribution rights
Acquired distribution rights are recorded at cost and represent rights to the
distribution of certain distance learning products. The capitalized costs of the
distribution rights will be amortized each period, commencing when
electronically converted products are available for license, at the greater of
i) the amount calculated based on the straight-line method over the estimated
useful life of 5 years or ii) the amount calculated based on the ratio of
current gross revenues received from the licensing of the electronically
converted products over the sum of the current and future gross revenues
anticipated to be received by licensing the electronically converted products.
[note 9[c]]. If it is determined that investment in distribution rights is not
recoverable from estimated sales, the distribution rights will be written down
to its fair value.
Revenue recognition
Revenue from consulting and programming services is recognized at the time such
services are rendered.
Research and development
Software development costs incurred prior to the establishment of technological
feasibility are expensed as incurred. Research costs are expensed as incurred.
F-12
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Foreign currency measurement
In preparing the Company's Canadian dollar functional currency financial
statements, United States dollar monetary assets and liabilities are remeasured
in the Company's Canadian dollar functional currency at the period end rate of
exchange. The statements are then translated into the Company's United States
dollar reporting currency. Transactions in foreign currency are remeasured at
the dollar actual rates of exchange. Foreign currency remeasurement differences
are included in general and administrative expenses.
Stock options
As permitted by FASB Statement No. 123 ["FASB 123"], "Accounting for Stock-Based
Compensation," the Company has adopted the intrinsic value method of APB 25,
"Accounting for Stock Issued to Employees" in respect of stock options granted
to its employees and directors and FASB 123 in respect of stock options granted
to its consultants. The measurement date of options granted to consultants will
be the date the services are completed. For purposes of recognition of the cost
of the options prior to the measurement date such options are measured at their
then current fair value at each interim financial reporting date.
Income taxes
The Company follows the liability method of providing for income taxes in
accordance with FASB Statement No. 109, "Accounting for Income Taxes."
Basic and diluted loss per common share
Per share amounts have been computed based on the weighted average number of
common shares outstanding each period. The weighted average number of common
shares outstanding prior to the acquisition on January 29, 1999 are based on the
number of VPS common shares outstanding during that period.
InfoCast Canada's 1,500,000 exchangeable shares outstanding are deemed to be
outstanding common shares of InfoCast for the purposes of the loss per share
calculations and share continuity disclosures because the exchangeable shares
are the economic equivalent of common shares of the Company.
F-13
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Use of estimates
Management uses estimates and assumptions in preparing consolidated financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported amounts of
revenue and expenses. Actual results could vary from the estimates that are
used.
3. INTELLECTUAL PROPERTY
The Company executed a Memorandum of Agreement dated July 31, 1997, whereby the
Company acquired certain intellectual property owned by an officer of the
Company, in consideration for 35 VPS common shares issued at Cdn.$1 per share.
The fair value of the intellectual property is $23 based on the fair value of
the 35 VPS shares issued in consideration thereof. The fair value per share in
respect of the 35 VPS common shares issued for the intellectual property is
consistent with the cash proceeds received per share in respect of the other 65
VPS common shares issued during 1997. The intellectual property purchased
pursuant to this agreement is completed technology and is related to electronic
information delivery algorithms.
On November 17, 1998, the Company entered into a Purchase and Sale Agreement
with Advanced Systems Computer Consultants Inc., a company owned by the officer
of the Company noted above, pursuant to which the Company acquired certain
additional intellectual property rights. The intellectual property purchased
pursuant to this agreement is completed technology and relates to remote banking
software. The Company purchased the intellectual property rights for
consideration as follows:
[i] $49,735 [Cdn.$75,000] if the Company becomes a public corporation and has
completed a minimum financing of $2,000,000; and
[ii] $215,000 [Cdn.$325,000] if the purchased remote banking software generates
revenue.
The Company has accrued the first $49,735 installment in its accounts as the
Company assessed the conditions requiring its payment to be probable when the
agreement was executed.
F-14
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Acquired intellectual property consists of the following:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
Net Net
Accumulated book Accumulated book
Cost amortization value Cost amortization value
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Electronic information
delivery algorithms 23 - 23 23 - 23
Remote banking software 49,712 4,144 45,568 49,003 - 49,003
49,735 4,144 45,591 49,026 - 49,026
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
Net
Accumulated book
Cost amortization value
$ $ $
<S> <C> <C> <C>
Electronic information
delivery algorithms 25 - 25
25 - 25
</TABLE>
4. CAPITAL ASSETS
Capital assets consist of the following:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
---------------------------------------- ----------------------------------------
Net Net
Accumulated book Accumulated book
Cost depreciation value Cost depreciation value
$ $ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computer equipment 64,899 7,684 57,215 15,865 4,077 11,788
Office equipment 49,220 1,887 47,333 7,180 60 7,120
Leasehold improvements 2,979 135 2,844 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
117,098 9,706 107,392 23,045 4,137 18,908
- ------------------------------------------------------------------------------------------------------------------------------------
Computer equipment 12,405 451 11,954
- ------------------------------------------------------------------------------------------------------------------------------------
12,405 451 11,954
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5. NOTE PAYABLE TO INFOCAST CORPORATION AND AMOUNT DUE FROM INFOCAST
CORPORATION
InfoCast advanced $250,000 to VPS in December 1998 in contemplation of the
acquisition [note 1[b]]. The advance was evidenced by a promissory note that is
payable on demand and bears interest at 7%. Subsequent to December 31, 1998 and
prior to the completion of the acquisition on January 29, 1999, InfoCast
advanced an additional $146,900 to VPS on the same terms.
During December 1998, VPS incurred expenses of $25,020 on behalf of InfoCast.
The amount was outstanding as of December 31, 1998, was non-interest bearing and
was payable on demand.
These amounts were eliminated upon the acquisition of InfoCast by VPS on January
29, 1999 [note 1[b]].
F-15
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
6. DUE TO DIRECTORS, OFFICERS AND STOCKHOLDERS
The amounts due to directors, officers and shareholders consist of the
following:
<TABLE>
<CAPTION>
March 31, December 31, December 31,
1999 1998 1997
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
View Media 383 109,269 105,965
Advanced Systems Computer Consultants Inc. 65,420 64,125 3,580
Griffis International Limited 28,348 26,714 --
Past officer of the Company 44,001 43,280 --
Current officers and directors of the Company 39,118 29,637 --
- ------------------------------------------------------------------------------------------------------------------------------------
177,270 273,025 109,545
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amounts are non-interest bearing and payable on demand. All of the amounts
due to View Media and Cdn.$25,000 of the amount due to Griffis International
Limited as of March 31, 1999 and December 31, 1998 relate to cash advances
provided to the Company, while $49,710 [Cdn.$75,000] of the amount due to
Advanced Systems Computer Consultants Inc. as of March 31, 1999 and December 31,
1998 relates to the intellectual property described in note 3. The balance
relates to expenditures incurred and services performed on behalf of the
Company.
During the three months ended March 31, 1999, the Company incurred expenses of
nil [March 31, 1998 - $16,178; December 31, 1998 - $59,319; December 31, 1997 -
$42,119] for managerial and consulting services from Advanced Systems Computer
Consultants Inc., nil [March 31, 1998 - nil; December 31, 1998 - $30,526; 1997 -
nil] for consulting services provided by View Media and $26,981 [March 31, 1998
- - nil; December 31, 1998 - $16,178; 1997 - nil] for consulting services provided
by Griffis International Limited.
View Media is a company controlled by a stockholder and former director of the
Company. Griffis International Limited is a company owned by a stockholder and
the Chairman of the Company.
7. SHARE CAPITAL
Authorized
The Company has 100,000,000 preferred shares authorized at a par value of $0.001
per share and has 100,000,000 common shares authorized at a par value of $0.001
per share.
F-16
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Issued and outstanding common shares
The issued share capital subsequent to January 29, 1999 consists of the
following:
<TABLE>
<CAPTION>
Common stock issued and
outstanding and
additional paid-in-capital
------------------------------------
Shares Amount
# $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding as of January 29, 1999 [note 1[b]] 15,080,000 310,131
Private placement at $1.50 per share 3,032,333 4,548,500
Issuance of shares in consideration for consulting services 60,000 337,800
Share issuance costs -- (42,992)
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as of March 31, 1999 18,172,333 5,153,439
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Private placement
During March 1999, InfoCast completed the placement of 3,032,333 common shares
at $1.50 per share. The gross proceeds of the issue were $4,548,500.
Issuance of shares in consideration for consulting services
Pursuant to an agreement dated March 22, 1999, the Company issued 60,000 common
shares to a financial investment consulting firm in consideration for assistance
in securing additional financing over the following year. The measurement date
for these common shares will be March 22, 2000. For purposes of recognition of
the cost of the common shares prior to the measurement date such common shares
are measured at their then current fair value at each interim financial
reporting date. As of March 31, 1999, the common shares have been valued at the
$5.63 per share closing price on the agreement date of which $10,180 was charged
to general and administrative expenses during the three month period ended March
31, 1999.
Stock options
As a condition of the acquisition [note 1], InfoCast adopted the 1998 Stock
Option Plan as amended on January 29, 1999 pursuant to which 2,250,000 stock
options were set aside to be granted to various individuals involved in the
management of VPS, including 375,000 options granted to consultants. The options
were granted on February 8, 1999, are exercisable at a price of $1.00 per share,
expire three years from the date of grant and are subject to a vesting period of
at least six months.
F-17
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
As of April 19, 1999, 175,000 of the stock options had been cancelled due to the
termination of certain individuals and the renegotiation of employment terms.
The closing market price of the Company's common shares on the date of grant was
$6.625 per share. Of the 2,075,000 remaining stock options, 775,000 will vest on
August 8, 1999 and 1,300,000 will vest on February 8, 2000. These outstanding
stock options have been valued at $11,788,250 of which $2,256,938 has been
recognized as a stock option compensation expense, and of which the balance of
$9,531,312 has been recorded as deferred compensation in stockholders' equity.
The deferred compensation attributable to the 375,000 stock options granted to
consultants was determined based on the fair value of the options at the date of
grant, $5.87 per option, and will be adjusted to the then current value at each
interim financial reporting date and will be amortized to income over the
vesting periods of the stock options. The deferred compensation in respect of
the 1,700,000 stock options granted to employees and directors will be amortized
to income over the remaining vesting periods of the options in accordance with
the intrinsic value method.
A summary of the Company's share option activity is as follows:
Three Months Ended
March 31, 1999
Number of Weighted Average
Options Exercise Price
# $
Outstanding as of January 1, 1999 - -
Granted 2,250,000 1.00
Exercised - -
Forfeited - -
Cancelled (175,000) 1.00
Outstanding as of March 31, 1999 2,075,000 1.00
Exercisable as of March 31, 1999 - -
If the Company had been following FASB 123 in respect of stock options granted
to its employees and directors, the Company would have recorded a higher stock
option compensation expense for the three month period ended March 31, 1999 of
$69,556 and a higher deferred compensation as of March 31, 1999 of $322,434.
This higher stock option compensation expense would result in a pro-forma net
loss of $3,153,487 and a pro-forma basic and diluted loss per share of $0.27 in
respect of the three month period ended March 31, 1999. The fair value of the
stock options granted was $5.87 per option utilizing a Black-Scholes valuation
model. The Company assumed an expected dividend rate of 0%, a three year option
life, a risk free interest rate of 5.08% and an expected volatility factor of
0.838 in respect of the valuation of the stock options in accordance with FASB
123.
The directors of the Company have approved a 1999 stock option plan under which
an additional 2,000,000 stock options will be eligible for grant. The 1999 stock
option plan is subject to stockholder approval.
8. DISCONTINUED REVENUE SOURCES
The Company recorded revenue of $43,446 during the year ended December 31, 1998
[March 31, 1998 - $43,446; December 31, 1997 - $3,508] mainly resulting from the
provision of computer programming services to one customer. These services are
no longer being provided by the Company to this customer.
As of March 31, 1999, nil [March 31, 1998 - nil; December 31, 1997 - $3,448] was
recorded as accounts receivable from this customer.
F-18
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
9. COMMITMENTS
[a] Lease commitments
The Company leased premises under non-cancellable operating leases which require
future annual minimum lease payments as follows:
$
- -------------------------------------------------------------------
1999 60,428
2000 52,238
2001 35,072
2002 5,874
2003 --
- -------------------------------------------------------------------
153,612
- -------------------------------------------------------------------
The rental payments for the premises are exclusive of taxes and operating costs.
During the three month period ended March 31, 1999, the Company incurred rent
expense of $38,682 [March 31, 1998 - $4,044; December 31, 1998 - $16,701;
December 31, 1997 - $5,711].
[b] Acquisition of Homebase Work Solutions Ltd.
Pursuant to a Letter of Intent dated December 14, 1998, between the Company and
Homebase Work Solutions Ltd. ["Homebase"], the Company intended to purchase a
100% interest in Homebase in consideration for 2,100,000 common shares of the
Company. The agreement was conditional upon regulatory approval and satisfactory
due diligence. Homebase is a telework solution provider headquartered in
Calgary, Alberta.
Pursuant to a share purchase agreement dated May 13, 1999, all of Homebase's
outstanding common shares, first preferred series A shares, common share
purchase warrants and penalty common share purchase warrants were acquired by
the Company in consideration for 3,400,000 exchangeable shares of InfoCast
Canada. The InfoCast Canada exchangeable shares are convertible into InfoCast
common shares on a one-for-one basis at no additional consideration. The
acquisition will be accounted for by the purchase method. The allocation of the
purchase price has not yet been finalized.
As a condition of the closing of the share purchase agreement, the Company will
pay $139,000 [Cdn. $210,000] to officers of Homebase and must pay an additional
$139,000 [Cdn. $210,000] to the officers of Homebase if the Company completes a
private placement financing for gross proceeds of at least
F-19
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
$1,000,000 or completes a letter of credit financing of at least $500,000. These
amounts will be expensed after the closing.
On March 25, 1999, the Company advanced Cdn. $150,000 to Homebase in
consideration for a promissory note bearing interest at prime plus 1%. The
promissory note is payable on demand and is collateralized by a general security
agreement. As of March 31, 1999, $99,529 has been recorded as an amount due from
Homebase, including interest receivable of $105.
[c] Purchase of distribution rights
Pursuant to an agreement dated December 15, 1998, as amended by a letter
agreement dated February 16, 1999, and an agreement dated March 12, 1999,
between the Company and ITC Learning Corporation ["ITC"], the Company has the
option to purchase from ITC perpetual distribution rights for certain distance
learning products in consideration for $1,000,000 in respect of the first
150,000 user licenses and based on a shared revenue formula for user licenses in
excess of 150,000. The first $500,000 of the initial $1,000,000 purchase price
was paid during March 1999 and has been recorded as distribution rights deposit
in the accounts of the Company. The Company must make the final payent of
$500,000 by May 31, 1999 if the Company decides to continue with the agreement.
[d] Purchase of Applied Courseware Technology (A.C.T.) Inc.
Pursuant to a Letter of Intent dated February 10, 1999 between the Company and
Applied Courseware Technology (A.C.T.) Inc. ["ACT"], the Company intends to
purchase a 100% interest in ACT in consideration for [i] $185,600 [Cdn.
$280,000] cash, [ii] 750,000 common shares of the Company, [iii] the assumption
of long-term debt of ACT of approximately $464,000 [Cdn. $700,000] which the
Company intends to renegotiate and [iv] the settlement by the Company of
approximately $232,000 [Cdn. $350,000] of additional ACT debt. The transaction
was subject to satisfactory due diligence.
Pursuant to subsequent negotiations, the $185,600 [Cdn. $280,000] cash component
of the purchase price was revised to nil. The amount and terms of ACT's debt
that was to be assumed by the Company upon its acquisition has not yet been
determined.
In September 1999, the Company decided not to proceed with the acquisition of
ACT.
During February and March 1999, the Company paid $92,794 [Cdn. $140,000] of the
ACT debt in consideration for a note secured by a general security agreement
subject to prior charges and made cash advances to ACT totalling $46,398 to fund
certain development expenditures incurred on behalf of the Company. As of March
31, 1999, $139,299 has been recorded as an amount due from ACT, including
interest receivable of $107. The realization of these loans are uncertain as a
result of ACT's poor financial condition and the Company's decision to not
proceed with the purchase of ACT.
ACT has indicated to the Company that ACT believes the Company's decision to not
proceed with the acquisition is unlawful and that the Company has access to and
possesses intellectual property belonging to ACT that the Company has no right
to use or derive any benefit from. ACT has indicated that they expect to
commence an action against the Company for damages.
F-20
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
[e] Marketing agreement
Pursuant to a consulting agreement and a news letter publicity agreement dated
April 15, 1999, the Company will pay $6,000 per month plus expenses to a
marketing consultant in consideration for national media consulting services
over the one year term of the agreement and will pay $250,000 for the costs of
the production and distribution of an investor newsletter featuring the Company.
[f] CosmoCom, Inc.
Pursuant to a summary of terms and conditions for a definitive agreement between
the Company and CosmoCom, Inc. dated April 1999, the Company intends to purchase
licenses for CosmoCom, Inc.'s CosmoCall software. Under this summary, the
Company placed an initial order for 300 licences for total consideration of
$754,500, payable in four installments during 1999.
10. INCOME TAXES
As of March 31, 1999, the Company has accumulated non-capital losses of
approximately Cdn.$1,000,000 [approximately $663,000] for Canadian income tax
purposes which are available to reduce future years' taxable income. The future
income tax benefits associated with these non-capital losses have not yet been
recognized in the accounts. These non-capital losses will expire as follows:
$
- --------------------------------------------------------------------------
2003 83,000
2004 414,000
2005 166,000
- --------------------------------------------------------------------------
663,000
- --------------------------------------------------------------------------
The Company has recorded no United States current federal income tax expense or
benefit. As of March 31, 1999, the Company has accumulated non-capital losses of
approximately $600,000 for United States income tax purposes which are available
to reduce future years' taxable income. The future income tax benefits
associated with these non-capital losses have not yet been recognized in the
accounts. These non-capital losses will expire as follows:
$
- ------------------------------------------------------------------------
2018 200,000
2019 400,000
- ------------------------------------------------------------------------
600,000
- ------------------------------------------------------------------------
The Company has a United States capital loss carryforward of approximately
$65,000. This capital loss carryforward will expire, if not utilized, in 2003. A
capital loss carryforward may only be used to reduce capital gains and cannot be
applied against taxable ordinary income that might be earned by the Company.
A deferred tax asset has been established relating to the operating and capital
loss carryforwards and the timing differences between the Company's tax and
financial reporting basis. A valuation
F-21
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
allowance equal to the entire amount of the deferred tax asset has been
established due to the uncertainty of the future utilization of the operating
and capital loss carryforwards. Following are the components of the Company's
deferred tax asset balances:
March 31, December 31, December 31,
1999 1998 1997
$ $ $
- ----------------------------------------------------------------------------
Deferred tax asset 559,887 231,189 40,517
Valuation allowance (559,887) (231,189) (40,517)
- ----------------------------------------------------------------------------
-- -- --
- ----------------------------------------------------------------------------
11. CONTINGENCIES
Fair value of financial instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies.
The fair values of financial instruments classified as current assets or
liabilities including cash and cash equivalents, accounts receivable, due from
InfoCast [the acquired entity], due from ACT, due from Homebase, accounts
payable and accrued liabilities, notes payable and due to directors, officers
and stockholders as of March 31, 1999, March 31, 1998, December 31, 1998 and
December 31, 1997 approximate the carrying values due to the short-term maturity
of the instruments.
Concentration of credit risk
The Company invests its cash and cash equivalents primarily with a major
Canadian chartered bank. Certain deposits, at times, are in excess of limits
insured by the Canadian government.
F-22
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Note receivable from Cherokee Mining Company Inc.
Pursuant to an agreement dated November 23, 1998 as amended April 20, 1999, and
effective December 18, 1998, InfoCast [the acquired entity] sold its equity
interest in its two subsidiaries, Gold King Mines Corporation ["Gold King"] and
Madison Mining Corporation ["Madison Mining"] to Cherokee Mining Company Inc.
["Cherokee"], a company controlled by a former director of InfoCast, for [i] a
non-interest bearing note of $600,000 due November 25, 1999 and [ii] the
entitlement to 80% of the net proceeds received by Madison Mining and Gold King
in excess of $681,175 from the sale of their mining properties and assets.
InfoCast did not record a value on the $600,000 note receivable because of the
uncertainty of whether the management of Cherokee, Gold King and Madison Mining
will be able to sell the capital assets of Gold King and Madison Mining for
sufficient proceeds to enable the note to be repaid to InfoCast. As a result,
VPS did not reflect the note in the purchase equation upon the acquisition of
InfoCast [note 1[b]]. In the event that the note is repaid, the amount received
will be credited to income.
F-23
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED BALANCE SHEET
[U.S.dollars, U.S. GAAP ]
Unaudited
As of
September 30, 1999
ASSETS
Current
Cash and cash equivalents 5,300,965
Accounts receivable 142,093
Prepaid expenses and refundable deposits 325,042
- --------------------------------------------------------------------------------
Total current assets 5,768,100
- --------------------------------------------------------------------------------
Capital assets, net 2,181,598
Goodwill, net 5,397,009
Distribution and licensing rights, net [note 3(b)] 2,975,000
Intellectual property, net 16,753,736
Software license [note 3 (f)] 125,650
- --------------------------------------------------------------------------------
33,201,093
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY )
Current
Accounts payable and accrued liabilities 1,067,741
Current portion of obligations under capital leases 380,782
Due to directors, officers and stockholders 33,279
- --------------------------------------------------------------------------------
Total current liabilities 1,481,802
- --------------------------------------------------------------------------------
Obligation under capital lease 882,017
- --------------------------------------------------------------------------------
Deferred income taxes 6,351,895
- --------------------------------------------------------------------------------
Total liabilities 8,715,714
- --------------------------------------------------------------------------------
Stocholders' equity (deficiency)
Common stock (100,000,000 authorized
and 23,712,333 issued and outstanding) 22,212
Additional paid-in capital 48,921,081
Deferred compensation (5,151,232)
Warrants 848,550
Accumulated other comprehensive loss 62,562
Accumulated development stage deficit (20,217,794)
- --------------------------------------------------------------------------------
Total stockholders' equity (deficiency) 24,485,379
- --------------------------------------------------------------------------------
33,201,093
- --------------------------------------------------------------------------------
F-24
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE LOSS
[U.S.dollars, U.S. GAAP ]
<TABLE>
<CAPTION>
Unaudited
Six months Six months Cumulative from
ended ended inception to
September 30, 1999 September 30, 1998 September 30, 1999
- ---------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C>
Consulting income - 99 46,954
Interest income 58,464 - 62,942
- -----------------------------------------------------------------------------------------------------
58,464 99 109,896
- -----------------------------------------------------------------------------------------------------
EXPENSES
General, administrative and selling 4,023,321 35,310 5,081,911
Stock option compensation 9,506,548 - 11,763,486
Research and development 1,783,346 52,498 2,085,697
Interest and loan fees - - 23,562
Amortization 1,863,286 - 1,867,430
Depreciation 29,908 1,895 39,709
- -----------------------------------------------------------------------------------------------------
17,206,409 89,703 20,861,795
- -----------------------------------------------------------------------------------------------------
Net loss before income taxes (17,147,945) (89,604) (20,751,899)
Deferred income taxes (534,105) - (534,105)
- -----------------------------------------------------------------------------------------------------
Net loss for the period (16,613,840) (89,604) (20,217,794)
Translation adjustment 48,253 12,204 62,562
- -----------------------------------------------------------------------------------------------------
Comprehensive loss for the period (16,565,587) (77,400) (20,155,232)
- -----------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 21,305,895 788,848 6,711,775
- -----------------------------------------------------------------------------------------------------
Basic and diluted loss per share $ (0.78) $ (0.11) $ (3.01)
- -----------------------------------------------------------------------------------------------------
</TABLE>
F-25
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF CASH FLOW
[U.S.dollars, U.S. GAAP ]
<TABLE>
<CAPTION>
Unaudited
Six months Six months Cumulative from
ended ended inception to
September 30, 1999 September 30, 1998 September 30, 1999
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss for the period (16,613,840) (89,604) (20,217,794)
Add (deduct) items not affecting cash
Stock option compensation 9,506,548 - 11,763,486
Common stock issued for services 254,149 - 264,329
Warrant issued for services 595,083 - 595,083
Write-off in-process research & development 19,000 - 19,000
Write-off ACT Loan 98,685 - 98,685
Deferred income taxes (534,105) - (534,105)
Amortization 1,863,286 - 1,867,430
Depreciation 29,908 1,833 39,709
- -------------------------------------------------------------------------------------------------------------------------------
(4,781,286) (87,771) (6,104,177)
Changes in non-cash working capital balances
Accounts receivable (64,181) 34,904 (83,597)
Prepaid expenses and refundable deposits (302,171) (231) (323,575)
Bank overdraft - (9,263) -
Accounts payable and accrued liabilities 630,861 23,312 921,276
Due from InfoCast [the acquired entity] prior to acquisition - - (25,020)
- -------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (4,516,777) (39,049) (5,615,093)
- -------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES -
Purchase of capital assets (820,850) (2,184) (938,565)
Purchase of intellectual property - (48,979) -
Distribution rights (2,475,000) - (2,975,000)
Purchase of software license (125,650) - (125,650)
Due from Homebase Work Solutions Ltd. - - (99,529)
Acquisition of Homebase Work Solutions Ltd. 50,667 - 50,667
Due from Applied Courseware Technology (A.C.T.) Inc. - - (139,299)
Acquisition of InfoCast Corporation - - 87
- -------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (3,370,833) (51,163) (4,227,289)
- -------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in note payable to InfoCast [the acquired entiry] - - 250,000
Increase (decrease) in due to directors, officers and shareholders (143,991) 76,830 (15,725)
Receipt of short-term unsecured loan - - 470,000
Payment of short-term unsecured loan - - (470,000)
Cash advance from InfoCast [the acquired entity] prior to acquisition - - 146,900
Cash Proceed from issuance of share capital , net 10,202,084 2,363 14,710,010
-
- -------------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 10,058,093 79,193 15,091,185
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash during the period 2,170,483 (11,019) 5,248,803
Effects of foreign exchange rates change on cash balances 38,037 11,104 52,162
Cash & cash equivalents, beginning of period 3,092,445 - -
- -------------------------------------------------------------------------------------------------------------------------------
Cash & cash equivalents, end of period 5,300,965 85 5,300,965
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-26
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Unaudited
Common Stock Additional
Common Issued and Paid-in Deferred
Shares outstanding Capital Compensation
# $ $ $
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding as of March 31, 1999 18,172,333 16,672 16,925,017 (9,858,932)
Deemed common shares issued for acquisition 3,400,000 3,400 16,996,600 -
of Homebase Work Solutions
Common shares issued for cash 2,140,000 2,140 11,557,860 -
Share issuance costs- cash - - (1,357,926) -
Share issuance costs- warrants - - (226,800) -
Warrants issued for consulting services - - - (76,002)
Adjustments resulting from revaluation of stock options - - 1,386,250 678,079
granted to consultants in previous periods
Adjustments resulting from revaluation of common shares - - 164,700 (6,777)
granted to consultants in previous periods
Adjustments resulting from revaluation of warrants - - - (95,750)
granted to consultants in previous periods
Granting of stock options - - 3,475,380 (3,475,380)
Amortization of deferred compensation - - - 7,683,530
Net loss for the period - - - -
Translation adjustment - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding as of September 30, 1999 23,712,333 22,212 48,921,081 (5,151,232)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated
other Accumulated Total
Comprehensive development Stockholders'
Warrants loss stage deficit Equity
$ $ $ $
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding as of March 31, 1999 - 14,309 (3,603,954) 3,493,112
Deemed common shares issued for acquisition - - - 17,000,000
of Homebase Work Solutions - - - -
Common shares issued for cash - - - 11,560,000
Share issuance costs- cash - - - (1,357,926)
Share issuance costs- warrants 226,800 - - -
Warrants issued for consulting services 526,000 - - 449,998
Adjustments resulting from revaluation of stock options - - - 2,064,329
granted to consultants in previous periods - - - -
Adjustments resulting from revaluation of common shares - - - 157,923
granted to consultants in previous periods - - - -
Adjustments resulting from revaluation of warrants 95,750 - - -
granted to consultants in previous periods - - - -
Granting of stock options - - - -
Amortization of deferred compensation - - - 7,683,530
Net loss for the period - - (16,613,840) (16,613,840)
Translation adjustment - 48,253 - 48,253
- ------------------------------------------------------------------------------------------------------------------------------
Outstanding as of September 30, 1999 848,550 62,562 (20,217,794) 24,485,379
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-27
<PAGE>
1. BASIS OF ACCOUNTING
Nature of operations and continuing entity
These consolidated financial statements are the continuing financial statements
of Virtual Performance Systems Inc. ["VPS"] [a development stage company], an
Ontario corporation which was incorporated on July 29, 1997. VPS had a 100%
interest in, and subsequently amalgamated with, Cheltenham Technologies
Corporation, an Ontario corporation. VPS has a 100% interest in Cheltenham
Interactive Corporation ["Cheltenham Interactive"], an inactive Ontario
corporation, and Cheltenham Technologies (Bermuda) Corporation ["Cheltenham
Bermuda"], a Barbados corporation which owns certain intellectual properties. On
January 29, 1999, VPS acquired the net assets of InfoCast Corporation [formerly
Grant Reserve Corporation] ["InfoCast"], a United States non-operating company
traded on the NASDAQ OTC Bulletin Board which had a 100% interest in InfoCast
Canada Corporation ["InfoCast Canada"]. After the acquisition, the accounting
entity continued under the name of InfoCast Corporation.
InfoCast, InfoCast Canada, VPS, Cheltenham Interactive and Cheltenham Bermuda
are collectively referred to as the "Company". The Company is a development
stage technology company engaged in the research and development of information
delivery technologies.
The Company's primary operational focus as outlined in its business plan entails
significant investment in developing and marketing electronic commerce enabling
application solutions.
The aggregate future capital requirements to support this growth are expected to
be substantially funded from external resources including issuing equity and or
debt. There can be no assurance that any financing will be available on terms
acceptable to the Company or at all.
The Company believes that its cash as well as the additional proceeds of up to
$3,000,000 expected to be received by the Company from the completion of the
current Regulation S financing by the end of January 2000 will be sufficient to
support the Company's growth for approximately the next 6 months. In the event
the current Regulation S financing is not concluded, the Company will curtail
its development plans commencing January 2000 and reduce expense levels
materially. In such event the Company believes that its current cash reserves
will support limited activities until January 2001.
The Company is currently seeking to raise additional funds through private or
public financings, strategic or other relationships. In October 1999 the Company
entered into an agreement with N.M. Rothschild & Sons Canada Ltd. and N.M.
Rothschild & Sons (Washington) L.L.C. (together "Rothschild") pursuant to which
Rothschild is to assist the Company in raising up to $50 to $75 million over the
next six months.
The functional currency of VPS, Cheltenham Interactive, Cheltenham Bermuda and
InfoCast Canada is the Canadian dollar. However, for reporting purposes, the
Company has adopted the United States dollar as its reporting currency.
Accordingly, the Canadian dollar balance sheets of these companies have been
translated into United States dollars at the rates of exchange at the respective
period ends, while transactions during the periods and share capital amounts
have been translated at the weighted average rates of exchange for the
respective periods and the exchange rate at the date of the transaction,
respectively. Gains and losses arising from these translation adjustments are
included in comprehensive loss.
Acquisition of Homebase Work Solutions Ltd.
Pursuant to a share purchase agreement dated May 13, 1999, Homebase Work
Solutions Ltd. ["Homebase"] was acquired by the Company in consideration for
3,400,000 exchangeable shares of InfoCast Canada. The InfoCast Canada
exchangeable shares are convertible into InfoCast common shares on a one-for-one
basis at no additional consideration.
As a condition of the closing of the share purchase agreement, the Company paid
$141,561 [Cdn.$210,000] to officers of Homebase in May 1999 and an additional
$142,023 [Cdn.$210,000] in August 1999 to the officers of Homebase.
F-28
<PAGE>
The acquisition has been accounted for using the purchase method. The value of
the acquisition was $17,077,000, which included $77,000 of expenses directly
attributable to the acquisition. For accounting purposes the exchangeable shares
of InfoCast Canada have been valued at $5.00 which is equal to the price per
share received from the June 1999 private placement of the Company's common
shares. The total purchase price of $17,077,000 has been allocated as follows:
$
- --------------------------------------------------------------------------
Cash 127,667
Other current assets 13,565
Capital assets 20,465
Completed technology 17,015,000
In-process research and development 19,000
Trademarks 853,000
Workforce-in-place 253,000
Goodwill 5,846,293
Deferred income taxes (6,886,000)
Accounts payable and accrued liabilities (82,145)
Due to the Company (102,845)
- --------------------------------------------------------------------------
Purchase price 17,077,000
- --------------------------------------------------------------------------
The completed technology, trademarks, workforce in-place and goodwill will be
amortized over their respective useful lives of 5 years, 5 years, 3 years and 5
years. The in-process research and development was charged to income immediately
subsequent to the acquisition. The completed technology, trademarks and
workforce-in-place have been classified as intellectual property on the
consolidated balance sheet. The deferred income tax liability was created in
respect of the difference between the accounting and tax basis of the completed
technology, trademarks and workforce-in-place. The identification and the fair
values of the completed technology, in-process research and development,
trademarks and workforce-in-place were determined by management with the
assistance of an independent valuator.
The completed technology is comprised of Homebase's information hub, telework
and web enabling technologies, together with the benefits of Homebase's
association with the National Environmental Policy Institute ("NEPI"). NEPI is a
United States based non-profit environmental lobbyist group that promotes
telework policies in the United States.
The results of operations of Homebase during the post-acquisition 141-day period
ended September 30, 1999 have been consolidated with those of the Company.
CHANGE IN YEAR END
The Company changed its year end from December 31 to March 31.
F-29
<PAGE>
Basis of presentation
These unaudited interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. Accordingly, these unaudited interim
consolidated financial statements do not include all the financial information
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
[consisting of normal recurring accruals] considered necessary for fair
presentation have been included. The operating results for the six-month period
ended September 30, 1999 may not be indicative of the operating results that
will occur for the year ended March 31, 2000.
For further information, please refer to the consolidated financial statements
and footnotes thereto of the Company as of and for the three-month period ended
March 31, 1999, as of and for the year ended December 31, 1998 and as of and for
the 156-day period ended December 31, 1997, included elsewhere in this document.
2. SHARE CAPITAL
Authorized
The Company has 100,000,000 preferred shares authorized at a par value of $0.001
per share and has 100,000,000 common shares authorized at a par value of $0.001
per share.
ISSUED AND OUTSTANDING COMMON SHARES
Common stock issued and
outstanding and
additional paid-in-capital
Shares Amount
# $
- --------------------------------------------------------------------------------
Outstanding as of March 31, 1999 18,172,333 5,153,739
Acquisition of Homebase Work Solutions Ltd. 3,400,000 17,000,000
Private placement at $5.00 per share 420,000 2,100,000
Private placement at $5.50 per share 1,720,000 9,460,000
Share issuance costs -- (1,584,725)
- --------------------------------------------------------------------------------
Outstanding as of September 30, 1999 23,712,333 32,129,014
- --------------------------------------------------------------------------------
Exchangeable shares
The number of common shares outstanding as of September 30, 1999 includes
4,900,000 exchangeable shares of InfoCast Canada which have been deemed as
common shares of the Company for accounting purposes because the exchangeable
shares are the economic equivalent of common shares of the Company.
F-30
<PAGE>
Securities Purchase Agreement
Pursuant to a Securities Purchase Agreement dated June 24, 1999, the Company
issued, by way of a private placement, 420,000 common shares to the agent at
$5.00 per share for gross proceeds of $2,100,000, net of commissions of
$210,000.
Also pursuant to the Securities Purchase Agreement, the Company issued 70,000
warrants on June 24, 1999 to the agent. Each warrant has an exercise price of
$7.00, expires June 23, 2001 and has been valued at $3.24 in the accounts based
on an expected volatility factor of 0.715 and a risk free interest rate of 5.1%.
As a result, $226,800 was charged to share issuance costs during the six-month
period ended September 30, 1999.
Private Placement Memorandum
During July, August and September 1999, pursuant to a Private Placement
Memorandum dated July 1, 1999, the Company completed the private placement of
1,720,000 common shares at $5.50 per share for gross proceeds of $9,460,000 less
an agent's fee of $945,879.
Stock options
As of September 30, 1999, 2,075,000 common shares were reserved for the exercise
of stock options granted to various individuals involved in the management of
VPS, including 375,000 options granted to consultants, pursuant to the Company's
1998 Stock Option Plan as amended on January 29, 1999. The options were granted
on February 8, 1999, are exercisable at a price of $1.00 per share, expire three
years from the date of grant and are subject to a vesting period of at least six
months. The closing market price of the Company's common shares on the date of
grant was $6.625 per share. Of the 2,075,000 stock options that were originally
valued at $11,788,250, the deferred compensation attributable to the 375,000
stock options that were granted to consultants was originally determined based
on the fair market value of the options on the date of grant, $5.87 per option,
and was revalued as of August 8, 1999 to the then current fair value of $9.06
per stock option [based on a revised volatility of 1.019 and the August 8, 1999
common share closing market price of $ 10.00]. This revaluation resulted in a
charge to stock option compensation expense of $2,876,640 during the six-month
period ended September 30, 1999. Stock compensation expense of $5,201,935 was
charged to income during the six-month period ended September 30, 1999 in
respect of the remaining 1,700,000 stock options granted to employees and
directors that are accounted for utilizing the intrinsic value method.
The directors and stockholders of the Company approved the 1999 Stock Option
plan under which an additional 2,000,000 stock options are eligible for grant.
As of September 30, 1999 1,180,500 stock option were granted to various
employees, officers, consultants and advisors pursuant to the 1999 Stock Option
Plan. The options were granted on June 1, 1999, are exercisable at a price of
$7.00 per share, expire five years from the date of grant and are subject to the
following vesting: 905,500 vested on June 1, 1999 and 275,000 will vest on
December 1, 1999. The closing market price of the Company's common shares on the
date of grant was $7.00 per share, while the fair value of the stock options
granted was $2.16 per option utilizing a Black-Scholes valuation model. Of the
1,180,500 stock options, 700,000 were granted to employees and 480,500 were
granted to consultants and advisors. The 480,500 outstanding stock options
granted to consultants and advisors have been valued at $1,252,380, of which
$1,072,880 has been recognized as a stock option compensation expense during the
six-month period ended September 30, 1999, and of which the balance of $179,500
has been recorded as deferred compensation in the stockholders' equity. The
deferred compensation will be adjusted for the then current fair market value at
each interim financial reporting date for the 480,500 stock option granted to
consultants and advisors, and will be amortized to income over the vesting
periods of the stock options. The deferred compensation in respect of the
700,000 stock options granted to employees and directors was nil because the
exercise price of the options was equal to the market price of the common shares
on the date of grant.
F-31
<PAGE>
On June 1, 1999, the directors of the Company approved the grant of 750,000
stock options outside of the 1999 Stock Option Plan to an individual who became
an officer of the Company on September 4, 1999. The stock options are
exercisable at a price of $7.00 per share, expire 5 years from the date of grant
and vest as follows: 250,000 on September 4, 1999 upon the acceptance by the
individual of formal employment with the Company, 250,000 on September 4, 2000
and 250,000 on September 4, 2001. These outstanding options have been valued at
$2,437,500 of which $355,093 has been recognized as a stock option compensation
expense during the six-month period ended September 30, 1999, and of which the
balance of $2,082,407 has been recorded as deferred compensation in
stockholders' equity. The measurement date in respect of these stock options was
September 4, 1999
A summary of the Company's stock option activity is as follows:
Six Months Ended
September 30, 1999
Number of Weighted Average
Options Exercise Price
# $
Outstanding at March 31, 1999 2,075,000 1.00
Granted 1,930,500 7.00
Exercised - -
Forfeited - -
Cancelled - -
Outstanding at September 30, 1999 4,005,500 3.89
Exercisable as of September 30, 1999 1,930,500 4.59
If the Company had been following FASB Statement No. 123 ["FASB 123"] in respect
of stock option granted to its employee and directors, the Company would have
recorded a higher stock option compensation expense for the six month period
ended September 30, 1999 of $1,623,948 which results in a pro-forma net loss of
$18,237,788 and a pro-forma basic and diluted loss per share of $0.86 in respect
of the six-month period ended September 30, 1999. The Company assumed an
expected dividend rate of 0%, an expected life of 0.75 years, a risk-free rate
of 5.08% and an expected volatility factor of 0.838 in respect of the valuation
of stock options granted under the 1998 Stock Option Plan in accordance with
FASB 123. The Company assumed an expected dividend rate of 0%, an expected life
of one year, a risk-free rate of 5.1% and an expected volatility factor of 0.744
in respect of the valuation of stock options granted under the 1999 Stock Option
Plan and stock options granted outside of the 1999 Stock Option Plan in
accordance with FASB 123.
Issuance of shares in consideration for consulting services
Pursuant to an agreement dated March 22, 1999, the Company issued 60,000 common
shares to a financial investment-consulting firm on March 22, 1999 in
consideration for assistance in securing additional financing over the following
year. The measurement date for these common shares will be March 22, 2000, For
purposes of recognition of the cost of the common shares prior to the
measurement date such common shares are measured at their then current fair
value at each interim financial reporting date. These common shares were
revalued as of September 30, 1999 to $8.375 each which resulted in a charge to
general and administrative expense of $254,149 during the six-month period ended
September 30, 1999.
F-32
<PAGE>
Other warrants
Pursuant to a letter agreement dated May 20, 1999 with an investor relations
company and subsequent negotiations in October 1999, the Company will pay a
total of $75,000 and issue 75,000 warrants in consideration for consulting
services over the period from June 1, 1999 to May 31, 2000. The payments will be
made and warrants issued for services, in advance, as follows: $25,000 and
25,000 warrants on June 1, 1999, $12,500 and 12,500 warrants on each of October
6 and December 1, 1999 and $25,000 and 25,000 warrants on March 1, 2000. Based
on a volatility factor of 0.963 and a risk-free interest rate of 5.10% , the
Company valued the 25,000 warrants issued on June 1, 1999 at $149,750 which is
the fair market value as of the August 31, 1999 measurement date. The 12,500
warrants issued on October 6, 1999 are in consideration for consulting services
for the period September 1, 1999 to November 30, 1999. Based on a volatility
factor of 0.905 and a risk-free interest rate of 5.10% , the Company valued
these 12,500 warrants at $40,000 which will be adjusted on the November 30, 1999
measurement date to their then fair market value. Each of the existing and
future warrants issued under this agreement will have an exercise price equal to
the market price on the date granted, is exercisable on or after June 1, 2000
and expires May 31, 2001. The Company charged $163,083 to general and
administrative expenses in respect of these warrants during the six-month period
ended September 30, 1999.
On June 1, 1999, the Company issued 200,000 warrant to parties in consideration
for past consulting services to the Company. These warrants have a purchase
price of $7.00, are exercisable on or after June 1, 2000 and expire May 31,
2001. These warrants have been valued at $432,000 in the accounts based on a
volatility factor of 0.744 and a risk-free interest rate of 5.10% and have been
charged to general and administrative expenses.
3. COMMITMENTS
[a] Marketing agreement
Pursuant to an advertising services agreement dated July 14, 1999, the
Company will pay $14,173 [Cdn.$20,833] per month to an advertising agency
in consideration for the creation, production and placement of various
marketing and advertising initiatives. This agreement commences July 1,
1999 and continues for a fixed term until May 1, 2000.
[b] Acquired distribution and licensing rights
Pursuant to a license agreement dated June 29, 1999, between the Company
and ITC Learning Corporation ["ITC"], the Company will become, for an
unlimited term, ITC's exclusive distance learning technology partner for
the hosting and delivery of educational material utilizing the A-STAR
component within ITC's Workforce Initiative Program for total
consideration of $2,000,000. The consideration of $2,000,000 is payable in
three installments, the first two of which were paid prior to September
30, 1999 for a total of $1,500,000 while the final installment of $500,000
is due on October 10, 1999. The final installment has been provided for in
the accounts.
The Company also entered into a separate distribution agreement with ITC
in March 1999. This distribution agreement provided the Company with the
perpetual non-exclusive right to market, sell and electronically convert
all existing and future ITC products in consideration for $1,000,000 in
respect of electronic distribution to the first 150,000 licensed
purchasers. In the event that the Company effects distribution to more the
150,000 licensed purchasers, the Company and ITC will share the revenue
generated therefrom based on a revenue sharing formula. The total
consideration was subsequently reduced to $975,000 and was paid by the
Company in two installments in March and May 1999.
F-33
<PAGE>
Acquired distribution and licensing rights are recorded at cost. The
capitalized costs of the distribution and licensing rights will be
amortized each period, commencing when the electronically converted
products and educational material are available for distribution and
license, at the greater of (i) the amount calculated based on the
straight-line method over the estimated useful life of 5 years or (ii) the
amount calculated based on the ratio of current gross revenues received
from the licensing of the electronically converted products and the
hosting and delivery of educational material over the sum of the current
and future gross revenues anticipated to be received by licensing the
electronically converted products and hosting and delivering the
educational material. If it is determined that investment in distribution
and licensing rights is not recoverable from estimated sales, the
distribution and licensing rights will be written down to their fair
value.
[c] Call Center Learning Solutions On-Line Inc. joint venture
Pursuant to an agreement dated May 18, 1999, between the Company and Call
Center Learning Solutions Inc. ["CCLS"], the two parties have agreed to
form a new corporation, Call Center Learning Solutions On-Line Inc. ["CCLS
On-Line"] to be owned equally by the Company and CCLS. The new corporation
will develop, own and exploit courseware in an electronic format capable
of electronic distribution. The Company will contribute the resources
necessary to convert the first five courses into the electronic format and
will fund the incorporation and organization of the new corporation. Under
the agreement, the Company agreed to fund all marketing and technical
support efforts of the new corporation for the initial six-month period.
Pursuant to subsequent renegotiations, the Company has agreed to extend
the funding of all marketing and technical support efforts on a month to
month basis beyond the original six-month period. These sales and
marketing costs, the incorporation and organization costs for the new
corporation and the costs to convert the first five courses into
electronic format will be recorded and expensed by the Company in the
period in which they occur. Once the first five courses have been
converted into an electronic format capable of electronic distribution,
the two parties will share all revenues and bear all costs on a 50/50
basis. When the courses are contributed to the joint venture they will be
accounted for at the transferor's basis of zero. As of September 30, 1999
the Company had funded approximately $103,000 of marketing expenses which
the Company charged to income.
[d] Lease agreement
Homebase entered into a lease agreement with Sun Microsystems on June 25,
1999 for the lease of a Sun Microsystems Enterprise 10000 computer. The
Company paid a deposit of $476,210 [Cdn.$700,000] at the time of signing.
The equipment was delivered on September 20, 1999 and under the terms of
the lease, 36 monthly lease payments of $40,272 [Cdn.$59,197] are to
commence on the 16th day following delivery of the equipment. The lease
has been accounted for as a capital lease.
[e] Innatrex Inc.
The Company entered into a letter of intent with Innatrex Inc. in August
1999 whereby the two parties will be evaluating the feasibility of call
center technology owned by Innatrex Inc. for readiness within the
application service provider market. The Company agreed to pay to Innatrex
a total of $204,090 [Cdn.$300,000] as follows: $34,015 [Cdn.$50,000] upon
signing of the letter of intent and $42,519 [Cdn.$62,500] on each of
August 31, September 30, October 31 and November 30, 1999. To date, the
Company has paid a total of $161,572 and expects to pay the remaining
$42,519 on November 30, 1999. The Company expects to receive the payments
back through future revenue generated by the Company through the licensing
of this call center technology to third parties or this prepaid amount
will be converted to equity in Innatrex Inc.
[f] CosmoCom, Inc.
Pursuant to a summary of terms and conditions for a definitive agreement
between the Company and CosmoCom, Inc. dated April 1999, the Company
intends to purchase licenses for CosmoCom Inc.'s CosmoCall software. Under
this summary, the Company placed an initial order for 300 licenses for
total consideration of $754,500, payable in four installments. The Company
has taken delivery of 50 licenses and is currently testing the software.
The Company paid license fees of $62,875 in April 1999 and $62,875 in
September 1999 related to the first 50 licenses. The Company expects to
pay the third installment of $314,375, in consideration for the remaining
250 licenses, once the testing is completed and the software is to the
Company's satisfaction, with the final installment of $314,375 payable
upon delivery of the remaining 250 licenses.
F-34
<PAGE>
[g] Investment banking and financial advisory services agreement
In October 1999 the Company entered into a non-exclusive investment
banking and financial advisory services agreement with N.M. Rothschild &
Sons Canada Ltd and N.M. Rothschild & Sons (Washington) L.L.C. (together
"Rothschild") pursuant to which Rothschild's will provide financial
advisory services to the Company. In consideration for its services,
Rothschild is entitled to a monthly work fee of $50,000 payable monthly in
arrears by the Company. Either party may terminate this agreement at any
time, with or without cause, by giving the other party 15 days written
notice.
4. CONTINGENCIES
Fair value of financial instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies.
The fair values of financial instruments classified as current assets or
liabilities including cash and cash equivalents, accounts receivable, due from
ACT and accounts payable and accrued liabilities as of September 30, 1999
approximate the carrying values due to the short-term maturity of the
instruments.
Concentration of credit risk
The Company invests its cash and cash equivalents primarily with a major
Canadian chartered bank. Certain deposits, at times, are in excess of limits
insured by the Canadian government.
Note receivable from Cherokee Mining Company Inc.
Pursuant to an agreement dated November 23, 1998, as amended April 20, 1999, and
effective December 18, 1998, InfoCast [the acquired entity] sold its equity
interest in its two subsidiaries, Gold King Mines Corporation ["Gold King"] and
Madison Mining Corporation ["Madison Mining"] to Cherokee Mining Company Inc.
["Cherokee"], a company controlled by a former director of InfoCast, for [i] a
non-interest bearing note of $600,000 due November 25, 1999 and [ii] the
entitlement to 80% of the net proceeds received by Madison Mining and Gold King
in excess of $681,175 from the sale of their mining properties and assets.
InfoCast did not record a value on the $600,000 note receivable because of the
uncertainty of whether the management of Cherokee, Gold King and Madison Mining
will be able to sell the capital assets of Gold King and Madison Mining for
sufficient proceeds to enable the note to be repaid to InfoCast. As a result,
VPS did not reflect the note in the purchase equation upon the acquisition of
InfoCast in January 1999. In the event that the note is repaid, the amount
received will be credited to income.
F-35
<PAGE>
Purchase of Applied Courseware Technology (A.C.T.) Inc.
Pursuant to a Letter of Intent dated February 10, 1999 between the Company and
Applied Courseware Technology (A.C.T.) Inc. ["ACT"], the Company intended to
purchase a 100% interest in ACT in consideration for [i] Cdn.$280,000 cash, [ii]
750,000 common shares of the Company and [iii] the assumption of ACT's
liabilities. Pursuant to subsequent negotiations, the Cdn.$280,000 cash
component of the purchase price was revised to nil. The transaction was subject
to satisfactory due diligence. The amount and terms of ACT's debt that will be
assumed by the Company upon its acquisition has not been determined.
During the six-month period ended September 30, 1999, the Company made cash
advances to ACT totaling $542,014 [Cdn $ 801,797] to fund certain development
expenditures incurred on behalf of the Company. These advances in addition to
$47,320 [Cdn.$70,000] that was outstanding as of March 31, 1999 have been
charged to research and development expenses during the six-month period ended
September 30, 1999.
In September 1999 the Company made the decision not to proceed with the
acquisition of ACT.
As of September 30, 1999, $95,242 [1998 - nil], including interest receivable of
$3,443, was recorded as an amount due from ACT in respect of Cdn.$140,000 of
ACT's debt that the Company paid in March 1999 in consideration for a note
secured by a general security agreement subject to prior charges. The
realization of this loan is uncertain as a result of ACT's poor financial
condition and the Company's decision not to proceed with the purchase of ACT.
This loan amount was written down to $nil in September 1999.
ACT has indicated to the Company that ACT believes the Company's decision to not
proceed with the acquisition is unlawful and that the Company has access to and
possesses intellectual property belonging to ACT that the Company has no right
to use or derive benefit from. ACT has indicated that they expect to commence an
action against the Company for damages.
5. SUBSEQUENT EVENT
Private placement
From October 1, 1999 to November 22, 1999, the Company completed the private
placement of 159,000 common shares at $5.50 per share for gross proceeds of
$874,500, less an agent's fee of $87,450.
Between October 1, 1999 and December 31, 1999 the Company granted an additional
775,000 stock options to employees under the 1999 Stock Option Plan and 60,000
stock options outside of the 1999 Stock Option Plan to a consultant in
consideration for services to be rendered. The Company cancelled 270,500 options
previously granted under the 1999 Stock Option Plan.
F-36
<PAGE>
AUDITORS' REPORT
To the Directors of
Homebase Work Solutions Ltd.
We have audited the balance sheets of Homebase Work Solutions Ltd. [a
development stage company] as at March 31, 1999 and December 31, 1998 and the
statements of loss and accumulated development stage deficit and cash flows for
the three-month period ended March 31, 1999, the 101-day period ended December
31, 1998 and the cumulative period from inception, September 22, 1998, to March
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at March 31, 1999 and
December 31, 1998 and the results of its operations and its cash flows for the
three-month period ended March 31, 1999, the 101-day period ended December 31,
1998 and the cumulative period from inception, September 22, 1998, to March 31,
1999 in accordance with accounting principles generally accepted in Canada.
Toronto, Canada, /s/ Ernst & Young LLP
June 11, 1999. Chartered Accountants
F-37
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
BALANCE SHEETS
[expressed in Canadian dollars]
<TABLE>
<CAPTION>
As at As at
March 31, December 31,
1999 1998
$ $
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
Current
<S> <C> <C>
Cash 332,198 66,716
Prepaid expenses 2,140 2,140
Accounts receivable 9,719 41,455
- --------------------------------------------------------------------------------------------------------------------------
Total current assets 344,057 110,311
- --------------------------------------------------------------------------------------------------------------------------
Fixed assets, net [note 3] 9,643 1,900
Software distribution rights, net [note 4] 389,244 --
- --------------------------------------------------------------------------------------------------------------------------
742,944 112,211
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities 134,378 6,920
Promissory note payable to InfoCast Corporation [note 6] 150,000 --
Due to shareholders [note 7] 283 1,117
First preferred series A shares [note 5] 258,639 236,683
Dividends payable on first preferred series A shares [note 5] 28,125 --
- --------------------------------------------------------------------------------------------------------------------------
Total current liabilities 571,425 244,720
- --------------------------------------------------------------------------------------------------------------------------
Shareholders' equity (deficiency)
Common shares [note 5] 727,275 8,212
Accumulated development stage deficit (555,756) (140,721)
- --------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity (deficiency) 171,519 (132,509)
- --------------------------------------------------------------------------------------------------------------------------
742,944 112,211
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-38
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
STATEMENTS OF LOSS AND ACCUMULATED
DEVELOPMENT STAGE DEFICIT
[expressed in Canadian dollars]
<TABLE>
<CAPTION>
Cumulative period
from inception,
Three-month 101-day period September 22,
period ended ended 1998,
March 31, December 31, to March 31,
1999 1998 1999
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C>
Interest 288 719 1,007
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Professional fees 46,460 78,545 125,005
Wages and benefits 81,733 29,511 111,244
National Environmental Policy
Institute funding [note 9] 143,884 -- 143,884
Bank charges and interest 234 193 427
First preferred series A share interest
accretion [note 5] 21,956 11,683 33,639
First preferred series A share dividend
expense [note 5] 28,125 -- 28,125
Other 62,605 21,508 84,113
Depreciation and amortization 30,326 -- 30,326
- ------------------------------------------------------------------------------------------------------------------------------------
415,323 141,440 556,763
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss for the period (415,035) (140,721) (555,756)
Accumulated development stage deficit,
beginning of period (140,721) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated development stage deficit,
end of period (555,756) (140,721) (555,756)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-39
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
STATEMENTS OF CASH FLOWS
[expressed in Canadian dollars]
<TABLE>
<CAPTION>
Cumulative period
from inception,
Three-month 101-day period September 22,
period ended ended 1998,
March 31, December 31, to March 31,
1999 1998 1999
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss for the period (415,035) (140,721) (555,756)
Add items not affecting cash
Depreciation and amortization 30,326 -- 30,326
First preferred series A share interest
accretion [note 5] 21,956 11,683 33,639
First preferred series A share dividend
expense [note 5] 28,125 -- 28,125
- ------------------------------------------------------------------------------------------------------------------------------------
(334,628) (129,038) (463,666)
Net change in non-cash working capital
balances related to operations 158,360 (35,558) 122,802
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (176,268) (164,596) (340,864)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of fixed assets (8,250) (1,900) (10,150)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (8,250) (1,900) (10,150)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of preferred shares -- 225,000 225,000
Proceeds from issuance of common shares 300,000 8,212 308,212
Promissory note payable to
InfoCast Corporation 150,000 -- 150,000
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 450,000 233,212 683,212
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash during the period 265,482 66,716 332,198
Cash, beginning of period 66,716 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of period 332,198 66,716 332,198
- ------------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid during the period -- -- --
</TABLE>
See accompanying notes
F-40
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
1. NATURE OF OPERATIONS
Incorporation
Homebase Work Solutions Ltd. [the "Company"] was incorporated on September 22,
1998 under the Alberta Corporations Act. The Company is in the development stage
and is engaged in the development of information delivery technologies.
Economic dependence
In May 1999, the Company was acquired by InfoCast Corporation ["InfoCast"], a
company also in the development stage [note 8]. As a result of the Company's
limited financial resources, the Company is economically dependent upon
InfoCast.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada which conform in all material respects
with accounting principles generally accepted in the United States ["US GAAP"],
except as outlined in note 12. The preparation of financial statements in
accordance with such principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could vary from the estimates that were used.
The Company's significant accounting policies are summarized as follows:
Fiscal periods presented
The Company has not yet chosen a year end. The financial periods reported in
these financial statements conform with those of the Company's acquirer,
InfoCast [note 8].
F-41
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
Fixed assets
Fixed assets are recorded at cost less accumulated depreciation. If it is
determined that a fixed asset is not recoverable over its estimated useful life,
the fixed asset will be written down to its net recoverable value. Maintenance
and repairs are charged to expenses as incurred. Gains and losses on disposition
of fixed assets are included in income. Depreciation is provided for at the
following annual rate and method:
Office furniture and equipment 30% declining balance
Software distribution rights
Software distribution rights are recorded at cost less accumulated amortization.
If it is determined that a software distribution right is not recoverable over
its estimated useful life, the software distribution right will be written down
to its net recoverable value.
Amortization is provided on a straight-line basis over two years.
Research and development
Software development costs are expensed as incurred unless they meet generally
accepted accounting criteria for deferral and amortization. Software development
costs incurred prior to the establishment of technological feasibility do not
meet these criteria and are expensed as incurred. Research costs are expensed as
incurred.
Income taxes
The Company follows the tax liability method of income tax allocation.
F-42
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
March 31, 1999
------------------------------------------------
Accumulated Net book
Cost depreciation value
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Office furniture and equipment 10,150 507 9,643
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998
------------------------------------------------
Accumulated Net book
Cost depreciation value
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
Office furniture and equipment 1,900 -- 1,900
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4. SOFTWARE DISTRIBUTION RIGHTS
Software distribution rights consist of the following:
<TABLE>
<CAPTION>
March 31, 1999
--------------------------------------------------
Accumulated Net book
Cost amortization value
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Facet Decisions software distribution rights 218,385 28,719 189,666
Facet Petroleum software distribution rights 200,678 1,100 199,578
- ------------------------------------------------------------------------------------------------------------------------------------
419,063 29,819 389,244
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pursuant to a licensing and distribution agreement dated March 7, 1999 between
the Company and Facet Decisions Inc. ["Facet Decisions"], a private British
Columbia company, the Company acquired the exclusive right in the telework
market to distribute Facet Decisions' computer software for a period of two
years in consideration for 6,910 common shares of the Company valued at
$218,385. The software subject to the agreement includes Cause&Effect Complex
Decision Support Software and optional modules, HeadsUp Business Intelligence
Software and optional modules, FastTracks Methodology and Decision Frameworks
Industry Applications
F-43
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
["Facet Decisions' Software"]. In addition, all sales of Facet Decisions'
Software to the Company will be discounted by 30% from Facet Decisions'
published prices.
Pursuant to a licensing and distribution agreement dated March 30, 1999 between
the Company and Facet Petroleum Solutions Inc. ["Facet Petroleum"], a private
British Columbia company, the Company acquired the exclusive right in the
telework market to distribute Facet Petroleum's Telework Operational Data Store
["TODS"] software for a period of two years in consideration for 6,910 common
shares of the Company valued at $200,678. In addition, all sales of the TODS
software to the Company will be discounted by 50% from Facet Petroleum's
published prices.
The ascribed value of the shares issued to Facet Decisions and Facet Petroleum
is based on the 50,000 total InfoCast shares received by Facet Decisions and
Facet Petroleum upon the acquisition of the Company by InfoCast [note 8] and the
market price of the InfoCast shares on the effective dates of the respective
licensing and distribution agreements with Facet Decisions and Facet Petroleum.
A principal shareholder, director and officer of the Company is a director of
Facet Decisions and Facet Petroleum.
5. CAPITAL STOCK
Authorized
The Company is authorized to issue an unlimited number of common shares and an
unlimited number of first and second preferred shares.
First and second preferred shares may be issued in series and the directors of
the Company may fix, before issuance, the rights, privileges, restrictions and
conditions attached thereto.
F-44
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
Issued and outstanding
<TABLE>
<CAPTION>
Shares Amount
# $
- ------------------------------------------------------------------------------------------------------------------------------------
Common shares
<S> <C> <C>
On incorporation, issued for cash 1,000 1
Issued pursuant to a private placement 820,180 8,211
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as at December 31, 1998 821,180 8,212
Issued pursuant to a private placement 120,000 300,000
Issued for acquisition of software distribution rights [note 4] 13,820 419,063
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as at March 31, 1999 955,000 727,275
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Amount
# $
- ------------------------------------------------------------------------------------------------------------------------------------
First preferred series A shares
<S> <C> <C>
Issued for cash, pursuant to a private placement
dated November 10, 1998 45,000 225,000
Interest accretion to redemption price -- 11,683
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as at December 31, 1998 45,000 236,683
Interest accretion to redemption price -- 21,956
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as at March 31, 1999 45,000 258,639
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
First preferred series A units
Series A of the first preferred shares were issued in units. Each unit consisted
of 2,000 redeemable first preferred series A shares, 3,000 common share purchase
warrants, and 1,500 penalty common share purchase warrants. Each first preferred
series A share was required to be redeemed by the Company by December 31, 1999
at $7.50 per share and commanded 50% cumulative dividends commencing January 1,
1999. The Company has recorded first preferred series A share interest expenses
of $21,956 for the three-month period ended March 31, 1999 and $11,683 for the
101-day period ended December 31, 1998 based on the accretion of the first
preferred series A shares from the $5.00 issuance price to the December 31, 1999
$7.50 redemption price using the effective yield method. In addition, the
Company has recorded first preferred Series A share dividend expenses of $28,125
in respect of the three-month period ended March 31, 1999. The first preferred
series A shares were acquired by InfoCast [note 8].
F-45
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
Each common share purchase warrant entitled the holder thereof to purchase one
common share of the Company at $5.00 per share. The common share purchase
warrants would have expired 30 days subsequent to the redemption of the first
preferred series A shares in proportion to such redemption. Each penalty common
share purchase warrant entitled the holder to purchase one common share of the
Company at $5.00 per share. The penalty common share purchase warrants would
have vested three years after the issuance of the first preferred series A units
in proportion to the number of first preferred series A shares that had not been
redeemed at that time, and would have expired 30 days subsequent to the
redemption of the first preferred series A shares in proportion to such
redemption. The outstanding 67,500 common share purchase warrants and 33,750
penalty common share purchase warrants of the Company were acquired by InfoCast
[note 8].
6. PROMISSORY NOTE PAYABLE TO INFOCAST CORPORATION
The promissory note payable to InfoCast [note 8] bears interest at prime plus
1%, is secured by a general security agreement covering all assets of the
Company and is due on demand. No interest was paid by the Company on the note
during the three-month period ended March 31, 1999. The note was repaid during
May 1999.
7. DUE TO SHAREHOLDERS
Amounts due to shareholders are payable on demand and are non-interest bearing.
8. ACQUISITION BY INFOCAST CORPORATION
Pursuant to a share purchase agreement dated May 13, 1999, all of the Company's
outstanding common shares, first preferred series A shares, common share
purchase warrants and penalty common share purchase warrants were acquired by
InfoCast in consideration for 3.4 million exchangeable shares of InfoCast Canada
Corporation ["InfoCast Canada"], a 100% owned subsidiary of InfoCast. The
InfoCast Canada exchangeable shares are convertible into InfoCast common shares
on a one-for-one basis at no additional consideration. InfoCast is a development
F-46
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
stage technology company traded on the NASDAQ OTC Bulletin Board and is engaged
in the research and development of information delivery technologies.
As a condition of the closing of the share purchase agreement, InfoCast will pay
$210,000 to officers of the Company and must pay an additional $210,000 to the
officers of the Company if InfoCast completes a private placement financing for
gross proceeds of at least US$1,000,000 or completes a letter of credit
financing of at least US$500,000.
9. NATIONAL ENVIRONMENTAL POLICY INSTITUTE FUNDING
During the three-month period ended March 31, 1999, the Company paid US$25,000
to the National Environmental Policy Institute ["NEPI"], a United States based
non-profit environmental lobbyist group, to assist NEPI's efforts in promoting
telework policies in the United States. In addition, as at March 31, 1999, the
Company has committed an additional US$70,000 in funding to NEPI which has been
provided for in the accounts.
10. INCOME TAX LOSS CARRYFORWARDS
As at March 31, 1999, the Company has accumulated non-capital losses for
Canadian income tax purposes of approximately $319,000 which are available to
reduce future years' taxable income. The future income tax benefits associated
with these non-capital losses have not yet been recognized in the accounts.
The loss carryforwards will expire as follows:
$
- ----------------------------------------------------------
2005 126,000
2006 193,000
- ----------------------------------------------------------
319,000
- ----------------------------------------------------------
F-47
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
11. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
12. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada which conform in all material respects
with US GAAP except as follows:
Interest accretion and dividends on first preferred shares
Under US GAAP, first preferred share interest accretion and dividends payable
are charged directly to shareholders' equity. Accordingly, the net loss would
have decreased by $50,081 in respect of the three-month period ended March 31,
1999 [101-day period ended December 31, 1998 - $11,683].
F-48
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
September 30, 1999
BASIS OF PRESENTATION
The unaudited pro-forma consolidated financial information of InfoCast
Corporation [formerly Virtual Performance Systems Inc.] [a development stage
company] [the "Company"] set forth below gives effect to the acquisition of
Homebase Work Solutions Ltd. ["Homebase"] as if the Company had acquired
Homebase as of January 1, 1998 for purposes of the pro-forma consolidated
statements of operations for the six-month period ended September 30, 1999, for
the three-month period ended March 31, 1999 [the transition period] and for the
year ended December 31, 1998. Homebase was acquired by the Company on May 13,
1999.
The pro-forma consolidated financial statements are not necessarily indicative
of the results that actually would have occurred had the Company acquired
Homebase on the date indicated or which would be obtained in the future.
The unaudited pro-forma consolidated information should be read in conjunction
with the audited and unaudited consolidated financial statements of the Company
and the audited financial statements of Homebase appearing elsewhere in this
registration statement.
The unaudited pro-forma statement of operations for the year ended December 31,
1998, the three-month period ended March 31, 1999 and the six-month period ended
September 30, 1999 have been prepared from the audited and unaudited
consolidated statements of operations of the Company and the audited and
unaudited pre-acquisition statements of operations of Homebase after translation
of its statements of operations from Canadian dollars to United States dollars.
The audited and unaudited statements of operations of Homebase have been
prepared in accordance with Canadian GAAP.
The pro-forma adjustments do not reflect any operating efficiencies or potential
synergies that may be achievable with respect to the combined companies.
The pro-forma adjustments reflecting the acquisition of Homebase under the
purchase method of accounting is based on available financial information and
certain estimates and assumptions.
F-49
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
SEPTEMBER 30, 1999
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six-month period ended September 30, 1999
<TABLE>
<CAPTION>
Homebase Work
Solutions Ltd.
[43-day period
InfoCast ended Pro-forma Pro-forma
Corporation May 13, 1999] adjustment consolidated
$ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C> <C>
Interest income 58,464 473 58,937
- ------------------------------------------------------------------------------------------------------------------------------------
58,464 473 58,937
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General, administrative
and selling 4,023,321 68,130 4,091,451
Stock option
compensation 9,506,548 -- 9,506,548
Research and development 1,783,346 -- 1,783,346
Amortization and
depreciation 1,893,194 16,872 [c] 546,351 2,456,417
First preferred Series A
share interest accretion -- 7,518 [b] (7,518) --
First preferred Series A
share dividend expense -- 8,813 [b] (8,813) --
- ------------------------------------------------------------------------------------------------------------------------------------
17,206,409 101,333 530,020 17,837,762
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before
income taxes (17,147,945) (100,860) (530,020) (17,778,825)
Deferred income taxes (534,105) -- [c] (159,945) (694,050)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss
for the period (16,613,840) (100,860) (370,075) (17,084,775)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average
number of shares
outstanding 21,305,895 3,400,000 24,705,895
- ------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted
loss per share (0.78) (0.03) (0.69)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-50
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
SEPTEMBER 30, 1999
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three-month period ended March 31, 1999
<TABLE>
<CAPTION>
Homebase
InfoCast Work Pro-forma Pro-forma
Corporation Solutions Ltd. adjustment consolidated
$ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C> <C>
Interest income 4,478 191 [a] (105) 4,564
- ------------------------------------------------------------------------------------------------------------------------------------
4,478 191 (105) 4,564
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General, administrative
and selling 635,334 221,453 856,787
Stock option compensation 2,256,938 -- 2,256,938
Research and development 162,914 -- 162,914
Interest and loan fees 23,562 155 23,717
First preferred Series A
share interest accretion -- 14,528 [b] (14,528) --
First preferred Series A
share dividend expense -- 18,610 [b] (18,610) --
Amortization and depreciation 9,651 20,066 [c] 1,187,067 1,216,784
- ------------------------------------------------------------------------------------------------------------------------------------
3,088,399 274,812 1,153,929 4,517,140
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before income taxes (3,083,921) (274,621) (1,154,034) (4,512,576)
Deferred income taxes -- -- [c] (347,500) (347,500)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss for the period (3,083,921) (274,621) (806,534) (4,165,076)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average
number of shares
outstanding 11,583,995 3,400,000 14,983,995
- ------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted
- ------------------------------------------------------------------------------------------------------------------------------------
loss per share (0.27) (0.08) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-51
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
SEPTEMBER 30, 1999
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Homebase
Work
Solutions Ltd.
[101-day
period
from inception
InfoCast to December 31, Pro-forma Pro-forma
Corporation 1998] adjustment consolidated
$ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C> <C>
Other revenue 43,446 -- 43,446
Interest income -- 485 485
- ------------------------------------------------------------------------------------------------------------------------------
43,446 485 -- 43,931
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General, administrative
and selling 375,302 87,337 462,639
Research and
development 88,180 -- 88,180
Interest and loan fees -- 130 130
First preferred Series A
share interest accretion -- 7,875 [b] (7,875) --
Amortization and
depreciation 3,836 -- [c] 4,827,192 4,831,028
- ------------------------------------------------------------------------------------------------------------------------------
467,318 95,342 4,819,317 5,381,977
- ------------------------------------------------------------------------------------------------------------------------------
Loss before income taxes (423,872) (94,857) (4,819,317) (5,338,046)
Deferred income taxes -- -- [c] (1,390,000) (1,390,000)
- ------------------------------------------------------------------------------------------------------------------------------
Net loss for the period (423,872) (94,857) (3,429,317) (3,948,046)
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average
number of shares
outstanding 768,301 3,400,000 4,168,301
Basic and diluted
loss per share (0.55) (0.03) (0.95)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-52
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
SEPTEMBER 30, 1999
PRO-FORMA ADJUSTMENTS
The unaudited pro-forma consolidated financial statements give effect to the
following pro-forma adjustments:
[a] The elimination of nil and $105 of interest revenue recorded in the
accounts of the Company for the 43-day period ended May 13, 1999 and the
three-month period ended March 31, 1999, respectively, in respect of the
note payable from Homebase to the Company.
[b] Homebase's first preferred series A shares were purchased by the Company
on May 13, 1999. Accordingly, Homebase's first preferred Series A share
interest accretion of $7,518, $14,528 and $7,875 in respect of the 43-day
period ended May 13, 1999, the three-month period ended March 31, 1999 and
the 101-day period ended December 31, 1998, respectively, have been
eliminated. In addition, Homebase's first preferred Series A share
dividend expenses of $8,813, $18,610 and nil in respect of the 43-day
period ended May 13, 1999, the three-month period ended March 31, 1999 and
the 101-day period ended December 31, 1998, respectively, have been
eliminated.
[c] The amortization of the $17,015,000 of completed technology, $853,000 of
trademarks, $253,000 of workforce-in-place and $5,846,293 of goodwill
created by the purchase of Homebase by the Company over the
pre-acquisition 43-day period ended May 13, 1999, the three-month period
ended March 31, 1999 and the year ended December 31, 1998 on a
straight-line basis utilizing amortization periods of five years in
respect of the completed technology, trademarks and goodwill and three
years in respect of the workforce-in-place. In addition, the amortization
of the $6,886,000 deferred income tax liability [created by the purchase
of Homebase by the Company in respect of the difference between the tax
and accounting basis of the completed technology, trademarks and
workforce-in-place] over the periods of the underlying assets.
F-53
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission Filing Fee................$24,458.38
*Accountants' fees and expenses..............................$10,000.00
*Legal fees and expenses.....................................$50,000.00
*Miscellaneous...............................................$ 5,541.62
----------
Total...................................................$90,000.00
- --------------------------
* Estimated for purposes of this filing.
The foregoing costs and expenses will be paid by the Company. Other than
the Securities and Exchange Commission filing fee, all fees and expenses are
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Neither the Company's Certificate of Incorporation, as amended, nor its
Amended and Restated Bylaws provide for the indemnification of its officers and
directors. Under Nevada's General Corporation Law, the Company may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the Company (such as a shareholder derivative suit), by reason of the fact
that such person is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise. Such indemnification may extend to expenses,
including attorneys' fees, judgments, fines and amount paid in settlement
actually and reasonable incurred by such person in connection with the action,
suit or proceeding if he acted in good faith and in a manner which he reasonable
believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. Indemnification may not be made for any claim, issue
or matter as to which such a person has been adjudged by a court to be liable to
the Company or for amounts paid in settlement to the Company, unless the court
in which the action or suit was brought, or another court of competent
jurisdiction, determines that in view of all the circumstances, the person is
fairly and reasonably entitled to be indemnified for such expenses.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, and the Company is not aware of any pending or threatened litigation
that may result in claims for indemnification by any officer, director, employee
or other agent.
The Company is in the process of purchasing Directors and Officers
liability insurance to defend and indemnify directors and officers who are
subject to claims made against them for their actions and omissions as directors
and officers of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In 1998, the Company issued 5,000,000 (pre-split) shares of Common Stock to
Sheridan Reserve Incorporated for the acquisition of two mining interests
pursuant to an exemption under Section 4(2) of the Securities Act of 1933, as
amended.
II-1
<PAGE>
In April 1998, the Company consummated a private placement of 1,000,000
(pre-split) units at a price of $0.50 per unit to 20 accredited investors
pursuant to Rule 504 of Regulation D of the Securities Act of 1933, as amended.
Each unit consisted of two shares of Common Stock and two Common Stock purchase
warrants. Each Common Stock purchase warrant was exercisable for one (pre-split)
share of Common Stock at an exercise price of $0.25 per share. The $500,000
aggregate issue price of the units was satisfied through the receipt by the
Company of cash proceeds of $260,000 and the settlement of a non-interest
bearing note of $240,000 that was due from the Company to Sheridan Reserve
Incorporated.
On October 13, 1998, the shareholders of the Company voted to effect a
two-for-one stock split that increased the number of outstanding shares of
Common Stock from 6,000,000 to 12,000,000 and increased the number of
outstanding Common Stock purchase warrants from 1,000,000 to 2,000,000.
Accordingly, the exercise price of the Common Stock purchase warrants was
reduced to $0.25 per share. Subsequently, 1,580,000 of the Common Stock purchase
warrants were exercised at $0.25 each for cash proceeds of $395,000. The
remaining 420,000 Common Stock purchase warrants expired.
On January 29, 1999, the Company consummated the acquisition of Virtual
Performance Systems, Inc. for 1,500,000 shares of InfoCast Canada which are
exchangeable on a one-for-one basis for shares of Common Stock of the Company to
17 persons pursuant to an exemption under Section 4(2) of the Securities Act of
1933, as amended, and Regulation D promulgated thereunder.
On February 8, 1999, the Company issued options to purchase 2,250,000
shares of Common Stock at an exercise price of $1.00 per share pursuant to the
Company's 1998 Stock Option Plan. Such options were issued to the Company's
directors, officers and consultants.
In March 1999, the Company consummated a private placement financing
pursuant to which it issued 2,767,334 shares of Common Stock to 25 non-U.S.
persons for an aggregate offering price of $4,151,001 pursuant to Regulation S
of the Securities Act of 1933, as amended.
In March 1999, the Company consummated a private placement financing
pursuant to which it issued 265,002 shares of Common Stock to Paul Kalvin,
George and Angela Shafran, Tom Shafran, Robert L. Frome, Jeffrey and Renee
Spindler, Douglas W. Fitzgerald and Amy Ladd, Marc Schinderman, Gary L. Roberts,
Alan DeClerck and David Olson, all of whom were accredited investors for an
aggregate offering price of $397,503 pursuant to Regulation D of the Securities
Act of 1933, as amended.
Pursuant to an agreement dated March 22, 1999, the Company issued 60,000
shares of Common Stock to Thomson Kernaghan & Co. Limited, a financial
investment consulting firm, for assistance in securing additional financing over
the following year.
On May 13, 1999, the Company consummated the acquisition of HomeBase Work
Solutions for 3,400,000 shares of InfoCast Canada which are exchangeable on a
one-for-one basis for shares of Common Stock of the Company to 51 persons
pursuant to an exemption under Section 4(2) of the Securities Act of 1933, as
amended, and Regulation D promulgated thereunder.
In June and October 1999, the Company issued warrants to purchase 25,000
and 12,500 shares of Common Stock at an exercise price of $7.00 and $8.75 per
share, respectively, to the Poretz Group, an investor relations consulting firm,
in consideration for ongoing investor relations consulting services. The Company
may issue warrants to purchase an additional 62,500 shares of Common Stock to
such firm for similar services to be rendered.
In June 1999, in return for consulting services in respect of the
development of the Company's virtual call center application and the InfoCast
corporate name, the Company issued warrants to purchase an aggregate of 50,000
shares of Common Stock at an exercise price of $7.00 per share to each of Tsun
Chow, Armin Roeseler, Paul Prabhaker and John J. Malley.
On June 1, 1999, the Company issued options to purchase 1,180,500 shares of
Common Stock to officers, employees, consultants and advisors under the 1999
Stock Option Plan and options to purchase 750,000 shares of Common Stock to
James Leech, its President, Chief Executive Officer and a director of the
Company.
II-2
<PAGE>
On June 24, 1999, the Company consummated a private placement financing
pursuant to which it issued 420,000 shares of Common Stock and warrants to
purchase 70,000 shares of Common Stock at an exercise price of $7.00 per share
to Canadian Advantage LT partnership for an aggregate offering price of
$2,100,000 pursuant to Regulation D of the Securities Act of 1933, as amended.
From July to December 22, 1999, the Company issued 1,879,000 shares of
Common Stock in a private placement financing for an aggregate offering price of
$10,334,550 to 81 non-U.S. persons pursuant to Regulation S of the Securities
Act of 1933, as amended. The Company may issue up to an additional 500,000
shares of Common Stock to non-U.S. persons for an aggregate offering price of
$3,575,000 in such offering.
In October 1999, the Company issued options to purchase 60,000 shares of
Common Stock at an exercise price of $8.25 per share to Howard Nichol, an
investor relations consultant for services, including assisting the Company with
communications with and presentations to stock brokers, analysts and private and
institutional investors, providing access to financial media and introducing the
Company to potential acquisition or alliance opportunities.
On November 19, 1999, the Company issued options to purchase an aggregate
of 400,000 shares of Common Stock to Carl Stevens, Christopher Rouse and
Jennifer Scoffield, officers of the Company, under the 1999 Stock Option Plan.
On December 8, 1999, the Company issued options to purchase 375,000 shares
of Common Stock to Herve Seguin, the Company's Chief Financial Officer, and
three employees of the Company.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
*3.1 Articles of Incorporation, as amended, of the Company.
*3.2 Amended and Restated By-laws of the Company.
*4.1 Specimen Certificate of the Company's Common Stock.
*4.2 Form of 1998 Stock Option Plan ("1998 Plan").
*4.3 Form of Option Grant Letter under 1998 Plan.
*4.4 Form of 1999 Stock Option Plan ("1999 Plan").
*4.5 Form of Option Grant Letter under 1999 Plan.
*4.6 Option Agreement dated June 1, 1999, by and between the Company
and James William Leech.
*4.7 Warrant to Purchase 50,000 shares of Common Stock dated June 24,
1999, issued to Thomson Kernaghan and Co. Ltd.
*4.8 Warrant to Purchase 20,000 shares of Common Stock dated June 24,
1999, issued to Thomson Kernaghan and Co. Ltd.
*4.9 Warrant to Purchase 25,000 shares of Common Stock dated May 31,
1999 issued to the Poretz Group.
*4.10 Provisions Attaching to Common Shares of InfoCast Canada
Corporation.
*4.11 Exchange Agreement dated as of May 13, 1999 by and among the
Company, InfoCast Canada Corporation, HomeBase Work Solutions
Ltd. and the Shareholders.
*4.12 Support Agreement dated as of May 13, 1999 by and among the
Company, InfoCast Canada Corporation, HomeBase Work Solutions
Ltd., and the Shareholders.
*4.13 Warrant to Purchase 12,500 shares of Common Stock dated October
6, 1999 issued to the Poretz Group.
**5.1 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP.
*10.1 Letter Agreement dated March 17, 1999, from the Company to Sandy
Walsh.
*10.2 Employment to Agreement dated August 5, 1999, by and between the
Company and James William Leech.
*10.3 Consulting Agreement dated December 1, 1998, by and between the
Company and Three Hundred & Sixty Degrees, Inc.
*10.4 Consulting Agreement dated March 22, 1999, by and between the
Company and Thomson Kernaghan & Co. Ltd.
*10.5 Consulting Agreement dated April 15, 1999, by and between the
Company and Michael Baybak and Company, Inc.
II-4
<PAGE>
*10.6 Letter Agreement dated June 15, 1999, by and between the Company
and Lasso Communications Inc.
*10.7 Advertising Services Agreement dated July 1, 1999, by and between
the Company and Lasso Communications Inc.
*10.8 Release dated July 14, 1999, by and among the Company, Lasso
Communications Inc., James Hines and Michael Gruber.
*10.9 Memorandum of Understanding dated June 7, 1999, by and between
the Company and Willow CSN.
*10.10 Summary of Terms and Conditions dated April 21, 1999, by and
between the Company and CosmoCom, Inc.
*10.11 Agreement of Purchase and Sale dated as of November 17, 1998, by
and between Advanced Systems Computer Consultants, Inc. and
Cheltenham Technologies (Bermuda) Corporation.
*10.12 Asset Sale Agreement dated as of November 23, 1998, by and
between Grant Reserve Corporation and Cherokee Mining Company.
*10.13 Pledge Agreement dated as of November 25, 1998, by and between
Grant Reserve Corporation and Cherokee Mining Company.
*10.14 Agreement dated as of May 18, 1999, by and between the Company
and Call Center Learning Solutions, Inc.
*10.15 Distribution Agreement dated as of March 12, 1999, by and between
the Company and ITC Learning Corporation.
*10.16 License Agreement dated June 29, 1999, by and between the Company
and ITC Learning Corporation.
*10.17 Letter Agreement dated March 24, 1999, by and between the Company
and Applied Courseware Technology, Inc.
*10.18 General Security Agreement dated March 25, 1999, by and between
InfoCast Canada Corporation and Applied Courseware Technology,
Inc.
*10.19 Memorandum of Understanding dated August 28, 1998, by and between
Home Base Work Solutions Ltd. and Shaw Fiberlink Ltd.
*10.20 Licensing and Distribution Agreement dated March 7, 1999, by and
between HomeBase Work Solutions Ltd. and Facet Decision Systems,
Inc.
*10.21 Licensing and Distribution Agreement dated March 30, 1999, by and
between HomeBase Work Solutions Ltd. and Facet Petroleum
Solutions, Inc.
*10.22 Share Purchase Agreement dated as of May 13, 1999, by and among
the Company, InfoCast Canada Corporation, HomeBase Work Solutions
Ltd. and the Shareholders named therein.
*10.23 General Security Agreement dated March 25, 1999, by and between
InfoCast Canada Corporation and HomeBase Work Solutions, Ltd.
*10.24 Letter Agreement dated May 1999 (date unspecified), by and among
the Company and Darcy Galvon, Ken MacLean and Sean Fleming.
II-5
<PAGE>
*10.25 Master Lease Agreement dated June 25, 1998, by and between
HomeBase Work Solutions, Ltd. and Sun MicroSystems.
*10.26 Memorandum of Agreement dated July 31, 1997, by and between
Virtual Performance Systems Inc.
*10.27 Letter Agreement dated November 27, 1998, by and among Grant
Reserve Corporation, Sheridan Reserve Corporation and Virtual
Performance Systems Inc.
*10.28 Share Purchase Agreement dated as of January 29, 1999, by and
among InfoCast Canada Limited, Virtual Performance Systems Inc.
and the Selling Shareholders named therein.
*10.29 Letter Agreement dated May 18, 1999, by and between the Company
and Satish Kumeta.
*10.30 Letter of Engagement dated October 21, 1999, by and among the
Company, N.M. Rothschild & Sons Canada Limited and N.M.
Rothschild & Sons (Washington) LLC.
*10.31 Letter of Understanding by and between the Company and AT&T
Canada Long Distance Services Company.
*10.32 Memorandum of Engagement dated December 10, 1998 by and between
the Company and College Boreal D'Arts Appliques et de
Technologie.
*10.33 Assignment of Contract and Assumption of Liability dated October
19, 1999 by and between the Company and High Performance Group,
Inc.
***10.34 Employment Agreement dated December 6, 1999 by and between the
Company and Herve Seguin.
***10.35 Employment Agreement dated October 1, 1999 by and between
InfoCast Canada Corporation and Christopher Rouse.
***10.36 Employment Agreement dated September 1999 by and between the
Company and Carl Stevens
***10.37 Strategic Alliance Agreement dated November 29, 1999 by and
between the Company and TManage, Inc.
*16.1 Letter from Jackson & Rhodes, P.C. relating to change of
accountants, dated September 3, 1999.
*21.1 List of Subsidiaries.
***23.1 Consents of Ernst & Young LLP, independent public accountants.
***24 Power of attorney (included on the signature page hereto).
*27.1.1 Financial Data Schedule.
*27.1 Financial Data Schedule.
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<PAGE>
*27.2 Financial Data Schedule.
*27.3 Financial Data Schedule.
*27.4 Financial Data Schedule.
- ------------
* Incorporated herein by reference from Exhibits to the Company's
Registration Statement on Form 10 (File No. 0-27343).
** To be filed by amendment.
*** Filed herewith.
(b) Financial Statement Schedules. None required.
II-7
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(i) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(ii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of A. Thomas Griffis and James Leech
his true and lawful attorneys-in-fact and agent, with full power of substitution
and resubstitution, for and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement on Form
S-1, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
January 4, 2000
INFOCAST CORPORATION
By: /s/ A. Thomas Griffis
---------------------
A. Thomas Griffis
Co-Chairman of the Board, Director
By: /s/ Darcy Galvon
-----------------
Darcy Galvon
Co-Chairman of the Board, Director
By: /s/ James Leech
---------------
James Leech
Chief Executive Officer, Director
(Principal executive officer)
By: /s/ Herve Seguin
----------------------
Herve Seguin
Chief Financial Officer
(Principal financial and accounting officer)
By: /s/ Michael Sheehan
-------------------
Michael Sheehan
Vice President, Virtual Call Center, Director
By: /s/ James Hines
---------------
James Hines
Executive Vice President, Director
By: /s/ George Shafran
------------------
George Shafran
Director
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the captions "Summary Financial
Information", "Selected Financial Data" and "Experts" and to the use of our
report dated April 21, 1999 (except for Note 9[b] which is as of May 13, 1999
and Note 9[d] which is as of October 27, 1999), in the Registration Statement
(Form S-1) and related Prospectus of InfoCast Corporation dated January 7, 2000.
/s/ Ernst & Young LLP
Ernst & Young LLP
Toronto, Canada
January 7, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report, dated June 11, 1999, relating to the financial statements of
Homebase Work Solutions Ltd., in the Registration Statement (Form S-1) and
related Prospectus of InfoCast Corporation dated January 7, 2000.
/s/ Ernst & Young LLP
Ernst & Young LLP
Toronto, Canada
January 7, 2000
SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the day of December 6, 1999 (the "Effective
Date").
B E T W E E N:
INFOCAST CORPORATION, a corporation
incorporated under the laws of the State of Nevada,
in the United States of America
(hereinafter referred to as the "Employer")
OF THE FIRST PART
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HERVE SEGUIN, of the City of Toronto, in the Province
of Ontario (hereinafter referred to as the "Employee")
OF THE SECOND PART
WHEREAS the Employer wishes to employ the Employee in the
capacity of Chief Financial Officer effective January 4, 2000 (the "Start
Date");
AND WHEREAS the Employer recognizes that the Employee will render
and provide to the Employer special skills which are essential to the continued
growth of the Employer's business and the Employer believes that it is
reasonable and fair to the Employer that the Employee receive fair incentive and
security of employment and compensation terms;
AND WHEREAS the Employer and the Employee have agreed to enter
into this Employment Agreement to formalize in writing the terms and conditions
reached between them governing the Employee's employment;
NOW THEREFORE in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties, the
parties hereto agree as follows:
<PAGE>
Article 1
RETENTION, DUTIES AND POWERS OF THE EMPLOYEE
1.1 Employment of Employee.
The Employer hereby employs the Employee effective the Start Date
as its Chief Financial Officer, reporting to the Employer's President, to
perform the duties and responsibilities incident to such position and as
otherwise assigned by the Employer's President. Such employment shall continue,
unless and until terminated in accordance with Article 4 of this Agreement.
1.2 Acceptance of Employment; Time and Attention.
The Employee hereby accepts such employment and agrees that
throughout the period of his employment hereunder he will devote substantially
all his time, attention, knowledge and skills, faithfully, diligently and to the
best of his ability, in furtherance of the business of the Employer, and will
perform the duties and responsibilities assigned to him pursuant to Section 1,
subject, at all times, to the direction and control of the Employer's President.
As an executive officer, the Employee shall perform such specific duties and
shall exercise such specific authority related to the management of the
day-to-day operations of the Employer consistent with his position as Chief
Financial Officer as may be assigned to the Employee from time to time by the
Employer's President. The Employee shall at all times be subject to, observe and
carry out such rules, regulations, policies, directions and restrictions as the
Employer shall from time to time establish. During the period of his employment
hereunder, the Employee shall not, directly or indirectly, accept employment or
compensation from, or perform services of any nature for, any business
enterprise other than the Employer. The Employee shall be elected to such
offices of the Employer as may from time to time be determined by the Board.
During the period of the Employee's employment hereunder, he shall not be
entitled to additional compensation for serving in any offices of the Employer
to which he is elected or appointed.
Article 2
COMPENSATION AND BENEFITS
2.1 Remuneration.
For the performance of his services hereunder, the Employee shall
be paid a salary (the "Base Salary") of Cdn$200,000 per annum, payable twice
monthly in arrears. The Employee's Base Salary shall be reviewed annually by the
Employer's Board of Directors (the "Board") based on recommendation from the
Employer's President and, from time to time during the term of this Agreement,
may be increased in the sole discretion of the Board. The first such review
shall take place 30 days following release of the Employer's March 31, 2001
audited financial statements.
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<PAGE>
2.2 Benefits and Perquisites
Provided the Employee is otherwise eligible, the Employee will be
entitled to participate in all benefit plans and to receive all perquisites
enjoyed by the senior employees of the Employer. The Employer will pay the costs
of the Employee's existing disability insurance with annual premiums of
approximately Cdn.$4,000. All benefit plans will be governed and interpreted by
their written terms, if applicable.
2.3 Incentive Plans.
The Employee will be entitled to participate in all incentive
plans (including, without limitation, a Bonus Plan to be created for the fiscal
year commencing April 1, 2000, which includes an entitlement to an annual target
bonus of 50 percent of Base Salary to be paid within 90 days following the
Employer's fiscal year end, and the Share Option Plan) made available to any
employee of the Employer. Except as provided for herein, all incentive plans
will be governed and interpreted by their written terms, if applicable.
It is agreed that, effective the Start Date, the Employer shall
grant the Employee 350,000 options to purchase common shares on terms
substantially the same as those set forth in the Infocast Corporation 1999 Share
Option Plan (a copy of which is attached as Schedule A hereto) except as
otherwise provided herein. These options will be issued with an exercise price
equal to the trading price of the shares on the Start Date. The terms of these
options will provide that their exercise period shall be five years from the
Start Date and that they vest as to 116,666 options upon the Employee assuming
the position of the Employer's Chief Financial Officer, 116,666 on the first
anniversary thereof and the remaining 116,667 on the second anniversary thereof.
The option agreement will also specify that all of the Employee's options
outstanding at the time of a Change of Control (as defined in Section 4.4) shall
vest and be fully exercisable.
2.4 Out-of-Pocket Expenses.
The Employee shall, upon production of supporting statements and
vouchers, be reimbursed forthwith by the Employer in accordance with applicable
policies of the Employer for all reasonable out-of-pocket expenses actually
incurred by the Employee in the performance of his duties under this Agreement.
2.5 Vacation.
The Employee is entitled to a minimum of four weeks paid vacation
in respect of each 12 month period of his employment hereunder. To the extent
that the Employee does not utilize his full vacation entitlement in any given
year, the Employee
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<PAGE>
shall be entitled to carry forward his vacation entitlement to the next year
provided that the Employee shall not be entitled to accumulate more than five
weeks vacation.
Article 3
EMPLOYEE'S NEGATIVE COVENANTS
3.1 Confidential Information.
The Employee acknowledges that, in the course of carrying out,
performing and fulfilling his obligations to the Employer under this Agreement,
the Employee will have access to and will be entrusted with information that
would reasonably be considered confidential to the Employer and its affiliates,
clients or suppliers, the disclosure of any of which to competitors of the
Employer or any of its affiliates, clients or suppliers, or the general public,
would be highly detrimental to the best interests of the Employer. Except as may
be required in the course of carrying out his duties under this Agreement, the
Employee therefore covenants and agrees that he will not disclose or directly or
indirectly cause to be disclosed, during his employment or any time thereafter,
any of such information to any person, other than the directors, officers or
employees of the Employer or any of its affiliates that have a need to know such
information, nor shall the Employee use or exploit, directly or indirectly, the
same for any purpose other than the purposes of the Employer. This provision
will not apply to any confidential information which is publicly available
through no fault of the Employee or which the Employee is required by law to
disclose.
3.2 Corporate Opportunities.
Any business opportunities related to the business of the
Employer or any of its affiliates which become known to the Employee during the
period of his employment hereunder must be fully disclosed and made available to
the Employer by the Employee and the Employee agrees not to take or omit to take
any action if the result would be to divert from the Employer or any of its
affiliates any opportunity which is within the scope of its business as known to
the Employee from time to time.
3.3 Proprietary Information.
The Employee acknowledges and agrees that all right, title and
interest in and to any information, trade secrets, inventions, discoveries,
improvements, research materials and databases, including but not limited to
patents, copyright, design and moral rights in the results thereof, made or
conceived by the Employee during his employment with the Employer relating to
the business or affairs of the Employer or any of its affiliates shall belong to
the Employer and the Employee hereby waives any and all moral rights he may have
in connection thereto. The Employee shall promptly communicate to the Employer
all information concerning such proprietary information and, if requested by the
Employer, the Employee shall provide, at the expense of the Employer, all such
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<PAGE>
assistance as the Employer considers necessary to secure the vesting of such
rights in the Employer. The Employee hereby, for the term of this Agreement,
irrevocably appoints the Employer as the Employee's attorney with full power in
Employee's name to execute and deliver documents and do any things which the
Employer may consider necessary or desirable for the purposes of giving effect
to this Section 3.3. The Employee hereby agrees to ratify and confirm whatever
the Employer may lawfully do as the Employee's attorney.
3.4 Non-Competition.
(a) In consideration of his employment hereunder, the Employee shall
not, during the Employee's term of employment (as set forth in
Section 1.1) and during the 6 month period following the date
that the Employee ceases to be an employee of the Employer or
other termination of this Agreement (regardless of who initiated
the termination and whether with or without cause), either
individually or in partnership or in conjunction in any way with
any person or persons, corporation, partnership or other entity,
whether as principal, agent, director, member, officer,
consultant, shareholder, guarantor, creditor in or any other
manner whatsoever, directly or indirectly:
(i) solicit, interfere with, endeavour to entice away from
the Employer or any of its affiliates, accept any
business related to the Restricted Business from, or
sell any product or render any service related to the
Restricted Business to, any person, firm, or
corporation who is or was a client, customer or
supplier of the Employer or any of its affiliates with
whom the Employer or its affiliate has or has had any
dealing during the 6 month period immediately preceding
the date upon which the Employee ceases to be an
employee of the Employer;
(ii) offer employment to (unless previously terminated by
the Employer) or endeavour to entice away from the
Employer or any of its affiliates, any person employed
by the Employer or its affiliates at the date upon
which the Employee ceases to be an employee of the
Employer or interfere in any way with the employment
relationship between such employee and the Employer or
its affiliate, as the case may be or induce, influence
or seek to induce or influence any person engaged as an
employee, representative, agent, independent contractor
or otherwise by the Employer, to terminate his or her
relationship with the Employer;
-5-
<PAGE>
(iii) engage in, carry on or otherwise be concerned with or
have any interest in, or advise, lend money to,
guarantee the debts or obligations of, or permit the
Employer's name or any part thereof to be used or
employed by, and person, firm, association, syndicate
or corporation engaged in or concerned with, a
Restricted Business in North America; or
(iv) own, manage, operate, join, control, participate in,
invest in, or otherwise be connected with, in any
manner, whether as an officer, director, employee,
partner, investor or otherwise, any business entity
engaged in or concerned with, a Restricted Business in
North America.
For the purposes of this Section 3.4(a), "Restricted Business"
means any business carried on by the Employer or any of its
affiliates at the date upon which the Employee ceases to be an
employee of the Employer.
(b) The foregoing covenants are given by the Employee acknowledging
that the Employee either has or will have specific knowledge of
the affairs of the Employer and its business. Therefore, the
Employee hereby acknowledges and agrees that all covenants,
provisions and restrictions contained in this Article 3 are
reasonable and valid in the circumstances of this Agreement, and
all defenses to the strict enforcement thereof by the Employer
are hereby waived by the Employee. The Employee acknowledges and
agrees that any breach by the Employee of the covenants,
provisions and restrictions contained in this Article 3 during
the term of his employment under this Agreement shall constitute
cause for termination.
(c) The Employee further acknowledges and agrees that in the event of
a breach of the covenants, provisions and restrictions in this
Article 3, the Employer's remedy in the form of monetary damages
may be inadequate and that the Employer shall be and is hereby
authorized and entitled, in addition to all other rights and
remedies available to the Employer, to apply for and obtain from
any court of competent jurisdiction interim and permanent
injunctive relief and an accounting of all profits and benefits
arising out of such breach. The Employee also acknowledges that
the operation of the foregoing covenants may seriously constrain
his freedom to seek other remunerative employment.
3.5 Investments.
Nothing in this Agreement shall be deemed to prevent or prohibit
the Employee from owning shares in a public company as an investment, so long as
the Employee does not own more than 5 percent of the outstanding voting shares
thereof.
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<PAGE>
3.6 Survival.
Neither the termination of this Agreement, nor of the Employee's
employment hereunder, shall terminate or affect in any manner any provision of
this Article 3 that is intended by its terms to survive such termination.
3.7 Qualification of Non-Competition.
If the provisions of Section 3.4 are ever adjudicated to exceed
the limitations on time or geographic scope permitted by applicable law, then
such provisions shall be deemed to be amended to the maximum time or geographic
scope permitted by applicable law.
Article 4
TERMINATION
4.1 Termination for Cause, Disability, Etc.
(a) The Employer may terminate this Agreement and the Employee's
employment hereunder without payment of any compensation either
by way of anticipated earnings or damages of any kind for any of
the following reasons:
(i) cause which, for the purposes of this Agreement, means
any act which would constitute "cause" at law, any
violation by the Employee of any material instructions,
rules and practices of the Employer, a failure on the
part of the Employee to comply with any provision of
this Agreement (including the withholding of services
thereunder), any breach of his fiduciary duties to the
Employer likely to cause harm to the Employer, fraud or
any conviction of a felony or indictable offence or any
crime involving moral turpitude or any of theft or
dishonesty relating to a matter material to the
Employer;
(ii) disability which, for the purposes of this Agreement,
means the eligibility of the Employee for long term
disability benefits under the disability insurance
referred to in Section 2.2 of this Agreement; or
(iii) death of the Employee.
(b) In the event of termination pursuant to Section 4.1(a)(i), the
Employee's sole entitlement shall be his Base Salary to and
including the date of
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<PAGE>
termination, all benefits accrued to the date of termination and
all rights pursuant to any Share Option Plan governing options
issued to the Employee. For greater certainty, the Employee shall
not be entitled to any part or pro rata payment for any unpaid
bonus or payments pursuant to any incentive plans except to the
extent earned but not yet paid for the fiscal year immediately
preceding the date of termination.
(c) In the event of termination pursuant to Section 4.1(a)(ii) or
(iii) above, the Employee's sole entitlement shall be his Base
Salary to and including the date of termination, all benefits
accrued to the date of termination, all rights pursuant to any
Share Option Plan governing options issued to the Employee
(provided that all such options shall immediately accelerate and
vest in the Employee or the legal representative of his estate,
as applicable) and a pro rata payment for all bonuses (calculated
at 50% of annual Base Salary) and payments pursuant to any
incentive plans up to the date on which the Employee's active
employment ceased.
4.2 Other Termination by Employer without Cause.
Notwithstanding anything contained in this Agreement, where the
provisions of Section 4.1 do not apply, this Agreement and the Employee's
employment under this Agreement may be terminated at any time by the Employer
during the term set out in Section 1.1 as follows:
(a) the Employer shall pay to the Employee his Base Salary to and
including the date of termination, together with a lump sum
amount equal to his annual Base Salary (the "Base Severance");
and
(b) all options for shares of the Employer issued to the Employee
shall immediately accelerate and vest in the Employee and the
exercise period for all options for shares of the Employer issued
to the Employee shall be 12 months from the date of the
termination;
4.3 Other Termination by Employee.
Notwithstanding anything contained in this Agreement, where the
provisions of Section 4.1 do not apply, this Agreement and the Employee's
employment under this Agreement may be terminated at any time by the Employee
during the term set out in Section 1.1 upon three (3) months' notice in the case
of termination before the second anniversary of the Start Date, and one (1)
months' notice in the case of termination on or after the second anniversary of
the Start Date, in writing by the Employee to the Employer. In that event, the
following shall apply:
(a) the Employer shall pay to the Employee his Base Salary to the
effective date of resignation; and
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<PAGE>
(b) the exercise period for all options for shares of the Employer
issued to the Employee shall be as provided pursuant to the Share
Option Plans under which they were issued.
4.4 Other Termination By Reason of Change in Control.
(a) In the event of termination by the Employer of the Employee at
any time within 24 months following the occurrence of a "Change
of Control" (as hereinafter defined), then the provisions of
Sections 4.1, 4.2 and 4.3 shall not apply. Rather,
notwithstanding anything contained in this Agreement, the
following shall apply:
(i) the Employer shall pay to the Employee his Base Salary
to and including the date of termination, together
with a lump sum amount equal to 1.5 times his annual
Base Salary (the "Enhanced Severance"); and
(ii) all options for shares of the Employer issued to the
Employee shall immediately accelerate and vest in the
Employee and the exercise period for all options for
shares of the Employer issued to the Employee shall be
the earlier of their original expiry date or 18 months
from the date of the termination;
(b) For the purposes of this Agreement, "Change of Control" shall
mean the occurrence, at any time, of any of the following events:
(i) the acquisition by any person, entity or group of
persons or entities acting jointly or in concert, of
voting securities of the Employer or rights or options
to acquire voting securities of the Employer or
securities convertible into or exchangeable for voting
securities of the Employer or any combination thereof
such that after the completion of the acquisition such
person, entity or group would be entitled to exercise
50.1% or more of the total number of votes entitled to
be cast at a meeting of shareholders of the Employer;
or
(ii) the sale by the Employer of all or substantially all
of the property or assets of the Employer; or
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<PAGE>
(iii) a reorganization, plan of arrangement or merger
resulting in the circumstances set out in (i) or (ii)
above.
4.5 General Termination Provisions.
(a) Upon any termination of this Agreement for any reason, the
Employee shall at once deliver or caused to be delivered to the
Employer all books, documents, effects, money, securities or
other property belonging to the Employer or for which the
Employer is liable to others, which are in the possession,
charge, control or custody of the Employee.
(b) All amounts referred to in this Agreement, specifically
including the Employer's payment obligations pursuant to this
Article 4, shall constitute when due a debt owed by the Employer
to the Employee. The Employee shall not be required to mitigate
damages by seeking other employment or otherwise, nor shall the
amount provided for under this Agreement be reduced in any
respect in the event that the Employee shall secure alternative
employment, or not reasonably pursue alternative employment,
following the termination of the Employee's employment with the
Employer. Notwithstanding the foregoing, should the Employee
replace any life, health or accident plan, at an equivalent
level, upon obtaining alternate employment or otherwise, the
Employer shall not be required to continue such benefits.
(c) As a condition to any payment pursuant to this Article 4, the
Employee agrees to deliver to the Employer at the time of payment
a full and final release from all actions or claims, such release
to be in a form reasonably satisfactory to the Employer and to be
for the benefit of the Employer, its affiliates, directors,
officers and employees.
Article 5
DIRECTORS AND OFFICERS
5.1 Resignation.
If the Employee is a director or officer at the relevant time,
the Employee agrees that, after termination of his employment with the Employer
for any reason, he will tender his resignation from any position he may hold as
an officer or director of the Employer or any of its affiliated or associated
companies. If the Employee fails to resign, the Employer is irrevocably
authorized to appoint another person to act in his name and on his behalf to
sign any documents necessary to give effect to the resignation.
-10-
<PAGE>
5.3 Indemnity.
(a) Subject to the provisions of applicable law, the Employer agrees
to indemnify and save the Employee harmless from and against all
demands, claims, costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or
administrative action or proceeding to which the Employee is made
a party by reason of being or having been a director or officer
of the Employer or of any affiliated company, whether before or
after any termination if:
(i) the Employee acted honestly and good faith with a view
to the best interests of the Employer; and
(ii) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, the
Employee had reasonable grounds for believing that his
conduct was lawful.
(b) Subject to the provisions of applicable law, the Employer agrees,
with the approval of the court, to indemnify and save the
Employee harmless from and against all demands, claims, costs,
charges and expenses reasonably incurred by him in connection
with an action by or on behalf of the Employer to procure a
judgment in the Employer's favour to which the Employee is made a
party by reason of being or having been a director or officer of
the Employer or of any affiliated company, whether before or
after any termination, if:
(i) the Employee acted honestly and in good faith with a
view to the best interest of the Employer; and
(ii) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, the
Employee had reasonable grounds for believing that his
conduct was lawful.
-11-
<PAGE>
Article 6
GENERAL CONTRACT PROVISIONS
6.1 Notices.
Any notice or other document ("Notice") required or permitted to
be given hereunder shall be in writing and shall be given by hand delivery,
responsible over night delivery service, or facsimile transmission (with
confirmation of receipt), to be addressed to:
(a) the Employer or the Board of Directors at:
1 Richmond St. West, Suite #901
Toronto, Ontario
M5H 3W4
Telephone: 416-867-9087
Facsimile: 416-867-9320
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Jeffrey S. Spindler, Esq.
or to such other person as the Employer may designate;
(b) the Employee at:
44 Dane Avenue
Toronto, Ontario
M6A 1G5
Telephone: (416) 783-3027
Any Notice hand delivered personally or by delivery service or
transmitted by facsimile shall be deemed to have been received by and given to
the addressee on the day of delivery or transmission, provided that if the date
of transmission is not a business day, or the transmission occurs after normal
business hours, on the business day next following the date of transmission.
-12-
<PAGE>
6.2 Currency.
All dollar amounts set forth or referred to in this Agreement and
all uses of the dollar sign ($) used herein refer to currency of the United
States of America, except as otherwise indicated.
6.3 Counterparts.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
6.4 Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario and the laws of the Canada applicable
therein. The parties hereto attorn to the jurisdiction of the courts of the
Province of Ontario.
6.5 Interpretation not Affected by Headings, etc.
Any headings preceding the text and paragraphs in this Agreement
hereof have been inserted for convenience and reference only and shall not be
construed to affect the meaning, construction, or effect of this Agreement.
6.6 Deemed Amendments.
If any paragraph or provision of this Agreement is adjudicated to
be invalid or unenforceable, in whole or in part then such paragraph or
provision, or part thereof, shall be deemed amended to delete therefrom the
objectionable portion and the remaining portions of this Agreement shall
continue to remain in full force and effect.
6.7 Non-Assignability.
Neither this Agreement, nor the right to receive any payments
hereunder, may be assigned by the Employee without the prior written consent of
the Employer.
6.8 Time of the Essence.
Time shall be of the essence of this Agreement.
6.9 Binding Effect.
This Agreement shall be binding upon and shall enure to the
benefits of each of the parties and their respective heirs, executors,
administrators, successors and permitted assigns.
-13-
<PAGE>
6.10 Entire Agreement.
This Agreement (together with the plans and documents referred to
herein) supersedes and replaces all prior negotiations and/or agreements made
between the parties, whether oral or written, and shall constitute the entire
Agreement between the parties with respect to all matters relating to the
Employee's employment and the execution of this Agreement has not been induced
by, nor do any of the parties hereto rely upon or regard as material any
representations or writings whatsoever not incorporated into and made a part of
this Agreement. This Agreement shall not be amended, altered or modified except
in writing signed by the parties hereto.
6.11 Taxes.
All payments under this Agreement shall be subject to withholding
of such amounts, if any relating to tax or other payroll deduction as the
Employer may reasonably determine should be withheld pursuant to any applicable
law or regulation.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement as of the Effective Date.
INFOCAST CORPORATION
Per:/s/ James Leech
-----------------------------------
Per:__________________________________
)
)
)
)/s/Herve Seguin
- ---------------------------------------- ------------------------------------l/s
Witness Herve Seguin
THIS AGREEMENT made as of the 1st day of October, 1999,
B E T W E E N:
INFOCAST CANADA CORPORATION
a corporation incorporated under the laws of Ontaio,
(hereinafter referred to as the "Corporation"),
OF THE FIRST PART,
- and -
CHRIS ROUSE
of the City of TORONTO, in the
Province of ONTARIO,
(hereinafter referred to as the "Executive")
OF THE SECOND PART.
WHEREAS the Corporation wishes to retain the services of the Executive
to provide the services hereinafter described during the term hereunder set out;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements herein contained and for other good and valuable
consideration, the parties agree as follows:
1. EMPLOYMENT OF EXECUTIVE
The Corporation shall employ the Executive as its VICE PRESIDENT,
MARKETING to perform the duties and responsibilities indicated to such position,
subject at all times to the control and direction of the Board of Directors of
the Corporation (the "Board").
2. DUTIES
The Executive shall serve the Corporation and any subsidiaries of the
Corporation in such capacity or capacities and shall perform such duties and
exercise such powers pertaining to the management and operation of the
Corporation and any subsidiaries and affiliates of the Corporation as may be
determined from time to time by the Board consistent with the office of the
Executive. The Executive shall:
(a) devote his full time (which shall not be less than 35 hours
per week) and attention and his best efforts during normal
business hours to the business and affairs of the Corporation;
<PAGE>
(b) perform those duties that may reasonably be assigned to the
Executive diligently and faithfully to the best of the
Executive's abilities and in the best interests of the
Corporation; and
(c) use his best efforts to promote the interests and goodwill of
the Corporation.
3. REPORTING PROCEDURES
The Executive shall report to the person holding the office of
President. The Executive shall report fully on the management, operations and
business affairs of the Corporation and advise to the best of his ability and in
accordance with reasonable business standards on business matters that may arise
from time to time during the term of this agreement.
4. COMPENSATION
(a) The annual base salary payable to the Executive for his services
hereunder for the first year of the term of this agreement shall be Cdn$90,000,
exclusive of bonuses, benefits and other compensation. The annual base salary
payable to the Executive for his services hereunder for each successive year of
this agreement, exclusive of bonuses, benefits and other compensation, shall be
determined by the Board and agreed to by the Executive. The annual base salary
payable to the Executive pursuant to the provisions of this section 4 shall be
payable in equal semi-monthly installments in arrears on the 15th and 30th day
of each month or in such other manner as may be mutually agreed upon, less, in
any case, any deductions or withholdings required by law.
(b) The Corporation shall provide the Executive with employee benefits
comparable to those provided by the Corporation from time to time to other
senior executives of the Corporation and shall permit the Executive to
participate in any share option plan, share purchase plan, retirement plan or
similar plan offered by the Corporation from time to time to its senior
executives in the manner and to the extent authorized by the Board.
(c) InfoCast Canada Corporation will also pay the Executive a
commission based on performance. The commission will be paid on a semi-monthly
basis in addition to the Executive's base salary, in advance against commissions
earned. In the event of termination for any reason, any outstanding commissions
owing to the Company become due. (See Section 8: Terminations). The annual
maximum commission payable to the Executive for the first year of the term of
this agreement shall be Cdn$30,000. These commissions will be paid on a
semi-monthly basis for the first four (4) months of the term of this agreement.
At the end of the first four (4) months, the performance of the Executive will
be reviewed by the President and the Board of Directors and may be adjusted
accordingly. Any adjustments will be reviewed with the Executive and mutually
agreed upon.
-2-
<PAGE>
5. PERFORMANCE BONUS
In addition to the Executive's annual base salary, the Executive shall
participate in the Corporation's executive bonus plan ["the Plan"], if
implemented. At the present time, the Corporation does not have a bonus plan
established.
6. VACATION
The Executive shall be entitled to three (3) weeks' paid vacation per
fiscal year of the Corporation at a time approved in advance by the Chairman
and/or the President, which approval shall not be unreasonably withheld but
shall take into account the staffing requirements of the Corporation and the
need for the timely performance of the Executive's responsibilities. In the
event that the Executive decides not to take all the vacation to which he is
entitled in any fiscal year, the Executive shall be entitled to take up to one
week (5 days) of such vacation in the next following fiscal year at a time
approved in advance by the Chairman and/or the President. Any remaining unused
vacation time shall be forfeited.
7. EXPENSES
The Executive shall be reimbursed for all approved, reasonable travel
and other out-of-pocket expenses in accordance with the Corporation's approved
travel and expense policies, as determined by the Board in its sole discretion,
actually and properly incurred by the Executive from time to time in connection
with carrying out his duties hereunder. For all such expenses, the Executive
shall furnish to the Corporation a signed expense report including originals of
all invoices or statements in respect of which the Executive seeks
reimbursement.
8. TERMINATION
(a) For Cause
The Corporation may terminate the employment of the Executive
without notice or any payment in lieu of notice for cause which, without
limiting the generality of the foregoing, shall include:
(i) if there is a repeated and demonstrated failure on the part of
the Executive to perform the material duties of the
Executive's position in a competent manner and where the
Executive fails to substantially remedy the failure within a
reasonable period of time after receiving written notice of
such failure from the Corporation;
(ii) if the Executive is convicted of a criminal offence involving
fraud or dishonesty;
(iii) if the Executive or any member of his family makes any
personal profit arising out of or in connection with a
transaction to which the Corporation is a party or with which
it is associated without making disclosure to and obtaining
the prior written consent of the Corporation;
-3-
<PAGE>
(iv) if the Executive fails to honor his fiduciary duties to the
Corporation, including the duty to act in the best interests
of the Corporation; or
(v) if the Executive disobeys reasonable instructions given in the
course of employment by the Chairman, the President or the
Board that are not inconsistent with the Executive's
management position and not remedied by the Executive within a
reasonable period of time after receiving written notice of
such disobedience.
(b) For Disability/Death
This agreement may be immediately terminated by the Corporation by
notice to the Executive if the Executive becomes permanently disabled. The
Executive shall be deemed to have become permanently disabled if in any year
during the employment period, because of ill health, physical or mental
disability, or for other causes beyond the control of the Executive, the
Executive has been continuously unable or unwilling or has failed to perform the
Executive's duties for 120 consecutive days, or if, during any year of the
employment period, the Executive has been unable or unwilling or has failed to
perform his duties for a total of 180 days, consecutive or not. The term "any
year of the employment period" means any period of 12 consecutive months during
the employment period.
This agreement shall terminate without notice upon the death of the
Executive.
9. SEVERANCE PAYMENTS
(a) Upon termination of the Executive's employment: (i) for cause; or
(ii) by the voluntary termination of employment of the Executive, the Executive
shall not be entitled to any severance payment other than compensation earned by
the Executive before the date of termination calculated pro rata up to and
including the date of termination.
(b) If the Executive's employment is terminated for any other reason
other than the reasons set forth in subsection 9(a), the Executive shall be
entitled to receive the lesser of:
(i) the total of:
(A) 2 months' salary at the then applicable base salary
rate;
(B) the present value, as determined by the Chairman and/or
the President, acting reasonably, of the benefits
described in section 4(b) that would be enjoyed by the
Executive during the next 3 months assuming his
employment was not terminated and assuming the then
current level of benefits were continued for those 3
months; and
(C) the present value, as determined by the Chairman and/or
the President, acting reasonably, of the amount that
the Chairman and/or the President estimates would be
the amount payable to the
-4-
<PAGE>
Executive out of the Plan assuming that the Executive's
employment was not terminated until the end of the
current fiscal year and all other participants of the
Plan continued in the employment of the Corporation for
the full then current fiscal year; and
(ii) the salary otherwise payable to the Executive for the
unexpired term of this agreement together with the other
amounts described in clause 9(b)(i), mutatis mutandis.
The payment described in this subsection 9(b) is the only severance payment the
Executive will receive in the event of the termination of this agreement for
reasons contemplated in this subsection 9(b).
(c) If the Executive's employment is terminated as a result of the
permanent disability or death of the Executive, the Executive or his estate, as
applicable, shall be entitled to receive, within 30 days of the date of such
termination, the balance of the base salary that would otherwise be paid to the
Executive during the remainder of the term of this agreement. The Executive
agrees to reasonably comply with all requirements necessary for the Corporation
to obtain life insurance on the life of the Executive for the term of this
agreement.
10. CONFIDENTIALITY
The Executive acknowledges and agrees that:
(a) in the course of performing his duties and responsibilities as an
officer of the Corporation, he has had and will continue in the future to have
access to and has been and will be entrusted with detailed confidential
information and trade secrets (printed or otherwise) concerning past, present,
future and contemplated products, services, operations and marketing techniques
and procedures of the Corporation and its subsidiaries, including, without
limitation, information relating to addresses, preferences, needs and
requirements of past, present and prospective clients, customers, suppliers and
employees of the Corporation and its subsidiaries (collectively, "Trade
Secrets"), the disclosure of any of which to competitors of the Corporation or
to the general public, or the use of same by the Executive or any competitor of
the Corporation or any of its subsidiaries would be highly detrimental to the
interests of the Corporation;
(b) in the course of performing his duties and responsibilities for the
Corporation, the Executive has been and will continue in the future to be a
representative of the Corporation to its customers, clients and suppliers and as
such has had and will continue in the future to have significant responsibility
for maintaining and enhancing the goodwill of the Corporation with such
customers, clients and suppliers and would not have, except by virtue of his
employment with the Corporation, developed a close and direct relationship with
the customers, clients and suppliers of the Corporation;
(c) the Executive, as an officer of the Corporation, owes fiduciary
duties to the Corporation, including the duty to act in the best interests of
the Corporation; and
-5-
<PAGE>
(d) the right to maintain the confidentiality of the Trade Secrets, the
right to preserve the goodwill of the Corporation and the right to the benefit
of any relationships that have developed between the Executive and the
customers, clients and suppliers of the Corporation by virtue of the Executive's
employment with the Corporation constitute proprietary rights of the
Corporation, which the Corporation is entitled to protect.
In acknowledgement of the matters described above and in consideration
of the payments to be received by the Executive pursuant to this agreement, the
Executive hereby agrees that he will not, during the term of this agreement and
for one (1) year thereafter, directly or indirectly disclose to any person or in
any way make use of (other than for the benefit of the Corporation), in any
manner, any of the Trade secrets, provided that such Trade Secrets shall be
deemed not to include information that is or becomes generally available to the
public other than as a result of disclosure by the Executive.
11. NON-SOLICITATION
The Executive hereby agrees that he will not, during the term of this
agreement and ending one (1) year following the expiration of the term of this
agreement, be a party to or abet any solicitation of customers, clients or
suppliers of the Corporation or any of its subsidiaries, to transfer business
from the Corporation or any of its subsidiaries to any other person, or seek in
any way to persuade or entice any employee of the Corporation or any of its
subsidiaries to leave that employment or to be a party to or abet any such
action.
12. DISCLOSURE
During the employment period, the Executive shall promptly disclose to
the Chairman full information concerning any interest, direct or indirect, of
the Executive (as owner, shareholder, partner, lender or other investor,
director, officer, employee, consultant or otherwise) or any member of his
family in any business that is reasonably known to the Executive to purchase or
otherwise obtain services or products from, or to sell or otherwise provide
services or products to the Corporation or any of its subsidiaries or affiliates
or to any of its suppliers or customers.
13. RETURN OF MATERIALS
All files, forms, brochures, books, materials, written correspondence,
memoranda, documents, manuals, computer disks, software products and lists
(including lists of customers, suppliers, products and prices) pertaining to the
business of the Corporation or any of its subsidiaries and affiliates that may
come into the possession or control of the Executive shall at all times remain
the property of the Corporation or such subsidiary or affiliate, as the case may
be. On termination of the Executive's employment for any reason, the Executive
agrees to deliver promptly to the Corporation all such property of the
Corporation in the possession of the Executive or directly or indirectly under
the control of the Executive. The Executive agrees not to make for his personal
or business use or that of any other party, reproductions or copies of any such
property or other property of the Corporation.
-6-
<PAGE>
14. GOVERNING LAW
This agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario.
15. SEVERABILITY
If any provision of this agreement, including the breadth or scope of
such provision, shall be held by any court of competent jurisdiction to be
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remaining provisions, or part thereof, of this agreement and such remaining
provisions, or part thereof, shall remain enforceable and binding.
16. ENFORCEABILITY
The Executive hereby confirms and agrees that the covenants and
restrictions pertaining to the Executive contained in this agreement, including,
without limitation, those contained in sections 10 and 11 hereof, are reasonable
and valid and hereby further acknowledges and agrees that the Corporation would
suffer irreparable injury in the event of any breach by the Executive of his
obligations under any such covenant or restriction. Accordingly, the Executive
hereby acknowledges and agrees that damages would be an inadequate remedy at law
in connection with any such breach and that the Corporation shall therefore be
entitled in lieu of any action for damages, temporary and permanent injunctive
relief enjoining and restraining the Executive form any such breach.
17. NO ASSIGNMENT
The Executive may not assign, pledge or encumber the Executive's
interest in this agreement nor assign any of the rights or duties of the
Executive under this agreement without the prior written consent of the
Corporation.
18. SUCCESSORS
This agreement shall be binding on and enure to the benefit of the
successors and assigns of the Corporation and the heirs, executors, personal
legal representatives and permitted assigns of the Executive.
-7-
<PAGE>
19. NOTICES
Any notice or other communication required or permitted to be given
hereunder shall be in writing and either delivered by hand or mailed by prepaid
registered mail. At any time other than during a general discontinuance of
postal serve due to strike, lock-out or otherwise, a notice so mailed shall be
deemed to have been received three business days after the postmarked date
hereof or, if delivered by hand, shall be deed to have been received at the time
it is delivered. If there is a general discontinuance of postal service due to
strike, lock-out or otherwise, a notice sent by prepaid registered mail shall be
deemed to have been received three business days after the resumption of postal
service. Notices shall be addressed as follows:
(a) If to the Corporation:
InfoCast Canada Corporation
1 Richmond Street West
Suite 902
Toronto, ON
M5H 3W4
(b) If to the Executive:
CHRIS ROUSE
22 EARL STREET
TORONTO, ON, M4Y 1M3
-8-
<PAGE>
20. LEGAL ADVICE
The Executive hereby represents and warrants to the corporation and
acknowledges and agrees that he had the opportunity to seek and was not
prevented nor discouraged by the Corporation from seeking independent legal
advise prior to the execution and delivery of this agreement and that, in the
event that he did not avail himself of that opportunity prior to signing this
agreement, he did so voluntarily without any undue pressure and agrees that his
failure to obtain independent legal advice shall not be sued by him as a defence
to the enforcement of his obligations under this agreement.
IN WITNESS WHEREOF the parties have executed this agreement as of the
date first written above.
INFOCAST CANADA CORPORATION
Per:/s/ James Hines
--------------------------------
CHRIS ROUSE
Per:/s/ Chris Rouse
--------------------------------
-9-
SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the day of September, 1999 (the "Effective
Date").
B E T W E E N:
INFOCAST CORPORATION, a corporation
incorporated under the laws of the State of Nevada,
in the United States of America
(hereinafter referred to as the "Employer")
OF THE FIRST PART
- and -
CARL STEVENS, of the City of Atlanta, in the State of
Georgia (hereinafter referred to as the "Employee")
OF THE SECOND PART
WHEREAS the Employer wishes to employ the Employee in the capacity of
President - Distance Learning Division effective September , 1999 (the "Start
Date");
AND WHEREAS the Employer recognizes that the Employee will render and
provide to the Employer special skills which are essential to the continued
growth of the Employer's business and the Employer believes that it is
reasonable and fair to the Employer that the Employee receive fair incentive and
security of employment and compensation terms;
AND WHEREAS the Employer and the Employee have agreed to enter into
this Employment Agreement to formalize in writing the terms and conditions
reached between them governing the Employee's employment;
NOW THEREFORE in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties hereto
agree as follows:
<PAGE>
Article 1
RETENTION, DUTIES AND POWERS OF THE EMPLOYEE
1.1 Employment of Employee.
The Employer hereby employs the Employee effective the Start Date as
its President - Distance Learning Division, reporting to the Employer's
President, to perform the duties and responsibilities incident to such position
and as otherwise assigned by the Employer's President. Such employment shall
continue, unless and until terminated in accordance with Article 4 of this
Agreement.
1.2 Acceptance of Employment; Time and Attention.
The Employee hereby accepts such employment and agrees that throughout
the period of his employment hereunder he will devote substantially all his
time, attention, knowledge and skills, faithfully, diligently and to the best of
his ability, in furtherance of the business of the Employer, and will perform
the duties and responsibilities assigned to him pursuant to Section 1, subject,
at all times, to the direction and control of the Employer's President. As an
executive officer, the Employee shall perform such specific duties and shall
exercise such specific authority related to the management of the day-to-day
operations of the Employer consistent with his position as a Senior Vice
President as may be assigned to the Employee from time to time by the Employer's
President. The Employee shall at all times be subject to, observe and carry out
such rules, regulations, policies, directions and restrictions as the Employer
shall from time to time establish. During the period of his employment
hereunder, the Employee shall not, directly or indirectly, accept employment or
compensation from, or perform services of any nature for, any business
enterprise other than the Employer. The Employee shall be elected to such
offices of the Employer as may from time to time be determined by the Board.
During the period of the Employee's employment hereunder, he shall not be
entitled to additional compensation for serving in any offices of the Employer
to which he is elected or appointed.
Article 2
COMPENSATION AND BENEFITS
2.1 Remuneration.
For the performance of his services hereunder, the Employee shall be
paid a salary (the "Base Salary") of US$225,000 per annum, payable twice monthly
in arrears. The Employee's Base Salary shall be reviewed annually by the
Employer's Board of Directors (the "Board") based on recommendation from the
Employer's President and, from time to time during the term of this Agreement,
may be increased in the sole discretion of the Board.
-2-
<PAGE>
2.2 Benefits and Perquisites
Provided the Employee is otherwise eligible, the Employee will be
entitled to participate in all benefit plans and to receive all perquisites
enjoyed by the senior employees of the Employer. All benefit plans will be
governed and interpreted by their written terms, if applicable.
2.3 Incentive Plans.
The Employee will be entitled to participate in all incentive plans
(including, without limitation, a Bonus Planto be created which includes an
entitlement to an annual target bonus of 25 percent of Base Salary to be paid
within 90 days following the Employer's fiscal year end, and the Share Option
Plan) made available to any employee of the Employer. Except as provided for
herein, all incentive plans will be governed and interpreted by their written
terms, if applicable.
It is agreed that the Employee's bonus for the period ending 12 months
from the Start Date shall be US$50,000 which shall be paid prior to the end of
said 12 month period, at a time designated by the Employee.
It is agreed that, effective the Start Date, the Employer shall grant
the Employee 250,000 options to purchase common shares on terms substantially
the same as those set forth in the Infocast Corporation 1999 Share Option Plan
(a copy of which is attached as Schedule A hereto) except as otherwise provided
herein. These options will be issued with an exercise price of US$7.00 each. The
terms of these options will provide that they vest as to 83,333 options upon the
Employee assuming the position of the Employer's President - Distance Learning
Division, 83,333 on the first anniversary thereof and the remaining 83,334 on
the second anniversary thereof.
2.4 Out-of-Pocket Expenses.
The Employee shall, upon production of supporting statements and
vouchers, be reimbursed forthwith by the Employer in accordance with applicable
policies of the Employer for all reasonable out-of-pocket expenses actually
incurred by the Employee in the performance of his duties under this Agreement.
2.5 Vacation.
The Employee is entitled to a minimum of three weeks paid vacation in
respect of each 12 month period of his employment hereunder. To the extent that
the Employee does not utilize his full vacation entitlement in any given year,
the Employee shall be entitled to carry forward his vacation entitlement to the
next year provided that the Employee shall not be entitled to accumulate more
than five weeks vacation.
-3-
<PAGE>
Article 3
EMPLOYEE'S NEGATIVE COVENANTS
3.1 Confidential Information.
The Employee acknowledges that, in the course of carrying out,
performing and fulfilling his obligations to the Employer under this Agreement,
the Employee will have access to and will be entrusted with information that
would reasonably be considered confidential to the Employer and its affiliates,
clients or suppliers, the disclosure of any of which to competitors of the
Employer or any of its affiliates, clients or suppliers, or the general public,
would be highly detrimental to the best interests of the Employer. Except as may
be required in the course of carrying out his duties under this Agreement, the
Employee therefore covenants and agrees that he will not disclose or directly or
indirectly cause to be disclosed, during his employment or any time thereafter,
any of such information to any person, other than the directors, officers or
employees of the Employer or any of its affiliates that have a need to know such
information, nor shall the Employee use or exploit, directly or indirectly, the
same for any purpose other than the purposes of the Employer. This provision
will not apply to any confidential information which is publicly available
through no fault of the Employee or which the Employee is required by law to
disclose.
3.2 Corporate Opportunities.
Any business opportunities related to the business of the Employer or
any of its affiliates which become known to the Employee during the period of
his employment hereunder must be fully disclosed and made available to the
Employer by the Employee and the Employee agrees not to take or omit to take any
action if the result would be to divert from the Employer or any of its
affiliates any opportunity which is within the scope of its business as known to
the Employee from time to time.
3.3 Proprietary Information.
The Employee acknowledges and agrees that all right, title and interest
in and to any information, trade secrets, inventions, discoveries, improvements,
research materials and databases, including but not limited to patents,
copyright, design and moral rights in the results thereof, made or conceived by
the Employee during his employment with the Employer relating to the business or
affairs of the Employer or any of its affiliates shall belong to the Employer
and the Employee hereby waives any and all moral rights he may have in
connection thereto. The Employee shall promptly communicate to the Employer all
information concerning such proprietary information and, if requested by the
Employer, the Employee shall provide, at the expense of the Employer, all such
assistance as the Employer considers necessary to secure the vesting of such
rights in the Employer. The Employee hereby, for the term of this Agreement,
irrevocably appoints the Employer as the Employee's attorney with full power in
Employee's name to execute
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and deliver documents and do any things which the Employer may consider
necessary or desirable for the purposes of giving effect to this Section 3.3.
The Employee hereby agrees to ratify and confirm whatever the Employer may
lawfully do as the Employee's attorney.
3.4 Non-Competition.
(a) In consideration of his employment hereunder, the Employee shall
not, during the Employee's term of employment (as set forth in
Section 1.1) and during the 6 month period following the date
that the Employee ceases to be an employee of the Employer or
other termination of this Agreement (regardless of who initiated
the termination and whether with or without cause), either
individually or in partnership or in conjunction in any way with
any person or persons, corporation, partnership or other entity,
whether as principal, agent, director, member, officer,
consultant, shareholder, guarantor, creditor in or any other
manner whatsoever, directly or indirectly:
(i) solicit, interfere with, endeavour to entice away from the
Employer or any of its affiliates, accept any business
related to the Restricted Business from, or sell any
product or render any service related to the Restricted
Business to, any person, firm, or corporation who is or was
a client, customer or supplier of the Employer or any of
its affiliates with whom the Employer or its affiliate has
or has had any dealing during the 6 month period
immediately preceding the date upon which the Employee
ceases to be an employee of the Employer;
(ii) offer employment to (unless previously terminated by the
Employer) or endeavour to entice away from the Employer or
any of its affiliates, any person employed by the Employer
or its affiliates at the date upon which the Employee
ceases to be an employee of the Employer or interfere in
any way with the employment relationship between such
employee and the Employer or its affiliate, as the case may
be or induce, influence or seek to induce or influence any
person engaged as an employee, representative, agent,
independent contractor or otherwise by the Employer, to
terminate his or her relationship with the Employer;
(iii) engage in, carry on or otherwise be concerned with or have
any interest in, or advise, lend money to, guarantee the
debts or obligations of, or permit the Employer's name or
any part
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<PAGE>
thereof to be used or employed by, and person, firm,
association, syndicate or corporation engaged in or
concerned with, a Restricted Business in North America; or
(iv) own, manage, operate, join, control, participate in, invest
in, or otherwise be connected with, in any manner, whether
as an officer, director, employee, partner, investor or
otherwise, any business entity engaged in or concerned
with, a Restricted Business in North America.
For the purposes of this Section 3.4(a), "Restricted Business"
means any business carried on by the Employer or any of its
affiliates at the date upon which the Employee ceases to be an
employee of the Employer.
(b) The foregoing covenants are given by the Employee acknowledging
that the Employee either has or will have specific knowledge of
the affairs of the Employer and its business. Therefore, the
Employee hereby acknowledges and agrees that all covenants,
provisions and restrictions contained in this Article 3 are
reasonable and valid in the circumstances of this Agreement, and
all defenses to the strict enforcement thereof by the Employer
are hereby waived by the Employee. The Employee acknowledges and
agrees that any breach by the Employee of the covenants,
provisions and restrictions contained in this Article 3 during
the term of his employment under this Agreement shall constitute
cause for termination.
(c) The Employee further acknowledges and agrees that in the event of
a breach of the covenants, provisions and restrictions in this
Article 3, the Employer's remedy in the form of monetary damages
may be inadequate and that the Employer shall be and is hereby
authorized and entitled, in addition to all other rights and
remedies available to the Employer, to apply for and obtain from
any court of competent jurisdiction interim and permanent
injunctive relief and an accounting of all profits and benefits
arising out of such breach. The Employee also acknowledges that
the operation of the foregoing covenants may seriously constrain
his freedom to seek other remunerative employment.
3.5 Investments.
Nothing in this Agreement shall be deemed to prevent or prohibit
the Employee from owning shares in a public company as an investment, so long as
the Employee does not own more than 5 percent of the outstanding voting shares
thereof.
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3.6 Survival.
Neither the termination of this Agreement, nor of the Employee's
employment hereunder, shall terminate or affect in any manner any provision of
this Article 3 that is intended by its terms to survive such termination.
3.7 Qualification of Non-Competition.
If the provisions of Section 3.4 are ever adjudicated to exceed
the limitations on time or geographic scope permitted by applicable law, then
such provisions shall be deemed to be amended to the maximum time or geographic
scope permitted by applicable law.
Article 4
TERMINATION
4.1 Termination for Cause, Disability, Etc.
(a) The Employer may terminate this Agreement and the Employee's
employment hereunder without payment of any compensation either
by way of anticipated earnings or damages of any kind for any of
the following reasons:
(i) cause which, for the purposes of this Agreement, means a
wilful refusal on the part of the Employee to perform the
services required of him under this Agreement (including
the wilful and intentional withholding of services
thereunder), any breach of his fiduciary duties to the
Employer likely to cause material harm to the Employer,
fraud or any conviction of a felony or indictable offence
or any crime involving moral turpitude or any of theft or
dishonesty relating to a matter material to the Employer,
provided that a wilful refusal to perform the services
required under this Agreement will constitute cause only
if the Employee fails to terminate the relevant actions or
cure the relevant failure to act and remedy any harm
therefrom within 10 business days after receipt of written
notice to such wrongful act, failure to act or harm from
the Employer;
(ii) disability which, for the purposes of this Agreement,
means the eligibility of the Employee for long term
disability benefits under the disability insurance
referred to in Section 2.2 of this Agreement; or
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<PAGE>
(iii) death of the Employee.
(b) In the event of termination pursuant to Section 4.1(a)(i), the
Employee's sole entitlement shall be his Base Salary to and
including the date of termination, all benefits accrued to the
date of termination and all rights pursuant to any Share Option
Plan governing options issued to the Employee. For greater
certainty, the Employee shall not be entitled to any part or pro
rata payment for any unpaid bonus or payments pursuant to any
incentive plans except to the extent earned but not yet paid for
the fiscal year immediately preceding the date of termination.
(c) In the event of termination pursuant to Section 4.1(a)(ii) or
(iii) above, the Employee's sole entitlement shall be his Base
Salary to and including the date of termination, all benefits
accrued to the date of termination, all rights pursuant to any
Share Option Plan governing options issued to the Employee
(provided that all such options shall immediately accelerate and
vest in the Employee or the legal representative of his estate,
as applicable) and a pro rata payment for all bonuses (calculated
as the greater of the bonus which would be paid under the
Employer's bonus plan on the basis that targets were met and 25%
of annual Base Salary) and payments pursuant to any incentive
plans up to the date on which the Employee's active employment
ceased.
4.2 Other Termination by Employer without Cause.
Notwithstanding anything contained in this Agreement, where the
provisions of Section 4.1 do not apply, this Agreement and the Employee's
employment under this Agreement may be terminated at any time by the Employer
during the term set out in Section 1.1 as follows:
(a) the Employer shall pay to the Employee his Base Salary
to and including the date of termination, together with
a lump sum amount equal to his annual Base Salary (the
"Base Severance"); and
(b) all options for shares of the Employer issued to the
Employee shall immediately accelerate and vest in the
Employee and the exercise period for all options for
shares of the Employer issued to the Employee shall be
12 months from the date of the termination;
4.3 Other Termination by Employee.
Notwithstanding anything contained in this Agreement, where the
provisions of Section 4.1 do not apply, this Agreement and the Employee's
employment under this Agreement may be terminated at any time by the Employee
during the term set out in Section 1.1 upon three (3) months' notice in the case
of
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<PAGE>
termination before the second anniversary of the Start Date, and one (1) months'
notice in the case of termination on or after the second anniversary of the
Start Date, in writing by the Employee to the Employer. In that event, the
following shall apply:
(a) the Employer shall pay to the Employee his Base Salary
to the effective date of resignation; and
(b) the exercise period for all options for shares of the
Employer issued to the Employee shall be as provided
pursuant to the Share Option Plans under which they were
issued.
4.4 General Termination Provisions.
(a) Upon any termination of this Agreement for any reason,
the Employee shall at once deliver or caused to be
delivered to the Employer all books, documents, effects,
money, securities or other property belonging to the
Employer or for which the Employer is liable to others,
which are in the possession, charge, control or custody
of the Employee.
(b) All amounts referred to in this Agreement, specifically
including the Employer's payment obligations pursuant to
this Article 4, shall constitute when due a debt owed by
the Employer to the Employee. The Employee shall not be
required to mitigate damages by seeking other employment
or otherwise, nor shall the amount provided for under
this Agreement be reduced in any respect in the event
that the Employee shall secure alternative employment,
or not reasonably pursue alternative employment,
following the termination of the Employee's employment
with the Employer. Notwithstanding the foregoing, should
the Employee replace any life, health or accident plan,
at an equivalent level, upon obtaining alternate
employment or otherwise, the Employer shall not be
required to continue such benefits.
(c) As a condition to any payment pursuant to this Article
4, the Employee agrees to deliver to the Employer at the
time of payment a full and final release from all
actions or claims, such release to be in a form
reasonably satisfactory to the Employer and to be for
the benefit of the Employer, its affiliates, directors,
officers and employees.
Article 5
DIRECTORS AND OFFICERS
5.1 Resignation.
If the Employee is a director or officer at the relevant time, the
Employee agrees that, after termination of his employment with the Employer for
any reason, he
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<PAGE>
will tender his resignation from any position he may hold as an officer or
director of the Employer or any of its affiliated or associated companies. If
the Employee fails to resign, the Employer is irrevocably authorized to appoint
another person to act in his name and on his behalf to sign any documents
necessary to give effect to the resignation.
5.3 Indemnity.
(a) Subject to the provisions of applicable law, the
Employer agrees to indemnify and save the Employee
harmless from and against all demands, claims, costs,
charges and expenses, including an amount paid to settle
an action or satisfy a judgment, reasonably incurred by
him in respect of any civil, criminal or administrative
action or proceeding to which the Employee is made a
party by reason of being or having been a director or
officer of the Employer or of any affiliated company,
whether before or after any termination if:
(i) the Employee acted honestly and good
faith with a view to the best interests
of the Employer; and
(ii) in the case of a criminal or
administrative action or proceeding that
is enforced by a monetary penalty, the
Employee had reasonable grounds for
believing that his conduct was lawful.
(b) Subject to the provisions of applicable law, the Employer
agrees, with the approval of the court, to indemnify and
save the Employee harmless from and against all demands,
claims, costs, charges and expenses reasonably incurred
by him in connection with an action by or on behalf of
the Employer to procure a judgment in the Employer's
favour to which the Employee is made a party by reason of
being or having been a director or officer of the
Employer or of any affiliated company, whether before or
after any termination, if:
(i) the Employee acted honestly and in good
faith with a view to the best interest of
the Employer; and
(ii) in the case of a criminal or
administrative action or proceeding that
is enforced by a monetary penalty, the
Employee had reasonable grounds for
believing that his conduct was lawful.
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<PAGE>
Article 6
GENERAL CONTRACT PROVISIONS
6.1 Notices.
Any notice or other document ("Notice") required or permitted to be
given hereunder shall be in writing and shall be given by hand delivery,
responsible over night delivery service, or facsimile transmission (with
confirmation of receipt), to be addressed to:
(a) the Employer or the Board of Directors at:
1 Richmond St. West, Suite #901
Toronto, Ontario
M5H 3W4
Telephone: 416-867-9087
Facsimile: 416-867-9320
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Jeffrey S. Spindler, Esq.
or to such other person as the Employer may designate;
(b) the Employee at:
Any Notice hand delivered personally or by delivery service or
transmitted by facsimile shall be deemed to have been received by and given to
the addressee on the day of delivery or transmission, provided that if the date
of transmission is not a business day, or the transmission occurs after normal
business hours, on the business day next following the date of transmission.
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<PAGE>
6.2 Currency.
All dollar amounts set forth or referred to in this Agreement and all
uses of the dollar sign ($) used herein refer to currency of the United States
of America, except as otherwise indicated.
6.3 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
6.4 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Nevada and the laws of the United States of America
applicable therein. The parties hereto attorn to the jurisdiction of the courts
of the State of Nevada.
6.5 Interpretation not Affected by Headings, etc.
Any headings preceding the text and paragraphs in this Agreement hereof
have been inserted for convenience and reference only and shall not be construed
to affect the meaning, construction, or effect of this Agreement.
6.6 Deemed Amendments.
If any paragraph or provision of this Agreement is adjudicated to be
invalid or unenforceable, in whole or in part then such paragraph or provision,
or part thereof, shall be deemed amended to delete therefrom the objectionable
portion and the remaining portions of this Agreement shall continue to remain in
full force and effect.
6.7 Non-Assignability.
Neither this Agreement, nor the right to receive any payments
hereunder, may be assigned by the Employee without the prior written consent of
the Employer.
6.8 Time of the Essence.
Time shall be of the essence of this Agreement.
6.9 Binding Effect.
This Agreement shall be binding upon and shall enure to the benefits of
each of the parties and their respective heirs, executors, administrators,
successors and permitted assigns.
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<PAGE>
6.10 Entire Agreement.
This Agreement (together with the plans and documents referred to
herein) supersedes and replaces all prior negotiations and/or agreements made
between the parties, whether oral or written, and shall constitute the entire
Agreement between the parties with respect to all matters relating to the
Employee's employment and the execution of this Agreement has not been induced
by, nor do any of the parties hereto rely upon or regard as material any
representations or writings whatsoever not incorporated into and made a part of
this Agreement. This Agreement shall not be amended, altered or modified except
in writing signed by the parties hereto.
6.11 Taxes.
All payments under this Agreement shall be subject to withholding of
such amounts, if any relating to tax or other payroll deduction as the Employer
may reasonably determine should be withheld pursuant to any applicable law or
regulation.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement
as of the Effective Date.
INFOCAST CORPORATION
Per:/s/ James Leech
-------------------------------
Per:______________________________
)
)
)
) /s/Carl Stevens
- ------------------------------------------ --------------------------------l/s
Witness Carl Stevens
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STRATEGIC ALLIANCE AGREEMENT
This Strategic Alliance Agreement (SAA) is made as of the 29th day of November,
1999 (the "Effective Date").
BETWEEN: INFOCAST CORPORATION, a company incorporated pursuant to the
laws of the State of Nevada and having its head office in
Lisle, Illinois (hereinafter "Infocast")
AND: TMANAGE INC., a company incorporated pursuant to the laws of
Delaware and having its principal place of business in Austin,
Texas (hereinafter "TManage")
WHEREAS Infocast is in the business of providing certain technology services in
Canada and the United States ("Infocast Products/Services"), including an
internet based software program generally described in Schedule A attached
hereto and accessible at the domain name WWW.TELETRIPS.COM ("Teletrips");
WHEREAS TManage is in the business of providing a telework Solution in the
United States, including those products/services generally described in Schedule
B attached hereto ("TManage Products/Services");
AND WHEREAS Infocast and TManage wish to jointly market and sell Teletrips and
other Infocast Products/Services generally described in Schedule A attached
hereto and TManage Products/Service for use in conjunction with one or more
TManage Products/Services (collectively the "Alliance Offering");
AND WHEREAS Teletrips is a web-enabled software program that calculates the
benefits of vehicle miles not traveled due to teleworking, and calculates the
corresponding reductions in hydrocarbons, nitrogen oxides, carbon monoxide and
carbon dioxide;
NOW THEREFORE in consideration of the covenants and agreements contained herein,
the parties hereto covenant and agree as follows:
1.0 RIGHTS TO DEVELOP, MARKET AND SELL PRODUCTS/SERVICES
1.1 Infocast and TManage agree to market and sell Teletrips, as a
marketing tool to promote teleworking. Infocast and TManage agree
to develop a mutually acceptable marketing plan outlining each
parties' responsibilities and obligations for marketing the
Alliance Offering within 60 days of the Effective Date.
1.2 Infocast and TManage agree to fund and develop Teletrips as
generally described in Schedules C and D attached hereto. (Funding
and Development Estimate). The parties shall share profits as
described in Item 3 of Schedule
<PAGE>
"D"and revenues as described in Items 1, 2, 4 and 5 of Schedule D
attached hereto.
1.3 Infocast and TManage agree to jointly market and sell each other's
products and services as described in Schedule A (Infocast) and
Schedule B (TManage) and as outlined in this Agreement. The parties
will not delegate this marketing obligation except as agreed to in
writing by the parties.
1.4 In the event that Infocast establishes a Licensee ("Infocast
Licensee") to sell its products/services outside of North America,
TManage shall make reasonable efforts to enter into an agreement
with that Infocast Licensee to market the TManage Products/Services
outside of North America on substantially the same terms and
conditions as this Agreement.
1.5 In the event that TManage establishes a Licensee ("TManage
Licensee") to sell its products/services outside of North America,
Infocast shall make reasonable efforts to enter into an agreement
with that TManage Licensee to market the Infocast products/services
outside North America on substantially on the same terms and
conditions as this Agreement. Notwithstanding the foregoing, each
party shall have the right, in its sole discretion, to refuse to
enter into any agreement to market and/or provide products/services
outside of North America.
1.6 Each party shall use commercially reasonable efforts to promote the
Alliance Offering to its customers.
1.7 The parties agree to enter into a Statement of Work or other
agreement for each implementation of the Alliance Offering
outlining the price for the Alliance Offering, the delivery
schedule, the order process, the payment processing and billing,
support and maintenance of the Alliance Offering and other
necessary arrangements to implement the Alliance Offering.
1.8 TManage may fulfill the orders for TManage Products/Services
directly or through a subcontractor. Each of Infocast and TManage
maintains, at its sole discretion, the right to refuse to enter
into a contract for its respective products/services for any
particular Alliance Offering order.
1.9 Neither Infocast nor TManage may obligate the other to enter
service or support agreements to support their respective products
agreements, or otherwise obligate the other party, without an
express written agreement with that party.
2.0 TERM
2.1 Unless terminated earlier as provided below, the term of this SAA
shall commence on the Effective Date hereof and shall continue in
effect until
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October 31, 2001. Thereafter, this SAA may be renewed for such term
and upon such conditions as the parties may agree in writing.
3.0 TERMINATION
3.1 If either party to this Agreement breaches any term, condition,
representation or warranty or fails to perform any of its material
obligations hereunder and such breach is not remedied after 45
days' written notice from the non-defaulting party, the
non-defaulting party may terminate this SAA immediately upon
providing prior written notice of termination to the defaulting
party.
3.2 The parties agree that either party may terminate this SAA
immediately in the event that either party:
3.2.1 Elects to be wound up and dissolved;
3.2.2 Becomes insolvent or admits in writing its inability to pay
its debts as they become due;
3.2.3 Ceases to do business as a going concern;
3.2.4 Files a voluntary assignment in bankruptcy under the
Bankruptcy and Insolvency Act
3.2.5 Commences a reorganization pursuant to the Bankruptcy and
Insolvency Act or the Companies' Creditors Arrangement Act;
3.2.6 Has an involuntary petition filed in bankruptcy to have a
trustee appointed over its affairs and such appointment is
made and not terminated or discharged within sixty (60)
days; or
3.2.7 Is subject to the appointment of a receiver or manager of
all or substantially all of its assets.
4.0 INVENTIONS AND INTELLECTUAL PROPERTY
4.1 Except as expressly provided in this Agreement, nothing in this SAA
is intended to grant any express or implied rights, by license or
otherwise, to any given invention, discovery, or improvement made,
conceived or acquired prior to the Effective Date.
4.2 Teletrips, including any improvements or derivative works thereto
developed during the term of this Agreement by either party, is and
shall remain wholly owned by Infocast. Infocast hereby grants
TManage a non-exclusive, non-transferable and paid-up license to
use, copy, display, perform, and distribute (with the right to
sublicense any of these rights to end users of Teletrips) Teletrips
during the term of this Agreement.
4.3 If Infocast is no longer involved in the business of marketing and
supporting Teletrips, then TManage will have a right of first
refusal to purchase or license Teletrips, at Infocast's option,
less the Applicable Discount.
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<PAGE>
4.4 If Infocast is still in the business of marketing and supporting
Teletrips, but this Agreement terminates for whatever reason, then
TManage is entitled to a non-exclusive, non-transferable, paid-up
license to use, copy, display and distribute the source code of the
then current version of Teletrips to support TManage's existing and
future customers. This right shall be restricted to use of
Teletrips for TManage's own business without the right to
sublicense this right except to the end users of Teletrips.
Specifically, TManage will not have the right to create derivative
products to market to present or future customers.
4.5 For the purposes of Section 4.3, "Applicable Discount" means the
percentage determined by dividing the amount of TManage's
contributions to the development of Teletrips by the total cost of
Teletrips development.
5.0 CONFIDENTIALITY/NON-DISCLOSURE
5.1 TManage and Infocast shall execute a Mutual Non-Disclosure
Agreement, attached hereto as Schedule E, concurrently with the
execution of this SAA.
6.0 USE OF TRADEMARKS AND TRADE NAMES
6.1 Both parties authorize the other to use certain names and logos, as
provided in Schedule F, as part of this SAA. Each party hereby
grants the other a non-exclusive, limited right to use the trade
names, logos, and trademarks of the other listed in Schedule F (the
"Marks") for all proper purposes in the marketing and sales of the
Alliance Offering and the performance of duties under this
Agreement, provided that the licensed party displays the ownership
legends required by the owning party from time to time and the
symbol "TM" or a , as appropriate, adjacent to each use of a Mark
the first time a Mark is used or such other symbols and notices as
may be prescribed by the owning party. The licensed party agrees to
use the names of the owning party's products in any advertising
concerning the owning party's services, and will include all
relevant Marks in all brochures, technical information and other
promotional literature. Each Mark shall be clearly visible whenever
it is used, and shall be utilized in a reasonable manner that will
not directly or indirectly lessen the value of the Mark or value of
the goodwill of the Mark.
6.2 Upon termination of this Agreement for any reason, each party shall
discontinue the use of the other's Marks in any sign, literature or
advertising and thereafter shall not use the Marks directly or
indirectly in connection with its business, nor use any other name,
title or symbol so nearly resembling any of the other's Marks as to
be likely to lead to confusion or uncertainty or to deceive the
public. TManage trademarks are and shall
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<PAGE>
remain the property of TManage. Infocast trademarks are and shall
remain the property of Infocast.
6.3 All use of one party's trademarks by the other will inure to the
benefit of the party owning the trademark.
6.4 Infocast and TManage shall ensure that any of its employees,
contractors, agents or similar parties, including third parties
shall comply with the terms and conditions contained in this
Section 6.
7.0 WARRANTIES
7.1 Each party warrants to the other that it will perform its duties
under this Agreement in a workmanlike and professional manner.
8.0 INDEMNIFICATION
8.1 Each party hereby agrees to indemnify, defend and hold the other
party and its Affiliates and their respective successors, permitted
assigns, directors, officers, employees, agents and consultants
harmless from and against any and all claims, loss, damage,
liability and expense whatsoever, including lawyer's fees, arising
from or relating to any of the following:
(i) any breach by the party of any representation, warranty,
term or condition contained in this SAA;
(ii) any misrepresentation, deceit, misconduct, negligence or
fraud on the part of the party or its employees, contractors
or agents while acting in the course of their respective
duties;
(iii) any unauthorized representation, warranty, or other
commitment made by the party on behalf of the other;
(iv) any intellectual property infringement by the party; and
(v) any violation or infringement by the party or its employees,
contractors or agents of any federal, state or local laws,
rules or regulations.
9.0 LIMITATION OF LIABILITY
9.1 Except for Section 5 ("Confidentiality/NonDisclosure") and Section
8.1(iv) ("Indemnification for Infringement"), the sole and
exclusive remedy of either party for any claim, loss or damage in
any way related to, or arising out of, this Agreement shall be
limited to its actual, direct damages and shall not under any
circumstances, extend to any lost profits, loss of business, or any
indirect, consequential, incidental, exemplary or punitive losses
or damages of any kind or nature whatsoever or howsoever caused,
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<PAGE>
regardless of whether or not the party had been advised of a
possibility of such damages. 10.0 Assignment 10.1 This Agreement
may not be assigned by either party without the written consent of
the other party, which consent may not be unreasonably withheld.
11.0 Notice
11.1 Any demand, notice or other communication to be given in connection
with this SAA shall be given in writing and shall be given by
personal delivery, by registered mail or by electronic means of
communication addressed to the recipient as follows:
To Infocast Corporation To TManage Inc.
Suite 1220 Suite 475
855 2 nd Avenue SW 3925 Braker Lane
Calgary, Alberta Austin, Texas
T2P 4J7 78759
Attention: Ross Wickware Attention: Michael Moore
Telephone: (403) 303-5869 Telephone: (512) 794-6037
Facsimile: (403) 294-1196 Facsimile: (512) 794-6001
Email:[email protected] Email: [email protected]
12.0 CURRENCY
12.1 All dollar amounts referred to in this SAA are in $USD except as
otherwise stated.
13.0 SURVIVAL OF PROVISIONS
13.1 The following provisions of this SAA, Section 4 ("Inventions and
Intellectual Property"), Section 5 ("Confidentiality/Non-
Disclosure") Section 6 (Use of Trademarks and Trade Names"),
Section 8 ("Indemnification"), Section 9 ("Limitation of
Liability") and Section 20 ("Non-Solicitation) shall survive this
expiration or termination of this SAA for an unlimited period of
time.
14.0 GOVERNING LAW
14.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of Nevada and the federal laws of the
United States of America applicable therein.
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15.0 ENTIRE AGREEMENT
15.1 This Agreement, including the schedules attached hereto,
constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supercedes any prior
understandings and agreements between the parties hereto with
respect thereto. There are no representations, warranties, terms,
conditions, undertakings or agreements between the parties relating
to the subject matter hereof except as contained herein.
16.0 AMENDMENT/WAIVER
16.1 No modification of, or amendment to this SAA shall be valid or
binding unless set forth in writing and duly executed by the
parties hereto, and no waiver of any breach of any term or
provision of this SAA shall be effective and binding unless made in
writing and signed by the party purporting to give the same and,
unless otherwise provided, shall be limited to the specific breach
waived.
17.0 INVALIDITY OF PROVISIONS
17.1 In the event that any provision of this SAA is adjudicated invalid,
illegal or unenforceable, such adjudication shall not affect the
validity, legality or enforceability of any other provision and
this SAA shall be construed as though such invalid, illegal or
unenforceable provision had never been contained herein, and that
provision shall be replaced by a mutually acceptable provision,
which, being valid, legal and enforceable, comes closest to the
intentions of the parties underlying the invalid, illegal or
unenforceable provisions.
18.0 COUNTERPARTS
18.1 This SAA may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which taken
together shall be deemed to constitute one and the same instrument.
19.0 DISPUTE RESOLUTION
19.1 Prior to bringing litigation on any dispute or claim, both parties
must attempt in good faith to negotiate a settlement with each
other, through direct personal contact of a member of the board of
directors of the parties. If that meeting is not held within ten
(10) days of notice, or if that meeting is not successful in
resolving the dispute within twenty (20) days after it is held,
either party may initiate litigation.
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20.0 NON-SOLICITATION
20.1 Each party agrees that it will not directly solicit or make an
offer of employment to an employee of the other company or to a
person who has been an employee of the other party within six
months of the date of the offer during the term of this Agreement
and for one year following the termination or expiration of this
Agreement. If either party hires an employee of the other party
during the non-hiring period in violation of this nonsolicitation
commitment, it will promptly pay the other party an amount equal to
the employee's annual salary.
21.0 INDEPENDENT CONTRACTORS
21.1 Each party acknowledges that it is an independent contractor under
this agreement, and that it is not authorized to act on behalf of
or commit for the other party. Nothing in this Agreement shall be
construed to create any agency, partnership, joint venture or
franchise relationship. Neither party shall represent itself as an
agent or legal representative of the other party.
IN WITNESS WHEREOF, the parties have executed this Strategic Alliance Agreement
on the date first above written.
INFOCAST CORPORATION TMANAGE INC.
Per: /s/ Darcy Galvon Per: /s/ Glenn Lovelace
---------------------- ----------------------------
Glenn Lovelace
CEO/President
___________________________ ___________________________
Attachments:
Schedule A - Teletrips
Schedule B - TManage Products/Services
Schedule C - Funding and Development Estimate
Schedule D - TManage/TManage Dollar Volumes
Schedule E - Mutual Non-Disclosure Agreement
Schedule F Licensed Trademarks
Schedule G Escrow Agreement
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