U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under section 12(b) or (g) of the Securities Exchange Act of 1934
CYBERECORD, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
Florida 91-1985843
- ------------------------------- ----------------
(State or other jurisdiction of I.R.S. ID Number
incorporation or organization)
800 Bellevue Way N.E., Suite 400, Bellevue, WA 98004
(Address of principal executive offices (zip code)
Issuer's telephone number (425) 990-5593
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered each class is to be registered
- ------------------- ------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common stock $.001 par value
----------------------------
(title of class)
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CYBERECORD
Form 10-SB
Table of Contents Page
Part I
Item 1 Description of Business..........................................1
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operation....................2
Item 3. Description of Property.......................................... 5
Item 4. Security Ownership of Certain Beneficial
Owners and Management............................................6
Item 5. Directors, Executive officers, promoters
And Control Persons..............................................7
Item 6. Executive Compensation...........................................8
Item 7. Certain Relationships and Related Transactions...................9
Item 8. Description of Securities........................................9
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and other Stockholder Matters.....................10
Item 2. Legal Proceedings...............................................11
Item 3. Changes in and Disagreements with Accountants...................11
Item 4 Recent Sales of Unregistered Securities.........................11
Item 5. Indemnification of Directors and Officers.......................12
PART F/S
Financial Statements....................................................F-1
PART III
Item 1. Index to Exhibits and Description of Exhibits...................12
Signature Page...........................................................13
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PART 1
Item 1. Description of Business.
CybeRecord, Inc. (the "Company/we/CybeRecord") was incorporated on February 17,
1969 as Flexi-Built Modular Housing Corporation in the State of Florida. In
March 1984, the Company changed its name to Flexicare, Inc.; In September 1996,
the name was again changed to Pillar Entertainment Group Inc. In November 1997,
the Company acquired all of the issued and outstanding stock of Chrysalis Hotels
and Resorts Corp. and changed its name to Chrysalis Hotels and Resorts Corp
("Chrysalis").
Chrysalis was not successful in securing contracts for management consulting or
operations management for any hotel operations, nor was it able to secure the
financing to build a hotel. In early 1999, an opportunity to enter a high
technology business was presented to the Company. In April 1999, the company
proceeded with the venture, and acquired certain assets of James J. Lucas, Glenn
and Paulette Kimball, Marek Niczyporuk, James L. and Barbara Baker Quinn,
Herbert and Patricia Walker and Alva D. and Kirsten Cravens, in exchange for
6,000,000 shares of the Company's common stock, and we changed our name to
CybeRecord, Inc.
The assets exchanged for the stock included the following:
(a) The intellectual property rights owned and/or, licensed for a microfilm,
scanning device design, and all hardware design; (b) Computer programming code
and all software developed including, but not limited to, any and all software
needed to allow the scanning /digitizing / reading device to operate in a
reliable and commercial manner; (c) Programs software, including all trademarks
and the intellectual property related to the foregoing, in both machine readable
and/or human readable form; (d) Rights to, and any rights to apply for and/or
register, patents and patent applications, copyrights, trademarks, trade secrets
and all other proprietary rights relating to such intellectual property; (e)
Records and files relating to manufacturing, quality control, sales, marketing
and customer support and designs for such intellectual property; (f) Derivative
works of intellectual property; and (g) All related documentation.
The Company also acquired certain other assets consisting of hardware patents,
rights to hardware patents, customer lists, contracts, agreements, licenses or
license agreements, commitments, warranties, claims and other existing and
inchoate rights. At the time of acquisition, the cost of the assets acquired was
charged to expense as research and development, as the assets had not reached
technological feasibility.
CybeRecord presently has a number of pending patents. We are not aware of any
government approval that would be necessary to conduct business and there are no
projected environmental impacts or other regulations that will affect the
business of the Company. The Company presently employs five full-time employees.
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Forward-Looking Statement
This registration Statement contains certain forward-looking statements and
information relating to CybeRecord, Inc. that are based on the beliefs of its
management as well as assumptions made by and information currently available to
its management. When used in this report, the words "anticipate", "believe',
"expect", "intend", "plan" and similar expression, as they relate to CybeRecord,
Inc and. to its management, are intended to identify forward looking statements.
These statements reflect management's current view of CybeRecord, Inc.
concerning future events and are subject to certain risks, uncertainties and
assumptions, including among many others: a general economic downturn; a
downturn in the securities market.; enactment of future federal or state laws or
regulations having an adverse effect on our business, and other risks and
uncertainties.
Should any of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described in this report as anticipated, estimated or expected, our business,
results of operations and financial condition may be adversely affected.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
CybeRecord's business is the development, manufacture and marketing of a
low-cost, high-speed microfilm scanner. The following discussion of the results
of operations and financial condition should be read in conjunction with the
audited financial statements and related notes appearing subsequently under the
caption "Financial Statements."
Market Research
Micrographics Newsletter, a publication of Microfilm Publishing, Inc., PO box
950, Larchmont, NY 10538-0950, published research in the May 1997 edition of
Micrographics & Hybrid Imaging Systems Newsletter, conducted by the Giga
Information Group. The newsletter estimates a United States domestic market of
12,900 film scanner units with a total market, including equipment and services,
of $580 million. The study further estimates 523 billion images on film with the
vast majority being 16mm film, followed in order by fiche, 35mm and aperture
cards. The market is estimated to grow at 2-5% per annum.
The study identified nine major markets for film scanning which include state
and local government, federal government, law enforcement agencies, legal
services, banking and insurance, non-government archives, health care,
manufacturing/engineering, and publishing.
The AIIM, the Association for Information and Imaging Management, is the
industry association leader in matter relating to the conversion of documents to
digital images. The web site for AIIM is YPERLINK "http://www.aiim.org", and its
address is AIIM International, 1100 Wayne Avenue, Suite 1100, Silver Springs,
Maryland 20910. According to information from AIIM, the Company's own research
and the conclusions of market research conducted by the Giga Information Group,
the market for microfilm scanners nationwide was estimated as high as $1.19
billion during the period between 1998 and the year 2001. The Giga study
estimated that over 523 billion microfilm images are highly qualified for
conversion to digital images over a four-year period. Converting merely 15% of
these would create a $500 million market. With the introduction of the Company's
product, the area of greatest growth in the microfilm scanner market will be in
the mid-range of the market.
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CybeRecord intends to offer scanners on a rental basis. Customers can install as
many scanners as necessary for the time they need them, with no capital
expenditure. Monthly rental fees will be charged according to the number of
images scanned per unit and the number of scanners used for the conversion.
If the Company ships 1,250 microfilm scanners during the first four years, or
approximately 10% of Giga's four-year market estimate of 12,900 units, the
Company projects revenues of nearly $97 million during that period. CybeRecord's
four-year estimate is 5% of Giga's optimistic high case four-year estimate of
29,200 units and a $1.3 billion cumulative market. The Company intends to target
all microfilm users who have been waiting for a cost effective means to convert
microfilm records to digital images. The Company will reach customers through
advertising, direct mail, and trade shows. The Company will advertise in
vertical magazines that communicate with managers in end user organizations such
as, Law Enforcement magazines for law enforcement, Insurance magazines for
insurance, etc. The Company will also employ web pages with links to related
strategic partners.
Conversion of large volumes of microfilm to computer-based systems requires that
the microfilm be converted to digital images using a microfilm scanner. Once
digitized, the images are indexed using special indexing software and
transferred on a large image database for storage and future retrieval. There
are several indexing and image database systems sold by system integrators and
value added resellers (VARs). CybeRecord does not intend to compete with the
many companies that produce indexing or file management software because we
intend to develop strategic relationships with these companies as noted in the
following paragraph.
The Company will also develop strategic relationships with developers of
indexing and database systems, large VARs and system integrators who are already
selling to the Knowledge Management market. The Company's strategy is to
aggressively promote its "click charge" program, ease of use, high quality
digital image output, and high productivity. The relative low monthly cost of
the Company's rental program lends itself to direct marketing, so CybeRecord's
sales strategy is to offer the product direct, as well as through select VARs.
The Ethernet ready CybeRecord scanner supports the industry popular paper
scanner interface, allowing the many Resellers already selling paper scanners to
sell the Company's scanner with little investment or training.
The Company's browser based system tracks and tallies the number of images
scanned each month for each scanner. This information is downloaded to the
Company monthly for customer billing. In addition, the software has a sixty-day
clock that must be reset via modem by the Company. If the clock is not reset,
the scanner will cease to operate. Customers who fail to pay their bills will be
unable to scan, thus collection problems will be minimized.
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The Company's pricing strategy will encourage customers to rent rather than
purchase. At the minimum monthly charge of $3,000, it would take almost four
years to equal an acquisition cost of $135,000, assuming $129,000 plus $6,000
annual maintenance. The Company believes the elimination of significant capital
expenditure approvals will encourage over 90% of the companies to pay by the
image scanned rather the purchase. The Company's direct sales force has
previously developed relationships in key accounts and will focus heavily on
government, including law enforcement, banking, insurance, title companies, and
service bureaus.
Two prototype scanners will be produced for beta testing early in the year 2000,
and volume production can begin immediately after completion of beta testing.
The Company product prototype was completed in November 1999 and is currently
coordinating its hardware-software capabilities for testing before
manufacturing. Based on a successful outcome of the prototype testing, the first
shipments could be readied for distribution as early as February or March of
2000. Pre-sales of the equipment is now starting. However, definitive sales
activity will not commence until final determination of cost pricing and
manufacturing capability projections.
The Company is in the process of applying for various patents to protect its
technology and intends to develop lower cost scanners for the library market.
Most microfilm is of extremely low quality, seldom pristine, and sometimes over
100 years old. When microfilm technology was first introduced, it was
state-of-the-art and represented the best means available for vast data storage
needs. Often, these microfilm libraries contained millions of items including
everything from bank check, credit card records, vital statistics, arrest
records for law enforcement agencies, etc. Over the years, these libraries
deteriorate and soon contained large amount of substandard film. Our technology
addresses the quality problems...problems that are not trivial. Consequently, we
have applied for two broad patents to protect the imaging enhancement
capabilities of our scanners.
The major reason for converting from microfilm to digital images is to make the
data available electronically, which is faster and more flexible. An electronic
database would be readily available to be shared with branch offices and
customers who are located offsite. Today, the sheer volume of records has made
microfilm access relatively slow and limited in terms of data access speed.
Digital access addresses the problems of retrieval speeds and the difficulty of
sharing information off-site.
Our customers require a rapid and accurate microfilm scanner; which will allow
unskilled clerical workers to extract the highest possible images from microfilm
with minimal operator supervision. Clerks will not be required to perform a
complex scanner set-up; traditionally required by other scanners. Further, an
operator can supervise several of our scanners needing only to mount new film or
add fiche to an automated feeder.
Additionally, since the information contained in the libraries is so vital, the
conversion process must be made in the shortest period possible. An insurance
company, for example, would not want to take many years to convert a microfilm
database because information retrieval would be cumbersome during the process of
conversion. Purchasing equipment makes a quick conversion difficult because of a
large capital investment required. A scanner can convert, at best, 300,000
records a month. Even at $45,000 per scanner, it would require many scanners to
do that job efficiently.
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Microfilm databases of 120 million images are common. To convert such a film
database would require 400 scanners to accomplish the task in one month.
Alternatively, 34 scanners are required to complete the task in one year. At
$45,000 per scanner, the capital investment involved for 34 scanners is over
$1.5 million. This figure does not include the cost of operators and overhead.
That is why microfilm users are presently willing to spend from 5 cents to 15
cents (and more) to outsource conversion to a service provider. We believe our
"per image" click-charge program will be considerably lower than outsource cost.
This will allow the user to bring in ten or twenty scanners during the
conversion and, after finishing, returning the machines.
Competitors
Prices for microfilm scanners presently range from $50,000 to $160,000.
Currently, SunRise Imaging and Mekel are the leaders in the microfilm scanner
market. Fuji does offer a proprietary scanner limited to its own 16mm blipped
roll-film.
Both SunRise Imaging and Mekel have recently been acquired by other companies
and, in our opinion, will not be as strong competitively since the acquisitions.
To our knowledge, none of the existing microfilm scanner companies place product
without a sales contract or third party lease, both of which require capital
purchase approval and capital. The exception is a Fuji film scanner that sells
for around $16,000, but the scanner is limited to 16mm Fuji blipped roll-film
and is, therefore, not a competitor for the general microfilm scanning market.
Liquidity and Capital Resources
The Company currently believes that it has adequate cash resources to fund
current operations. The capital requirements to finish research-and-development,
including initial operational costs, were projected at $1 million, all of which
has been received.
An additional $2 million is being sought to fund sales and manufacturing. We
have yet to determine whether this funding will come from a bank line-of-credit
or from the sell of securities.
Current revenue projections show that the availability of product and its
revenue-generated distribution in the second quarter of 2000 will enable the
Company to meet its financial operational requirements as an on-going entity.
There can be no assurance, however, that the Company's actual capital needs will
not exceed anticipated levels, or that the Company will generate sufficient
revenues to fund its operations in the absence of other sources.
Item 3. Description of Property
The Company leases offices at 800 Bellevue Way, N.E., Suite 400, Bellevue,
Washington pursuant to a written lease, which expires on June 30, 2000. The
lease continues on a six-month period-to-period basis at a monthly rental of
$1,735, which includes office space, communication services, and office
furniture. The lease is with Vantas Bellevue, 800 Bellevue Way, NE, 4th Floor,
Bellevue, Washington 98004, telephone number (425) 462-4059.
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Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of the date of this Registration Statement,
the stock ownership of each executive officer and director of the Company, of
all executive officers and directors of the Company as a group, and of each
person known by the Company to be a beneficial owner of 5% or more of its common
stock. Except as otherwise noted, each person listed below is the sole
beneficial owner of the shares and has sole investment and voting power for such
shares. No person listed below has any options, warrants or other rights to
acquire additional securities of the Company, except as may be otherwise noted.
Percent of Beneficial
Name and Address Shares Owner of Class (1)
- ---------------- ------ ---------------------
James J. Lucas 1,500,000 9.74
401 -- 100th NE, #316
Bellevue, WA 98004-5456
James L. Quinn* 1,100,000 7.14
3419 Evergreen Point Road
Medina, WA 98039
Glenn Kimball** 1,500,000 9.74
2850 College Avenue
Modesto, CA 95350
Thomas Morikawa 1,115,000 7.24
1737 14th Avenue
Seattle, WA 98122
Brent Nelson 225,000 1.46
5395 176th Place
Bellevue, WA 98004
Marek A. Niczyporuk 1,300,000 8.44
962 Elsinore Drive
Palo Alto, CA 94303
Alva D. Cravens 100,000 0.65
17235 Deerpark Road
Los Gatos, CA 95032
All officers and directors
as a group (4 persons) 4,425,000 28.7%
* Shares held jointly with Mr. Quinn's wife, Barbara Quinn
** Shares held jointly with Mr. Kimball's wife, Paulette Kimball
(1) For purposes of the table, a person is considered to "beneficially own" any
shares with respect to which he/she directly or indirectly has or shares voting
or investment power or of which he or she has the right to acquire the
beneficial ownership within 60 days. Unless otherwise indicated and subject to
applicable community property law, voting power, and investment power are
exercised solely by the person named above or shared with members of his or her
household.
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company and their ages as of the
date of this document are as follows:
Name Age Position
- ---- --- --------
James J. Lucas 57 President, CEO, Director
James L. Quinn 63 Vice President
Glenn S. Kimball 66 Vice President
Brent Nelson 38 Director
Alva D. Cravens 59 Director
William Altieri 70 Director
James J. Lucas, President and CEO.--Mr. Lucas has more than 20 years of senior
management experience in digital imaging markets. Career highlights include
positions as vice president of product marketing and vice president of
advertising and public relations for General Electric Company, Calma Division,
and vice president of special markets for Eastman Kodak Company, Atex Division.
In 1981, he developed the original business and product concepts for Qubix
Graphic Systems, a venture-funded company that went public and was subsequently
acquired. Mr. Lucas joined CybeRecord in June, 1999. From 1998 until he became
affiliated with the Company, he was employed by Ziff Davies, Inc., in Foster
City, CA. For the year prior to joining Ziff Davies, Mr. Lucas ran his own
consulting company, and prior to that was Vice president of Sales & Marketing
for Sun Rise Imaging of Freemont, Ca.
James Quinn, Vice President of Sales--Mr. Quinn graduated from Franklin Marshall
University in 1958. prior to joining CybeRecord, he was Director of
International Sales for Tally Printer Corporation, Kent, Washington.
Glenn Kimball, Vice President of Engineering--Mr. Kimball has more than 20 years
of experience in imaging product development, primarily for large government
organizations. He developed image-processing techniques to separate and enhance
poor quality, overlapping bank endorsements and a series of test documents,
enabling performance of high-speed check reader- sorters for the Federal
Reserve. He managed development and production of seven multimillion-dollar
topographic map compilation systems that performed at micron accuracy for the
United States Defense Mapping Agency..
Brent Nelson has served as a Director of the Company since October 1997. He
presently serves as the managing director of Northwest Capital Partners, L.L.C.,
a venture capital firm located in Bellevue, Washington. Mr. Nelson also
presently serves on the boards of directors of Palmworks, Inc. and Interactive
Objects, Inc., both software development firms. He earned a diploma in marketing
from Douglas College, Vancouver, B.C., Canada in 1983. Mr. Nelson has over 15
years of experience in corporate project financing.
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Alva D. Cravens was appointed a Director on November 15, 1999. He is Vice
President of Worldwide Marketing for AdForce, an Internet ad-serving firm
recently ranked ninth in Inter@ctive Week magazines top ten advertising and
marketing companies. He has more than 20 years of executive experience in
strategic marketing, communications, positioning, branding, and advertising for
technology companies, including Silicon Valley high-tech firms Sun Microsystems,
Radius, IDG, and Adaptec. Mr. Cravens holds both a BA and an MA in
Communications from San Jose State University.
William Altieri was appointed a Director on November 15, 1999. His experience
encompasses domestic and international product branding; corporate and product
positioning; and advertising and general marketing for consumer, industrial, and
high technology products. He has been employed as a Brand Manager for Proctor
and Gamble's Joy detergent. He then joined Norman, Craig and Kummel Advertising
in New York City as a Vice President and was promoted to Senior Vice President
of European Operations directing marketing programs for Hertz,
Chesborough-Ponds, and American-Cyanamid. Subsequently, he became a senior
partner and Managing Director of London's Jack Tinker Advertising, where he was
responsible for adapting U.S. marketing efforts into European marketing programs
for Coca-Cola, Exxon, Miles Laboratories, and Nabisco. Mr. Altieri holds an MBA
from Stanford University. As a Lieutenant Commander in the United States Navy,
he commanded a UDT (Underwater Demolition Team), now called a SEAL (Sea Air
Land) team.
Item 6. Executive Compensation.
Compensation for the officers of the Company is presented below. There are no
other benefits or compensation provided. The following table shows all the cash
compensation paid by the Company as well as certain other compensation paid
during the fiscal years indicated.
Annual Compensation Awards Payouts
Position Year Salary (*) Bonus ($)
- -------- ---- ---------- ---------
James Lucas, Pres. & CEO 1999 $168,000 $12,500
Glenn Kimball, VP Engineering 1999 $108,000 $12,500
James Quinn, VP Sales 1999 $132,000
* Amortized salary
Note: Salary payments commenced 1 May 1999.
Option/SAR Grants in Last Fiscal Year.
There were no option/SAR Grants in the last fiscal year.
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Compensation of Directors
The Company's directors serve without compensation.
Item 7. Certain Relationships and Related Transactions.
Brent Nelson, a director of our Company, is the president of Northwest Capital
Partners, LLC ("Northwest"). In March, 1999, we entered into a Consulting
Agreement under which Northwest agreed to act as financial advisor in connection
with completion of financing as provided in the Consulting Agreement. The
Consulting Agreement has a three-year term, and Northwest has a right of first
refusal to consult with the Company regarding financings subsequent to the
financings set forth in the Consulting Agreement. The Consulting Agreement
provides for payment of monthly consulting fees to Northwest in the amount of
$500 per month., plus reimbursement for out-of-pocket expenses not to exceed
$3,000 in any calendar month. The fee provision is subject to an increase to
$1,000 per; month and extension for 36 months upon closing of certain financing
transactions set forth in the Consulting Agreement. The Company also agreed to
issue the Consultant 500,000 shares of our common stock at a value of $.01 per
share if our market capitalization reaches at least $100,000,000, and an
additional 500,000 shares of common stock at a value of $.01 per share if the
Company's market capitalization achieves a value of at least $200,000,000. These
shares will be issued as restricted shares, and will be granted "piggy-back"
rights, so that the shares will be registered upon the Company's first
registration after the shares are issued. Northwest's obligations under the
Consulting Agreement are subject to certain conditions to be performed by us,
including refraining from modifying our capital structure without Northwest's
prior written consent. In addition, the Consulting Agreement provides that for
three years after the date that our common stock commences trading on the OTC
Bulletin Board, if we desire to issue new shares of stock or any of our officers
or directors who hold 5% or more of our common stock ("Principal Stockholders")
desire to transfer their shares of our stock to a third party, we and the
Principal stockholders are required to first offer such shares to the Company
(if applicable), to Northwest, and then to the other principal stockholders. The
Consulting Agreement also requires our officers and directors and the Principal
Stockholders to agree that for a period of twelve months after our common stock
commences trading on the OTCBB, the Principal stockholders will not sell any of
their shares of common stock without Northwest's prior written consent, which
will not be unreasonably withheld. Finally, the Consulting Agreement provides
that Northwest is entitled to nominate a director for our board of directors for
a period of five years.
Item 8. Description of Securities.
Common Stock
The Company has authorized 25,000,000 shares of Common Stock par value $.001.
Each outstanding Share of Common Stock is entitled to one vote, either in person
or by proxy, on all matters that may be voted upon by the owners thereof at
meetings of the stockholders.
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The holders of Common Stock (i) have equal ratable rights to dividends from
funds legally available therefore, when, and if declared by the Board of
Directors of the Company; (ii) are entitled to Share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per Share on all matters on which stockholders may vote at all meetings of
stockholders.
All of the issued and outstanding shares of Common stock are, and all unissued
shares when sold will be, duly authorized, validly issued, fully paid, and
non-assessable. To the extent that additional shares of the Company's common
stock are issued, the relative interests of the then existing shareholders may
be diluted.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
Market Information
The Company's Common Stock ($.001 par value), all of which are one class, is
publicly traded on the over the counter market. It is presently traded in the
OTC "Pink Sheets" The Company's principal market makers are Olsen Payne &
Company, Paragon Capital Corporation, Sharpe Capital Corp., and Hill, Thomson
Magid and Company. The high-low bid information for the Company's stock for the
period May 1998 to September 1999 as provided by CSI, Inc, follows:
Monthly prices (May 1998 to Dec 1999)
Date High Low Close
- ---- ---- ---- -----
Dec-99 1.125 0.8125 0.25
Nov-99 1.375 0.6125 1.0625
Oct-99 1.75 0.6125 1.0
Sep-99 1.0 0.5 0.875
Aug-99 1.25 0.938 1.0
Jul-99 1.563 1.125 1.188
Jun-99 1.875 0.938 1.625
May-99 1.438 0.5 1.094
Apr-99 1.0 0.406 0.875
Mar-99 0.813 0.125 0.563
Feb-99 0.375 0.188 0.375
Jan-99 0.25 0.125 0.25
Dec-98 0.375 0.125 0.219
Nov-98 0.563 0.219 0.375
Oct-98 0.5 0.219 0.219
Sep-98 0.5 0.24 0.5
Aug-98 0.938 0.625 0.656
Jul-98 0.125 0.75 0.938
Jun-98 1.063 0.688 0.906
May-98 1.0 0.438 1.0
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Holders
The approximate number of record holders of the Company's Common Stock as of
September 30, 1999 was 346, inclusive of those brokerage firms and/or
clearinghouses holding the Company's common shares for their clientele (with
each such brokerage house and/or clearing house being considered as one holder).
The aggregate number of shares of Common Stock outstanding as of September 30
1999 was 15,401,864 shares.
Dividends
The Company has not paid or declared any dividends upon its Common Stock since
its inception and, by reason of its present financial status and its
contemplated financial requirements, does not contemplate or anticipate paying
any dividends upon its Common Stock in the foreseeable future.
Item 2. Legal Proceedings
The Company is not presently a party to any material litigation, nor to the
Company's knowledge is such litigation threatened.
Item 3. Changes in and Disagreements with Accountants
The Company has had no changes in or disagreements with accountants on
accounting or financial disclosure.
Item 4. Recent Sales of Unregistered Securities
The following unregistered securities of the Company have been issued in the
past three years:
1. On October 1, 1997, the Company issued 4,000,000 free-trading shares to
fifty-one non-affiliates at a price of $.06 per share for an aggregate
consideration of $240,000 pursuant to an exemption from registration under
Regulation D, Rule 504 of the Act.
2. On October 11, 1997, the Company issued 8,000,000 restricted shares to
seventeen affiliates.
3. On March 24, 1999, the Company issued 1,970,000 free-trading shares to ten
non-affiliates pursuant to an exemption from registration under Regulation D,
Rule 504 of the Act, at a price of $.50 per share for a total consideration of
$985,000. In consideration for legal services rendered, 46,000 of free-trading
shares were issued to two non-affiliates pursuant to an exemption from
registration under Regulation D, Rule 504 of the Act.
4. On April 20, 1999, the Company issued 6,000,000 restricted shares to seven
affiliates in exchange for transfer of assets. An additional 50,000 shares were
issued as a finder's fee in the transaction. The shares were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Act").
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Item 5. Indemnification of Directors and Officers
The Certificate of Incorporation and Bylaws of the Company contain provisions
limiting or eliminating the liability of directors of the Company to the Company
or its stockholders to the fullest extent permitted by the General Corporation
law of Florida and indemnifying officers and directors of the Company to the
fullest extent permitted by the General Corporation Law of Florida. Insofar as
indemnification for liabilities arising under the Act may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
PART F/S
The Financial Statements of CybeRecord, Inc. required by Regulation S-B commence
on page F-1 and are incorporated herein by reference.
PART III
Items 1 & 2. Index to Exhibits and Description of Exhibits
3.1 Articles of Incorporation with Amendments*
3.2 By-Laws*
10.2 Consulting Agreement with Northwest Capital Partners, LLC
21 Subsidiaries of the Registrant
27 Financial Data Schedule
* Previously filed
12
<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.
CYBERECORD, INC.
/s/James J. Lucas
-------------------------------
Date: February 15, 2000 James J. Lucas, President & CEO
13
<PAGE>
BALANCE SHEET
CybeRecord, Inc.
Setember 30,1999
ASSETS
Current Assets
Cash $35,052
Prepaid Expenses Total Current Assets $11,700
-------
$46,752
Furniture and Equipment, at cost, less accumlated
depreciation of $1594 $31,566
-----------
Total Assets $78,318
===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable $22,932
Stockholders' Equity
Common Stock, par value $01 at 30 June 1999, and $01 at
31 December 1998 and 1997 $15,402
Additional Paid-In Capital $4,450,086
Retained Deficit ($3,925,102)
-----------
Subtotal $540,386
Less Stock Subscriptions Receivable $485,000
-----------
Subtotal Stockholders' Equity $55,386
Total Liabilties & Stockholders Equity $78,318
===========
<PAGE>
STATEMENTS OF CASH FLOWS
CybeRecord, Inc.
1 July to 30 September, 1999
<TABLE>
<CAPTION>
Cash Flows From Operating Activities
<S> <C>
Net Loss ($290,868.00)
Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities
Depreciation $1 400.00
Changes in Operating Assets & Liabilities
Prepaid Expenses & Deposits $11,401.00
Accounts Payable $16,219.00
-------------
Cash Used in Operating Activities ($261 848.00)
Cash Flows From Investing Activity
Purchase of Equipment ($26,192.00)
Cash Flows From Financing Activity
Issuance of Common Stock
Capital Contribution
Cash Provided by Financing Activities
-------------
Net increase (Decrease) in Cash ($288,040.00)
Cash, Beginning of Year $323,092.00
-------------
Cash, End of Year $35,052.00
=============
</TABLE>
<PAGE>
STATEMENTS OF OPERATIONS
CybeRecord, Inc.
1 July to 30 September, 1999
REVENUES
Expenses
Research & Development (including labor & benefits of $157306) $95,645
General Administration (including labor & benefits of $157308) $195,223
----------
Total Expenses $290,868
Net Loss ($290,868)
==========
Basic Loss Per Share of Common Stock ($0.02)
<PAGE>
CYBERECORD, INC.
NOTES TO FINANCIAL STATEMENTS
September30, 1999
Note 1. Basis of Presentation
CybeRecord, Inc. ("CybeRecord'9) is a development stage company that is
developing software it intends to market. CybeRecord started the development
stage on September27, 1996.
The accompanying unaudited financial statements do not include all the
disclosures required by generally accepted accounting principles for complete
financial statements. Reference should be made to CybeRecord's Form 10-SB for
the fiscal year ended December 31, 1998, and the six months ended June 30, 1999,
for additional disclosures, including CybeRecordts accounting policies.
In the opinion of management of CybeRecord, the financial statements include all
adjustments necessary for a fair presentation of the financial position and
results of operations of CybeRecord.
Note 2. Loss Per Share
Loss per share is computed on the basis of the weighted average number of shares
outstanding during the period. There are no convertible securities, warrants, or
options outstanding, so there are no potentially dilutive securities. The
weighted average number of shares outstanding for the tliree months ended
September30, 1999, was 15,401,864.
<PAGE>
CYBERECORD, INC.
FINANCIAL REPORT
JUNE 30, 1999
DECEMBER 31, 1998
DECEMBER 31, 1997
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
Balance sheets F-2
Statements of operations F-3
Statements of stockholders' equity F-4
Statements of cash flows F-5
Notes to financial statements F-6 - F-10
<PAGE>
PETERSON SULLIVAN P.L.L.C.
601 Union Street Suite 2300 Seattle WA 98101 (206) 382-7777 Fax 382-7700
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
CybeRecord, Inc.
Bellevue, Washington
We have audited the accompanying balance sheets of CybeRecord, Inc. (a
development stage company) as of June 30, 1999, December 31, 1998, and December
31, 1997, and the related statements of operations, stockholders' equity, and
cash flows for the six months ended June 30, 1999, the years ended December 31,
1998 and 1997, and for the period from September 27, 1996 to June 30, 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. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CybeRecord, Inc. (a development
stage company) as of June 30, 1999, December 31, 1998, and December 31, 1997,
and the results of its operations and its cash flows for the six months ended
June 30, 1999, the years ended December 31, 1998 and 1997, and for the period
from September 27, 1996 to June 30, 1999, in conformity with generally accepted
accounting principles.
/s/ Peterson Sullivan P.L.L.C.
- ------------------------------
Peterson Sullivan P.L.L.C.
September 21, 1999
F-1
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
BALANCE SHEETS
June 30, 1999, December 31, 1998, and December 31, 1997
<TABLE>
<CAPTION>
June 30, December 31, December 31,
ASSETS 1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Current Assets
Cash ........................................ $ 323,092 $ 1,307 $ 58
Prepaid expenses ............................ 23,101
----------- ----------- -----------
Total current assets ............... 346,193 1,307 58
Furniture and Equipment, at cost,
less accumulated depreciation of $194 ....... 6,774
----------- ----------- -----------
$ 352,967 $ 1,307 $ 58
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ............................ $ 6,713 $ -- $ --
Stockholders' Equity
Common stock, par value $.001 at June 30,
1999, and $.01 at December 31, 1998
and 1997 ................................. 15,402 123,359 123,359
Additional paid-in capital .................. 4,450,086 309,079 225,579
Deficit accumulated during the
development stage ........................ (3,634,234) (431,131) (348,880)
----------- ----------- -----------
831,254 1,307 58
Less: Stock subscriptions receivable ....... (485,000)
----------- ----------- -----------
346,254 1,307 58
----------- ----------- -----------
$ 352,967 $ 1,307 $ 58
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-2
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1999, Years Ended December 31, 1998 and
December 31, 1997, and the Period From September 27, 1996 to June 30, 1999
<TABLE>
<CAPTION>
Total
Accumulated
During
Development
Stage
(September 27,
June 30, December 31, December 31, 1996 to
1999 1998 1997 June 30, 1999)
----------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
Expenses
Write-off of acquired research
and development 3,000,000 3,000,000
In-process research and
development 128,317 128,317
General and administrative 74,786 82,251 345,688 505,917
----------------- --------------- ---------------- ------------------
3,203,103 82,251 345,688 3,634,234
----------------- --------------- ---------------- ------------------
Net loss $ (3,203,103) $ (82,251) $ (345,688) $ (3,634,234)
================= =============== ================ ==================
Basic loss per share of common stock $ (0.23) $ (0.01) $ (0.03) $ (0.32)
================= =============== ================ ==================
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1999, Years Ended December 31, 1998 and
December 31, 1997, and the Period From September 27, 1996 to June 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Common Paid-in Development Receivable for
Shares Stock Capital Stage Shares Sold Total
--------- ------------ ------------ -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, September 27, 1996 335,864 $ 3,359 $ 769 $ - $ - $ 4,128
Issuance of common stock
(October and November 1996) 8,700,000 8,700 49,410 58,110
Net loss (3,192) (3,192)
--------- ------------ ------------ -------------- -------------- ------------
Balances, December 31, 1996 9,035,864 12,059 50,179 (3,192) 59,046
Issuance of common stock, net of
effects of exchange
of Chrysalis shares for Pillar
shares (October 1997) 3,300,000 111,300 128,700 240,000
Additional capital contributed
by shareholders 46,700 46,700
Net loss (345,688) (345,688)
--------- ------------ ------------ -------------- -------------- ------------
Balances, December 31, 1997 12,335,864 123,359 225,579 (348,880) 58
Additional capital contributed
by shareholders 83,500 83,500
Net loss (82,251) (82,251)
--------- ------------ ------------ -------------- -------------- ------------
Balances, December 31, 1998 12,335,864 123,359 309,079 (431,131) 1,307
Issuance of common stock in
exchange for cash and stock
subscriptions receivable
(March 1999) 1,970,000 19,700 965,300 (485,000) 500,000
Issuance of common stock in
exchange for services
(March and April 1999) 96,000 960 39,040 40,000
Contribution of shares back to
the corporation
by shareholders (April 1999) (5,000,000) (50,000) 50,000
Issuance of common stock in
exchange for Kristal Group
assets (April 1999) 6,000,000 60,000 2,940,000 3,000,000
Additional capital contributed
by shareholders 8,050 8,050
Change in par value of stock (138,617) 138,617
Net loss (3,203,103) (3,203,103)
---------- ------------ ------------ -------------- -------------- ------------
Balances, June 30, 1999 15,401,864 $ 15,402 $ 4,450,086 $ (3,634,234) $ (485,000) $ 346,254
========== ============ ============ ============== ============ ============
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1999, Years Ended December 31, 1998 and
December 31, 1997, and the Period From September 27, 1996 to June 30, 1999
<TABLE>
<CAPTION>
Total
Accumulated
During
Development
Stage
(September 27,
June 30, December 31, December 31, 1996 to
1999 1998 1997 June 30, 1999)
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (3,203,103) $ (82,251) $ (345,688) $ (3,634,234)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation 194 194
Write-off of assets (primarily intellectual
property) acquired that had not
reached technological feasibility 3,000,000 3,000,000
Professional fees exchanged for
common stock 40,000 40,000
Changes in operating assets and liabilities
Prepaid expenses and deposits (23,101) 14,709 (23,101)
Accounts payable 6,713 (5,390) 6,713
Other 44,200
------------ ------------- ------------ --------------
Cash used in operating activities (179,297) (82,251) (292,169) (610,428)
Cash Flows From Investing Activity
Purchase of equipment (6,968) (6,968)
Cash Flows From Financing Activities
Issuance of common stock 500,000 240,000 798,110
Capital contribution 8,050 83,500 46,700 138,250
------------ ------------- ------------ --------------
Cash provided by financing activities 508,050 83,500 286,700 936,360
------------ ------------- ------------ --------------
Net increase (decrease) in cash 321,785 1,249 (5,469) 318,964
Cash, beginning of period 1,307 58 5,527 4,128
------------ ------------- ------------ --------------
Cash, end of period $ 323,092 $ 1,307 $ 58 $ 323,092
============ ============= ============ ==============
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Significant Accounting Policies
Organization/Development Stage Company
CybeRecord, Inc. ("CybeRecord") was previously known as Chrysalis Hotels and
Resorts, Inc. ("Chrysalis"). Chrysalis was previously known as Pillar
Entertainment, Inc. ("Pillar").
Pillar was a corporation with very little financial activity for many years. In
October 1997, Pillar exchanged its common stock for all the outstanding stock of
Chrysalis. As Pillar and Chrysalis were related corporations (Pillar's president
was a major stockholder in Chrysalis), the transaction was accounted for at a
historical cost basis. Pillar then changed its name to Chrysalis. These
financial statements are prepared as if the companies were combined as of
September 27, 1996 (the date Chrysalis was incorporated).
In April 1999, Chrysalis issued common stock to acquire the assets (primarily
intellectual property) of four individuals: Glenn Kimball, Marek Niczyporuk,
James J. Lucas, and James L. Quinn (hereinafter referred to as the "Kristal
Group" for the sake of convenience). Chrysalis then changed its name to
CybeRecord.
In conjunction with the acquisition of the Kristal Group's assets, CybeRecord is
working toward the development of software that will enhance paper and microfilm
records when converted to digital documents. This will allow these records to be
shared electronically over the Internet and within company Intranet systems. As
of June 30, 1999, products developed by CybeRecord have not reached the stage of
technological feasibility as defined by Statements of Financial Accounting
Standards ("SFAS") 86. Accordingly, the cost of the assets acquired from the
Kristal Group and all costs associated with software development have been
charged to expense as research and development.
CybeRecord intends to market the software it is developing. Revenue recognition
policies for software sales will be established when products are ready for
distribution. Revenue will be recognized when earned and CybeRecord will follow
American Institute of Certified Public Accountants Statements of Position 97-2
and 98-4, "Software Revenue Recognition."
These financial statements have been prepared treating CybeRecord as a
development stage company. CybeRecord has not generated any revenues through
June 30, 1999. For the purpose of these financial statements, it is assumed the
development stage started September 27, 1996, which is the date of inception for
Chrysalis.
F-6
<PAGE>
Note 1. (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Accordingly, actual results could differ from the estimates that were used.
Cash
Cash includes cash balances held at a bank and all highly liquid debt
instruments with original maturities of three months or less. Cash balances are
in excess of amounts insured by the Federal Deposit Insurance Corporation.
No cash payments for interest or income taxes were made during the six months
ended June 30, 1999, and the years ended December 31, 1998 and 1997.
Stock Subscriptions Receivable
Stock subscriptions receivable are for 970,000 shares of common stock and are
due from five non-United States investors. The amounts receivable are expected
to be collected by December 31, 1999.
Furniture and Equipment
Furniture and equipment are depreciated using the straight-line method over the
estimated useful lives of the related assets.
Research and Development
Research and development costs are expensed as incurred. When products being
developed reach technological feasibility, costs associated with these products
will be capitalized and amortized over their estimated useful lives.
Taxes on Income
CybeRecord accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in CybeRecord's
financial statements or tax returns. In estimating future tax consequences,
CybeRecord generally considers all expected future events other than enactments
of changes in the tax laws or rates.
F-7
<PAGE>
Note 1. (Continued)
Earnings Per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares. There are no potentially dilutive common shares at June 30, 1999,
or at December 31, 1998 and 1997. The weighted average number of shares was
13,693,864, 12,335,864, and 9,860,864 for the six months ended June 30, 1999,
and the years ended December 31, 1998 and 1997. The weighted average number of
shares was 11,372,972 for the period from September 27, 1996 to June 30, 1999.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value.
Although there has been no stock-based compensation, CybeRecord has chosen to
account for stock-based compensation using Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees." Accordingly, compensation
cost for stock options granted to employees is measured as the excess, if any,
of the quoted market price of the Corporation's stock at the date of the grant
over the amount an employee is required to pay for the stock.
Comprehensive Income
There are no reconciling items between the net loss presented in the Statements
of Operations and comprehensive loss as defined by SFAS No. 130, "Reporting
Comprehensive Income."
New Accounting Standards
New accounting standards issued through the date of the independent auditors'
report do not have an effect on these financial statements.
F-8
<PAGE>
Note 2. Capital Stock
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998 December 31, 1997
------------- ----------------- -----------------
<S> <C> <C> <C>
Shares authorized 25,000,000 20,000,000 20,000,000
========== ========== ==========
Shares issued and outstanding 15,401,864 12,335,864 12,335,864
========== ========== ==========
</TABLE>
Note 3. Non-Cash Transactions
In 1999, CybeRecord issued 6,000,000 shares of common stock in conjunction with
the acquisition of the Kristal Group's assets (See Note 1). The common stock was
valued at $.50 per share. This value was based on stock sales in the same time
period. The number of shares issued was based on negotiations between CybeRecord
and the various owners of the Kristal Group's assets. As part of these
negotiations, certain shareholders contributed 5,000,000 shares of common stock
back to CybeRecord.
In addition, in 1999, CybeRecord issued 56,000 shares in exchange for legal
services. These shares were valued at $.50 per share, as they were issued at
approximately the same time that shares were issued for the Kristal Group's
assets. Finally, in 1999, CybeRecord issued 40,000 shares in exchange for
consulting services. These shares were valued at $12,000, as they were issued to
settle a $12,000 invoice.
Note 4. Income Taxes
The reconciliation of income tax on income computed at the federal statutory
rates to income tax expense is as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998 December 31, 1997
------------- ----------------- -----------------
<S> <C> <C> <C>
Tax at statutory rate $ (1,089,055) $ (27,966) $ (117,534)
Change in valuation allowance
for deferred tax asset 1,089,055 27,966 117,534
------------- -------------- --------------
Income tax expense $ - $ - $ -
============= ============== ==============
</TABLE>
F-9
<PAGE>
Note 4. (Continued)
CybeRecord's deferred tax asset is as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998 December 31, 1997
------------- ----------------- -----------------
<S> <C> <C> <C>
Net operating loss
carryforwards (before
valuation allowance) $ 214,042 $ 144,713 $ 116,067
Research and development
costs expensed for
financial statement
purposes, but
capitalized for income
tax purposes 1,020,000
Other 1,598 1,872 2,552
Less valuation allowance
for deferred tax asset (1,235,640) (146,585) (118,619)
------------- ------------- --------------
Net deferred tax asset $ - $ - $ -
============= ============= ==============
</TABLE>
CybeRecord has net operating loss carryforwards of $629,536 at June 30, 1999.
These losses expire in 2019.
F-10
CONSULTING AGREEMENT
This Agreement is made and entered into this _____ day of March, 1999, between
CybeRecord, Inc. (Nevada) (the "Company") and Northwest Capital Partners, L.L.C.
(the "Consultant"), and sets forth the terms and conditions upon which the
Consultant will act as financial advisor to the Company in connection with the
completion of the financing described in Exhibit "A" attached hereto (the
"Financing").
In consideration for the mutual promises and covenants contained herein, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. PURPOSE. The Company hereby engages the Consultant during the term hereof to
arrange financing, as a finder, for the Company upon terms and conditions as set
forth herein and in accordance with the requirements set forth in Exhibit "A"
(the "Financing"). Consultant shall also have a right of first refusal to
consult with the Company regarding appropriate financings subsequent to the
Financings set forth in Exhibit "A" for a period of three years following the
term of this Agreement.
2. TERM. The term of this Agreement shall be for a period of 36 months, provided
that the first Interim Financing shall be completed within 30 days of the
Company's approval and, following the quotation of the Company's common stock on
the NASD OTC Bulletin Board. The second Interim Financing shall be completed
within 180 days of the Company's approval, following the quotation of the
Company's common stock on the NASD OTC Bulletin Board. This offering will be
pursuant to Rule 504 or other applicable Rule adopted pursuant to the Securities
Act of 1933, as amended (the "Act"). A third round of financing, if required,
shall be negotiated and completed after the 180 day period following the date
the Company's common stock is quoted on the NASD OTC Bull tin Board.
3. DUTIES OF THE CONSULTANT. During the term hereof, Consultant shall provide
the Company with the benefit of its best judgment and efforts to complete the
Financing on a reasonable business basis in accordance with the requirements set
forth in Exhibit "A." It shall be Consultant's duty to suggest and evaluate from
the standpoint of financial soundness, the Company's business plans and
programs, corporate financial structures, and corporate organization, and any
other financial matters involving the Company. In connection with the financing
contemplated by this Agreement, Consultant agrees that it will advise and work
with the Company to complete the Financing successfully in accordance with Rule
504 or other applicable Rule under the Act and the related and applicable Blue
Sky laws of the states in which the financing is completed. Consultant shall
advise the Company of each proposed broker or other financing or referral source
identified by Consultant prior to authorizing any participation in the
Financing. Consultant shall use its best efforts, after receiving information
from Company sufficient to comply with the informational requirements of Rule 1
<PAGE>
5c2-l 1 under the Securities Exchange Act of 1934 (the "1934 Act"), to arrange
for the shares of common stock of the Company to be quoted on the NASD OTC
Bulletin Board either by direct application and approval through the NASD or by
reverse merger. The Company and the Consultant shall review the potential filing
of a Form 10 (1934 Act form) with the U.S. Securities and Exchange Commission
following the Second Stage Financing. Company agrees that it will accept
Financing amounts at each closing contemplated by Exhibit "A" which are in
excess of the amounts in Exhibit "A" if Consultant is able to raise such
additional amounts in accordance with the appropriate disclosure and the
securities registration exemption provisions of the Act and the relevant Blue
Sky laws. Consultant's duties shall also include, but not be limited to:
3.1 Assist the Company's management in the development and execution of a
strategic short-term, intermediate term and long-term financial plan;
3.2 Assist the Company in the negotiation of the terms of the Financings;
3.3 Assist the management of the Company in connection with inquiries made by
or on behalf 0 any proposed brokers and investors;
3.4 Assist the management of the Company in the preparation of presentation
materials for the purpose of pursuing the Financing;
3.5 Using its best efforts, on terms acceptable to the Company, to arrange
the Financings as described in Exhibit "A" attached hereto.
3.6 If the Company and the Consultant determine that a direct application to
the NASD is not n the best interest of the Company and determine that the
Company go public by way of a reverse merger with an existing publicly traded
company the Consultant will be responsible for the location and acquisition of
such public company including all costs associated with its acquisition.
4. CONSULTANT'S COMPENSATION.
4.1 The Company shall pay Consultant a fee of $500.00 for each month or
partial month this Agreement has been in effect, providing that such payment
shall be paid, as accrued, at the closing of the Interim Financing and then
continuing through the closing of the Second and Third Stage Financings, as
described in Exhibit "A," by the Consultant. Upon the closing of any Third Round
of Financing, the fee of $500.00 will be increased to $1,000.00 per month will
be extended for an additional 36 months, for duties to be mutually agreed upon
by the parties.
4.2 The Company agrees to issue the Consultant 500,000 shares at a value of
$0.01 per share if the Company's market capitalization achieves the value of
$100,000,000.00 or more. The Company agrees to issue the Consultant an
additional 500,000 shares a' a value of $0.01 per share if the Company's market
capitalization achieves the value of $200,000,000.00 or more. These shares will
be issued by the company as restricted shares at a value of $0.01 per share and
will be granted "piggy- back" rights so that the shares will be registered upon
the Company's first registration after the share's issuance.
<PAGE>
4.3 The Company agrees that it shall reimburse Consultant for reasonable,
out-of-pocket expenses incurred by Consultant in performing the services
provided pursuant to this Agreement, provided that such out-of-pocket expense
reimbursement shall not exceed $3,000 in any calendar month or partial month,
and provided that any expenses in excess of $500 ill any calendar month shall
require advance approval by the Company. Such reimbursement shall be paid upon
the within 15 days of the Company's receipt of the Consultant's invoice. Such
reimbursement may be claimed for any month commencing with the signing of this
Agreement and monthly thereafter to the date of each closing, payable within 15
days of receipt.
4.4 If he Consultant is unsuccessful in introducing investors to the Company
(either directly or through a broker) who would be willing to fund the
Financings contemplated in Exhibit "A" within the time periods set forth, this
Agreement may be terminated at the Company's discretion, unless otherwise
extended by mutual consent. Such consent will be implied should the Company be
in or continue negotiation with investors which should reasonably result in
successful Financing or should the Company accept funds from one of the sources
introduced to the Company by the Consultant during this period. Following
termination, however, Consultant will be entitled to the consideration above as
to those stages of the Financing completed and in the event that after
termination a financing of any kind or amount is consummated with any party
introduced to the Company by the Consultant during a period of twelve months
after termination of this Agreement.
5. INDEMNIFICATION.
5.1 The Company agrees to indemnify the Consultant, its agents and employees
against any and all claims, lawsuits, and litigation arising from
representations of the Company made t Consultant or prospective investors
concerning its business plan and financial condition. Such indemnification shall
include reasonable attorney's fees to defend any such actions or claims.
5.2 The Consultant agrees to indemnify the Company, its agents and employees
against any and all claims, lawsuits, and litigation arising from
representations of the Consultant made to prospective investors concerning the
Company except for those representations constituting information provided by
the Company. Such indemnification shall include reasonable attorney's fees to
defend any such actions or claims.
Promptly after receipt by an indemnified party of notice of any claim or
commencement of any action in respect of which indemnity may be sought, the
indemnified party will notify the indemnifying party in writing of the receipt
or commencement thereof and the indemnifying party shall have the right to
assume the defense of any such claim or action (including the employment of
counsel reasonably satisfactory to the indemnified party and the payment of fees
and expenses of such counsel), after which the indemnifying party shall not be
<PAGE>
liable to the indemnified party for any legal fees incurred by the indemnified
party in connection with the defense of such claim or action. Notwithstanding
the prior sentence, the indemnified party shall have the right to control its
defense if in the opinion of it counsel, the indemnified party's defense is
unique or separate to it, as the case may be, as opposed to a defense pertaining
to the indemnifying party. In such event, the indemnified party shall have the
right to retain counsel reasonably satisfactory to the indemnifying party at the
indemnifying party's expense, to represent it in any claim or action in respect
of which indemnity may be sought and agrees to cooperate with the indemnifying
party and the indemnifying party's counsel on the defense of any such claim of
action, it being understood, however, that the indemnifying party shall not, in
connection with any such claim or action or separate but substantially similar
or related claim or action in the same jurisdiction arising out of the same
general circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys, unless the defense of one indemnified party
is unique or separate from that of another indemnified party subject to the same
claim or action. No party shall be liable for any settlement of any claim or
action effected without its written consent.
6. REPRESENTATION AND WARRANTIES. Company represents and warrants as follows:
6.1 The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Nevada and is
qualified as a foreign corporation where required.
6.2 The shares of common stock of the Company which will be delivered to the
investors and Consultant will be duly authorized and validly issued and fully
paid and nonassessable.
7. CONDITIONS PRECEDENT. Consultant's duties to use its best efforts to complete
the Financings contemplated herein shall be subject to:
7.1 The Company will not change or modify the Company's capital structure
without the prior written consent of Consultant, which consent shall not be
unreasonably withheld.
7.2 The Company will submit quarterly budgets to Consultant during the period
of the Financing and for one year after successful completion of the Financing.
7.3 The Company will provide all pertinent information in connection with the
Company's assets, including, but not limited to, all tangible and intangible
assets, and all copyright and trademark information.
7.4 The Company shall have received executed employment agreements from each
of its officers and directors and other key individuals in a form reasonably
appropriate in accordance with industry standards.
<PAGE>
7.5 The Company will provide Consultant with all information and
verifications thereof which Consultant or its legal counsel may reasonably
request from the Company in a manner and form satisfactory to Consultant and its
legal counsel.
7.6 Receipt by Consultant of suitable financial statements of the Company
that are in form and substance satisfactory to Consultant, in its sole
discretion. The Company shall provide financia1 statements consisting of a
balance sheet and a related statement of income for the period then ended, which
fairly present the financial condition of each as of their respective dates and
for the periods involved, and such statements shall be prepared in accordance
with generally accepted accounting principles consistently applied or upon such
other basis as the parties shall mutually agree and for the periods mutually
agreed upon among the parties.
7.7 All existing shares of the Company have or will be issued in accordance
to Rule 4(2) of the 1933 Act and consequently, such securities will be
"Restricted Securities" as such term is defined in Rule 144 as promulgated under
the 1933 Act and thus will be subject to certain resale limitations as contained
in Rule 144 and the certificates shall bear the following restrictive legend
limiting their resale under Rule 144 of the Act.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED PURSUANT
TO A TRANSACTION EFFECTED IN RELIANCE UPON SECTION 4(2) OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND HAVE NOT BEEN THE SUBJECT OF A REGISTRATIQN
STATEMENT UNDER THE ACT OR ANY STATE SECURITIES ACT. THESE SECURITIES MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR APPIACABLE
EXEMPTION THEREFROM UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES ACT."
8. CONDITIONS SUBSEQUENT.
8.1 For a period of three years from the date of closing of a Financing
arranged by Consultant pursuant to this Agreement, the Company will provide
Consultant, at its expense, following a reasonable request by Consultant for the
purpose of reviewing and/or protecting the Company's shareholder's interests,
with copies of stock transfer sheets from the Company's Transfer Agent, as well
as weekly DTC Reports from the Depository Trust Company to the extent such
reports can be made available to a party that is not an affiliate of the
Company, and will provide Consultant with all publicly available financial
reports and publicly available reports of material developments regarding the
Company and its compliance with laws and regulations applicable thereto.
8.2 For a period of three years after the date that the Company's shares of
common stock commence trading on the NASD OTC Bulletin Board, the Company's
executive officers and directors who own at least five percent (5%) of the
<PAGE>
Company's common stock ("Principal Stockholders") and the Company shall provide
the Company with the right of first refusal with respect to any offering (public
or private) of the Company's securities by either the Company or the Principal
Stockholders involving more than 1000 shares of stock.
For a period of three years after the date that the Company's shares of common
stock commence trading on the NASD OTC Bulletin Board, the Company's executive
officers and directors who own at least five percent (5%) of the Company's
common stock ("Principal Stockholders") and the Company shall provide the
Consultant with the second right of first refusal with respect to any offering
(public or private) of the Company's securities by either the Company or the
Principal Stockholders involving more than 1000 shares of stock.
For a period of three years after the date that the Company's shares of common
stock commence trading on the NASD OTC Bulletin Board, the Company's executive
officers and directors who own at least five percent (5%) of the Company's
common stock ("Principal Stockholders") and the Company shall provide the other
Principal Stockholders of the Company with the third right of first refusal with
respect to any offering (public or private) of the Company's securities by
either the Company or the Principal Stockholders involving more than 1000 shares
of stock.
8.3 The Company's officers and directors will use their best efforts to cause
each Principal Shareholder and each other holder of 5% or more of the Company's
common stock to enter into an agreement with Consultant pursuant to the terms of
which each such person shall agree not to sell any shares owned by such person
on the NASD OTC Bulletin Board, for a period of twelve months after the date
that the Company's shares of common stock commence trading on the NASD OTC
Bulletin Board, without Consultant's prior written consent, which consent will
not be unreasonably withheld. Provided that each such person may sell up to
1,000 shares every three months after the first 180 days has passed after the
date that the Company's shares of common stock commence trading on the NASD OTC
Bulletin Board.
8.4 Consultant shall be entitled for a period of five years to nominate a
director for the Company's board of directors which the Company's existing
directors will support. Such director shall be paid the same salary as other
directors (for director's duties performed) and shall participate in all bonus
programs granted to the Company's board of directors.
9. TERMINATION OF RELATIONSHIP. This Agreement shall terminate upon the
happening of any one of the following events:
9.1 Either party may terminate this Agreement upon ten days written notice to
the other that a material breach by the other of the terms or covenants of this
Agreement shall have occurred and such breach shall not have been cured within
ten days after such notice. 9.2 Either party shall have the right (but not the
obligation) to terminate this Agreement upon written notice to the other party
if such terminating party reasonably determines that the other party or any of
its directors, officers or controlling shareholders has engaged in any unlawful,
wrongful, or fraudulent act against the Company or its shareholders.
<PAGE>
9.3 Either party shall have the right (but not the obligation) to terminate
this Agreement upon written notice to the other party if such terminating party
shall determine that any material fact concerning the other party represented to
them during the course of performing their undertakings under this Agreement are
misstated or untrue or that the other party has intentionally failed to provide
the terminating party with material facts concerning the other party.
9.4 Either party may terminate this Agreement at any time: (i) in the event
of war; (ii) in the event of any material adverse change in the business,
property or financial condition of the Company (of which terminating party shall
be the sole judge); (iii) in the event of any action, suit or proceeding at law
or at equity against the Company or Consultant, or by any Federal, State or
other commission or agency where any unfavorable decision would materially
adversely affect the business, property, financial condition or income of a
party; (iv) in the event of adverse market conditions of which event the
terminating party is to be the sole judge. Further, Consultant's commitment will
be subject to receipt by Consultant of all information and verifications thereof
which Consultant or their counsel may reasonably request from the Company in a
manner and form satisfactory to Consultant.
In the event of Termination by Consultant, upon grounds stated herein above,
Consultant shall be entitled to accrued fees and expense reimbursements and
shares otherwise payable shall be paid as though this Agreement was not
terminated.
10. MISCELLANEOUS.
10.1 Authorization. This Agreement has been duly authorized, executed and
delivered by and on behalf of the Company and the Consultant.
10.2. Notices. Any notice or other communication required or permitted by any
provision of this Agreement shall be in writing and shall be deemed to have been
given or served for all purposes if delivered personally or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed to the
parties as follows:
To Consultant: Northwest Capital Partners, L.L.C.
Mr. Brent Nelson
10900 NE 8th Street, Suite 900
Bellevue, Washington 98004
Tel : 425-455-1969
Fax : 425-990-5979
<PAGE>
To the Shareholders
and to the Company: CybeRecord, Inc. Nevada)
Mr. James Lucas
21 El Cerrito Ave.
San Mateo, California 94402
Tel : 650-343 4771
Fax: 650-343-4779
10.3 Validity; Complete Agreement. The validity and enforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof. This Agreement sets forth the entire understanding and
embodies the entire agreement of the parties with respect to the subject matter
covered hereby and supersedes all prior or contemporaneous oral or written
agreements, understandings, arrangements, negotiations or commumcations among
the parties hereto.
10.4 Amendment. This Agreement shall not be modified or amended except by
written agreement of the parties hereto.
10.5 Governing Law. This Agreement shall be governed by the laws of the state
of Washington giving effect to that state's conflict of laws principle.
In witness whereof, the parties hereto have executed this Agreement as of the
date first above written.
NORTHWEST CAPITAL PARTNERS, L.L.C.
By:
-----------------------
Brent Nelson, President
CYBERECORD INC. (NEVADA)
By:
---------------------------
James Lucas, Chairman & CEO
EXHIBIT "A"
CybeRecord, Inc. (Nevada) Financing Requirements
Attached hereto and made a part hereof the Agreement between CybeRecord, Inc.
(Nevada) and Northwest Capital Partners, L.L.C.
Dated March ___ 1999
MINIMUM AMOUNT APPROXIMATE DATE
$500,000 Interim Financing June 30, 1999
$500,000 Interim Financing (1) October31, 1999
Third Stage financings as required (2)
(1) The price per share of common stock shall be determined by the Company
following consultation with Consultant.
(1) The term "Interim Financing" as used in the Agreement shall include
segment 1 above.
(2) Within 6 months after the date the Company's common stock is quoted on the
NASD OTC Bulletin Board, provided that the Company has subsequently filed with
the U.S. Securities and Exchange Commission a Form 10 pursuant to Section 12(g)
of the 1934 Act.
CYBERECORD. INC. (NEVADA)
APPROVAL OF CAPITAL RESTRUCTURE
The undersigned hereby agree to revise the Capital Structure of CybeRecord, Inc.
(Nevada) as indicated below. Furthermore, the undersigned agree to allow the
CybeRecord, Inc. (Nevada) Compensation Committee to grant stock options from
those shares of stock reserved in the Employee Pool to new or existing hires, in
accordance. with the option package structure guidelines to be determined by the
CybeRecord, Inc. (Nevada) Compensation Committee, and at the Committee's
discretion.
Shareholder Shares
- ----------- ------
James Lucas 1,500,000
Glenn & Paulette Kimball 1,500,000
Marek Niczyporuk 1,300,000
James L. & Barbara Quinn 1,100,000
Herbert L. & Patricia A. Walker 500,000
Alva D. & Kirstin Cravens 100,000
Total Shares to be issued to CybeRecord, Inc. 6,000,000
Signed this ____ day of March, 1999 by:
Brent Nelson
President, Northwest Capital Partners, L.L.C.
James Lucas
Chairman & CEO CybeRecord, Inc. (Nevada)
CybeRecord, Inc., a Nevada corporation
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