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FORM 10-SB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
DENMANS.COM, INC.
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(Name of Small Business Issuer in its charter)
COLORADO
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(state or other jurisdiction of
incorporation or organization)
#780 - 789 WEST PENDER STREET
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VANCOUVER, BRITISH COLUMBIA
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V6C 1H2
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(Address of principal executive offices and zip code)
(604) 684-7804
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(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
NONE
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Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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Title of each class to be so registered
FORWARD LOOKING STATEMENTS
Denmans.com, Inc. (the "Company" or "Denmans") cautions readers that certain
important factors (including without limitation those set forth in this Form
10-SB) may affect the Company's actual results and could cause such results to
differ materially from any forward-looking statements that may be deemed to have
been made in this Form 10-SB registration statement, or that are otherwise made
by or on behalf of the Company. For this purpose, any statements contained in
the registration statement that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "expect", believe", "anticipate", "intend",
"could", "estimate" or "continue" or the negative or other variations of
comparable terminology, are intended to identify forward-looking statements.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
I. BUSINESS DEVELOPMENT
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A. DENMANS.COM, INC.
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Denmans.com, Inc. (the "Company") was incorporated in January 1999 in the state
of Colorado as IDS Internet Distribution Systems Inc. For marketing, branding
and promotional reasons, the Company changed its name in July 1999 to
Denmans.com, Inc. In March 1999, Denmans Jewelry (USA) Inc. was incorporated as
IDS Jewelry (USA) Inc. in the State of Nevada which is intended to act as the
operating company for all USA based business activities of the Company. In
March, 1999, Denmans Jewelry (Canada) Inc. was incorporated as IDS Jewelry
(Canada) Inc. in British Columbia, Canada which is intended to act as the
operating company for all Canada based business activities of the Company. The
name of the U.S. subsidiary was changed in July 1999 and the name of the
Canadian subsidiary was changed in August, 1999 to conform to the name change of
the parent company. The intent of the Company is to develop an electronic
website or websites for the purpose of retailing jewelry and jewelry related
products to the public in established markets. The Company, including its
subsidiaries, employs 6 full time persons. The majority of these individuals
either develop and produce the content for the website for display on the
computer accessible medium known commonly as the Internet, pursue alliances with
manufacturers of jewelry related products for sale on the website, or develop
alliances with other jewelry related websites which are intended to allow the
Company's website to be linked to such websites for the purpose of driving
Internet traffic to the website.
B. DENMANS.COM, INC. CORPORATE HISTORY
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In January 1999, the Company filed its Articles of Incorporation with the
Secretary of State of Colorado as IDS Internet Distribution Systems Inc., in
which, among other things, the Board of Directors was elected as follows: Mark
N. Dohlen, Douglas N. Bolen, Kurt S. Dohlen and Terry G. Bowering. The
authorized capital of the Company consists of 100,000,000 Common Shares and
50,000,000 Preferred Shares. On January 7, 1999, the Directors, by way of
Organizational Consent of the Directors of the Company, accepted the stock
subscriptions and payment for the number of shares issued to the individuals
referred to above at a price of $0.001 per share. In addition, the Directors
appointed Mark N. Dohlen to the office of President, Douglas N. Bolen to the
office of Secretary and Kurt S. Dohlen to the office of Chief Operating Officer.
On February 10, 1999, the Company accepted subscription agreements from nine
entities to acquire securities of the Company pursuant to a Rule 504 offering
under Regulation D. The Board authorized the Company to proceed with the sale of
its shares pursuant to the subscriptions received for the sale of 4,500,000
Common Shares at a price of $0.001 per Common Share. Pacific Stock Transfer
Company was appointed as the Transfer Agent of the Common Shares of the Company.
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On May 15, 1999, a Board of Directors Meeting was held at which the number of
the Board members was increased to five and the following additional member was
elected to the Board: Dr. Drew C. Parker.
On July 23, 1999, by way of Shareholders' Consent, the name of the Company was
changed from IDS Internet Distribution Systems Inc. to Denmans.com, Inc. to
further Management's plans in respect of marketing. On July 28, 1999, by way of
Shareholders' Consent, the name of the U.S. subsidiary was changed from IDS
Jewelry (USA) Inc. to Denmans Jewelry (USA) Inc.. On August 1, 1999, by way of
Shareholders' Consent, the name of the Canadian subsidiary was changed from IDS
Jewelry (Canada) Inc. to Denmans Jewelry (Canada) Inc.
On August 20, 1999 the Board of Directors accepted the resignation of Mark N.
Dohlen from the positions of Chairman of the Board of Directors, President and
Director. On the same day, the Board of Directors appointed Kurt S. Dohlen to
the offices of President and Chairman of the Board.
II. BUSINESS OF THE ISSUER
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Denmans Jewelry (USA) Inc. ("Denmans USA") was incorporated in March 1999 as IDS
Jewelry (USA) Inc. and is based in Nevada, USA. Denmans USA is a wholly owned
subsidiary of the Company and is intended to act as the operating entity for the
Company's business in the USA. Denmans Jewelry (Canada) Inc. ("Denmans Canada"),
was incorporated as IDS Jewelry (Canada) Inc. in Vancouver, British Columbia,
Canada is a wholly owned subsidiary of the Company and is intended to act as the
operating entity for the Company's business in Canada. The Company, through its
wholly owned subsidiaries, intends to establish itself as an on-line retailer of
Jewelry and jewelry related products. Its early entry into the on-line jewelry
products retailing industry is expected to help the Company gain a
well-recognized brand and a large customer base. The Company intends to strive
to combine the advantages of online commerce with a superior customer focus in
order to be the authoritative source for jewelry and jewelry related products.
The Company's online store is expected to offer broad selection, informative
content, easy to use navigation and search capabilities, a high level of
customer service, competitive pricing and personalized merchandising and
recommendations. With the intention to make available up to 250,000 items, the
Company will provide a selection of readily available products that is 20 to 50
times that of a typical, store-based, jewelry products retailer. The Company's
store will be open 24 hours a day, seven days a week and will offer its
customers convenient and timely product fulfillment, including an overnight
delivery option.
The Company intends to implement a broad array of scalable site management,
search, customer interaction and distribution services systems that are intended
to be used to display products, process customer orders and payments. These
proposed services and systems use a combination of commercially available,
licensed technologies which are being customized and integrated to provide the
platform for the online store. The Company has entered into an agreement with
Webcast Systems Inc., a Vancouver based software developer whereby the Company
obtains consulting, programming, service and support in respect of the
development and hosting of its online stores. Management believes that the
software will have the capacity to facilitate every aspect of the Company's
plans in respect of the stores, including order taking, confirmation of orders,
organize, place and manage orders with suppliers, manage shipment of products to
customers, credit card processing, order fulfillment, distribution, data
collection, accounting and the provision of information of users.
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III. BUSINESS AND MARKETING STRATEGIES
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The Company intends to be a leading Web-based retailer focused exclusively on
jewelry and jewelry related products. By combining expertise in jewelry and
jewelry related products and a commitment to excellent customer service with the
benefits of Internet retailing, the Company believes it will be able to deliver
a unique shopping experience to consumers. The Company's initial product focus
has been on jewelry with the intention to grow into one of the leading online
retailers jewelry products. The Company anticipates being able to carry
approximately 250,000 jewelry items. Management believes that jewelry and
jewelry related products are well suited for online commerce given brand
recognition, generally high average sales prices and relatively low average
distribution and shipping costs.
MARKET OPPORTUNITY
Management believes that many people find shopping for jewelry and jewelry
related products to be time-consuming and inconvenient because few traditional
store-based retailers currently combine an extensive selection, convenient
shopping hours, broad geographic coverage and knowledgeable staff. The online
store is designed to provide consumers with a convenient and enjoyable shopping
experience in a Web-based retail environment. The key components of the
Denmans.com experience are intended to include:
- - - EXTENSIVE PRODUCT SELECTION. The Company intends to offer an extensive
variety of jewelry and jewelry related products, with a view to offering one of
the largest selections of jewelry available on the Internet.
- - - COMPELLING CONTENT AND DETAILED PRODUCT INFORMATION. The Web site is
intended to include significant content and detailed product information, such
as displaying over 250,000 product photos, specific brand histories and key
messages. Management also intends to employ numerous specialists to provide a
convenient and enjoyable shopping experience and to help customers make informed
purchasing decisions.
- - - COMPETITIVE PRICES AND COMPELLING VALUE. Compared to traditional store-based
retail competitors, management believes that the cost structure will be lower.
As a result, management intends to offer customers products at competitive
prices and, combined with a high-quality shopping experience, provide compelling
value.
- - - COMMITMENT TO EXCELLENT CUSTOMER SERVICE. Jewelry and jewelry related
products consumers expect the highest level of personalized customer service.
The Company is committed to superior customer service and intends to provide
trained customer service representatives, extended warranties, gift-wrapping and
a generous return policy.
- - - PERSONALIZED SHOPPING EXPERIENCE. The online store is intended to provide
convenient and useful services that enhance the shopping experience. The Web
site is intended to include features such as an innovative online product
showcase that allows customers to choose and compare products side-by-side, gift
suggestions and software that allows real-time online customer interaction. The
Company intends to strive to make its customers' experience informative,
efficient and intuitive by constantly updating and improving its store format
and features. The Company's online store intends to incorporate "point and
click" options, supported by technical enhancements including easy-to-use search
capabilities (by brand, style, size, price), personalized jewelry products
suggestions, order tracking and confirmation. The online stores is planned to
promote jewelry products learning and discovery by enabling visitors to access
information on brands, ratings, articles on jewelry products topics and
potentially up to approximately 250,000 viewing samples of both popular items
and hard to find items. These features are intended to make shopping at the
store entertaining and informative and encourage purchases and repeat visits.
- - - GEOGRAPHIC COVERAGE. By selling online, it is expected that the online store
will be able to offer an extensive selection of products throughout the U.S. and
worldwide where the products might not otherwise be available.
- - - MULTILINGUAL CAPABILITIES. The Company believes that international markets
will represent a significant portion of the Company's future sales since many
products offered by the Company are not otherwise available in these markets.
Based on the data referred to below, management believes that a significant
market opportunity exists outside of the U.S. As such, the Company intends to
introduce Spanish, French, German, Portuguese and Japanese language versions of
its proposed Web sites that contain translation of account registration and
ordering instructions, and supports its international sales efforts with
customer service representatives fluent in these languages. The Company intends
to introduce additional foreign language versions in the future.
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STRATEGY
The Company's objective is to be one of the leading online retailers of jewelry
and jewelry related products. Key elements of management's strategy include:
- - - FOCUS ON THE JEWELRY MARKET. Management intends to capitalize on what it
intends to offer in order to create a leading online market position in jewelry
products to become the primary destination for consumers to purchase jewelry and
jewelry related products. The objective is to grow the Company's market position
and expand its customer base through superior execution and strong relationships
with leading manufacturers, distributors and suppliers.
- - - CONSTANTLY EXPAND PRODUCT LINES AND CATEGORIES. Management intends to
enhance product offerings by expanding into additional jewelry related product
categories that management believes present significant online market
opportunities. Management believes that offering a broader selection of products
will enable the Company to increase sales per customer visit, encourage repeat
purchases and expand the customer base.
- - - BUILD DENMANS.COM EXPERIENCE AND BRAND. Management intends to establish a
brand identity that will support the creation of an Internet jewelry community
and provide leading manufacturers and distributors with a powerful new
distribution channel consistent with their jewelry identities. Management
intends to focus the brand campaign on selection, convenience, value, trust and
service.
- - - CREATE RELATIONSHIPS WITH LEADING JEWELRY MANUFACTURERS. Management's intent
is to be the Internet retailer of choice for jewelry and jewelry related
products. The Company intends to create, maintain and strengthen relationships
with jewelry manufacturers and suppliers as we increase the number of products
offered.
- - - PURSUE WAYS TO INCREASE SALES. Management intends to pursue new
opportunities to develop sales by continually expanding into new product
categories, increasing product selection, taking steps to add new customers and
to promote repeat purchases. In addition, management intends to pursue
international market opportunities, establish strategic alliances and acquire
complementary businesses, products and technologies.
- - - OPERATIONAL AND SYSTEMS INFRASTRUCTURE. Management plans to devote
substantial resources to developing and growing the systems and operational
infrastructure to handle customer volume, enhance service offerings and take
advantage of the unique characteristics of online jewelry products retailing.
MERCHANDISING
Management believes that the breadth and depth of its proposed online store's
product selection, together with the flexibility of its proposed online store
and its range of helpful and useful shopping services, will enable the Company
to pursue a unique merchandising strategy. Unlike store-based retail formats,
the Company's online store is expected to provide the Company with significant
flexibility with regard to the organization and presentation of product
selection. To encourage purchases, management intends to feature various
promotions on a rotating basis throughout the store and continually update the
online recommendations. Management intends to actively create and maintain pages
that are designed to highlight certain products and brands. The following are
examples of some of the Company's expected specific merchandising strategies.
ONLINE BOUTIQUES. In partnership with major jewelry brands, the Company
intends to have dedicated pages that communicate a brand's marketing message.
These pages are intended to detail a brand's history, product features, quality
statements and other key messages. In this way, it is intended that the store
will be able to provide more consistent and comprehensive information for more
products to the customer than a sales representative in a traditional retail
store would be able to communicate. No such partnerships have yet been made.
JEWELRY BOX. It is intended that, as customers shop and find items of
interest, they will be able to move such items into a special area of the online
store called the "jewelry box" where the item or items can be viewed at a later
date and items may be added or removed from the jewelry box at any time. With
this feature, it is intended that customers can shop on one occasion and return
on another occasion to review the items placed in the jewelry box and make
purchases accordingly.
FEATURED PRODUCTS. Management intends to frequently give a product
prominent placement on the site, describe its key features and potentially
highlight it as either a "great value", a "gift to give" or as "perfect for the
special occasion". Products that receive this merchandising focus are expected
to generally receive a boost in sales.
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PRODUCT BUNDLING. To promote purchases of higher value items, management
intends to combine products from the large selection to offer bundling
promotions, such as offering a free gift with purchase or just simply making a
suggestion that specific items go well together.
SPECIAL PROMOTIONS. Management intends to offer certain products on
promotion and provide special pricing. The technological advantages of online
retailing, compared to traditional store-based retailing, are expected to allow
the Company to adjust promotions rapidly to promote targeted sales.
MARKETING & PROMOTION
Management intends to continue developing a marketing and promotion strategy to
build the Denmans.com brand, increase customer traffic, promote the sales of new
products, maximize repeat purchases and build strong customer loyalty. The
Company's marketing and promotional activities are planned to primarily target a
customer demographic that is more likely to buy Denmans.com's jewelry and
jewelry related products. These activities include both offline and online
advertising.
ONLINE ADVERTISING. Although nothing has been contracted for in the
following areas, management intends to obtain banner advertisement agreements
with major Internet content and service providers, and targeted jewelry related
sites. Management also intends to partner with other major online portals,
Internet service providers and luxury and premium market-related Web sites to
build the brand and increase the Company's Internet presence. In addition, the
Company intends to establish an affiliate program and other initiatives aimed at
increasing traffic and supporting the brand development. Under the proposed
affiliate program, the Company would pay registered affiliates referral fees for
sales generated via their links to the Company's Web site.
ONLINE DIRECT MARKETING. As the customer base grows, management intends to
collect significant data about the Company's customers' buying preferences and
habits in an effort to increase repeat purchases. Management intends to maximize
the value of this information by delivering meaningful information and special
offers to customers via e-mail and other means. In addition, management intends
to publish a free, weekly, online newsletter delivered by e-mail to subscribers
in which will be highlighted important developments, special promotions, jewelry
related information and special occasions for which purchases from the store
would be appropriate.
OFFLINE ADVERTISING. The Company intends to use offline advertising to
promote both our brand and specific merchandising opportunities. To date, the
Company has not conducted any off-line advertising. The Company's plan is to
focus these efforts on print advertisements in newspapers located in cities with
high Internet use, such as Austin, Boston, San Francisco and San Jose.
Management also plans to utilize other forms of traditional offline advertising,
including television, radio, magazines, outdoor advertising and direct mail, in
order to continue building our brand recognition.
FULFILLMENT OPERATIONS
Purchases. Once an item has been selected, customers are expected to simply
click on the price to add products (including, advance orders of yet-to-be
released products) to their virtual shopping carts. Customers are intended to
add and remove products from their shopping carts as they browse, prior to
making a final purchase. The shopping cart page is expected to display each item
that has been placed in the cart, including title, price and any applicable
discount. To execute orders, customers are intended to click on the "Buy" button
and will be prompted to select shipping and payment methods online or by e-mail,
facsimile or telephone. Customers may also be able to add products which they
may wish to purchase on future visits to their "Jewelry Box," a special section
of the shopping cart where items may be stored over multiple visits.
Payment. In paying for orders, customers are intended to be able to use credit
cards, bank transfers, personal checks or money orders. For convenience, the
Company intends to enable customers to store credit card information on the
Company's secure server, thereby avoiding the need to re-enter this information
when making future purchases. The Company intends to offer a variety of shipping
options, including overnight delivery. The Company intends to automatically
confirm each order by e-mail within minutes after the order is placed and
subsequently will confirm shipment of each order by e-mail.
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Distribution and Fulfillment. All of the Company's inventory is intended to be
owned and held by outside vendors and shipped directly from these vendors to
customers. The breadth of the inventory maintained by these vendors provides the
Company with the ability to maintain high order fill rates. Denmans.com intends
to update its site daily with inventory information received from its vendors,
which will enable customers to check the availability of products before
ordering. The Company intends to electronically transmit orders to its outside
vendors up to once daily. Orders may be shipped by these vendors using a
Denmans.com box, label and invoice, in most cases within a 24 hours after an
order is placed with the Company. A customer's credit card may be charged once
an order is shipped.
The Company intends to obtain its products from brands and a diverse network of
distributors, manufacturers, brokers and wholesalers. To date, no contracts with
such have been executed but negotiations for the supply and distribution of
jewelry products are underway. The Company has entered into negotiations for the
supply and distribution of Jewelry products with the following: Bijan F.
Designs, Inc., a California corporation specializing in the manufacture of high
end jewelry and the importation of loose diamonds, with an inventory of over
2,000 items; FCI & First Class Inc., a New York corporation with an inventory of
over 5,000 styles of imported Italian gold chains and diamond jewelry; Raya
Inc., a California corporation which manufactures approximately 2,000 styles of
designer gold jewelry; Kim International Manufacturing Inc., a Texas corporation
which distributes in excess of 10,000 pieces of fine jewelry products; and
Stuller USA Inc., and Illinois corporation which manufactures approximately
40,000 pieces of various types of jewelry. All negotiations entered into to date
with the above referenced corporations contemplate supply, distribution and
fulfillment of the respective products.
Management's efforts are ongoing to expand the number of direct relationships
with manufacturers, suppliers, brokers, distributors and wholesalers in all the
product categories.
IV. INDUSTRY OVERVIEW
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GROWTH OF THE INTERNET AND ONLINE COMMERCE
The Internet is the largest and most widely used computer network in the world
and provides access to an incredible volume of information and data. Management
of the Company believes that hundreds of billions of private and public dollars
will be invested over the next decade to weave together the global information
systems, including the hardware and software necessary to navigate the Internet.
Internet usage and online commerce continue to grow worldwide. International
Data Corporation, or IDC, estimates that there were 159 million Web users
worldwide at the end of 1998. IDC anticipates that number will grow to
approximately 510 million users by the end of 2003. IDC also estimates that
revenue generated worldwide from online commerce will exceed $1.3 trillion by
2003. This growth can be attributed to many factors, including, a large and
growing installed base of personal computers and other Internet-connected
devices in the workplace and home, advances in performance and speed of personal
computers and modems, improvements in network security, infrastructure and
bandwidth, easier and cheaper access to the Internet; and the rapidly expanding
availability of online content and commerce sites.
The growth in online commerce can also be attributed to a number of advantages
the Internet provides to online retailers. Online retailers can display a larger
number of products at a lower cost than traditional store-based or catalog
retailers. In addition, online retailers can rapidly adjust their selections,
editorial content and pricing, providing significant merchandising flexibility.
Online retailers also benefit from the minimal cost to publish on the Web, the
ability to reach a large group of customers from a central location, and the
potential for low-cost customer interaction. Unlike traditional retail channels,
online retailers do not have the cost of managing and maintaining a retail store
infrastructure or the significant printing and mailing costs of catalogs. Online
retailers can also easily obtain demographic and behavioral data about
customers, increasing opportunities for direct marketing and personalized
services.
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TRADITIONAL JEWELRY PRODUCTS MARKET
The jewelry products market includes a broad selection of product categories,
including, rings, necklaces, pendants, bracelets, earrings, pins, watches,
accessories and loose gems. Based on data from The World Gold Council, US sales
of gold products in 1998 amounted to approximately 60 billion dollars. The Wall
Street Journal, Friday April 16, 1999 published an article in which the author
estimated that the worldwide diamond industry generated approximately 50 billion
dollars in 1998 and The International Colored Gemstone Association reports
worldwide sales of gemstones in 1996 to be approximately 10 billion dollars.
International Data Corporation reports approximately 6 billion dollars in total
worldwide retail sales in 1998 of mid-range to high-end watches, which typically
have retail prices ranging from approximately $75 to more than $5,000. The
Movado Group Inc., a premiere manufacturer of fine watches estimates the watch
industry worldwide to generate approximately 13 billion dollars annually.
Management believes that these jewelry product categories, along with those for
which no statistics have been found, represent significant online commerce
opportunities.
TRADITIONAL RETAIL CHANNELS FOR JEWELRY PRODUCTS.
Management believes that the traditional retailers for jewelry and jewelry
related products in the United States today can be grouped as follows:
- - - high-end department stores and jewelry stores often strive to provide a high
level of customer service and a knowledgeable sales staff, but typically offer a
limited selection of mid-range to high-end products;
- - - national department stores tend to carry broad selections of low-end to
mid-range products from brands that are complementary to the stores' other
offerings, but typically offer limited product-specific customer service;
- - - specialty and single brand stores are retail locations that carry a broad
selection of specific product categories, but are limited to the geographic
region in which the few physical stores are located; and
- - - boutiques are small stores often located in malls that generally carry a
selection of the latest trends in lower-priced, fashion products and
accessories.
CHALLENGES IN TRADITIONAL LUXURY GOODS RETAILING.
Management believes that traditional store-based retailers face a number of
challenges in providing a satisfactory shopping experience for buyers of jewelry
and jewelry related products.
- - - Selection is limited because physical retail space constrains the number of
styles and the amount of product inventory that may be carried by any one store.
In addition, the significant carrying costs of physical inventory in multiple
store locations require traditional store-based retailers to focus their product
selection on the most popular products that produce the highest inventory turns,
further limiting consumer selection.
- - - Traditional store-based retailers have a high cost structure. Most of the
leading jewelry products retailers are located either in the most exclusive and
expensive shopping locales or in high-cost retail outlets or malls, both of
which must be in close proximity to the target buyers. This is because their
sales are dependent on serving customers who are willing to physically visit
their stores. Traditional retailers sell jewelry products often at a
significantly higher price than wholesale to cover high operating costs. As a
result, consumers ultimately pay for the high cost structure of the retail
store.
- - - The needs of jewelry products customers are changing. Increasingly, jewelry
product manufacturers are appealing to a broader, time-constrained customer base
that is not willing or able to spend the time necessary to shop in traditional
store-based retail locations.
- - - In many cases, customers are served by employees with limited knowledge
regarding the features of the products they sell, whether due to high employee
turnover, limited training or other factors.
- - - Traditional store-based retailers can only serve those customers who have
convenient access to their stores. These store-based retailers must open new
stores to serve additional geographic areas, resulting in significant
investments in inventory, physical space, leasehold improvements and the hiring
and training of store personnel.
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Management believes that few traditional store-based retailers currently offer
an extensive selection of jewelry and jewelry related products, broad geographic
coverage and convenient access, and staff that is sufficiently knowledgeable to
assist with significant customer decisions typically involving purchases of
several hundred to several thousand dollars. As a result, management believes
customers often do not find shopping for jewelry and jewelry related products to
be a convenient or enjoyable experience.
THE DENMANS.COM SOLUTION
Denmans.com intends to become a leading Web-based retailer focused exclusively
on jewelry and jewelry products, including, gold, silver and platinum rings,
necklaces, pendants, bracelets, earrings, pins, watches, accessories and loose
gems, including diamonds and pearls. The online store is intended to offer an
extensive selection of jewelry products and services. The online store is being
designed to provide consumers with a convenient and enjoyable shopping
experience in a Web-based retail environment. It is intended that the online
store will provide an extensive selection, detailed product information that
enables consumers to make informed decisions, competitive pricing compared to
traditional retail channels, a commitment to the highest level of customer
service and the convenience of online shopping. The key components of the
proposed Denmans.com online store include:
EXTENSIVE PRODUCT SELECTION. Management intends to offer a broad selection
of jewelry and jewelry related products that would be economically and
physically difficult to offer in a traditional store, together with the unique
environment of the Internet that management expects will enable the Company to
dynamically adjust the product mix and merchandising strategy. The online store
is expected to offer in excess of 250,000 items of jewelry. Additionally, it is
intended that the store will offer not only popular items of jewelry which may
be easily found elsewhere but also hard to find items from around the world
which lack U.S. distribution networks. Management believes that its extensive
selection increases the likelihood that the consumer will find the product they
would like to purchase.
COMPELLING CONTENT AND DETAILED PRODUCT INFORMATION. The Web site is
intended to include significant content and detailed product information to
provide customers with a convenient and enjoyable shopping experience. The Web
site is intended to display detailed product descriptions and over 250,000
product photos. For certain brands, management intends to dedicate pages to
communicating specific brand histories and key messages. Although no agreements
have been entered into, the Company also intends to employ specialists with
product expertise, such as master watchmakers and a certified gemologist, who
are available to address detailed customer questions by phone, e-mail or online
chat. The goal is to provide our customers with the product information they
need to make educated and highly satisfactory purchase decisions.
COMPETITIVE PRICES AND COMPELLING VALUE. Compared to traditional
store-based retail competitors, management believes that the Company's cost
structure will be lower. As a result, management intends to be able to offer
customers products at competitive prices and, combined with a high-quality
shopping experience, provide compelling value.
COMMITMENT TO EXCELLENT CUSTOMER SERVICE. Jewelry products consumers expect
the highest level of personalized customer service, which management is
committed to providing. Customer service representatives are intended to be
available through phone, e-mail and an online chat service and are expected to
be trained to answer a broad array of questions regarding product styles,
features and technical specifications, as well as provide product
recommendations. Management intends to offer customers a certification of
authenticity and an extended warranty. In addition, management intends to
gift-wrap. It is intended that every order will be confirmed via e-mail
after it is placed and customers will be offered a 30-day full product refund to
ensure customer satisfaction.
PERSONALIZED SHOPPING EXPERIENCE. Management intends to provide a
convenient and enjoyable shopping experience that addresses the dynamic needs of
the jewelry products customer. These services are intended to help consumers
search through the product offerings and make informed selections. The services
are expected to include:
- - - Search Capability. The site is intended to offer search capabilities making
it easy for customers to find products on the site. Key search criteria include
brand, price, keyword, size, features, occasion and other criteria. In
addition, it is intended that customers may conduct targeted searches, browse
among top selling items and other featured items, read reviews, view samples,
register for personal communications, including personalized special occasion
reminders, and participate in in-store promotions and contests.
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- - - Real-Time Customer Interaction. The Company intends to allow customers to
use real-time, online customer interaction software, through which a customer
service representatives is able to answer specific questions about products and
services. This feature is intended to allow customers shopping from home with
just one phone line to communicate in real-time with a customer service
representative without losing their Internet connection and leaving the online
store.
- - - Availability Notification. Because the business model does not contemplate
carrying inventory, the Company intends to be in constant electronic contact
with its suppliers. In this way, when a customer places an order, the customer
can be advised immediately of the availability of the item selected and the
anticipated shipping time for the item.
- - - Price Alert. The Company intends that customers can ask to be notified by
e-mail if the price for a product changes and customers can also specify a
desired target price and ask to be notified by e-mail if the product reaches
that target price.
- - - Occasion Alert. The Company plans to make available to customer a
registration form into which they can input important dates like birthdays,
anniversaries, graduations, and the like so that the online store will
automatically notify the customer in advance of such dates that they are quickly
arriving. Management also anticipates being able to make gift suggestions at
this time, all of which will be done via e-mail.
- - - Gifts and Wish List. Management intends to provide a variety of gift
suggestions and feature product suggestions for particular holidays. The online
store is also intended to provide a wish list service that customers can use to
provide friends and relatives with gift ideas by e-mail. Customers buying gifts
are intended to be able to choose among a variety of gift-wrap styles at the
time of order. The online store is intended to be able to facilitate the
purchase of gift certificates which may then be electronically given away as
gifts via e-mail.
- - - Shopping Hours. The online store is intended to provide consumers the
opportunity to shop from their homes, offices or other locations 24 hours a
day, seven days a week.
Geographic Coverage. By selling online, management intends to be able to
sell products throughout the U.S. and worldwide where the products might not
otherwise be available. In addition, it is intended that consumers will be
able to go to one location and find an extensive selection as opposed to
visiting several stores with limited product offerings.
V. COMPETITION
-----------
The online commerce market is new, rapidly evolving and intensely competitive.
Management expects to face stiff competition in every product category that the
online store offers. Barriers to entry are minimal, and current and new
competitors can launch new Web sites at a relatively low cost.
Management potentially will compete with a variety of competitors, including the
following:
- - - traditional retailers of jewelry and jewelry related products, which may
compete with both an online and offline presence, including high-end department
stores, jewelers, jewelry boutiques and national department stores;
- - - manufacturers of jewelry products that decide to sell directly to
end-customers, either through physical retail outlets or through an online
store;
- - - other online retailers of jewelry and jewelry related products, including
online service providers that feature shopping services; and
- - - catalog, direct mail and multi level marketing retailers of jewelry and
jewelry related products.
Management believes that the following are the principal competitive factors in
the Company's proposed market: brand recognition; selection; convenience; order
delivery performance; customer service; site features and content; and price.
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Many of the Company's current and potential traditional store-based and online
competitors have longer operating histories, larger customer or user bases,
greater brand recognition and significantly greater financial, marketing and
other resources than does the Company. Many of these current and potential
competitors can devote substantially more resources to Web site and systems
development than the Company can. In addition, larger, well-established and
well-financed entities may acquire, invest in or form joint ventures with online
competitors.
Certain of the Company's competitors may be able to secure products from vendors
on more favorable terms, fulfill customer orders more efficiently and adopt more
aggressive pricing or inventory availability policies than can the Company.
Traditional store-based retailers also enable customers to see and feel products
in a manner that is not possible over the Internet. Given the fact that the
Company has no operating history, many of the Company's competitors have
significantly greater experience selling jewelry and jewelry related products.
The Company's online competitors are particularly able to use the Internet as a
marketing medium to reach significant numbers of potential customers. Finally,
new technologies and the expansion of existing technologies, such as price
comparison programs that select specific titles from a variety of Web sites and
may direct customers to other online jewelry and jewelry related product
sellers, may increase competition.
VI. RISKS
-----
A. RISKS RELATED TO OUR BUSINESS
The Company has no operating history upon which to base an evaluation of the
business and prospects. The business and prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as online commerce. As a result of the limited operating
history, it is difficult to accurately forecast net sales and management has no
historical financial data upon which to base planned operating expenses.
Management based our current and future expense levels on operating plans and
estimates of future net sales, and expenses are to a large extent fixed. Sales
and operating results are difficult to forecast because they generally depend on
the volume and timing of the orders received, which is uncertain. As a result,
management may be unable to adjust its spending in a timely manner to compensate
for any unexpected revenue shortfall. This inability could cause net losses in a
given period to be greater than expected.
FUTURE LOSSES AND NEGATIVE CASH FLOW, WHICH MAY LIMIT OR DELAY THE ABILITY TO
BECOME PROFITABLE.
Since incorporation, the Company has expended resources on technology, Web site
development, hiring of personnel and startup costs. As a result, losses were
incurred since incorporation and management expects to experience operating
losses and negative cash flow for the foreseeable future. Management anticipates
losses will continue to increase from current levels because the Company expects
to incur additional costs and expenses related to: brand development, marketing
and other promotional activities; the expansion of fulfillment operations, which
includes supply procurement, order receipt, packaging and shipment; the addition
of customer service personnel; the continued development of the Web site, the
systems and staff that are intended to process customer orders and payments, and
the computer network; the expansion of product offerings and Web site content;
and development of relationships with strategic business partners.
The Company's ability to become profitable depends on its ability to generate
and sustain substantially higher net sales while maintaining reasonable expense
levels. If the Company does achieve profitability, it cannot be certain that it
would be able to sustain or increase profitability on a quarterly or annual
basis in the future.
THE OPERATING RESULTS ARE DIFFICULT TO PREDICT. IF THE COMPANY FAILS TO MEET THE
EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE OF THE
COMMON STOCK MAY DECLINE SIGNIFICANTLY.
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Management expects both quarterly and annual operating results to fluctuate
significantly in the future. Because the operating results will be volatile and
difficult to predict, in some future quarter the operating results may fall
below the expectations of securities analysts and investors. In this event, the
trading price of the common stock may decline significantly. Factors that may
harm the business or cause the operating results to fluctuate include the
following: the inability to obtain new customers at reasonable cost or encourage
repeat purchases; decreases in the number of visitors to the Web site or the
inability to convert visitors to the Web site into customers; the inability to
maintain an adequate selection of products; seasonality; the inability to manage
fulfillment operations; the inability to adequately maintain, upgrade and
develop the Web site, the systems that are intended to process customer orders
and payments via the computer network; the ability of competitors to offer new
or enhanced Web sites, services or products; price competition; an increase in
the level of product returns; fluctuations in the demand for jewelry products;
the inability to obtain product lines from suppliers; the availability and
pricing of merchandise from vendors; consumer confidence in online encrypted
transactions; the failure to develop marketing relationships with key business
partners; increases in the cost of online or offline advertising; the amount and
timing of operating costs and capital expenditures relating to expansion of
operations; unexpected increases in shipping costs, particularly during the
holiday season, and the inability to recover these costs from customers;
unexpected increases in delivery times, particularly during the holiday season,
which could harm the Company's reputation, increase returns and cause customer
dissatisfaction; technical difficulties, system downtime or Internet brownouts;
government regulations related to use of the Internet for commerce or for sales
and distribution of jewelry products; and economic conditions specific to the
Internet, online commerce and the jewelry products market.
A number of factors will cause gross margins to fluctuate in future periods,
including the combinations of jewelry products sold, marketing and supply
decisions, inbound and outbound shipping and handling costs, the level of
product returns and the level of discount pricing and promotional coupon usage.
Any change in one or more of these factors could reduce gross margins in future
periods.
SEASONAL FLUCTUATIONS IN NET SALES, WHICH WILL CAUSE QUARTERLY RESULTS TO
FLUCTUATE AND COULD CAUSE ANNUAL RESULTS TO BE BELOW EXPECTATIONS.
Management expects to experience significant seasonal fluctuations in net sales
that will cause quarterly fluctuations in operating results. In particular,
management expects that approximately 40% of net sales for any give year of
operations primarily due to gift purchases made during the holiday season will
occur.
In anticipation of increased sales activity during the fourth calendar quarter,
management intends to hire a significant number of temporary employees to
bolster permanent staff. For this reason, if net sales are below seasonal
expectations during this quarter, annual operating results could be below the
expectations of securities analysts and investors.
Due to the fact that the Company has no operating history, it is difficult to
predict the seasonal pattern of sales and the impact of seasonality on business
and financial results. In the future, seasonal sales patterns may become more
pronounced, may strain personnel and order shipment activities and may cause a
shortfall in net sales as compared to expenses in a given period.
INABILITY TO PURCHASE CERTAIN OF OUR PROPOSED PRODUCT LINES DIRECTLY FROM THE
MANUFACTURER MAY DECREASE NET SALES.
Management intends to purchase most of its products directly from
the manufacturers. Part of the Company's proposed success is contingent on
attaining or maintaining our ability to buy directly from the manufacturer. If
this is lost, net sales or margins may decrease.
INABILITY TO OBTAIN SUFFICIENT QUANTITIES OF KEY PRODUCTS, NET SALES COULD
DECREASE.
If the Company is not able to offer its customers a sufficient supply and
selection of products in a timely manner, it could lose customers and net sales
could be below expectations. Success depends on the ability to purchase products
in sufficient quantities at competitive prices, particularly for the holiday
shopping season. As is common in the industry, the Company expects not to have
long-term or exclusive arrangements with any manufacturer, distributor or broker
that guarantee the availability of products for resale.
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From time to time, the Company may have trouble obtaining sufficient product
allocations of key products. In addition, key suppliers may have established,
and may expand, their own online retailing efforts, which may impact the ability
to get sufficient product allocations from suppliers. In several cases, the
manufacturers of products that the Company wishes to carry may delay
establishing a relationship with the Company until they have their own Web site
up and running. In other cases, manufacturers may produce only a small amount of
product and rely partially on the scarcity of that product to provide a
merchandising mystique. It is unlikely that the Company will obtain product for
the Web site from manufacturers who follow the scarcity mystique, and there is
no assurance that the Company will actually obtain relationships within all
sectors that management planned to offer. Therefore, there is no predictable or
guaranteed supply of products.
SALES OF JEWELRY PRODUCTS ARE PARTICULARLY SUSCEPTIBLE TO GENERAL ECONOMIC
DOWNTURNS. IF GENERAL ECONOMIC CONDITIONS DETERIORATE, SALES COULD SUFFER.
Purchases of jewelry products are typically discretionary for consumers and may
be particularly affected by negative trends in the general economy. The success
of operations will depend to a significant extent on a number of factors
relating to discretionary consumer spending and affecting disposable consumer
income, such as employment, wages and salaries, business conditions, interest
rates, exchange rates, availability of credit and taxation. In addition, because
the purchase of jewelry products is relatively discretionary, any reduction in
disposable income in general may affect the Company more significantly than
companies in other industries.
ABILITY TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE COMPETITORS.
The online commerce market is new, rapidly evolving and intensely competitive.
Management expects competition to intensify in the future because current and
new competitors can launch new Web sites at a relatively low cost and enter the
market with little difficulty. Increased competition is likely to result in
price pressure, reduced gross margins and loss of market share, any of which
could seriously harm net sales and operating results. The Company potentially
competes with a variety of other companies, including: traditional retailers
jewelry products, which may compete with both an online and offline presence,
including high-end department stores, jewelers and national department stores;
manufacturers of jewelry products that decide to sell directly to end-customers,
either through physical retail outlets or through an online store; other online
retailers of jewelry products, including online service providers that feature
shopping services; catalog, direct mail and multi level marketing retailers of
jewelry products.
Many of the current and potential traditional store-based and online competitors
have longer operating histories, larger customer or user bases, greater brand
recognition and significantly greater financial, marketing and other resources
than the Company does. Many of these current and potential competitors can
devote substantially more resources to Web site and systems development than the
Company can. In addition, larger, well-established and well-financed entities
may acquire, invest in or form joint ventures with online competitors.
Certain of these competitors may be able to secure products from vendors on more
favorable terms, fulfill customer orders more efficiently and adopt more
aggressive pricing or inventory availability policies than the Company can.
Traditional store-based retailers also enable customers to see and feel products
in a manner that is not possible over the Internet. Because the Company has no
operating history, many of these competitors have significantly greater
experience selling jewelry products.
The online competitors are particularly able to use the Internet as a marketing
medium to reach significant numbers of potential customers. Finally, new
technologies and the expansion of existing technologies, such as price
comparison programs that select specific titles from a variety of Web sites and
may direct customers to other online watch sellers, may increase competition.
INABILITY TO BUILD AWARENESS OF THE DENMANS.COM BRAND MAY PROHIBIT THE COMPANY
TO COMPETE EFFECTIVELY AGAINST COMPETITORS WITH GREATER NAME RECOGNITION AND
SALES COULD BE ADVERSELY AFFECTED.
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If the Company is unable to economically achieve or maintain a leading position
in online commerce or to promote and maintain its brand, its business, results
of operations and financial condition could suffer. Management believes that the
importance of brand recognition will increase as more companies engage in
commerce over the Internet. Development and awareness of our brand will depend
largely on the Company's success in increasing its customer base. If the leading
brands do not perceive the Company as an effective marketing and sales channel
for their merchandise, or consumers do not perceive the Company as offering a
desirable way to purchase merchandise, the Company may be unsuccessful in
promoting and maintaining its brand. Furthermore, in order to attract and retain
customers and to promote and maintain its brand in response to competitive
pressures, management plans to increase the Company's marketing and advertising
budgets and otherwise to increase substantially its financial commitment to
creating and maintaining brand loyalty among vendors and consumers. See
"Business -- Business Strategy" and "-- Marketing and Promotion".
IF THE STRATEGY TO SELL PRODUCTS OUTSIDE OF THE UNITED STATES IS NOT SUCCESSFUL,
THE BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY
ADVERSELY AFFECTED.
If management is not able to successfully market, sell and distribute its
proposed products in foreign markets or if certain risks and uncertainties of
doing business in foreign markets prove insurmountable then these factors could
have a material adverse effect on future global operations, and consequently, on
the business, results of operations and financial condition. The Company does
not have any current ability to sell products inside or outside of the U.S. as
it does not currently have any fulfillment or distribution facility or
arrangement or any Web site content localized for these markets, and management
cannot be certain that it will be able to establish a global presence. In
addition, there are certain risks inherent in doing business on a global level,
including: regulatory requirements; export restrictions; tariffs and other trade
barriers; difficulties in staffing and managing foreign operations; difficulties
in protecting intellectual property rights; longer payment cycles; problems in
collecting accounts receivable; political instability; fluctuations in currency
exchange rates; and potentially adverse tax consequences.
INABILITY TO SUCCESSFULLY CREATE AND EXPAND FULFILLMENT OPERATIONS MAY CAUSE NET
SALES TO FALL BELOW EXPECTATIONS.
The Company must be able to quickly and efficiently fill customer orders. If the
Company does not successfully create and expand its fulfillment operations to
accommodate increases in demand, particularly during the fourth calendar quarter
of each year, it will not be able to increase net sales in accordance with the
expectations of securities analysts and investors. The success depends on the
Company's ability to rapidly adjust proposed fulfillment operations in order to
accommodate a significant increase in customer orders. The Company must also be
able to rapidly grow its fulfillment operations and information systems to
accommodate significant increases in demand.
PROBLEMS WITH OUR THIRD-PARTY SHIPPING SERVICES COULD RESULT IN LOST CUSTOMERS.
The Company intends to rely upon third-party carriers for product shipments. The
Company is therefore subject to the risks, including employee strikes and
inclement weather, associated with these carriers' ability to provide delivery
services to meet shipping needs. In addition, failure to deliver products to
customers in a timely manner would damage reputation and brand.
OPERATING RESULTS DEPEND ON OUR INTERNALLY DEVELOPED WEB SITE, NETWORK
INFRASTRUCTURE AND TRANSACTION-PROCESSING SYSTEMS. FAILURE TO SUCCESSFULLY
MAINTAIN OR EXPAND THE WEB SITE AND THE SYSTEMS THAT PROCESS CUSTOMER ORDERS
COULD CAUSE A LOSS OF CUSTOMERS AND NET SALES COULD BE REDUCED.
The satisfactory performance, reliability and availability of the Web site,
transaction-processing systems and network infrastructure are critical to the
operating results, as well as to the ability to attract and retain customers and
maintain adequate customer service levels. Any system interruptions that result
in the unavailability of the Web site or reduced performance of the transaction
systems would reduce the volume of sales and the attractiveness of the Company's
service offerings. This would seriously harm the business, operating results and
financial condition.
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NET SALES COULD DECREASE IF ONLINE SECURITY MEASURES FAIL.
Relationships with customers may be adversely affected if the security measures
that the Company intends to use to protect their personal information, such as
credit card numbers, are ineffective. If, as a result, customers are lost, net
sales could decrease. The Company intends to rely on security and authentication
technology that is licensed from third parties. With this technology, the
Company intends to perform real-time credit card authorization and verification
with the banks. Management cannot predict whether events or developments will
result in a compromise or breach of the technology used to protect a customer's
personal information. Furthermore, servers may be vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions. The Company
may need to expend significant additional capital and other resources to protect
against a security breach or to alleviate problems caused by any breaches.
Management cannot assure that it can prevent all security breaches.
FAILURE TO RESPOND TO RAPID TECHNOLOGICAL CHANGES COULD CAUSE SERVICES TO BECOME
OBSOLETE AND THE LOSS OF CUSTOMERS
If the Company faces material delays in introducing new services, products and
enhancements, customers may forego the use of the Company's services and use
those of competitors. To remain competitive, the Company must continue to
enhance and improve the functionality and features of the online store. The
Internet and the online commerce industry are rapidly changing. If competitors
introduce new products and services, or if new industry standards and practices
emerge, the existing Web site and proprietary technology and systems may become
obsolete. To develop the Web site and technology entails significant technical
and business risks. The Company may use new technologies ineffectively or may
fail to adapt the technology to meet customer requirements or emerging industry
standards.
INTELLECTUAL PROPERTY CLAIMS AGAINST THE COMPANY CAN BE COSTLY AND COULD IMPAIR
BUSINESS.
Other parties may assert infringement or unfair competition claims against The
Company. Management cannot predict whether they will do so, or whether any
future assertions or prosecutions will harm the business. If the Company is
forced to defend against any infringement claims, whether they are with or
without merit or are determined in the Company's favor, then the Company may
face costly litigation, diversion of technical and management personnel, or
product shipment delays. Further, the outcome of a dispute may be that
management would need to develop non-infringing technology or enter into royalty
or licensing agreements. Royalty or licensing agreements, if required, may be
unavailable on terms acceptable to management, or at all.
IF THE PROTECTION OF PROPOSED TRADEMARKS AND PROPRIETARY RIGHTS IS INADEQUATE,
BRAND AND REPUTATION COULD BE IMPAIRED AND CUSTOMERS COULD BE LOST.
The Company intends to take steps to protect proprietary rights which steps may
be inadequate. Management regards copyrights, service marks, trademarks, trade
dress, trade secrets and similar intellectual property as critical to its
success. The Company intends to rely heavily on trademark and copyright law,
trade secret protection and confidentiality or license agreements with our
employees, customers, partners and others to protect proprietary rights.
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which the Company intends to sell its products
and services online. Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights is
unclear. Therefore, the Company may be unable to prevent third parties from
acquiring domain names that are similar to, infringe upon or otherwise decrease
the value of intended trademarks and other proprietary rights.
THE LOSS OF THE SERVICES OF ONE OR MORE OF OUR KEY PERSONNEL, OR A FAILURE TO
ATTRACT, ASSIMILATE AND RETAIN OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE,
COULD DISRUPT OPERATIONS AND RESULT IN LOSS OF NET SALES.
The Company's future performance will depend on the continued services of its
management and key personnel and the ability to attract additional management
and key personnel. The loss of the services of one or more of the key personnel
could seriously interrupt business. Management depends on the continued services
and performance of the senior management and other key personnel. The future
success also depends upon the continued service of the executive officers and
other key sales, marketing and support personnel.
B. RISKS RELATED TO OUR INDUSTRY
DEPENDENCE ON INCREASING USE OF THE INTERNET AND ON THE GROWTH OF ONLINE
COMMERCE.
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The Company's future revenues substantially depend upon the increased acceptance
and use of the Internet and other online services as a medium of commerce. Rapid
growth in the use of the Internet, the Web and online services is a recent
phenomenon. As a result, acceptance and use may not continue to develop at
historical rates and a sufficiently broad base of customers may not adopt,
and/or continue to use, the Internet and other online services as a medium of
commerce. Demand and market acceptance for recently introduced services and
products over the Internet are subject to a high level of uncertainty and there
exist few proven services and products.
In addition, the Internet may not be accepted as a viable long-term commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements. If the Internet continues to
experience significant expansion in the number of users, frequency of use or
bandwidth requirements, the infrastructure for the Internet may be unable to
support the demands placed upon it. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. Changes in, or
insufficient availability of, telecommunications services to support the
Internet also could result in slower response times and adversely affect usage
of the Internet generally.
The Company's business, financial condition and results of operations would be
seriously harmed if: use of the Internet, the Web and other online services does
not continue to increase or increases more slowly than expected; the
infrastructure for the Internet, the Web and other online services does not
effectively support expansion that may occur; the Internet, the Web and other
online services do not become a viable commercial marketplace; or traffic to the
Web site decreases or fails to increase as expected or if management spends more
than was expected to attract visitors to the Web site.
THE INABILITY TO ACQUIRE THE NECESSARY WEB DOMAIN NAMES COULD DAMAGE THE BRAND
AND REPUTATION RESULTING IN THE LOSS OF CUSTOMERS.
The Company may be unable to acquire or maintain Web domain names relating to
the brand in the United States and other countries in which management may
conduct business. As a result, the Company may be unable to prevent third
parties from acquiring and using domain names relating to the Company's brand,
which could damage its brand and reputation and take customers away from its Web
site. The Company currently holds the "DENMANS.com" domain name and may seek to
acquire additional domain names. Governmental agencies and their designees
generally regulate the acquisition and maintenance of domain names. The
regulation of domain names in the United States and in foreign countries is
subject to change in the near future. The changes in the United States are
expected to include a transition from the current system to a system that is
controlled by a non-profit corporation and the creation of additional top-level
domains. Governing bodies may establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names.
REQUIREMENTS TO CHANGE THE MANNER IN WHICH THE COMPANY CONDUCTS BUSINESS IF
GOVERNMENT REGULATION INCREASES.
The adoption or modification of laws or regulations relating to the Internet
could adversely affect the manner in which the Company proposes to conduct its
business. In addition, the growth and development of the market for online
commerce may lead to more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on the Company. Laws and
regulations directly applicable to communications or commerce over the Internet
are becoming more prevalent. The United States Congress recently enacted
Internet laws regarding children's privacy, copyrights, taxation and the
transmission of sexually explicit material. The European Union recently enacted
its own privacy regulations. Laws regulating the Internet, however, remain
largely unsettled, even in areas where there has been some legislative action.
It may take years to determine whether and how existing laws such as those
governing intellectual property, privacy, libel, and taxation apply to the
Internet.
In order to comply with new or existing laws regulating online commerce, the
Company may need to modify the manner in which it proposes to do business, which
may result in additional expenses. For instance, the Company may need to spend
time and money revising the process by which it intends to fulfill customer
orders to ensure that each shipment complies with applicable laws. The Company
may need to hire additional personnel to monitor compliance with applicable
laws. The Company may also need to modify its software to further protect
customers' personal information.
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LIABILITY FOR THE INTERNET CONTENT THAT IS PUBLISHED.
As a publisher of online content, the Company faces potential liability for
defamation, negligence, copyright, patent or trademark infringement, or other
claims based on the nature and content of materials that it publishes or
distributes. If the Company faces liability, then its reputation and its
business may suffer. In the past, plaintiffs have brought these types of claims
and sometimes successfully litigated them against online companies. In addition,
the Company could be exposed to liability with respect to the unauthorized
duplication of content or unauthorized use of other parties' proprietary
technology. Although the Company intends to carry general liability insurance,
such insurance may not cover claims of these types. The Company cannot be
certain that it will be able to obtain insurance to cover the claims on
reasonable terms or that it will be adequate to indemnify the management or the
Company for all liability that may be imposed. Any imposition of liability that
is not covered by our insurance or is in excess of insurance coverage could harm
the business.
NET SALES COULD DECREASE IF THE COMPANY BECOMES SUBJECT TO SALES OR OTHER TAXES.
If one or more states or any foreign country successfully asserts that the
Company should collect sales or other taxes on the sale of products, net sales
and results of operations could be harmed. Because the Company does not
currently sell any products, the Company does not currently collect sales or
other similar taxes for physical shipments of goods into any states. However,
one or more local, state or foreign jurisdictions may seek to impose sales tax
collection obligations on the Company. In addition, any new operation could
subject shipments in other states to state sales taxes under current or future
laws. If the Company becomes obligated to collect sales taxes, it will need to
update its system that processes customer orders to calculate the appropriate
sales tax for each customer order and to remit the collected sales taxes to the
appropriate authorities. These upgrades will increase operating expenses. In
addition, customers may be discouraged from purchasing products from the Company
because they have to pay sales tax, causing net sales to decrease. As a result,
the Company may need to lower prices to retain these customers.
C. RISKS RELATED TO SECURITIES MARKETS
INABILITY TO MEET FUTURE CAPITAL REQUIREMENTS.
The Company cannot be certain that additional financing will be available on
favorable terms when required, or at all. If the Company raises additional funds
through the issuance of equity, equity-related or debt securities, the
securities may have rights, preferences or privileges senior to those of the
rights of the common stock and those stockholders may experience additional
dilution. The Company expects to require substantial working capital to fund the
business. Since inception, the Company has experienced negative cash flow from
operations and expects to experience significant negative cash flow from
operations for the foreseeable future. Management currently anticipates that the
private financing done to date, together with expected revenues, will be
sufficient to meet anticipated needs for working capital and capital
expenditures through at least the next 12 months. After that, the Company may
need to raise additional funds.
THE COMMON STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES
FOR INDIVIDUAL STOCKHOLDERS.
The market price for the Company's common stock is likely to be highly volatile
and subject to wide fluctuations in response to factors including the following,
some of which are beyond the Company's control: actual or anticipated variations
in the quarterly operating results; announcements of technological innovations
or new products or services by the Company or its competitors; changes in
financial estimates by securities analysts; conditions or trends in the Internet
and/or online commerce industries; changes in the economic performance and/or
market valuations of other Internet, online commerce or retail companies;
announcements by management or competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments; additions or
departures of key personnel; release of lock-up or other transfer restrictions
on the outstanding shares of common stock or sales of additional shares of
common stock; and potential litigation.
In addition, the stock market has from time to time experienced extreme price
and volume fluctuations. These broad market fluctuations may adversely affect
the market price of the Company's common stock.
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DUE TO STOCK PRICE VOLATILITY, THE COMPANY COULD FACE A SECURITIES CLASS ACTION
LAWSUIT.
In the past, following periods of volatility in the market price of their stock,
many companies have been the subject of securities class action litigation. If
the Company was sued in a securities class action, it could result in
substantial costs and a diversion of management's attention and resources and
would cause the stock price to fall.
YEAR 2000 RISKS
Many existing computer programs use only two digits to identify a year. These
programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. The Company uses software, computer technology and other services
developed and provided by third party suppliers that may fail due to the year
2000 phenomenon. If any one of the systems fails due to the Year 2000 issues,
the business of the Company could be adversely affected. (For a complete
discussion See: MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS - F.
YEAR 2000 RISKS AND COMPLIANCE")
VII. REGULATORY BACKGROUND
---------------------
The Company is not currently subject to direct federal, state or local
regulation other than regulations applicable to businesses generally and
directly applicable to online commerce. However, as Internet use gains
popularity, it is possible that a number of laws and regulations may be adopted
with respect to the Internet. These laws may cover issues such as user privacy,
freedom of expression, pricing, content and quality of products and services,
taxation, advertising, intellectual property rights and information security.
Furthermore, the growth of online commerce may prompt calls for more stringent
consumer protection laws. Several states have proposed legislation to limit the
uses of personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Management does not contemplate providing personal information regarding the
Company's customers to third parties. However, the adoption of additional
consumer protection laws could create uncertainty in Web usage and reduce the
demand for the Company's products and services.
Management is not certain how its business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. The vast majority of these laws were adopted prior
to the advent of the Internet. As a result, they do not contemplate or address
the unique issues of the Internet and related technologies. Changes in laws that
are intended to address these issues could create uncertainty in the Internet
market place. This uncertainty could reduce demand for the Company's services or
its cost of doing business may increase as a result of litigation costs or
increased service delivery costs.
In addition, because the Company's services are intended to be made available
over the Internet in multiple states and foreign countries, other jurisdictions
may claim that the Company is required to qualify to do business in that state
or foreign country. The Company intends to qualify to do business only in
Nevada. The Company's failure to qualify in a jurisdiction where it is required
to do so could subject it to taxes and penalties. It could also hamper the
Company's ability to enforce contracts in these jurisdictions. The application
of laws or regulations from jurisdictions whose laws do not currently apply to
the business could have a material adverse effect on the business, results of
operations and financial condition.
VIII. DISCLOSURE
----------
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and/or
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the Company intends to be an electronic
filer and as such, all items filed by the Company are available through an
Internet site maintained by the SEC which contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC, which site is available at http://www.sec.gov. The
Company also maintains an Internet site which contains information about the
Company. This site is available at http://www.dmsz.com.
19
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
I. PLAN OF OPERATIONS
------------------
A. Revenues and Financing
----------------------
The Company currently has no revenues. It intends to derive its revenues
principally from the sale of jewelry and jewelry related products via the
Internet. Secondary revenues are intended to be generated through major
sponsorships on the Company's website and the sale of advertising on its Website
although no steps have been taken by the Company in these regards. It is
anticipated that the Internet will continue to become more accessible and that
the market opportunities for the Company will continue to expand. This
tremendous growth will also attract many potential new competitors. In order to
maintain sales growth, the Company intends to expand the content and to improve
the services on its Internet website, as well as researching and developing
other projects that will utilize its existing facilities and expertise.
The Company has been funded to date through debt financing from private arm's
length lenders. The Company has secured approximately $500,000 US through debt
financing, which should enable the Company to meet its financial obligations for
the next twelve to fourteen months. The sum was received by the Company pursuant
to a note payable dated May 31, 1999 payable to DGD Wealth Management. The loan
is unsecured, bears interest at the rate of 5% per annum and is due on May 30,
2001. The Company received the sum of $20,000 on February 1, 1999, $50,000 on
April 29, 1999, $130,000 on July 2, 1999 and $300,000 on July 7, 1999.
Management believes that the $500,000 plus revenues from sales will enable the
Company to meet its financial obligations for the next 12 months. No assurance
can be given that revenues from sales of jewelry and jewelry related products
and/or advertising will enable the Company to meet its financial obligations. As
such, the Company may solicit and arrange for additional debt financing from
private arm's length lenders in the event revenues do not meet the Company's
financial obligations. In addition, the Company may consider raising additional
equity financing through the sale of common stock of the Company through private
placements to sophisticated investors. The combination of existing financing,
expected revenues and additional debt and/or equity financing is intended to
provide the Company with sufficient operating capital for a period of
approximately one year.
B. Operations for the Next Twelve Months
-------------------------------------
It is the intention of the Company to have its suppliers and distribution
channels in place by the middle of September 1999 and to make available to the
public, its first web site in October 1999. As such, revenues are expected to
commence in October 1999.
The Company intends to hire additional product, marketing, computer programming
and graphic design personnel over the next twelve months as is deemed necessary
by management. From customer and purchasing data obtained from the web sites
during the first ten to twelve months of operations, the Company plans to make
adjustments to the operations as is deemed necessary by management.
Operations to date have been limited to establishing the infrastructure and
other general and administrative expenditures. Losses for the first quarter
ended May 31, 1999 amounted to $37,368.
C. Balance Sheet Data
------------------
At May 31, 1999 At February 28, 1999
--------------- --------------------
Working Capital 445,123 20,921
Total Assets 530,748 29,422
Shareholders' Equity (deficit) (36,447) (921)
20
<PAGE>
D. Liquidity and Capital Resources
-------------------------------
Cash flow used in operations for the three months ended May 31, 1999 was
$42,549. The $19,102 used in investing activities consisted primarily of office
and computer equipment. It is intended that revenues from sales should commence
shortly after the launch of the online store. The Company intends the store to
open in the middle of September, 1999 and as such, it is expected that revenues
from sales should commence in the late part of September or early October, 1999.
The Company anticipates that revenues from sales will not initially meet
expenses and as such, the Company plans to finance operations through additional
debt financing from arm's length private lenders until such time as revenues
from sale meet or exceed expenses. Once achieved, the Company intends to begin
repaying the private arm's length lenders. In addition, the Company may raise
additional money as is deemed necessary by management through private placements
of stock issued out of the treasury of the Company to individuals or
corporations who have expressed interest in obtaining stock in the Company.
E. Impact of Inflation
-------------------
The Company believes that inflation will not materially affect its business.
F. Year 2000 Risks and Compliance
------------------------------
Many existing computer programs use only two digits to identify a year. These
programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. The Company uses software, computer technology and other services
developed and provided by third party suppliers that may fail due to the year
2000 phenomenon. For example, the Company is dependent on the financial
institutions involved in processing customers' credit card payments for the
Internet services and a third party that hosts the Company's services. The
Company is also dependant on telecommunications vendors and suppliers to
maintain our network and the United States Postal Service and other third party
carriers to deliver orders to customers.
The Company has identified three categories of computer systems which may be
affected by the Year 2000 issue:
1. Internal Systems. The Company owns and operates computer hardware
on which is loaded licensed software from major software
providers. The Company uses these computers and software programs
for some accounting functions, office administration functions,
word processing functions and internal and external e-mail;
2. Third party Providers of Computer Systems. The Company relies on
various third party providers of computer hardware and software
which third parties provide critical services to the Company
including, product supply, product distribution, credit card
processing, website hosting, long distance Internet connectivity,
e-mail providers, and substantially all other systems used by the
Company in respect of the operation of the website; and
3. The General Infrastructure. This category includes the integrity
and stability of the Internet in providing the Company's services,
the computer systems of financial institutions and services used
by customers, the utility companies used by the Company and the
customers.
In respect of number 1 above, the Company has assessed the year 2000 readiness
of its internal systems. All hardware and software used internally have been
purchased within the previous six months and were purchased from reputable
vendors with assurances therefrom that all such items, alone and in combination
with each other are Year 2000 compliant. Based upon these assurances, the
Company has neither incurred any expenses in relation to this assessment nor has
it developed a remediation plan because it believes that it is not necessary.
21
<PAGE>
In respect of number 2 above, the Company has relied upon third parties for the
provision of substantially all of the systems for the operation of the website.
These systems include software used to provide the Company's websites' search
capabilities, customer interaction, and transaction processing and fulfillment
functions, as well as firewall, security monitoring and back-up capabilities.
The Company is currently assessing the Year 200 readiness of the third party
supplied software, computer technology and other services of the Company's
vendors. As part of the assessment, the Company is in the process of seeking
assurances from these third parties that their software, computer technology and
other services are Year 2000 compliant. At this time, the Company has not yet
developed a contingency plan to address situations that may result if these
third parties are unable to achieve Year 2000 compliance. Such contingency plan
will depend on the results of the Year 2000 review and assessment, the extent of
the corrective actions that have been implemented by the third parties and by
the Company and the status of the distribution systems that the Company intends
to establish. Based upon the results of this assessment, the Company will
develop and implement, if necessary, a remediation plan with respect to the
third party software, third party vendors and computer technology and services
that may fail to be Year 2000 compliant. At this time, the expenses associated
with this assessment and potential remediation plan are expected to be
insignificant but cannot be determined with any degree of accuracy at this time.
The failure of the software and computer technologies of the third parties to be
Year 2000 compliant would have an adverse effect on the Company including
difficulties in operating the website effectively or at all, difficulties taking
customers' orders, difficulties in making product deliveries and difficulties
conducting other fundamental parts of the business.
In respect of number 3 above, the Year 2000 readiness of the general
infrastructure necessary to support the Company's operations is difficult to
assess. For example, the Company depends on the integrity and stability of the
Internet to provide the Company's services. The Company also depends on the Year
2000 compliance of the computer systems and financial services used by
consumers. Thus, the infrastructure necessary to support the Company's
operations consists of a network of computers and telecommunications systems
located throughout the world and operated by numerous unrelated entities and
individuals, none of which has the ability to control or manage the potential
Year 2000 issues that may impact the entire infrastructure. The Company's
ability to assess the reliability of this infrastructure is limited and the
Company relies solely on generally available news reports, surveys and
comparable industry data. Based on these sources, the Company believes that most
entities and individuals that rely significantly on the Internet are reviewing
and attempting to remediate issues relating to Year 2000 compliance, but it is
not possible to predict whether these efforts will be successful in reducing or
eliminating the potential negative impact of Year 2000 issues.
A significant disruption in the ability of consumers to reliable access the
Internet or portions of it or to use their credit cards would have an adverse
effect on demand for the Company's products and services. In addition, the
Company may have difficulties operating portions or all of its website
effectively, taking customers' orders, fulfilling and distributing customers'
orders and conducting other fundamental parts of the Company's business.
The costs to address the Year 2000 compliance issues delineated above have not
been determined at this time. The cost of developing and implementing a plan, if
necessary, could be material and the Company may not have enough time to
implement it before the year 2000. Any failure of the Company's material
systems, its suppliers' material systems or the Internet to be year 2000
compliant could include difficulties in operating the website effectively,
taking product orders, making product deliveries or conducting other fundamental
parts of the Company's business, any one of which would have an adverse effect
on the Company.
ITEM 3. DESCRIPTION OF PROPERTY
The Company occupies 1196 square feet of commercial office space at 789 West
Pender Street, Vancouver, British Columbia, Canada. This facility houses the
majority of the Company's operations including production, marketing and
administration. The only operation not housed at this location is the computer
server on which the Company's online store is located. The building in which the
Company has leased space is in the heart of downtown Vancouver and is home to
several other Technology and Internet based companies. This arrangement and
proximity to other similar companies is expected to lend itself well to
promoting the Company as being in the right area and on the leading edge of
technology.
22
<PAGE>
The terms of the Pender Street commercial lease are as follows: The Company
leases 1196 square feet through to March 31, 2000 (12 months) at an annual rent
of $28,896 USD. The Company leases said space on a month-to-month basis during
the term. The Company has obtained an insurance policy as is required by the
terms of the lease.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 30, 1999 by (i) each person
who is known to the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) each of the Company's directors, (iii) executive
officers and (iv) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Owner (1) of Class
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Douglas N. Bolen 3,000,000 27.3%
Suite 509-1188 Quebec St. beneficial owner (2)
Vancouver, British Columbia
Canada, V6A 4B3
Secretary/Director
Kurt S. Dohlen 3,800,000 34.5%
3249 Charles Street beneficial owner (3)
Vancouver, British Columbia
Canada V6B 1A7
Chief Operating Officer,
President, Chairman of the Board
& Director
Terry G. Bowering 100,000 .9%
Dove Cove beneficial owner (4)
P.O. Box 3265
St. John's, Antigua
West Indies
Chief Financial Officer
And Director
Drew C. Parker 100,000 .9%
24 Arrow-Wood Place
Port Moody, B.C.
Canada, V3H 4J1
Director
All Directors & Executive Officers 6,500,000 63.6%
as a Group (4 persons)
</TABLE>
- ---------------------------------------
(1) No member of Management has the right to acquire within sixty days
through options, warrants, rights, conversion, privilege or similar
obligations any security of the Company.
(2) The BRF Family Trust, of which Douglas N. Bolen is a beneficiary
enjoys legal ownership of said securities.
(3) The Longhouse Sargent Investment Trust, of which Kurt S. Dohlen is a
beneficiary, enjoys legal ownership of said securities.
(4) Geneva Overseas Holdings Ltd., of which Terry G. Bowering is a
beneficial owner, enjoys legal ownership of said securities.
CHANGES IN CONTROL
Management is not aware of any arrangements which may result in a change of
control of the issuer.
23
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
I. DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
KURT S. DOHLEN, PRESIDENT, CHAIRMAN OF THE BOARD, CHIEF OPERATING OFFICER, AND
DIRECTOR
3249 Charles Street
Vancouver, British Columbia
Canada, V6B 1A7
Telephone: (604) 254-9693
DOB: December 28, 1961 (Age 38) Regina, Saskatchewan, Canada
Kurt S. Dohlen, B.A., President, Chairman of the Board, Chief Operating Officer
and Director
Mr. Dohlen brings over 15 years of retail sales/marketing and senior management
experience. Mr. Dohlen has considerable experience in both large corporations
and entrepreneurial enterprises. Mr. Dohlen was General Manager of Hill's Indian
Crafts Limited, a private art dealer with six locations, based in Vancouver,
Canada from July 1990 to December 1997. From 1997 to 1999, Mr. Dohlen was
involved in self-directed studies in the areas of business management with a
focus on Internet Retailing. Mr. Dohlen received a Bachelor of Arts from McGill
University in Montreal, Canada.
Mr. Dohlen was appointed to the position of Director in January 1999 to serve
until his successor has been elected and qualifies.
DOUGLAS N. BOLEN, CORPORATE COUNSEL, SECRETARY AND DIRECTOR
Suite 509 - 1188 Quebec Street
Vancouver, British Columbia, Canada
Canada, V6A 4B3
(604) 506-4243
DOB: August 25, 1965 (Age 34) Regina, Saskatchewan, Canada
Douglas N. Bolen, B.A., L.L.B. - Corporate Counsel, Secretary and Director.
Mr. Bolen brings over ten years experience in entrepreneurial enterprise. Mr.
Bolen received a Bachelor of Arts from the University of Regina, Saskatchewan
and his Bachelor of Laws from the University of Saskatchewan. Mr. Bolen is a
member in good standing of the Law Society of Saskatchewan, the Regina Bar
Association and the Canadian Bar Association. From 1995 to 1999, Mr. Bolen
articled and practiced law at Balfour Moss, Barristers and Solicitors, a large
Regina, Canada based law firm with a practice concentration in the area of
Corporate Commercial law. From 1992 to 1995, Mr. Bolen was attending the College
of Law at the University of Saskatchewan. Mr. Bolen currently is a Director and
officer of Healthnet International Inc., a Colorado based company which intends
to provide health products retail services via the Internet.
Mr. Bolen was appointed to the position of Director in January 1999 to serve
until his successor has been elected and qualifies.
DR. DREW PARKER, BUSINESS CONSULTANT AND DIRECTOR
24 Arrow-Wood Place
Port Moody, B.C.
Canada, V3H 4J1
Telephone: (604) 833-4690
D.O.B. August 31, 1957 (Age 42) Calgary, Alberta, Canada
Dr. Drew Parker, B.Comm, M.B.A., Ph.D., I.S.P., Business Consultant and Director
Dr. Parker is an Associate Professor of Information Technology in the Faculty of
Business Administration at Simon Fraser University in British Columbia. He has
taught, delivered presentations and consulted extensively in the Information
Systems and Telecommunications area. He has worked with Internet business issues
for over a decade.
Dr. Parker received his Bachelor of Commerce and Masters in Business
Administration from the University of Calgary in Alberta and his Ph.D. from the
Ivey School of Business Administration at the University of Western Ontario.
Mr. Parker was appointed to the position of Director in May 1999 to serve until
his successor has been elected and qualifies.
24
<PAGE>
TERRY G. BOWERING, DIRECTOR
Dove Cove
P.O. Box 3265
St. John's, Antigua
West Indies
Telephone: (268) 463-8600
DOB: August 30, 1960 (Age 39) Regina, Saskatchewan, Canada
Terry G. Bowering, B.Admin, M.B.A., Director
Mr. Bowering brings over fifteen years of experience in business management. Mr.
Bowering has considerable experience in both large corporations and
entrepreneurial enterprises and is qualified in the areas of business
development, finance, information systems, marketing, and sales. Currently, Mr.
Bowering is President and CEO of Net-Force Systems Inc., an Antigua corporation
proposing to provide entertainment services via the Internet. From January 1998
to July 1999, Mr. Bowering was Vice President of Offshore Operations for Starnet
Communications International Inc., a Delaware corporation, which is a fully
reporting issuer on the NASD OTC:BB. Mr. Bowering was a financial analyst with
the Asset Management Group Dept. of Crown Life Insurance, in Regina, from May
1992 to June 1996. From 1996 to 1998, Mr. Bowering worked as an investment
advisor with Leveques Securities Inc., a major Canadian brokerage firm.
Mr. Bowering holds a Bachelor of Administration in Finance from the University
of Regina, and a Master of Business Administration with a concentration in
Strategic Management from the University of Saskatchewan. Mr. Bowering is
currently completing the Chartered Financial Analysts professional designation
program. As well, Mr. Bowering is currently enrolled in the external Law
Programme at the University of London, U.K. and the Banking Program, University
of Manchester, U.K.
Mr. Bowering was appointed to the position of Director in January 1999 to serve
until his successor has been elected and qualifies.
II. FAMILY RELATIONSHIPS
--------------------
There are no family relationships among directors, executive officers or persons
nominated or chosen by the Company to become officers or executive officers.
III. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
----------------------------------------
The Company is not aware of any material legal proceedings involving any
director, director nominee, promoter or control person including criminal
convictions, pending criminal matters, pending or concluded administrative or
civil proceedings limiting one's participation in the securities or banking
industries, or findings of securities or commodities law violations. However,
legal bankruptcy proceeding under Canadian law involving Terry Bowering
concluded in 1997, with Mr. Bowering receiving a judicial discharge.
ITEM 6. EXECUTIVE COMPENSATION
The Company did not pay any compensation to its chief executive officer, any
other executive officer nor to any senior employees during its first fiscal year
ending February 28, 1999. Currently, the executive officers receiving salary
from the Company are Kurt S. Dohlen, President, Chairman of the Board, Chief
Operating Officer, who is receiving a salary of $43,290 per year and Douglas N.
Bolen, Secretary, who is receiving a salary of $11,988 per year, C. Jamie
Lanfranco, Vice President of Finance, who currently receiving $47,952 per year
and Donna Leyland, Vice President of Marketing, who is receiving $59,940 per
year.
The members of the Company's Board are reimbursed for actual expenses incurred
in attending Board meetings. There are no other arrangements for compensation to
the Board of Directors' members.
There are no written employment contracts or agreements with any executive
officers. Employee salaries are set by the Members of the Board of Directors.
25
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is not aware of any transactions or proposed transactions in respect
of which the Company was or is to be a party, in which any director, executive
officer, nominee for election as a director, 5% security holder, member of the
immediate family of any of the previously named persons had a direct or indirect
interest in the transaction other than the Company borrowed the sum of $50,000
from Mark N. Dohlen, a former shareholder and director on May 26, 1999 and
repaid said sum, without interest, on July 20, 1999.
ITEM 8. DESCRIPTION OF SECURITIES
The securities to be registered pursuant to this Form 10-SB are all of the
authorized Common Stock of Denmans.com, Inc. Holders of the Common Stock are
entitled to cast one vote for each share held at all shareholder meetings for
all purposes, except that in the election of Directors, each shareholder of
Common Stock shall have as many votes for each share held by him as there are
directors to be elected and for whose election the shareholder has a right to
vote. There are no preemptive rights associated with the securities and no
cumulative voting is authorized by the Articles of Incorporation or the By-Laws.
The total amount of shares authorized by the Company's Articles of Incorporation
is 150,000,000. Of these, 100,000,000 are Common Stock and 50,000,000 are
Preferred Stock. There has been no issuance of any Preferred stock. Dividend,
voting, conversion rights, liquidation rights and other rights of the Preferred
Stock, if any, will be established by the Board of Directors upon issuance.
The Company has never declared or paid cash dividends on the common stock of the
Company. Management intends to retain all available funds and any future
earnings for use in the operation and expansion of the business and does not
anticipate paying any cash dividends in the foreseeable future.
PART 2
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
There is no public trading market for the common equity shares of the
registrant. If the registrant successfully obtains a listing, as is presently
intended by management, the common equity shares will be listed upon the OTC
Bulletin Board Service. As of August 27, 1999, there are approximately 17 equity
holders of record of the Company's Common Stock. As of August 27, 1999, there
are no shares of the Company's Common Stock subject to outstanding options or
warrants to purchase or securities convertible into Common Stock of the Company.
The number of shares eligible for trading will be all of the Common Stock except
that which is owned by management of the Company. The Management of the Company
currently owns an aggregate of 6,500,000 shares which can be sold only in
compliance with Rule 144. There have been no cash dividends declared since the
inception of the Company nor its subsidiaries. There are no restrictions that
would limit the ability to pay dividends on common equity or that are likely to
do so in the future.
ITEM 2. LEGAL PROCEEDINGS
The issuer is not a party to any pending legal proceeding nor is its property
the subject of any pending legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no disagreements on accounting and financial disclosures from
the inception of the Company through to the date of this Registration Statement.
EXPERTS
The consolidated financial statements of Denmans.com, Inc. at May 31, 1999,
appearing in this Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
26
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In January 1999, the Company issued an aggregate of 6,500,000 shares of Common
Stock to the initial four Directors of the Company at a price of $0.001 per
common share in exchange for an aggregate of $6,500. The certificates
representing these shares bear a restrictive legend. These shares were issued
under the exemption from registration provided by Section 4(2) of The Securities
Act 1933. On February 9, 1999, the Company executed a Form D disclosing that it
relied upon Rule 504 in selling 4,500,000 shares of the Common Stock in exchange
for an aggregate of $4,500 US to nine entities. This offering was done by means
of a private placement to the following entities in the following amounts:
Orleans Trading Inc.
Central Street at Fiennes Avenue
Besselerre, St. Kitts
West Indies 500,000
Richland Acceptance Corporation
P.O. Box 3140
Roadtown, British Virgin Islands
West Indies 500,000
Orienstar Finance Limited
C/O Sagem - JC Roder
35 Rue De Bains
Geneva, Switzerland 120 500,000
Altmar Inc.
P.O. Box 1062
1 Capital Place
Roadtown, British Virgin Islands
West Indies 500,000
Eur-Am, B V
Hogeweg 76-1 2042 GJ Zandvoort
The Netherlands 500,000
Fonds Mondial D'Investissement S A
C/O Sagem -JC Roder
35 Rue De Bains
Geneva, Switzerland 120 500,000
Oriental New Investments
8th Floor, Heng Shan Ctr.
143 Queens Road East
Wanchai, Hong Kong 500,000
Sharp, Flint & Blunt
P.O. Box 3140
Roadtown, British Virgin Islands
West Indies 500,000
La Salle Investments Ltd.
C/O Sagem - JC Roder
35 Rue De Bains
Geneva, Switzerland 120 500,000
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles 7(b) and (c) of the Company's Articles of Incorporation read as
follows:
(b) INDEMNIFICATION. The corporation shall indemnify, to the
maximum extent permitted by Colorado law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation against any claim,
liability or expense arising against or incurred by such person made party to a
proceeding because he is or was a director, officer, agent, fiduciary or
employee of the corporation or because he is or was serving another entity or
employee benefit plan as a director, officer, partner, trustee, employee,
fiduciary or agent at the corporation's request. The corporation shall further
have the authority to the maximum extent permitted by Colorado law to purchase
and maintain insurance providing such indemnification.
27
<PAGE>
(c) LIMITATION ON DIRECTOR'S LIABILITY. No director of this
corporation shall have any personal liability for monetary damages to the
corporation or its shareholders for breach of his fiduciary duty as a director,
except that this provision shall not eliminate or limit the personal liability
of a director to the corporation or its shareholders for monetary damages for
any breach, act, omission or transaction as to which the Colorado Business
Corporation Act (as in effect from time to time) prohibits expressly the
elimination or limitation of liability. Nothing contained herein will be
construed to deprive any director of his right to all defenses ordinarily
available to a director nor will anything herein be construed to deprive any
director of any right he may have for contribution from any other director or
other person.
In addition, s.7-108-402 of The Colorado Business Corporation Act indicates that
the foregoing provisions shall not eliminate or limit the liability of a
director to the corporation or to its shareholders for monetary damages for any
breach of the director's duty of loyalty to the corporation or to its
shareholders, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, improper corporate distributions, or
any transaction from which the director directly or indirectly derived an
improper personal benefit.
PART F/S. FINANCIAL STATEMENTS
i. DENMANS.COM, INC. AUDITED FINANCIAL STATEMENTS, MAY 31, 1999.
CONSOLIDATED FINANCIAL STATEMENTS
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
(A DEVELOPMENT-STAGE COMPANY)
MAY 31, 1999
28
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
(A DEVELOPMENT-STAGE COMPANY)
We have audited the accompanying consolidated balance sheets of DENMANS.COM,
INC. as of May 31, 1999 and February 28, 1999 and the related consolidated
statements of loss, comprehensive loss, and deficit, shareholders' equity and
cash flows for the three month period ended May 31, 1999 and the period from
incorporation on January 6, 1999 to May 31, 1999 and February 28, 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 generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
DENMANS.com, Inc. at May 31, 1999 and February 28, 1999, and the consolidated
results of its operations and its cash flows for the three month period ended
May 31, 1999 and the period from incorporation on January 6, 1999 to May 31,
1999 and February 28, 1999 in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Vancouver, Canada,
July 16, 1999 (except as to
Note 1 which is at August 16, 1999). Chartered Accountants
29
<PAGE>
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN UNITED STATES DOLLARS)
As at
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1999 1999
$ $
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash 67,631 29,282
Accounts receivable [NOTE 6] 7,596 --
Note receivable [NOTE 4] 430,000 --
Prepaid expenses 1,666 140
Shareholder and employee loan receivable [NOTE 6] 5,425 --
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 512,318 29,422
- ----------------------------------------------------------------------------------------------------
Capital assets, net [NOTE 3] 18,430 --
- ----------------------------------------------------------------------------------------------------
530,748 29,422
====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 17,195 8,501
Shareholder loan payable [NOTE 6] 50,000 --
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 67,195 8,501
- ---------------------------------------------------------------------------------------------------
Note payable [NOTE 4] 500,000 20,000
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 567,195 28,501
- ---------------------------------------------------------------------------------------------------
Commitments [NOTE 7]
SHAREHOLDERS' EQUITY
Share capital [NOTE 5]
Authorized
100,000,000 common shares, par value $0.001
50,000,000 preferred shares, par value $0.001
Issued
11,000,000 common shares 11,000 11,000
Deficit accumulated in the development stage (47,447) (10,079)
- ---------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY (36,447) 921
- ---------------------------------------------------------------------------------------------------
530,748 29,422
===================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
30
<PAGE>
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
(A DEVELOPMENT-STAGE COMPANY)
<TABLE>
CONSOLIDATED STATEMENT OF
LOSS, COMPREHENSIVE LOSS, AND DEFICIT
(IN UNITED STATES DOLLARS)
<CAPTION>
FOR THE FOR THE PERIOD FROM FOR THE PERIOD FROM
THREE MONTH INCORPORATION ON INCORPORATION ON
PERIOD ENDED JANUARY 6, 1999 JANUARY 6, 1999
MAY 31, TO FEBRUARY 28, TO MAY 31,
1999 1999 1999
$ $ $
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EXPENSES
Accounting and legal 7,352 6,146 13,498
Amortization 672 -- 672
Foreign exchange loss 1,333 -- 1,333
General and administrative 11,235 800 12,035
Incorporation costs 412 3,133 3,545
Salaries and benefits 15,061 -- 15,061
Telecommunications 1,303 -- 1,303
- ----------------------------------------------------------------------------------------------------------
LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD 37,368 10,079 47,447
Accumulated deficit, beginning of period 10,079 -- --
- ----------------------------------------------------------------------------------------------------------
ACCUMULATED DEFICIT, END OF PERIOD 47,447 10,079 47,447
==========================================================================================================
LOSS PER COMMON SHARE 0.00 0.00 0.00
==========================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING FOR THE PERIOD 11,000,000 11,000,000 11,000,000
==========================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
31
<PAGE>
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
(A DEVELOPMENT-STAGE COMPANY)
<TABLE>
CONSOLIDATED STATEMENT OF
SHAREHOLDERS' EQUITY
(IN UNITED STATES DOLLARS)
<CAPTION>
DEFICIT
ACCUMULATED IN
COMMON STOCK THE DEVELOPMENT
SHARES AMOUNT STAGE
# $ $
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 6, 1999 -- -- --
Common shares issued for cash 11,000,000 11,000 --
Loss for the period -- -- (10,079)
- -----------------------------------------------------------------------------------------------------
BALANCE, FEBRUARY 28, 1999 11,000,000 11,000 (10,079)
Loss for the period -- -- (37,368)
- -----------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 1999 11,000,000 11,000 (47,447)
=====================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
32
<PAGE>
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
(A DEVELOPMENT-STAGE COMPANY)
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN UNITED STATES DOLLARS)
<CAPTION>
FOR THE FOR THE PERIOD FROM FOR THE PERIOD FROM
THREE MONTH INCORPORATION ON INCORPORATION ON
PERIOD ENDED JANUARY 6, 1999 JANUARY 6, 1999
MAY 31, TO FEBRUARY 28, TO MAY 31,
1999 1999 1999
$ $ $
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Loss for the period (37,368) (10,079) (47,447)
Amortization 672 -- 672
Increase in accounts receivable (7,596) -- (7,596)
Increase in prepaid expenses (1,526) (140) (1,666)
Increase in accounts payable and accrued liabilities 8,694 8,501 17,195
Increase in shareholder and employee loan
receivable (5,425) -- (5,425)
- ----------------------------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (42,549) (1,718) (44,267)
- ----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to capital assets (19,102) -- (19,102)
- ----------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (19,102) -- (19,102)
- ----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in note payable 480,000 20,000 500,000
Increase in note receivable (430,000) -- (430,000)
Issuance of share capital -- 11,000 11,000
Increase in shareholder loan payable 50,000 -- 50,000
- ----------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 100,000 31,000 131,000
- ----------------------------------------------------------------------------------------------------------
INCREASE IN CASH DURING THE PERIOD 38,349 29,282 67,631
Cash, beginning of period 29,282 -- --
- ----------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD 67,631 29,282 67,631
==========================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
33
<PAGE>
1. NATURE OF BUSINESS
DENMANS.com, Inc. (the "Company") was incorporated on January 6, 1999 in the
State of Colorado as IDS Internet Distribution Systems Inc. and is currently in
the development stage. On July 23, 1999 the Company changed its name from IDS
Internet Distribution Systems Inc. to DENMANS.com, Inc.
The Company intends to establish itself as an online retailer of jewelry and
jewelry related products. The Company's proposed online store intends to offer
broad selection, informative content, easy-to-use navigation and search
capabilities, a high level of customer service, competitive pricing and
personalized merchandising and recommendations.
DENMANS.com, Inc. has two wholly owned subsidiaries; Denmans Jewelry (USA) Inc.
and Denmans Jewelry (Canada) Inc.
Denmans Jewelry (USA) Inc. was incorporated on March 8, 1999 as IDS Jewelry
U.S.A. Inc. On July 28, 1999, IDS Jewelry U.S.A. Inc. changed its name to
Denmans Jewelry (USA) Inc. It was incorporated in the State of Nevada and is
intended to function as the operating company for the United States market.
Denmans Jewelry (Canada) Inc. was incorporated on March 25, 1999 as IDS Jewelry
Canada Inc. On August 1, 1999, IDS Jewelry Canada Inc. changed its name to
Denmans Jewelry (Canada) Inc. It was incorporated in the Province of British
Columbia and is intended to function as the operating company for the Canadian
market.
The Company has selected February as its fiscal year end. In the opinion of
management, the interim financial statements for the quarter ended May 31, 1999
reflect all adjustments, which consist only of normal and recurring adjustments,
necessary to present fairly the financial position at May 31, 1999 and the
results of operations and cash flows for the respective three month period ended
May 31, 1999 in accordance with accounting principles generally accepted in the
United States.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles in the United States. The following is a summary of the
significant accounting policies used in the preparation of these financial
statements.
34
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Management believes that the estimates utilized in preparing its financial
statements are reasonable and prudent; however, actual results could differ from
these estimates.
FINANCIAL INSTRUMENTS
The carrying values of the Company's financial instruments approximate fair
values, except as otherwise disclosed in the financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS133 `Accounting for
derivative instruments and hedging activities'. SFAS133 is effective for
financial statements for fiscal years beginning after June 15, 2000.
SFAS133 currently has no impact on the Company.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the amounts of the Company and all
its subsidiaries. All significant intercompany balances and transactions have
been eliminated.
CAPITAL ASSETS
Capital assets are recorded at cost less accumulated depreciation. Capital
assets are depreciated over their useful lives as follows:
Office furniture 10% declining balance
Computer hardware 30% declining balance
Computer software 1 year straight line
Internet software 2 years straight line
The Company recognizes only 50% of the depreciation in the year of acquisition.
35
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
TRANSLATION OF FOREIGN CURRENCIES
Monetary assets and liabilities denominated in foreign currencies are translated
into United States dollars at the year end rates of exchange. Non-monetary
assets and liabilities denominated in foreign currencies are translated into
United States dollars at the rates of exchange in effect at the date of the
transaction. Foreign currency revenue and expense items, except amortization are
translated at average monthly rates of exchange. Exchange gains or losses are
included in the statements of loss as incurred. Amortization is translated at
the same rate as the related assets.
CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, cash and cash equivalents
consist of cash on hand and balances with banks.
LOSS PER COMMON SHARE
The loss per common share has been determined by dividing the loss for each
period by the weighted average number of common shares of the Company
outstanding during each period.
3. CAPITAL ASSETS
Capital assets of the Company consist of the following:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAY 31, 1999
Office furniture 5,598 70 5,528
Computer software 620 78 542
Computer hardware 11,250 422 10,828
Internet software 1,634 102 1,532
- --------------------------------------------------------------------------------------------------
19,102 672 18,430
==================================================================================================
</TABLE>
At February 28, 1999, capital asset balances of the Company were $nil.
36
<PAGE>
4. NOTE PAYABLE
Note payable at May 31, 1999 of $500,000 is due to DGD Wealth Management. The
note payable, which is unsecured, bears interest at the rate of 5% per annum and
is due on May 31, 2001. Management believes the fair value of the note
approximates its carrying value.
The note payable became effective on May 31, 1999. However, as at May 31, 1999,
the Company had not received the funds from DGD Wealth Management. Since a
liability existed at May 31, 1999, the Company was required to record a
receivable for $430,000, representing the funds not yet advanced to the Company.
The Company received these funds in two installments of $130,000 and $300,000 on
July 2, 1999 and July 7, 1999 respectively.
5. STOCK OPTIONS
At May 31, 1999, 1,000,000 common shares were reserved for issuance pursuant to
exercise of stock options to be granted to the directors and officers of the
Company.
6. RELATED PARTY TRANSACTIONS
Accounts receivable at May 31, 1999 includes $2,712 due from Healthnet
International Inc., a company under common ownership. The receivable is
non-interest bearing and without specific terms of repayment.
The shareholder loan payable of $50,000 at May 31, 1999 is due to Mark Dohlen, a
shareholder and director of the Company. The loan, which is unsecured, is
non-interest bearing and payable on demand.
Shareholder and employee loan receivable at May 31, 1999 includes $4,408 due
from Douglas Bolen, a shareholder and director of the Company. The receivable is
non-interest bearing and without specific terms of repayment.
7. COMMITMENTS
The Company has entered into an operating lease in respect of its office
premises on a month by month basis. The monthly lease payment is $2,408.
37
<PAGE>
8. 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
entity, including those related to the efforts of customers, suppliers, or other
third parties will be fully resolved.
9. SUBSEQUENT EVENT
On July 10, 1999, the Company entered into a storefront development agreement
requiring; a) payment of initial development costs of $64,400 according to a
predetermined schedule; and b) monthly maintenance payments of $2,040/month
starting September 1999 for a minimum period of six months. The minimum
commitment will be $76,640 for the year ending February 2000. The term of the
agreement is for six months, however, the agreement is renewable at the option
of the Company.
On July 12, 1999, the Company made the required down payment of $28,800.
38
<PAGE>
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the use of our report dated July 16, 1999 in the Registration
Statement (Form 10-SB) of DENMANS.com, Inc. (formerly IDS Internet Distribution
Systems Inc.) for the registration of its common stock.
Vancouver, Canada Ernst & Young LLP
August 31, 1999 Chartered Accountants
PART III. INDEX TO EXHIBITS
2. (i) Articles of Incorporation
(ii) Bylaws
6. Material Contracts
(i) Webcast Systems Inc.
39
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Denmans.com, Inc.
(Registrant)
Date: August 30, 1999
/s/ "Kurt S. Dohlen"
-----------------------------------------------------------------------
Kurt S. Dohlen, President, Chairman of the Board, Chief Operating
Officer and Director
Date: August 30, 1999
/s/ "Douglas N. Bolen"
-----------------------------------------------------------------------
Douglas N. Bolen, Corporate Counsel, Secretary and Director
40
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
IDS INTERNET DISTRIBUTION SYSTEMS INC.
The undersigned, who, if a natural person, is eighteen years of age or
older, hereby establishes a corporation pursuant to the Colorado Business
Corporation Act as amended and adopts the following Articles of Incorporation:
FIRST: The name of the corporation is IDS Internet Distribution Systems
Inc.
SECOND: The corporation shall have and may exercise all of the rights,
powers and privileges now or hereafter conferred upon corporations organized
under the laws of Colorado. In addition, the corporation may do everything
necessary, suitable or proper for the accomplishment of any of its corporate
purposes. The corporation may conduct part or all of its business in any part of
Colorado, the United States or the world and may hold, purchase, mortgage, lease
and convey real and personal property in any of such places.
THIRD: (a) The aggregate number of shares which the corporation shall
have authority to issue is 150,000,000, consisting of 100,000,000 shares of
common stock and 50,000,000 shares of preferred stock. The shares of common
stock shall have unlimited voting power, subject to the voting rights of the
shares of preferred stock as established by the Board of Directors of the
corporation in accordance with these Articles of Incorporation and the Colorado
Business Corporation Act. The shares of common stock shall have the right to
receive the net assets of the corporation upon dissolution, subject to the
rights of the shares of preferred stock as established by the Board of Directors
of the corporation in accordance with these Articles of Incorporation and the
Colorado Business Corporation Act. The Board of Directors of the corporation
shall have the authority to divide the class of preferred shares into series and
to fix and determine the relative rights, preferences and limitations of the
preferred shares of any such series to the full extent permitted by the Colorado
Business Corporation Act.
(b) Each shareholder of common stock of record shall have one
vote for each share of common stock standing in his name on the books of the
corporation and entitled to vote, except that in the election of directors each
shareholder of common stock shall have as many votes for each share held by him
as there are directors to be elected and for whose election the shareholder has
a right to vote. Cumulative voting shall not be permitted in the election of
directors or otherwise.
(c) Unless otherwise ordered by a court of competent
jurisdiction, at all meetings of shareholders a majority of the shares of a
voting group entitled to vote at such meeting, represented in person or by
proxy, shall constitute a quorum of that voting group.
FOURTH: The number of directors of the corporation shall be fixed by
the bylaws, or if the bylaws fail to fix such a number, then by resolution
adopted from time to time by the board of directors. Four directors shall
constitute the initial board of directors. The following persons are elected to
serve as the corporation's initial directors until the first annual meeting of
shareholders or until their successors are duly elected and qualified:
NAME ADDRESS
Mark Dohlen Suite 509, 1188 Quebec Street
Vancouver, British Columbia
Canada V6A 4B3
Douglas Bolen 3035 Westgate Ave.
Regina, Saskatchewan
Canada
Terry G. Bowering P.O. Box 3265
St. John's, Antigua
West Indies
Kurt S. Dohlen 3249 Charles Street
Vancouver, British Columbia
Canada V6A 7G4
<PAGE>
FIFTH: The street address of the initial registered office of the
corporation is 1560 Broadway, Denver, Colorado. The name of the initial
registered agent of the corporation at such address is Corporation Service
Company.
SIXTH: The address of the initial principal office of the corporation
is Suite 509, 1188 Quebec Street, Vancouver, British Columbia, Canada V6A 4C3.
SEVENTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the corporation, and the same
are in furtherance of and not in limitation or exclusion of the powers conferred
by laws.
(a) CONFLICTING INTEREST TRANSACTIONS. As used in this
paragraph, "conflicting interest transaction" means any of the following: (i) a
loan or other assistance by the corporation to a director of the corporation or
to an entity in which a director of the corporation is a director or officer or
has a financial interest; (ii) a guaranty by the corporation of an obligation of
a director of the corporation or of an obligation of an entity in which a
director of the corporation is a director or officer or has a financial
interest; or (iii) a contract or transaction between the corporation and a
director of the corporation or between the corporation and an entity in which a
director of the corporation is a director or officer or has a financial
interest. To the full extent permitted by Colorado law, no conflicting interest
transaction shall be void or voidable, be enjoined, be set aside, or give rise
to an award of damages or other sanctions in a proceeding by a shareholder or by
or in the right of the corporation, solely because the conflicting interest
transaction involves a director of the corporation or an entity in which a
director of the corporation is a director or officer or has a financial
interest, or solely because the director is present at or participates in the
meeting of the corporation's board of directors or of the committee of the board
of directors which authorizes, approves or ratifies a conflicting interest
transaction, or solely because the director's vote is counted for such purpose
if: (A) the material facts as to the director's relationship or interest and as
to the conflicting interest transaction are disclosed or are known to the board
of directors or the committee, and the board of directors or committee in good
faith authorizes, approves or ratifies the conflicting interest transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors are less than a quorum; or (B) the material facts as
to the director's relationship or interest and as to the conflicting interest
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the conflicting interest transaction is specifically authorized,
approved or ratified in good faith by a vote of the shareholders; or (C) a
conflicting interest transaction is fair as to the corporation as of the time it
is authorized, approved or ratified in good faith by a vote of the shareholders;
or (D) a conflicting interest transaction is fair as to the corporation as of
the time it is authorized, approved or ratified by the board of directors, a
committee thereof, or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes, approves or ratifies the
conflicting interest transaction.
(b) INDEMNIFICATION. The corporation shall indemnify, to the
maximum extent permitted by Colorado law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation against any claim,
liability or expense arising against or incurred by such person made party to a
proceeding because he is or was a director, officer, agent, fiduciary or
employee of the corporation or because he is or was serving another entity or
employee benefit plan as a director, officer, partner, trustee, employee,
fiduciary or agent at the corporation's request. The corporation shall further
have the authority to the maximum extent permitted by Colorado law to purchase
and maintain insurance providing such indemnification.
(c) LIMITATION ON DIRECTOR'S LIABILITY. No director of this
corporation shall have any personal liability for monetary damages to the
corporation or its shareholders for breach of his fiduciary duty as a director,
except that this provision shall not eliminate or limit the personal liability
of a director to the corporation or its shareholders for monetary damages for
any breach, act, omission or transaction as to which the Colorado Business
Corporation Act (as in effect from time to time) prohibits expressly the
elimination or limitation of liability. Nothing contained herein will be
construed to deprive any director of his right to all defenses ordinarily
available to a director nor will anything herein be construed to deprive any
director of any right he may have for contribution from any other director or
other person.
<PAGE>
EIGHTH: The name and address of the incorporator is:
Scott M. Reed
1919 14th Street, Suite 330
Boulder, Colorado 80302
DATED the "6th" day of January, 1999.
/s/ "Scott M. Reed"
--------------------------------------
Incorporator
Corporation Service Company hereby consents to the appointment as the
initial registered agent for IDS Internet Distribution Systems Inc.
-------------------------------------
Initial Registered Agent
EXHIBIT 2.2
BYLAWS
OF
IDS INTERNET DISTRIBUTION SYSTEMS INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C> <C>
ARTICLE I. OFFICES.........................................................................................1
ARTICLE II. SHAREHOLDERS...........................................................................1
SECTION 1. ANNUAL MEETING.........................................................................1
SECTION 2. SPECIAL MEETINGS.......................................................................2
SECTION 3. PLACE OF MEETING.......................................................................2
SECTION 4. NOTICE OF MEETING......................................................................2
SECTION 5. FIXING OF RECORD DATE..................................................................3
SECTION 6. VOTING LISTS...........................................................................4
SECTION 7. RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS............................................4
SECTION 8. QUORUM AND MANNER OF ACTING............................................................5
SECTION 9. PROXIES................................................................................5
SECTION 10. VOTING OF SHARES.......................................................................6
SECTION 11. CORPORATION'S ACCEPTANCE OF VOTES......................................................7
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS........................................................8
SECTION 13. MEETINGS BY TELECOMMUNICATION..........................................................8
ARTICLE III. BOARD OF DIRECTORS.....................................................................8
SECTION 1. GENERAL POWERS.........................................................................8
SECTION 2. NUMBER, QUALIFICATIONS AND TENURE......................................................8
SECTION 3. VACANCIES..............................................................................9
SECTION 4. REGULAR MEETINGS.......................................................................9
SECTION 5. SPECIAL MEETINGS.......................................................................9
SECTION 6. NOTICE.................................................................................9
SECTION 7. QUORUM................................................................................10
SECTION 8. MANNER OF ACTING......................................................................10
SECTION 9. COMPENSATION..........................................................................10
SECTION 10. PRESUMPTION OF ASSENT.................................................................10
SECTION 11. COMMITTEES............................................................................11
SECTION 12. INFORMAL ACTION BY DIRECTORS..........................................................11
SECTION 13. TELEPHONIC MEETINGS...................................................................11
SECTION 14. STANDARD OF CARE......................................................................12
ARTICLE IV. OFFICERS AND AGENTS...................................................................12
SECTION 1. GENERAL...............................................................................12
SECTION 2. APPOINTMENT AND TERM OF OFFICE........................................................12
SECTION 3. RESIGNATION AND REMOVAL...............................................................13
SECTION 4. VACANCIES.............................................................................13
SECTION 5. PRESIDENT.............................................................................13
SECTION 6. VICE PRESIDENTS.......................................................................14
SECTION 7. SECRETARY.............................................................................14
SECTION 8. TREASURER.............................................................................14
ARTICLE V. STOCK.................................................................................15
SECTION 1. CERTIFICATES..........................................................................15
SECTION 2. CONSIDERATION FOR SHARES..............................................................16
SECTION 3. LOST CERTIFICATES.....................................................................16
SECTION 4. TRANSFER OF SHARES....................................................................16
SECTION 5. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS..........................................17
<PAGE>
ARTICLE VI. INDEMNIFICATION OF CERTAIN PERSONS....................................................17
SECTION 1. INDEMNIFICATION.......................................................................17
SECTION 2. RIGHT TO INDEMNIFICATION..............................................................18
SECTION 3. EFFECT OF TERMINATION OF ACTION.......................................................18
SECTION 4. GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION...............................18
SECTION 5. COURT-ORDERED INDEMNIFICATION.........................................................19
SECTION 6. ADVANCE OF EXPENSES...................................................................19
SECTION 7. ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER
THAN DIRECTORS...............................................................20
SECTION 8. WITNESS EXPENSES......................................................................20
SECTION 9. REPORT TO SHAREHOLDERS................................................................20
ARTICLE VII. PROVISION OF INSURANCE................................................................20
SECTION 1. PROVISION OF INSURANCE................................................................20
ARTICLE VIII. MISCELLANEOUS.........................................................................21
SECTION 1. SEAL..................................................................................21
SECTION 2. FISCAL YEAR...........................................................................21
SECTION 3. AMENDMENTS............................................................................21
SECTION 4. RECEIPT OF NOTICES BY THE CORPORATION.................................................21
SECTION 5. GENDER................................................................................21
SECTION 6. CONFLICTS.............................................................................21
SECTION 7. DEFINITIONS...........................................................................21
</TABLE>
<PAGE>
BYLAWS
OF
IDS INTERNET DISTRIBUTION SYSTEMS INC.
ARTICLE I.
OFFICES
The principal office of the corporation shall be designated from time
to time by the corporation and may be within or outside the State of Colorado.
The corporation may have such other offices, either within or outside
the State of Colorado, as the board of directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the board of directors.
ARTICLE II.
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall
be held each year on a date and at a time fixed by the board of directors of the
corporation (or by the president in the absence of action by the board of
directors), for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the election of directors
is not held on the day fixed as provided herein for any annual meeting of the
shareholders, or any adjournment thereof, the board of directors shall cause the
election to be held at a special meeting of the shareholders as soon thereafter
as it may conveniently be held.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call of or proper demand for a special
meeting and notice of the special meeting was not given within thirty days after
the date of the call or the date the last of the demands necessary to require
calling of the meeting was received by the corporation pursuant to C.R.S. ss.
7-107-102(1)(b), or the special meeting was not held in accordance with the
notice.
SECTION 2. SPECIAL MEETINGS. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by holders of shares representing at least ten percent of
all the votes entitled to be cast on any issue proposed to be considered at the
meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting or
any special meeting called by the board of directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or outside Colorado, as the place for such meeting. If no
designation is made, or if a special meeting is called other than by the board,
the place of meeting shall be the principal office of the corporation.
SECTION 4. NOTICE OF MEETING. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except that (i) if the number of authorized
shares is to be increased, at least thirty days' notice shall be given, or (ii)
if any other longer notice period is required by the Colorado Business
Corporation Act, such longer period of notice shall be applicable. The secretary
shall be required to give such notice only to shareholders entitled to vote at
the meeting except as otherwise required by the Colorado Business Corporation
Act.
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Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity which
this corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, or (v) any other purpose for which a statement
of purpose is required by the Colorado Business Corporation Act. Notice shall be
given personally or by mail, private carrier, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed and if in a comprehensible form, such notice
shall be deemed to be given and effective when deposited in the United States
mail, addressed to the shareholder at his address as it appears in the
corporation's current record of shareholders, with postage prepaid. If notice is
given other than by mail, and provided that such notice is in a comprehensible
form, the notice is given and effective on the date actually received by the
shareholder.
If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporate expense. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as undeliverable until such time
as another address for such shareholder is made known to the corporation by such
shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the corporation in writing of any change in such
shareholder's mailing address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for the
adjourned meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the corporation for filing with the corporate records, but
this delivery and filing shall not be conditions to the effectiveness of the
waiver. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because of
lack of notice or defective notice. By attending the meeting, the shareholder
also waives any objection to consideration at the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, or (iii)
demand a special meeting, or to make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the day before the notice of the meeting is
given to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. Unless otherwise specified when the record
date is fixed, the time of day for such determination shall be as of the
corporation's close of business on the record date.
<PAGE>
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
SECTION 6. VOTING LISTS. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten days
before such meeting or two business days after notice of the meeting has been
given, a complete list of the shareholders entitled to be given notice of such
meeting or any adjournment thereof. The list shall be arranged by voting groups
and within each voting group by class or series of shares, shall be in
alphabetical order within each class or series, and shall show the address of
and the number of shares of each class or series held by each shareholder. For
the period beginning the earlier of ten days prior to the meeting or two
business days after notice of the meeting is given and continuing through the
meeting and any adjournment thereof, this list shall be kept on file at the
principal office of the corporation, or at a place (which shall be identified in
the notice) in the city where the meeting will be held. Such list shall be
available for inspection on written demand by any shareholder (including for the
purpose of this Section 6 any holder of voting trust certificates) or his agent
or attorney during regular business hours and during the period available for
inspection. The original stock transfer books shall be prima facie evidence as
to who are shareholders entitled to examine such list or to vote at any meeting
of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
SECTION 7. RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the votes
entitled to be cast on a matter by a voting group represented in person or by
proxy, shall constitute a quorum of that voting group for action on the matter.
If less than a majority of such votes are represented at a meeting, a majority
of the votes so represented may adjourn the meeting from time to time without
further notice, for a period not to exceed 120 days for any one adjournment. If
a quorum is present at such adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, unless the meeting is adjourned and a
new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater number or voting by classes is required
by law or the articles of incorporation.
<PAGE>
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype, or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service organization,
or other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the corporation. The transmitted appointment shall set
forth or be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be filed with
the secretary of the corporation before or at the time of the meeting. The
appointment of a proxy is effective when received by the corporation and is
valid for eleven months unless a different period is expressly provided in the
appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile,
of an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could be
used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
SECTION 10. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors, and
each fractional share shall be entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the articles of incorporation as permitted by the Colorado Business
Corporation Act. Cumulative voting shall not be permitted in the election of
directors or for any other purpose.
In the election of directors each record holder of stock shall be
entitled to vote all of his votes for as many persons as there are directors to
be elected. At each election of directors, that number of candidates equaling
the number of directors to be elected, having the highest number of votes cast
in favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
<PAGE>
SECTION 11. CORPORATION'S ACCEPTANCE OF VOTES. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the corporation
has been presented with respect to the vote, consent, waiver, proxy appointment
or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign for
the shareholder has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-tenants or fiduciaries, and the person signing appears to be acting on behalf
of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section is
liable in damages for the consequences of the acceptance or rejection.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for determining
shareholders entitled to take action without a meeting is the date the
corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
SECTION 13. MEETINGS BY TELECOMMUNICATION. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
<PAGE>
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of its board of directors, except as otherwise
provided in the Colorado Business Corporation Act or the articles of
incorporation.
SECTION 2. NUMBER, QUALIFICATIONS AND TENURE. The number of directors
of the corporation shall be fixed from time to time by the board of directors,
within a range of no less than one or more than seven, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. A director shall be a natural person who is eighteen years
of age or older. A director need not be a resident of Colorado or a shareholder
of the corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act. Any director may be removed by the
shareholders of the voting group that elected the director, with or without
cause, at a meeting called for that purpose. The notice of the meeting shall
state that the purpose or one of the purposes of the meeting is removal of the
director. A director may be removed only if the number of votes cast in favor of
removal exceeds the number of votes cast against removal.
SECTION 3. VACANCIES. Any director may resign at any time by giving
written notice to the secretary. Such resignation shall take effect at the time
the notice is received by the secretary unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
corporation's acceptance of such resignation shall not be necessary to make it
effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders at a special meeting called
for that purpose or by the board of directors. If the directors remaining in
office constitute fewer than a quorum of the board, the directors may fill the
vacancy by the affirmative vote of a majority of all the directors remaining in
office. If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected by
the shareholders, the director shall hold office for the unexpired term of his
predecessor in office; except that, if the director's predecessor was elected by
the directors to fill a vacancy, the director elected by the shareholders shall
hold office for the unexpired term of the last predecessor elected by the
shareholders.
SECTION 4. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without notice immediately after and at the same place
as the annual meeting of shareholders. The board of directors may provide by
resolution the time and place, either within or outside Colorado, for the
holding of additional regular meetings without other notice.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any one director. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or outside Colorado, as the place for holding
any special meeting of the board of directors called by them, provided that no
meeting shall be called outside the State of Colorado unless a majority of the
board of directors has so authorized.
SECTION 6. NOTICE. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at his
residence or business address, or by notice transmitted by private courier,
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) five days after such notice is deposited
in the United States mail, properly addressed, with first class postage prepaid,
or (ii) the date shown on the return receipt, if mailed by registered or
certified mail return receipt requested, provided that the return receipt is
signed by the director to whom the notice is addressed. If notice is given by
telex, electronically transmitted facsimile or other similar form of wire or
wireless communication, such notice shall be deemed to be given and to be
effective when sent, and with respect to a telegram, such notice shall be deemed
<PAGE>
to be given and to be effective when the telegram is delivered to the telegraph
company. If a director has designated in writing one or more reasonable
addresses or facsimile numbers for delivery of notice to him, notice sent by
mail, telegraph, telex, electronically transmitted facsimile or other form of
wire or wireless communication shall not be deemed to have been given or to be
effective unless sent to such addresses or facsimile numbers, as the case may
be.
A director may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records, but such
delivery and filing shall not be conditions to the effectiveness of the waiver.
Further, a director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless at the beginning of the meeting, or
promptly upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by the
board of directors pursuant to Article III, Section 2 or, if no number is fixed,
a majority of the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors. If less than such majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time without further
notice, for a period not to exceed sixty days at any one adjournment.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
SECTION 9. COMPENSATION. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless (i) the director objects at the beginning of the
meeting, or promptly upon his arrival, to the holding of the meeting or the
transaction of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting, (ii) the director contemporaneously
requests that his dissent or abstention as to any specific action taken be
entered in the minutes of the meeting, or (iii) the director causes written
notice of his dissent or abstention as to any specific action to be received by
the presiding officer of the meeting before its adjournment or by the secretary
promptly after the adjournment of the meeting. A director may dissent to a
specific action at a meeting, while assenting to others. The right to dissent to
a specific action taken at a meeting of the board of directors or a committee of
the board shall not be available to a director who voted in favor of such
action.
SECTION 11. COMMITTEES. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have all
the authority of the board of directors, except that no such committee shall
have the authority to (i) authorize distributions, (ii) approve or propose to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders, (iii) fill vacancies on the board of
directors or any committee thereof, (iv) amend the articles of incorporation,
(v) adopt, amend or repeal the bylaws, (vi) approve a plan of merger not
requiring shareholder approval, (vii) authorize or approve the reacquisition of
shares unless pursuant to a formula or method prescribed by the board of
directors, or (viii) authorize or approve the issuance or sale of shares, or
contract for the sale of shares or determine the designations and relative
rights, preferences and limitations of a class or series of shares, except that
the board of directors may authorize a committee or officer to do so within
limits specifically prescribed by the board of directors. The committee shall
then have full power within the limits set by the board of directors to adopt
any final resolution setting forth all preferences, limitations and relative
rights of such class or series and to authorize an amendment of the articles of
<PAGE>
incorporation stating the preferences, limitations and relative rights of a
class or series for filing with the Secretary of State under the Colorado
Business Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 14 of these
bylaws.
SECTION 12. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors entitled to vote with respect to the action taken. Such consent
shall have the same force and effect as a unanimous vote of the directors or
committee members and may be stated as such in any document. Unless the consent
specifies a different effective time or date, action taken under this Section 12
is effective at the time or date the last director signs a writing describing
the action taken, unless, before such time, any director has revoked his consent
by a writing signed by the director and received by the president or the
secretary of the corporation.
SECTION 13. TELEPHONIC MEETINGS. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
SECTION 14. STANDARD OF CARE. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i)
one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, public accountant, or other person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors on which the director
does not serve if the director reasonably believes the committee merits
confidence.
ARTICLE IV.
OFFICERS AND AGENTS
SECTION 1. GENERAL. The officers of the corporation shall be a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be appointed by the board of directors and shall be a natural person
eighteen years of age or older. One person may hold more than one office. The
board of directors or an officer or officers so authorized by the board may
appoint such other officers, assistant officers, committees and agents,
including a chairman of the board, assistant secretaries and assistant
treasurers, as they may consider necessary. Except as expressly prescribed by
these bylaws, the board of directors or the officer or officers authorized by
the board shall from time to time determine the procedure for the appointment of
officers, their authority and duties and their compensation, provided that the
board of directors may change the authority, duties and compensation of any
officer who is not appointed by the board.
<PAGE>
SECTION 2. APPOINTMENT AND TERM OF OFFICE. The officers of the
corporation to be appointed by the board of directors shall be appointed at each
annual meeting of the board held after each annual meeting of the shareholders.
If the appointment of officers is not made at such meeting or if an officer or
officers are to be appointed by another officer or officers of the corporation,
such appointments shall be made as determined by the board of directors or the
appointing person or persons. Each officer shall hold office until the first of
the following occurs: his successor shall have been duly appointed and
qualified, his death, his resignation, or his removal in the manner provided in
Section 3.
SECTION 3. RESIGNATION AND REMOVAL. An officer may resign at any time
by giving written notice of resignation to the president, secretary or other
person who appoints such officer. The resignation is effective when the notice
is received by the corporation unless the notice specifies a later effective
date.
Any officer or agent may be removed at any time with or without cause
by the board of directors or an officer or officers authorized by the board.
Such removal does not affect the contract rights, if any, of the corporation or
of the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors, or
officer or officers authorized by the board of directors, may remove the officer
at any time before the effective date and may fill the resulting vacancy.
SECTION 5. PRESIDENT. The president shall preside at all meetings of
shareholders and all meetings of the board of directors unless the board of
directors has appointed a chairman, vice chairman, or other officer of the board
and has authorized such person to preside at meetings of the board of directors.
Subject to the direction and supervision of the board of directors, the
president shall be the chief executive officer of the corporation, and shall
have general and active control of its affairs and business and general
supervision of its officers, agents and employees. Unless otherwise directed by
the board of directors, the president shall attend in person or by substitute
appointed by him, or shall execute on behalf of the corporation written
instruments appointing a proxy or proxies to represent the corporation, at all
meetings of the stockholders of any other corporation in which the corporation
holds any stock. On behalf of the corporation, the president may in person or by
substitute or by proxy execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the president,
in person or by substitute or proxy, may vote the stock held by the corporation,
execute written consents and other instruments with respect to such stock, and
exercise any and all rights and powers incident to the ownership of said stock,
subject to the instructions, if any, of the board of directors. The president
shall have custody of the treasurer's bond, if any. The president shall have
such additional authority and duties as are appropriate and customary for the
office of president and chief executive officer, except as the same may be
expanded or limited by the board of directors from time to time.
SECTION 6. VICE PRESIDENTS. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, of if the board makes no such designation,
then the vice president designated by the president, or if neither the board nor
the president makes any such designation, the senior vice president as
determined by first election to that office), shall have the powers and perform
the duties of the president.
SECTION 7. SECRETARY. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors without a meeting, a record of all actions taken by a
committee of the board of directors in place of the board of directors on behalf
of the corporation, and a record of all waivers of notice of meetings of
shareholders and of the board of directors or any committee thereof, (ii) see
that all notices are duly given in accordance with the provisions of these
bylaws and as required by law, (iii) serve as custodian of the corporate records
and of the seal of the corporation and affix the seal to all documents when
authorized by the board of directors, (iv) keep at the corporation's registered
<PAGE>
office or principal place of business a record containing the names and
addresses of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held by,
each shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the names
and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) in general, perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him by the
president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers, subject to supervision by the secretary. The
directors and/or shareholders may however respectively designate a person other
than the secretary or assistant secretary to keep the minutes of their
respective meetings.
Any books, records, or minutes of the corporation may be in written
form or in any form capable of being converted into written form within a
reasonable time.
SECTION 8. TREASURER. The treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. Subject to the limits imposed by the board of directors,
he shall receive and give receipts and acquittances for money paid in on account
of the corporation, and shall pay out of the corporation's funds on hand all
bills, payrolls and other just debts of the corporation of whatever nature upon
maturity. He shall perform all other duties incident to the office of the
treasurer and, upon request of the board, shall make such reports to it as may
be required at any time. He shall, if required by the board, give the
corporation a bond in such sums and with such sureties as shall be satisfactory
to the board, conditioned upon the faithful performance of his duties and for
the restoration to the corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the board of directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
ARTICLE V.
STOCK
SECTION 1. CERTIFICATES. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by the president, a vice president, the secretary or an assistant
secretary. In case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, such certificate may nonetheless be issued by the
corporation with the same effect as if he were such officer at the date of its
issue. The names of the owners of the certificates, the number of shares, and
the date of issue shall be entered on the books of the corporation.
Each certificate representing shares shall state upon its face:
<PAGE>
(i) That the corporation is organized under the laws of Colorado;
(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of
the series, if any, that the certificate represents;
(iv) The par value, if any, of each share represented by the
certificate;
(v) If the corporation is authorized to issue different classes
of shares or different series within a class, the certificate shall contain a
conspicuous statement, on the front or the back, that the corporation will
furnish to the shareholder, on request in writing and without charge,
information concerning the designations, preferences, limitations, and relative
rights applicable to each class, the variations in preferences, limitations, and
rights determined for each series, and the authority of the board of directors
to determine variations for future classes or series; and
(vi) Any restrictions imposed by the corporation upon the
transfer of the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time
following the issue or transfer of such shares, the corporation shall send the
shareholder a complete written statement of all of the information required to
be provided to holders of uncertificated shares by the Colorado Business
Corporation Act.
SECTION 2. CONSIDERATION FOR SHARES. Certificates or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
SECTION 3. LOST CERTIFICATES. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
SECTION 4. TRANSFER OF SHARES. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be entered on
the stock books of the corporation which shall be kept at its principal office
or by the person and the place designated by the board of directors.
Except as otherwise expressly provided in Article II, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent provided in
Article 113 of the Colorado Business Corporation Act, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such shares on the part of any person other than the registered
holder, including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares on the part of any person other
than the registered holder, including without limitation any purchaser, assignee
or transferee of such shares or rights deriving from such shares, unless and
until such other person becomes the registered holder of such shares, whether or
not the corporation shall have either actual or constructive notice of the
claimed interest of such other person.
<PAGE>
SECTION 5. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI.
INDEMNIFICATION OF CERTAIN PERSONS
SECTION 1. INDEMNIFICATION. For purposes of Article VI, a "Proper
Person" means any person (including the estate or personal representative of a
director) 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, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee, fiduciary or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of any
foreign or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company, or other enterprise or employee benefit plan. The corporation
shall indemnify any Proper Person against reasonably incurred expenses
(including attorneys' fees), judgments, penalties, fines (including any excise
tax assessed with respect to an employee benefit plan) and amounts paid in
settlement reasonably incurred by him connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that he conducted himself in good faith and that he reasonably believed
(i) in the case of conduct in his official capacity with the corporation, that
his conduct was in the corporation's best interests, or (ii) in all other cases
(except criminal cases), that his conduct was at least not opposed to the
corporation's best interests, or (iii) in the case of any criminal proceeding,
that he had no reasonable cause to believe his conduct was unlawful. Official
capacity means, when used with respect to a director, the office of director
and, when used with respect to any other Proper Person, the office in a
corporation held by the officer or the employment, fiduciary or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. Official capacity does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirements in (ii) of this Section 1. A director's conduct with respect to an
employee benefit plan for a purpose that the director did not reasonably believe
to be in the interests of the participants in or beneficiaries of the plan shall
be deemed not to satisfy the requirement of this section that he conduct himself
in good faith.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper Person was
adjudged liable to the corporation or in connection with any proceeding charging
that the Proper Person derived an improper personal benefit, whether or not
involving action in an official capacity, in which he was adjudged liable on the
basis that he derived an improper personal benefit. Further, indemnification
under this Section in connection with a proceeding brought by or in the right of
the corporation shall be limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding.
SECTION 2. RIGHT TO INDEMNIFICATION. The corporation shall indemnify
any Proper Person who was wholly successful, on the merits or otherwise, in
defense of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.
SECTION 3. EFFECT OF TERMINATION OF ACTION. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person seeking indemnification did not meet the standards
of conduct described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
<PAGE>
SECTION 4. GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION.
Except where there is a right to indemnification as set forth in Sections 1 or 2
of this Article or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the corporation only as determined in the
specific case by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has met the applicable standards
of conduct set forth in Section 1 of this Article. This determination shall be
made by the board of directors by a majority vote of those present at a meeting
at which a quorum is present, which quorum shall consist of directors not
parties to the proceeding ("Quorum"). If a Quorum cannot be obtained, the
determination shall be made by a majority vote of a committee of the board of
directors designated by the board, which committee shall consist of two or more
directors not parties to the proceeding, except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee. If a Quorum of the board of directors cannot be obtained and the
committee cannot be established, or even if a Quorum is obtained or the
committee is designated and a majority of the directors constituting such Quorum
or committee so directs, the determination shall be made by (i) independent
legal counsel selected by a vote of the board of directors or the committee in
the manner specified in this Section 4 or, if a Quorum of the full board of
directors cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board
(including directors who are parties to the action) or (ii) a vote of the
shareholders.
Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible except that, if the determination that indemnification
or advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be made by the
body that selected such counsel.
SECTION 5. COURT-ORDERED INDEMNIFICATION. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If a court determines that the Proper Person is
entitled to indemnification under Section 2 of this Article, the court shall
order indemnification, including the Proper Person's reasonable expenses
incurred to obtain court-ordered indemnification. If the court determines that
such Proper Person is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he met the standards of
conduct set forth in Section 1 of this Article or was adjudged liable in the
proceeding, the court may order such indemnification as the court deems proper
except that if the Proper Person has been adjudged liable, indemnification shall
be limited to reasonable expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered indemnification.
SECTION 6. ADVANCE OF EXPENSES. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the corporation to any Proper Person in
advance of the final disposition of such action, suit or proceeding upon receipt
of (i) a written affirmation of such Proper Person's good faith belief that he
has met the standards of conduct prescribed by Section 1 of this Article VI,
(ii) a written undertaking, executed personally or on the Proper Person's
behalf, to repay such advances if it is ultimately determined that he did not
meet the prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may be
accepted without reference to financial ability to make repayment), and (iii) a
determination is made by the proper group (as described in Section 4 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.
SECTION 7. ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN
DIRECTORS. In addition to the indemnification provided to officers, employees,
fiduciaries or agents because of their status as Proper Persons under this
Article, the corporation may also indemnify and advance expenses to them if they
are not directors of the corporation to a greater extent than is provided in
these bylaws, if not inconsistent with public policy, and if provided for by
general or specific action of its board of directors or shareholders or by
contract.
SECTION 8. WITNESS EXPENSES. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a time
when he has not been made a named defendant or respondent in the proceeding.
<PAGE>
SECTION 9. REPORT TO SHAREHOLDERS. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
ARTICLE VII.
PROVISION OF INSURANCE
SECTION 1. PROVISION OF INSURANCE. By action of the board of directors,
notwithstanding any interest of the directors in the action, the corporation may
purchase and maintain insurance, in such scope and amounts as the board of
directors deems appropriate, on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of the corporation, or who, while a
director, officer, employee, fiduciary or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee fiduciary or agent of any other foreign or domestic
corporation or of any partnership, joint venture, trust, profit or nonprofit
unincorporated association, limited liability company, other enterprise or
employee benefit plan, against any liability asserted against, or incurred by,
him in that capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of Article VI or applicable law. Any such insurance may be
procured from any insurance company designated by the board of directors of the
corporation, whether such insurance company is formed under the laws of Colorado
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the corporation has an equity interest or any other
interest, through stock ownership or otherwise.
ARTICLE VIII.
MISCELLANEOUS
SECTION 1. SEAL. The board of directors may adopt a corporate seal,
which shall be circular in form and shall contain the name of the corporation
and the words, "Seal, Colorado."
SECTION 2. FISCAL YEAR. The fiscal year of the corporation shall be as
established by the board of directors.
SECTION 3. AMENDMENTS. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special meeting
of the board unless the shareholders, in making, amending or repealing a
particular bylaw, expressly provide that the directors may not amend or repeal
such bylaw. The shareholders also shall have the power to make, amend or repeal
the bylaws of the corporation at any annual meeting or at any special meeting
called for that purpose.
SECTION 4. RECEIPT OF NOTICES BY THE CORPORATION. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (1) at
the registered office of the corporation in Colorado; (2) at the principal
office of the corporation (as that office is designated in the most recent
document filed by the corporation with the secretary of state for Colorado
designating a principal office) addressed to the attention of the secretary of
the corporation; (3) by the secretary of the corporation wherever the secretary
may be found; or (4) by any other person authorized from time to time by the
board of directors or the president to receive such writings, wherever such
person is found.
SECTION 5. GENDER. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
SECTION 6. CONFLICTS. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
SECTION 7. DEFINITIONS. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the Colorado Business Corporation Act.
EXHIBIT 6.1
DENMANS.COM INTERNET JEWELRY STORE,
STOREFRONT AND BACK END DEVELOPMENT CONTRACT
between:
DENMANS JEWELRY (USA) , INC. A US BASED CORPORATION ( DENMANS )
and
WEBCAST SYSTEMS INC.
SUITE 503, 555 WEST HASTINGS STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA
("Webcast")
WHEREAS DENMANS desires to contract Webcast to implement an online storefront
and back end as described with the ultimate goal of becoming the largest single
point of access for online jewelery products. DENMANS is to be able to enter
their own products, product categories, and product attributes, plus add
additional menu items relating to specialty editorial content.
AND WHEREAS the site is to be easily navigatable with special attention to
simplicity with which products can be located, viewed, and ordered. As conveyed
by DENMANS, the logistics of tying together backend supplier fulfillment into
seamless automated processes are not a priority for this Phase 1.
NOW THEREFORE, in consideration of the premises and mutual covenants herein set
forth, the parties agree as follows:
1. WEBCAST WILL PROVIDE THE FOLLOWING PHASE 1 DEVELOPMENT ACTIVITIES:
1.1. Development management assistance
1.2. Finalization of menu structure and site specifications 1.3. Liaison
with artists for cosmetic detailing and screen parameters 1.4. Main menu
interface development and integration 1.5. Subcategory display pages and
content entry templates 1.6. Product database and SKU entry, editing, and
administration area 1.7. Search mechanism, based on product category and
SKU field parameters 1.8. Customer order status administration area 1.9.
DENMANS / Customer communications Email area
1.9.1.Development of Store structure, including;
1.9.2.Standardized product thumbnail, listing, and display directory
templates 1.9.3.Thumbnail zoom-ins and spec page print outs
1.9.4.Secure shopping cart, with tally and customer order email
verification 1.9.5.Hooks for credit card transactions - Visa,
Mastercard, American Express
Cost - Subtotal $45,000.
2. SOFTWARE SITE LICENSES - Estimated; Microsoft NT, MS Sequel, MS Commerce Site
Server
Subtotal ( estimated ) $15,000.
3. BACK-END CREDIT CARD VERIFICATIONS, TRANSACTIONS, AND MERCHANT NUMBER SETUP
WEBCAST WILL UNDERTAKE AND ASSIST IN ALL LOGISTICS RELATING TO THE SETUP
AND OPERATION OF THE DENMANS CREDIT CARD VERIFICATION AND TRANSACTIONS.
THIS WILL ALSO INCLUDE ORGANIZING MERCHANT NUMBERS, BANK RELATIONSHIPS, AND
ASSISTANCE IN HELPING DENMANS TO COMPLY WITH ALL NECESSARY US AND CANADIAN
E-COMMMERCE AND CORPORATE REGULATIONS.
Subtotal $10,000.
4. HARDWARE SETUP CONFIGURATION, DESCRIPTION, AND HOSTING PARAMETERS
Webcast System's Enterprise Management Server Platform ( EMSP ) provides
full dual redundancy of operation and complete scalable system
architecture. The phase 1 system configuration will handle thousands of
customers per day and can be scaled to extended server configurations
handling millions of visitors a day without interruption of services.
The EMSP architecture uses accepted industry standards and is not dependant
upon any certain manufacture's hardware or software technology to
accomplish this goal.
<PAGE>
INCLUDES:
LOAD BALANCED WEB APPLICATION SERVERS: Windows NT Server Enterprise Edition
running Microsoft Internet Information Server
CLUSTERED SQL SERVERS: Windows NT Server Enterprise Edition running Microsoft
SQL database and attached via SCSI to RAID.
CLUSTERED RAID FILE SERVER (storage array will be converted to a fiber channel
storage solution in 2000)
Cost of hardware server setup and infrastructure allocation as outlined
above, including; dual redundancy configuration, load balance
configuration, Internet IP address setups, and corporate email accounts.
Costs may increase as servers, storage, and transactional bandwidths are
scaled up due to increased demand and business success.
Cost Subtotal $25,000.
4. SERVER MAINTENANCE AND HOSTING
4.1. Webcast shall supply 24 hour technical support to DENMANS. The
following single access toll free emergency numbers will be available
DENMANS; in the Vancouver local area 686 5343, North American Wide - 1
800 840 8855. DENMANS will be responsible for its own customer
support.
4.2. Webcast shall make all reasonable efforts to repair and correct any
problems arising under Webcast's areas of responsibility that may
arise from time to time which would cause it to be unable to perform
its' obligations under this Agreement.
4.3. Webcast shall maintain the Hardware and pay all costs for maintaining
and/or upgrading the Hardware and the Hardware shall, at all times,
remain the property of Webcast.
4.4. Webcast shall supply the office space required to house the Hardware
at no cost to DENMANS.
4.5. Webcast shall notify DENMANS of any problems that may arise from time
to time and shall keep DENMANS apprised of any efforts undertaken to
rectify the problem.
4.6. Hosting based on site configuration of 100 GB bandwidth usage per
month and 40GB storage, with continuous 7 X 24 Webcast server
management and maintenance based on minimum 6 month commitment,
starting September 1999. $3000. / Month
Additional bandwidth is charged at $250. per 20 GB per month. Costs may
increase as servers, storage, and transactional bandwidths are scaled
up due to increased demand and business success.
5. INDEMNIFICATION
DENMANS acknowledges and agrees that neither Webcast nor any of its
members, shareholders, directors, officers, employees or representatives
(the "Indemnified Parties") will be liable to DENMANS or any of DENMANS'
customers for any special, indirect, consequential, punitive or exemplary
damages, or damages for loss of profits or savings, in connection with this
Agreement, the services or the Hardware or any other information, material
or services provided by Webcast to DENMANS under this Agreement.
6. DISRUPTIONS
DENMANS acknowledges that from time to time, as a result of Hardware
failure, supplier failures, or acts of god, the services provided under
this Agreement by Webcast can be temporarily disrupted. DENMANS
acknowledges and agrees that neither Webcast nor any of its members,
shareholders, directors, officers, employees or representatives will be
liable to DENMANS or any of DENMANS' customers for any specific, indirect,
consequential, punitive or exemplary damages, or damages for loss of
profits or savings, in connection with these temporary disruptions.
7. DEVELOPMENT SCHEDULE -
o Project Begins - July 12, 1999
o Beta Site Release - Aug. 27, 1999
o Launch Date - Sept 12, 1999
<PAGE>
8. COST SUMMARY ( cdn funds )
Site Structure Setup, Programming, Customizations $45,000.
Hardware Setup and Configurations $25,000.
Credit Card Transactions and Merchant Accounts - Setup $10,000.
MS Licenses - NT, Sequel, Site Server ( estimated ) $15,000.
--------
Total $95,000.
( Applicable taxes will be applied later if DENMANS is a Canadian based
company )
Payment Schedule:
Down payment to start $42,500.
Upon beta release $26,250.
Upon Launch $26,250.
9. UNDEFINED WORK ASPECTS (not included in above costs )
o The conversion and entry of product information, images, and editorial
content.
o Artist design work or specialty cosmetic customizations
o Integration of automated fulfillment supplier order systems.
o Hosting and hardware expansion based on growth volumes.
Additional work quoted and billed at programmer time of $95/hr
10. TERM AND TERMINATION
10.1.DENMANS may terminate this Agreement at any time upon five days notice
if Webcast becomes bankrupt or insolvent or ceases carrying on
business for any reason.
10.2.DENMANS may terminate this Agreement at any time upon 30 days notice
if Webcast is materially in breach of this Agreement for more than 30
days.
10.3.Webcast may terminate this Agreement at any time upon 5 days notice if
DENMANS becomes bankrupt or insolvent or ceases carrying on business
for any reason.
10.4.Webcast may terminate this Agreement at any time upon 30 days notice
if DENMANS is more than 30 days in arrears in paying any material
monthly fees due and owing to Webcast.
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement on the 23 day of
July, 1999.
Per: Webcast Systems Inc.
/s/ "Paul Harris" Date "July 23, 1999"
- ----------------------------------- ----------------------
Paul Harris / President
Per: DENMANS Jewelry (USA) Inc.
/s/ "Douglas N. Bolen" Date "July 23, 1999"
- ----------------------------------- ----------------------
Douglas N. Bolen/ Corporate Counsel,
Secretary & Director
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