UNITED STATES 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 12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934
SITESTAR CORPORATION
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(Name of Small Business Issuer in Its Charter)
NEVADA 88-0397234
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16133 VENTURA BLVD., SUITE 635, ENCINO 91436
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(Address of Principal Executive Office) (ZipCode)
(818) 981-4519
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Telephone Number
Securities to be registered under Section 12(b)
of the Exchange Act:
None
Securities to be registered under Section 12(g)
of the Exchange Act:
COMMON STOCK, $0.001 PAR VALUE
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(Title of class)
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TABLE OF CONTENTS
Page
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PART I
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Item 1. Description of Business....................................... 1
Item 2. Management's Discussion and Analysis
or Plan of Operation......................................18
Item 3. Description of Property.......................................38
Item 4. Security Ownership of Certain Beneficial Owners
and Management............................................39
Item 5. Directors, Executive Officers, Promoters and
Control Persons...........................................40
Item 6. Executive Compensation........................................41
Item 7. Certain Relationships and Related Transactions................41
Item 8. Description of Securities.....................................42
PART II
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Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters...............43
Item 2. Legal Proceedings.............................................43
Item 3. Changes in and Disagreements with Accountants.................43
Item 4. Recent Sales of Unregistered Securities.......................43
Item 5. Indemnification of Directors and Officers.....................44
PART F/S
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Financial Statements.....................................................45/F-1
PART III
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Item 1. Index to Exhibits.............................................46
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Sitestar Corporation (the "Company" or "Sitestar") is a diversified
Internet holding company. Our near term strategy is to acquire and invest in
emerging Internet-based enterprises to create a broad and diverse set of core
Internet businesses that deliver a variety of online solutions. In addition to
developing and integrating Internet-based technologies, our primary objective is
to create a mix of Internet operating companies and Internet-related portfolio
investments that will enhance the value of our current businesses in the
following areas:
o Internet e-commerce
o Value-added content
o Internet Service Providers (ISP)
o Internet Portals/Community Web sites
o Strategic investments in internet-related ventures
We will attempt to develop and refine the products and services of our
existing businesses and businesses or assets we acquire with the goal of
significantly increasing revenue as new products are commercially introduced.
Additionally, we will continue to pursue strategic investments in new
Internet-related opportunities to leverage its existing assets.
CORPORATE HISTORY
We were incorporated under the name of White Dove Systems, Inc. in December
1992 under the laws of the State of Nevada to engage in any lawful corporate
activity.
In October 1998 we acquired all the issued and outstanding shares of
Interfoods Consolidated, Inc. ("IFCO"), a California corporation, in exchange
for 5,580,000 shares of our Common Stock. IFCO, operating under the trade name
of Holland American International Specialties ("HAIS"), is a retailer and
wholesaler of imported and domestic specialty gourmet foods which was founded in
1943. HAIS' product offering ranges from exotic European delicacies to
mainstream specialty candies, chocolates and other confectionery products. In
connection with the acquisition, we changed our name to Interfoods Consolidated,
Inc.
In January 1999 we acquired 9% of the outstanding Common Stock of Sierra
Madre Foods, Inc. ("SMF"), a California corporation, for $200,000 through a
joint venture. SMF, formerly known as Queen International Foods ("QIF"), is a
manufacturer and wholesaler of frozen Mexican food products such as burritos and
chimichangas. We acquired our equity interest from the U.S. Bankruptcy court
proceedings along with the debtor-in-possession as our joint venture partner.
QIF filed for Chapter 11 Bankruptcy protection on April 1998. We formed SMF as a
joint venture with the debtor-in-possession for the sole purpose of acquiring
substantially all of the assets of QIF from the U.S. Bankruptcy court.
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In July 1999 we acquired all the issued and outstanding shares of
Sitestar, Inc. ("SYTE"), a Delaware corporation, in exchange for 3,491,428
shares of our Common Stock. SYTE is a Web development, design and hosting
company formed in 1996 and is based in Annapolis, Maryland.
In August 1999 we acquired substantially all of the assets of
Greattools.com in exchange for 49,000 shares of our Common Stock. Greattools.com
is an online low cost retailer of power tools.
Effective as of September 30, 1999 we sold the non-Internet assets of HAIS
to IFCO Group, LLC ("IFCO"), whose members consist of certain shareholders of
the Company, including Frederick T. Manlunas, our Chairman of the Board. We
retained the assets consisting of the Internet web site Holland-American.com.
HAIS will continue to serve as Holland-American.com's exclusive fulfillment
center. The purchase consideration for HAIS was $900,000 and was based upon a
business appraisal by an independent third party appraiser. The consideration
included $200,000 which was applied as a discount for services rendered by
members of IFCO in connection to the acquisition of Sitestar, Inc., the
assumption of $654,000 of liabilities and a promissory note in the amount of
$46,000. The note bears interest at a rate of 8% per annum, and is payable in
annual installments of $15,333, and is due and payable on September 30, 2002.
The note is secured by HAIS' accounts receivable and inventory.
On September 30, 1999, we sold our 9% equity interest in SMF to IFCO for
$200,000. The consideration was paid in the form of assumption of $160,000 of
debt related to the investment and the balance of $40,000 paid by a promissory
note payable in three annual installments of $13,334 each. The note bears
interest at a rate of 8% per annum. The purchase consideration was equal to our
original investment in January 1999.
POSSIBLE FUTURE ACQUISITIONS
We have signed letters of intent to acquire two companies, as described
below. These letters of intent do not create binding obligations of us or the
sellers. Accordingly, neither party is bound to proceed to complete the purchase
and sale. Further, the purchase price and other material terms and conditions of
any acquisition may change in connection with the negotiation and execution of
the final agreement. Accordingly, no assurance can be given that we will
complete either of these acquisitions, or that we will complete either of these
acquisitions in accordance with the terms of the letters of intent.
We have signed a letter of intent, dated September 30, 1999, to acquire
Neocom Microspecialists, Inc., an Internet access provider and Web development
company for 1,976,571 shares of our Common Stock. Neocom has advised us that
(i), as of August 31, 1999 it provided Internet access and enhanced products and
services to approximately 250 small and medium sized enterprises and
approximately 4,100 dial-up customers in the mid-Atlantic region and Web hosting
services to approximately 400 customers, and (ii) its revenues for the nine
months ended September 30, 1999 were $1.387 million.
We have also signed a letter of intent to acquire Eastern Shorenet, an
Internet access provider, for 96,000 shares of our Common Stock. The letter of
intent also requires us to assume liabilities of $18,000. Eastern Shorenet has
advised us that (i) as of August 31, 1999 it provided Internet access and
enhanced products and services to approximately 1,000 dial-up customers in the
eastern-shore region of Maryland, and (ii) its revenues for nine months ended
September 30, 1999, were $144,000.
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MARKET OPPORTUNITY
OVERVIEW. We believe that the Internet has become an important global
medium enabling growing numbers of people to obtain and share information and
conduct business electronically. Its expanded use has made the Internet a
critical tool for information and communications for many users. We believe that
Internet access and enhanced Internet services, including Web hosting and
electronic commerce services, represent two of the fastest growing segments of
the telecommunications services market. International Data Corporation ("IDC")
estimates that at the end of 1997 there were over 38 million Web users in the
United States and over 68 million worldwide, and projects that by the end of
2002 the number of Web users will increase to over 135 million in the United
States and over 319 million worldwide. We believe that the availability of
Internet access, advancements in technologies required to navigate the Internet,
and the proliferation of content and applications available over the Internet
have attracted a rapidly growing number of Internet users.
GROWTH IN BUSINESS USE OF THE INTERNET. We believe that the dramatic growth
in Internet usage in recent years, combined with enhanced functionality,
accessibility and security, has made the Internet increasingly attractive to
businesses as a medium for communication and commerce. We feel that for many
businesses, the Internet has created a new communication and sales channel which
enables large numbers of geographically dispersed organizations and consumers to
be reached quickly and cost-effectively. IDC estimates that the number of
consumers buying goods and services on the Internet will grow from 17.6 million
in 1997 to 128.4 million in 2002, and that the total value of goods and services
purchased over the Internet will increase from approximately $12 billion in 1997
to approximately $426 billion by 2002.
We believe that businesses will increasingly add a variety of enhanced
services and applications to their basic Internet access, Web sites and
e-commerce applications in order to more fully capitalize on the power of the
Internet. We feel that these services and applications will allow them to more
efficiently and securely communicate company information, expand and enhance
their distribution channels, increase productivity through back-office
automation, ensure reliability and reduce costs. We see opportunities for growth
in the following areas:
o DEMAND FOR INTERNET ACCESS SERVICES.
Internet access services represent the means by which ISPs
interconnect their customers to the Internet or corporate intranets
and extranets. According to Forrester Research, Internet access
revenues from businesses are expected to increase from less than $1
billion in 1997 to more than $16 billion in 2002. Due, in part, to
their size, small and medium sized enterprises often seek to outsource
these services..
o DEMAND FOR WEB HOSTING SERVICES.
Many businesses are seeking to outsource to ISPs services such as Web
hosting, collocation and file transfer protocol data storage and
retrieval.
o DEMAND FOR SECURE PRIVATE NETWORKS.
We believe that concerns relating to the security of internal and
proprietary information, data loss and reduced transmission speed has
led businesses to demand Internet services that include the ability to
provide electronic security monitoring and threat responses.
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THE SMALL AND MEDIUM SIZED ENTERPRISE MARKET. We have specifically targeted
small and medium sized enterprises because:
o We believe that these enterprises increasingly need high-speed data
and Internet connections to access business information and to
communicate more effectively with employees, customers and vendors.
o We believe that a relatively small percentage of these enterprises
currently utilize the Internet, but that this number is increasing
rapidly. The small and medium sized enterprise segment is expected to
be one of the fastest growing segments of the Internet industry.
o Many of these enterprises lack the resources and expertise to develop,
maintain and expand, on a cost-effective basis, the facilities and
network systems necessary for successful Internet operations.
o We believe that these enterprises will prefer an Internet service
provider with locally-based personnel who are available to assist in
developing and implementing their growing use of the Internet and to
respond to technical problems in a timely manner.
o We believe that these enterprises rely more heavily on their Internet
service provider than larger enterprises and tend to change Internet
service providers relatively infrequently.
INTERNET SERVICES IN SECONDARY MARKETS. Small and medium sized enterprises
are often concentrated in so-called "secondary markets" to avoid the higher
costs associated with locating in a metropolitan area. A secondary market is any
market smaller than the 100 most populated U.S. metropolitan markets. However,
national ISPs have historically placed their largest points of presence, or
POPs, only in or around densely populated major cities. A POP is an access point
at which customers in a traditional ISP network architecture can connect to data
circuits in order to obtain Internet access and other services. While customers
located within a few miles from these POPs often receive cost savings on their
access pricing, customers located in secondary markets that are as close as 20
to 75 miles away from these POPs have typically been charged higher prices for
Internet access services.
We believe that small and medium sized enterprises located in high-growth
secondary markets are currently underserved by both national and local providers
of Internet access and related services. National ISPs, on the one hand,
typically lack the local presence to provide local support. Local ISPs, on the
other hand, often lack the requisite scale and resources to provide a full range
of services at acceptable quality and pricing levels.
OUR GROWTH STRATEGY
Our goal is to be a premier Internet company that offers products ranging
from Internet access and a complete suite of Internet products and services to a
variety of e-commerce platforms targeting small and medium sized enterprises in
our target markets. We would like to offer a variety of business-to-consumer and
business-to-business e-commerce solutions to our customers.
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Key elements of our strategy include:
FOCUS GROWTH ON SECONDARY MARKETS. We intend to expand into selected
secondary markets by replicating our regional network and marketing model. Our
network architecture and scalable sales and marketing plan are designed to allow
us to penetrate additional regions rapidly and cost-effectively.
MARKET A VARIETY OF SERVICES TO NEW AND EXISTING CUSTOMERS. We intend to
offer a comprehensive suite of a variety of products and services to meet the
expanding needs and complexity of our customers' Internet operations allowing us
to increase revenue per customer and maintain a high customer retention rate by
strengthening relationships with our customers.
USE OF CENTRALIZED SALES AND MARKETING OPERATIONS. We intend to use our
centralized sales and marketing staff to help implement our regional strategy
cost-effectively. We intend to hire and train additional local sales and
marketing personnel within our target regions to complement the core of our
sales and marketing staff, which will continue to be concentrated in one
centralized location to maximize efficiency. These regionally located employees
are intended to add local market knowledge, expertise and familiarity to our
sales and marketing efforts to allows us to maintain a field presence in each of
our regions, while maximizing our central operations.
STRATEGIC RELATIONSHIPS AND ACQUISITIONS. We intend to enter into strategic
relationships, such as partnerships and joint ventures, and to make acquisitions
to expand our line of enhanced products and services.
As part of this strategy, we recently signed letters of intent to acquire
Neocom Microspecialists, Inc. and Eastern Shorenet, providers of Web hosting and
co-location services in the Mid-Atlantic region. These planned acquisitions are
consistent with our growth strategy of building our presence in secondary
markets that have traditionally been under served by the larger Internet
services companies. In addition, we are also actively seeking acquisition
opportunities and/or candidates in the Mid-Atlantic region that would help us
achieve critical mass in terms of our Internet access, development and hosting
customers.
INTERNET INDUSTRY OVERVIEW
We believe that Internet commerce is reshaping the way consumers and
businesses conduct business. According to new projections from Forrester
Research, worldwide e-commerce sales will reach as high as $3.2 trillion in
2003, representing nearly 5% of all global sales. These sales figures include
business-to-business and business-to-consumer sales and EDI (electronic data
interchange) orders placed on the Internet, but exclude the value of financial
transactions. E-commerce is defined as the trade of goods and services in which
the final order is placed over the Internet.
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Growth in Electronic Commerce
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We feel strongly that the growing popularity of the Internet represents an
opportunity for companies like us to take advantage of the potential for
commercial transactions conducted online, referred to as electronic commerce or
e-commerce. International Data, Inc., a market research firm, estimates that
business-to-consumer commerce over the Internet will increase from over $12
billion worldwide at the end of 1997 to approximately $425 billion worldwide by
the end of 2002. In addition, Jupiter Communications, another market research
firm, predicts that by 2002, 44% of Internet users will make purchases online,
as compared to an estimated 22% that did so in 1997. Several factors are driving
the growth in both business to consumer and business to business electronic
commerce. These factors include:
o increasing familiarity with the Internet;
o broadening consumer acceptance of online shopping;
o increasing acceptance on online distribution relationships by
businesses; o improved online network security and infrastructure;
o the growing base of personal computers and improved Internet access;
and
o expanding network bandwidth and access speeds.
We believe that the Internet is particularly well-suited for promoting,
marketing, selling and distributing merchandise both on a retail and a wholesale
level, permitting customers throughout the world to have direct access to
suppliers. Online stores can provide direct customer service and product
information to a large number of customers at the same time with a substantially
smaller sales staff than traditional stores. Online stores also have the ability
to rapidly and continually update such information. Internet merchandisers,
unlike traditional stores, do not have the same expenses associated with
operation of physical stores and warehouse facilities, and can change stores
design without substantial cost. In contrast to catalog merchandisers, Internet
retailers can react quickly to change product descriptions, pricing or product
mix and are not subject to the costs of catalog publication and distribution.
Additionally, online merchandisers have the ability to track directly customer
responses and preferences which enables the merchandisers to customize their
online stores to target specific customer groups and individuals.
Changing Demographics
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In the early days of the Internet, users consisted mainly of young,
technology-savvy or upscale males. Today, while the online population has
appears to have changed drastically, it remains a fairly elite group.
Demographics from Mediamark Research show that Internet users are approximately
twice as likely to have high household incomes, college degrees and management
positions than the overall U.S. population. They are also more likely to be
young and single. Geographically, Internet users can be found in all corners of
the U.S., although, according to researcher Inteco, the level of Internet use in
several major metropolitan areas exceeds the overall U.S. average.
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Consumer Acceptance
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We believe broadening consumer acceptance and retailer ambitions will
combine to fuel a rapid growth in online retail sales and to drive more than 40
million U.S. households to shop online by 2003, producing $108 billion revenues.
According to Forrester Research, online retail sales will account for 6% of U.S.
consumer retail spending in the U.S. by 2003. Analysts estimate that by the end
of 1998, nearly 9 million U.S. households will have shopped online for travel
services and retail goods other than automobiles, generating $7.8 billion in
online sales. We expect these numbers to grow rapidly over the next five years
as high speed Internet connections become more popular and consumers overcome
security and privacy concerns and embrace the convenience of Web shopping.
Corporate E-Commerce
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Although retail online shopping appears to receive more attention, analysts
predict a much larger growth in business-to-business e-commerce. Forrester
Research estimates that by year 2003, consumers will spend $108 billion to buy
goods online, while businesses will spend $1.3 trillion. As expected, computing
and electronic equipment will remain one of the largest categories of goods
traded between businesses, reaching $395 billion in revenue by 2003, while other
industries, such as cars and petrochemicals, will also top the $150 billion
mark. In addition to the $1.3 trillion in business-to-business sales of
products, Forrester also reports that online transactions in business services
will equal $220 billion by 2003. Michael Putnam of Forrester Research states
that "Just as the Internet has revolutionized the goods industries, the services
industry is going to be reinvented."
Internet-based businesses have already created more than 200 on-line
marketplaces for conducting business-to-business (B2B) electronic commerce.
These Internet locations bring buyers and sellers together in a central
marketplace and, in addition, provide services such as procurement management,
financial settlement and quality assurance. These services enhance the B2B
sites' value to the end customers and allow it to become an integral part of
those customers' business processes.
By providing a central on-line hub that automates transactions, aggregates
information, improves market reach and provides related services, we believe
these B2B sites will help their participants reduce both product and process
costs. By resolving information-based inefficiencies, they act as catalysts to
compress time, slash costs and improve processes in ways that were previously
unimaginable. Leading research firms estimate that product and process cost
savings afforded by B2B sites will amount to $57 billion by 2003.
Sitestar.net
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Product Offerings
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Internet Access
Sitestar.net offers a variety of Internet access solutions. These solutions
range from 56K and ISDN dial-up accounts to 3Mbps wireless access connections.
We are one of the few ISP's in the country [Is this supported?] to offer
Internet access with wireless technology. Our wireless service ranges in speed
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from 128Kbps to up to 3Mbps. We are also offering high-speed Digital Subscriber
Line (DSL) service in Annapolis, Baltimore, and Washington D.C. All dial-up
accounts include e-mail, unlimited Internet access, Usenet newsgroups and
require no long-term contracts. The prices of our Internet services range from
16.95 to 79.95 per month.
Web Hosting
We provide web hosting services utilizing both Unix and Windows NT Servers.
Standard hosting services include access to the web site via FTP
and/or Microsoft FrontPage. As additional services we offer Secure Transactions
(SSL), E-commerce shopping carts, Cold Fusion, Real Audio, Real Video, Chat
Rooms, Bulletin Boards, Online Calendars, and more]. In addition to these
services, we also offer server co-location, high-end hosting solutions and
Internet/Intranet server setup services.
Website Design
We have provided web site design services since 1996 and, as of September 1999,
have developed web sites for 250 customers. We provide a free initial
consultation. Our customers can choose from several customized possible web
layouts for their business requirements. After our customer's selection, we
develop a prototype site and work with customers to design the site to their
specifications
Banner Development
We also design banner advertisements for our customers and, as of September,
1999, we have developed 300 banner advertisements.
Online Marketing
We offer web site marketing services that continually build upon our customer's
current listing to improve their placement in the search engines. Initial launch
of our customer's web site reaches over 400 search engines and services.
Customers and Marketing
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Our customer base consists primarily of small and medium sized enterprises
and dial-up customers located in secondary markets.
We use targeted marketing and media advertising to develop brand awareness
and supplement these efforts with our highly customized sales process and
personalized customer service. Through our marketing managers, we seek to
develop strong customer relationships within local communities.
Our marketing managers will also provide assistance and support to our
centralized sales staff. This enables us to evaluate customers' needs more
effectively, to design customized solutions and to reinforce our local presence
as a value-added provider of enhanced Internet services. Our marketing managers
also identify market trends, provide constant data regarding changes in the
competitive landscape and also may identify and initiate contact with new
customers. We also attend trade shows and other events to further reach the
targeted small and medium sized enterprises in each region.
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Competition
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The Internet services market is extremely competitive and highly
fragmented. We face competition from numerous types of ISPs, including national
ISPs, and anticipate that competition will only intensify in the future as the
ISP industry consolidates. We believe that the primary competitive factors in
the Internet services market include:
o Pricing;
o Quality and breadth of products and services;
o Ease of use;
o Personal customer support and service; and
o Brand awareness.
We believe that we compete favorably based on these factors, particularly
due to our:
o Regionally focused operating strategy;
o Superior customer support and service;
o High performance; and
o Competitive pricing.
Our current competitors include many large companies that have
substantially greater market presence, brand-name recognition and financial
resources than we do. Some of our local or regional competitors may also enjoy
greater recognition within a particular community. We currently compete, or
expect to compete, with the following types of companies:
o national Internet service providers, such as PSINet, Inc., Concentric
Network Corporation, Earthlink, Netcom and Mindspring;
o providers of Web hosting, collocation and other Internet-based
business services, such as Verio, Inc. and Navisite;
o numerous regional and local Internet service providers, some of which
have significant market share in their particular market area;
o established on-line service providers, such as America Online, Inc.
and Prodigy;
o computer hardware and other technology companies that provide Internet
connectivity with their or other products, including the International
Business Machines Corporation and Microsoft Corporation;
o national long distance carriers such as AT&T Corporation, MCI
WorldCom, Inc., Qwest Communications International Inc. and Sprint
Communications Company, L.P.;
o regional Bell operating companies and local telephone companies;
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o providers of free Internet service, including NetZero, Inc. and
MicroWorkz Computer Corporation; cable operators or their affiliates,
including At Home Corporation and Time Warner Entertainment Company,
L.P.;
o terrestrial wireless and satellite Internet service providers; and
o non-profit or educational ISPs.
Many of the major cable companies and some other Internet access providers
have begun to offer or are exploring the possibility of offering Internet
connectivity through the use of cable modems. Cable companies, however, are
faced with large-scale upgrades of their existing plant, equipment and
infrastructure in order to support connections to the Internet backbone via
high-speed cable access devices. We believe that there is a trend toward
horizontal integration through acquisitions or joint ventures between cable
companies and telecommunications carriers. Other alternative service companies
have also announced plans to enter the Internet connectivity market with various
wireless terrestrial and satellite-based service technologies. In addition,
several competitive local exchange carriers and other Internet access providers
have launched national or regional digital subscriber line programs providing
high speed Internet access using the existing copper wire telephone
infrastructure. Several of these competitive local exchange carriers have
announced strategic alliances with local, regional and national service
providers to provide broadband Internet access. If we are unable to provide
technologically competitive service, our revenues and profit margins may decline
materially, and our ability to attract additional customers may suffer.
Recently, several national access providers have begun to offer dial-up
Internet access for free or at substantial discounts to prevailing rates, which
may result in significant pricing pressure for dial-up Internet access services.
We also believe that manufacturers of computer hardware and software products,
media and telecommunications companies and others will continue to enter the
Internet services market, which will also intensify competition, especially for
dial-up access providers. If we are unable to compete with lower-cost providers
by providing superior service and support, our revenues and profit margins may
decline materially, and our ability to attract additional customers may suffer.
Acquisition Strategy
--------------------
We recently signed letters of intent to acquire Neocom Microspecialists,
Inc. and Eastern Shorenet, providers of Internet access, Web hosting and
co-location services in the Mid-Atlantic region. These proposed acquisitions are
consistent with our growth strategy of building our presence in secondary
markets that have traditionally been under served by the larger Internet
services companies. In addition, we are also actively seeking acquisition
opportunities and/or candidates in the Mid-Atlantic region that would help us
achieve critical mass in terms of our Internet access, development and hosting
customers.
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Greattools.com
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Product Offerings
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Greattools.com is a direct merchandiser of over 60 specialty tool products
designed for light to heavy industrial applications. We market our products
under the name Great Tools Direct(TM) and maintain a diverse product line
comprised of five categories: (1) Power Tools; (2) Cutting Tools; (3) Masonry;
(4) Accessories; and (5) Automotive. We offer a comprehensive product line
aggregating approximately 90 different models of cordless drills, batteries,
cutting tools, sanders, grinders and miscellaneous power tool accessories. Our
main product and primary source of revenue is the cordless drill. Sales from
cordless drill account for about 80% of our Greattools.com revenues. We offer a
variety of cordless drills from the least powerful 2.4volt model to the more
advanced 18.8volt power drill. The 14.4volt cordless drill has become the
standard consumer drill for household use. We offer a 16.8volt drill and an
18.8volt drill at discounted prices. We have recently introduced a 24volt drill
and plan on introducing other products based on our assessment of trends and
market demand.
All GREAT TOOLS DIRECT products are designed and manufactured in China by
Tehao and Hitachi, two large manufacturers of industrial products, according to
strict specifications determined by our fulfillment center. Our fulfillment
center, Global Sourcing Group, frequently develops innovative design concepts in
an effort to improve and differentiate their product line from existing
competition. .
Our home page features advertisements, testimonials and promotions for
various in-stock merchandise. Our in-stock merchandise is carried entirely by
our fulfillment center. Global Sourcing Group's inventory acts as our "virtual"
inventory which translates to savings with regards inventory related costs. The
web site provides customers with product information and the ability to directly
purchase products over the Internet in a secure environment.
We maintain a standard refund policy to any consumer who purchases a
defective product. We have a thirty-day money back guarantee wherein we refund
or replace any products within thirty days from purchase. From inception, we
have refunded on the average less than three percent of our sales.
Customers and Marketing
-----------------------
Our target market consists of retail customers located throughout the
United States, Canada and South America. We target value-oriented consumers,
do-it-yourselfers and contractors who use power tools for light to heavy
industrial applications. We also target professionals who require tools in their
daily activity, such as plumbers, carpenters, electricians and a variety of
other services and repair professionals.
The retail segment also includes consumers who use power tools for
household applications. These include hobbyists, homemakers, students and other
do-it-yourselfers.
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The Company's market development strategy is based on several marketing
channels:
Direct Response Advertising
We advertise in specialty magazines and consumer publications, including
Popular Mechanics (circulation: 1,000,000), American Woodworker (circulation:
400,000), Wood Magazine (circulation: 650,000), Popular Woodworker (circulation:
220,000) and American How To (circulation: 750,000). We believe that these
publications are the most efficient medium to reach its target market. The
advertisements highlight our product line and feature the Internet address as
the primary means of ordering products, as well as a toll-free telephone number.
Database Marketing
We have created a database of customers for repeat sales and special
promotions. The database currently contains over 35,000 names. Each time a
customer places an order online, the database is updated to reflect that
customer's information and buying patterns. Due to the database's sorting
capabilities, we believe it receives a greater percentage of responses from
direct mail to the database targets than it would receive from a generic mass
mailing. We repeatedly mail marketing materials, catalogs and brochures to our
customers. Our catalog, produced once a year, lists the products we maintain in
our warehouse and products we can order directly from Tehao. The catalog is
mailed to all of the 35,000 names on our mailing list as well as new potential
customers generated by our Web site and regular advertisements.
We believe that a large portion of our potential success relies on the
reputation we have created in our "Great Tools Direct" brand name. However, we
do not have any specific plans to protect our mark "Great Tools Direct" by
filing a trademark application with the United States Patent and Trademark
office (PTO). We have conducted a trademark search on the label Great Tools
Direct which did not result in the discovery of any other commercial entity
using the Great Tools Direct or a substantially similar label in the United
States. We decided that we could better use our limited capital in advertising
and other expenses rather than investing in protecting its Great Tools Direct
brand name.
Power Tools Industry
--------------------
Dominated by large home centers and hardware and lumber cooperatives such
as Home Depot, Loews, Menard's, Ace and True Value, the tool market is large,
highly fragmented and characterized by multiple channels of distribution. The
distribution channels in the power tools market include retail outlets, small
distributorships, national, regional and local distributors, direct mail
suppliers, large warehouse stores and manufacturer's own direct sales forces.
Products imported from low-cost labor countries have increased the
competitive pressures on pricing. Cost pressures from more established name
brands are providing a focus on high quality, low cost alternatives. Aggressive
value pricing has redefined the basis for competition in many of the Company's
product lines.
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There are many discount retailers in the industry offering products at
competitive prices and blurring the distinction between wholesale and retail
such as Home Depot, Menards and Wal-Mart. Warehouse clubs and other category
leaders are establishing a new economic framework for the retail business,
forcing industry participants to reduce costs. Major marketers have focused on
value pricing strategies, changing the nature of merchandising throughout the
industry.
Competition
-----------
The power tool market in which we operate is extremely competitive, and we
expect such competition to intensify in the future. Our current and prospective
competitors include many large companies that have substantially greater market
presence and financial, technical, marketing and other resources than we have.
We compete with many retailers and direct marketers who sell merchandise over
the Internet and through catalogs. We also compete with traditional retailers
who sell similar merchandise to that sold by us. Those retailers usually offer
brand name products at prices higher than our products. As newer and more
powerful tools are being introduced into the market, intense competition between
manufacturers has developed. Companies in the industry are developing new
features to attract customers and tools are becoming more reliable, efficient
and quiet. At the same time, prices are becoming more competitive as power tool
companies are vying to gain market share. Moreover, as brand delineation becomes
more challenging, pricing becomes more competitive, thus further increasing the
drive to gain market share.
We believe that our ability to compete successfully depends on a number of
factors, including: (1) our ability to continually provide the customer with
value by offering quality products at prices lower than the prices usually
charged for name brand products; and (2) maintaining a flexible product line and
quickly adapting to the changing needs and tastes of the market.
Acquisition Strategy
--------------------
We believe there are acquisition opportunities among the many small sellers
of power tools. If we believe a favorable opportunity exists, we anticipate that
we will enter into discussions with the owners of such businesses regarding the
possibility of an acquisition by the Company. As of the date hereof, we do not
have any agreements or pending acquisitions and have not entered into any
letters of intent with respect to pending acquisitions. No assurance can be
given that we will identify satisfactory acquisition candidates or, if
identified, that we will be able to consummate an acquisition on terms
acceptable to us.
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Holland-American.com
- --------------------
Product Offerings
-----------------
Holland-American.com is an online purveyor of imported and domestic
specialty gourmet foods. We sell specialty products, such as condiments, sauces
and toppings, entrees, prepared foods and soups, breads, pasta, grains and
beans, crackers/snacks, desserts and confections and oils and vinegar.
Specialty Foods Industry
------------------------
Specialty Food Market Today
The products we sell are known as "gourmet and specialty food," defined by
the industry as a whole as distinctive food of high quality. This includes
traditional gourmet food and confections. This category also includes branded
specialty products which are available in specialty restaurants or retail shops.
Our criteria for determining whether to classify a food product as gourmet or
specialty include:
o cost of ingredients;
o cost of processing;
o freshness/perishability;
o uniqueness;
o newness/cutting edge;
o cost of packaging; and
o cost of importation/distribution.
We work closely with our fulfillment center, Holland American International
Specialties, our former food distribution division, in selecting products for
our Web site through a formal review process which involves review of the
supplier background and the details of their product line. Our fulfillment
center's product review committee then samples representative products from each
supplier and rates the products by standardized criteria.
Retail Market
The retail food market involves the sale of food products to individual
consumers and households. The gourmet and specialty food industry is a sizable
segment of the United States retail food market. According to a 1995 market
report published by Packaged Facts, retail sales of gourmet and specialty food
are projected to reach approximately $48 billion in 2000. Currently, specialty
food is principally sold through the following retail channels:
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o supermarkets;
o gourmet and specialty food stores;
o mail order catalogs;
o department stores;
o 32-television shopping channels; and
o discount warehouse retailers.
The combination of the size of the specialty food market and the growth of
online shopping have created what we believe to be a sizable market opportunity.
Wholesale Market
The wholesale market consists of specialty food retailers, gift shops,
caterers, restaurants and other resellers of specialty food products.
Traditionally, suppliers of specialty food have distributed their products
either by using a food broker to sell to retailers at wholesale prices, or by
selling their products to specialty food distributors who in turn sell to
retailers. In these arrangements, food brokers generally receive a 10%
commission on the wholesale price and distributors generally purchase the
product at a 20% to 25% discount from the supplier's wholesale price. The
assortment of specialized food brokers and distributors that currently supports
the industry is highly fragmented. As a result, many retail outlets for
specialty food products are underserved or have limited access to these food
brokers and distributors.
Online opportunity in Specialty Foods
In both the retail and wholesale markets, we believe electronic commerce
offers opportunities to improve the specialty food shopping experience and
selection. We believe traditional specialty food businesses face a number of
challenges in providing a satisfying experience:
o the specialty food market is highly fragmented with no single dominant
retailer or wholesaler, and we estimate there are at least 5,000
suppliers throughout the United States;
o this fragmentation leaves both retail and wholesale customers without
access to a broad base of specialty food products;
o distributors who carry specialty food products are limited in the
products they can offer by inventory holding costs, inventory spoilage
and warehouse size, which restricts the supply and selection available
for customers;
o mail order catalogs are not updated as inventory level or consumer
demand changes and are expensive to produce and mail; and
o traditional retail stores have costs associated with occupying and
operating a physical store and selection is limited by the size of the
store and inventory considerations.
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We believe that sales of gourmet and specialty food over the Internet
provides a means to address many of these challenges.
Customers and Marketing
Specialty foods are value-added, premium-priced items that are specifically
targeting consumers who are willing to pay a premium. The Company's primary
target market consists of discriminating consumers who seek imported specialty
gourmet foods. According to the National Association of the Specialty Food
Trade, such consumers typically share certain of the following demographics: (1)
Reside on the Pacific Coast or in New England; (2) Live in an urban community;
(3) are in the 25-44 age group; (4) College educated; (5) A professional or
proprietor/manager; (6) Earn upwards of $50,000 per annum; and (7) Have children
under the age of six.
We also have a potential to market to multiple secondary target markets in
the wholesale sector. Such potential customers include corporate coffeehouses,
restaurant chains, gift shops, supermarkets, grocery stores, institutional
accounts and other specialty stores.
The cornerstone in our marketing strategy is our personnel's knowledge of
the consumer. We believe that tomorrow's specialty food consumer will have a
broader age range from teens to elderly and will be more health conscious and
adventurous when it comes to specialty foods products. According to the
International Dairy-Deli-Bakery Association's 1996 year-end report, the next
generation will have a slant toward global environmentalism, blurred political
boundaries and cross-cultural values. In terms of the food consumer of tomorrow,
the report found that "clean" or "organic" food will be in great demand as baby
boomers and young people, with their concern for the environment, do more
shopping.
The development of the Holland-American.com market potential is predicated
upon the establishment of a diversified product portfolio capable of serving the
different types of imported specialty gourmet food needs of its target
customers. This would be crucial if we intend to exploit the opportunity to
influence "impulse" purchases. According to a 1996 A.C. Nielsen (Schaumburg,
Illinois) survey, cookies, crackers and other specialty snacks are among the
"high impulse" items.
We believe that convenience is the driving force spurring the desires of
America's specialty gourmet food product needs. A growing number of consumers
are embracing the convenience of shopping for specialty foods online. Our
commitment to carrying a comprehensive product line, making shopping a fun and
easy experience for the consumer and shipping orders in a timely manner will
play a critical role in our objective in achieving critical mass.
Competition
-----------
We operate in a competitive environment. The industry is dominated by large
regional retail establishments such as Whole Foods Market, Wild Oats, Trader
Joe's, Gelson's and Bristol Farm that rely heavily on aggressive marketing
campaigns and customer referrals. Many of these traditional retailers offer
diverse product lines and competitive pricing. In some instances, these firms do
market their products over the Internet such as Whole Foods Market, Wild Oats
and Bristol Farms.
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We enjoy three competitive advantages over these larger, regional firms:
(1) More diverse product lines, enabling the Company to act as a single-source
provider for all the customer's specialty foods needs; (2) the convenience of
online shopping; and (3) Prompt shipment of all customer orders.
Acquisition Strategy
--------------------
We intend to consider potential acquisitions to attempt to increase our
market share and revenues. To date, we have not entered into discussions with
any specific acquisition candidates. No assurance can be given that we will
identify satisfactory acquisition candidates or, if identified, that we will be
able to consummate an acquisition on terms acceptable to us.
Soccersite.com
- --------------
Product Offerings
-----------------
Soccersite.com is a content-oriented and e-commerce Internet site with over
400 pages of information about the sport of soccer. We provide traditional news
on recent professional soccer games, and we allow visitors to post amateur
league and tournament information and training camps. We also provide a forum
for coaches to interact with players and other coaches. We also host a special
section that caters to young soccer enthusiasts. In addition, we provide a
search capacity for visitors to explore specific topics. All content information
is provided free of charge to the visitor.
To capitalize on the retail opportunities associated with our web site, we
created SoccerMall, an e-commerce retailer of soccer-related merchandise and
apparel. All orders to SoccerMall are fulfilled directly by us through our
relationship with a local distributor in Annapolis, Maryland. The merchandise
selection of our fulfillment center also acts as our "virtual" inventory.
Soccer Industry
---------------
Widely regarded as the world's most popular sport, soccer is growing at a
rapid pace in the United States. Largely attributed to the expansive Latino
immigrant fan base, Southern California has become the epicenter for the soccer
community in North America. According to the Los Angeles Times, attendance at
international soccer games hosted in Los Angeles is up over 200% from its
introduction in 1997. In comparison to other professional Los Angeles sports
teams, the L.A. Galaxy (Major League Soccer professional team) consistently drew
larger home game crowds than any other local team except the Los Angeles Dodgers
with the local fan base largely comprised of members of the Latino community.
Strategy Research Corp., a leading industry association which tracks trends in
the Latino community, estimates the Southern California Latino consumers yield a
collective buying power of $57 billion.
Customers and Marketing
-----------------------
To date, we have had no targeted marketing campaign. Nonetheless,
word-of-mouth advertising and traffic generated by search engines, have resulted
in nearly one million visitors to the web site in the past year.
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<PAGE>
In addition to retail sales through SoccerMall, we sell advertising space
on the web site to merchants and manufacturers.
We are currently developing a marketing strategy designed to attract more
consumers to the web site, build greater advertising opportunities and further
advance the sport of soccer. This strategy will likely include sponsoring
amateur and professional soccer events, advertising in major industry
publications and participating in cooperative ventures with industry
associations.
Competition
-----------
There are numerous soccer-related organizations which have a presence on
the Internet. Most web sites are retail e-commerce websites offering soccer
merchandise and apparel. There are a smaller number of web sites that look to
combine a content-oriented format with the convenience of retail, including
Soccerweek.com and Soccermadness.com.
Acquisition Strategy
--------------------
We believe there are acquisition opportunities among the providers of value
added information about the sport of soccer. In furtherance of our acquisition
strategy, we anticipate reviewing and conducting investigations of potential
acquisitions. If we believe a favorable opportunity exists, we anticipate that
we will enter into discussions with the owners of such businesses regarding the
possibility of an acquisition by us. As of the date hereof, we do not have any
agreements or pending acquisitions and have entered into any letters of intent
with respect to pending acquisitions. No assurance can be given that we will
identify satisfactory acquisition candidates or, if identified, that we will be
able to consummate an acquisition on terms acceptable to us.
EMPLOYEES
As of September 30, 1999, we employed twelve (12) full time individuals. We
have four from management, six from sales and marketing and two from
administration. Our employees are not unionized, and we consider our relations
with our employees to be favorable.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH OUR FINANCIAL STATEMENTS AND THE RELATED NOTES TO THE FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THIS REGISTRATION STATEMENT. THE FOLLOWING INCLUDES A
NUMBER OF FORWARD-LOOKING STATEMENTS THAT REFLECT OUR CURRENT VIEWS WITH RESPECT
TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. WE USE WORDS SUCH AS ANTICIPATES,
BELIEVES, EXPECTS, FUTURE, AND INTENDS, AND SIMILAR EXPRESSIONS TO IDENTIFY
FORWARD-LOOKING STATEMENTS. INVESTORS SHOULD NOT PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS OF THE DATE OF THIS REGISTRATION
STATEMENT. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
HISTORICAL RESULTS OR OUR PREDICTIONS. FOR A DESCRIPTION OF THESE RISKS, SEE THE
SECTION ENTITLED "FACTORS THAT MAY AFFECT FUTURE RESULTS."
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OVERVIEW
We changed our corporate focus from that of a food holding company to an
Internet holding company with the acquisition of Sitestar Corporation in July
1999. Soon after concluding this acquisition, we started focusing on acquiring
and investing in Internet-based enterprises. Our mission is to develop our
Internet operating subsidiaries and future investments in other Internet
enterprises into highly focused and successful stand-alone Internet businesses.
We intend to achieve a fast-track development process by tapping the services,
support and knowledge of individuals and organizations that have extensive
experience in developing Internet concepts and technologies.
In July 1999, we began to implement our current strategy of acquiring and
investing in emerging internet based enterprises to create a broad and diverse
set of core Internet businesses which deliver a variety of online solutions. In
addition to developing and integrating internet-based technologies, our primary
objective is to create a mix of Internet operating companies and
Internet-related portfolio investments that will enhance the value of its core
holdings.
Our Internet services subsidiary began providing Internet services to its
customers in 1996 by providing Internet access and enhanced products and
services to small and medium sized enterprises in selected high growth markets.
We target primarily small and medium sized enterprise customers located in
selected high growth secondary markets. We currently provide our customers with
Internet access and enhanced products and services in the mid-Atlantic area of
the United States. We have designed our comprehensive suite of enhanced products
and services to meet the expanding needs of our customers and to increase our
revenue per customer. The products and services we provide include: * Internet
access services;
* Web design services;
* Web hosting services;
* End to end e-commerce solutions;
* Online marketing consulting; and
* Management of mission critical Internet applications.
RESULTS OF OPERATIONS
Prior to our change in corporate focus from that of a food holding company
to that of an Internet holding company, we generated all of our revenues from
sales of specialty food products. We have historically derived a majority of our
revenues from small independent specialty food retail customers. From inception
until July 1999, we generated revenues exclusively from wholesale and retail
sales. We derive income from our wholesale and retail sales from the excess of
the wholesale and retail prices we charge our customers over the product costs
we pay our suppliers. We have a wholesale program in which we sell bulk
quantities of specialty food products to registered retailers at wholesale
prices. In this program, we purchase products from suppliers at a distributor's
discounted price and derive income from the difference between this discounted
price and the wholesale price we charge. Additionally, our retail customers pay
for orders by cash or credit card while we pay our suppliers on extended terms.
As a result, we are able to increase our working capital between the time we
receive payment for orders and the time we are required to pay suppliers.
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<PAGE>
Our net revenues have grown since inception, from $1,553,926 in 1997 to
$2,175,867 in 1998. Specialty food sales are inherently seasonal, with highest
volumes during the fourth quarter holiday season. Additionally, our business has
a large gift-giving component. As a result of these two factors, approximately
46% of our 1998 sales were realized in the fourth quarter. We have taken steps
intended to reduce the magnitude of this trend such as expanding our product
selection, and emphasizing non-holiday occasions and personal consumption.
However, we expect fourth quarter sales to continue to represent a
disproportionate amount of annual sales in the future.
We incurred net losses of $197,839 in the six months ended June 30, 1999,
$284,494 in year ended December 31, 1998 and $194,069 in seven months ended
December 31, 1997. At June 30, 1999 we had an accumulated deficit of $676,402.
On a pro forma basis, had the divestiture of Holland American taken place at
January 1, 1999, our net loss in the six months ended June 30, 1999 would have
been $103,830. We also anticipate to further cut the losses as a result of the
elimination of the additional corporate expenses related to our spun-off food
operations.
We have a limited operating history on which to base an evaluation of our
business and prospects. You must consider our prospects 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. To address these risks, we must obtain sufficient
operating capital, maintain and expand our customer base, continue to increase
our product offerings, successfully implement our business, marketing and
promotional strategies, continue to develop our order processing technology,
respond to competitive developments in the specialty food market, and attract,
retain and motivate qualified personnel. We cannot assure you that we will be
successful in addressing these risks and our failure could be harmful to our
business, prospects, financial condition and results of operations.
The following table sets forth statement of operations data as a percentage
of revenues for the periods indicated:
Year Seven Months Six Months
Ended Ended Ended June 30,
December 31, December 31, -----------------
1998 1997 1999 1998
------------ ------------ ------ ------
Revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of revenues 74.2 75.8 75.1 69.8
Selling, general and
Administrative 38.0 36.7 43.7 29.1
----- ----- ----- -----
112.2 112.5 118.8 98.9
----- ----- ----- -----
Operating loss (12.2) (12.5) (18.8) 1.1
----- ----- ------ -----
Net loss (12.2)% (12.5)% (18.8)% 1.1%
====== ====== ====== ======
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<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
REVENUES. Net revenues consist of product sales to customers and charges to
customers for outbound shipping and handling costs and are net of product
returns and promotional discounts. Revenues are recognized upon the shipment of
products from our suppliers. Net revenues decreased to $870,249 for the six
months ended June 30, 1999 from $882,471 for the six months ended June 30, 1998.
This decrease reflects a decreased number of transactions due to a shortage of
products in the first quarter.
COST OF GOODS SOLD. Cost of goods sold consists primarily of the costs of
products sold to customers and actual outbound shipping and handling costs. Cost
of goods sold increased to $654,011 for the six months ended June 30, 1999 from
$616,688 for the six months ended June 30, 1998. Our gross profit margin
decreased to 24.9% of net revenues for the six months ended June 30, 1999 from
30.1% of net revenues for the six months ended June 30, 1998. This decrease in
gross profit margin was due to a few factors: During the first quarter of 1999,
we offered many products at promotional prices to increase sales after the
holiday season. As part of our promotional campaign, we also experienced
substantial demand in the first quarter of 1999 for products for which our
prices did not allow us to recoup our shipping costs. However, once our
promotional campaign is over, we anticipate to recoup all our shipping costs in
all future sales.
SELLING, GENERAL AND ADMINISTRATIVE. Sales and marketing expenses consist
primarily of advertising and promotional expenditures and payroll and related
expenses for personnel engaged in sales and marketing activities. Selling,
general and administrative expenses increased by $123,817, or 48.2%, to $380,623
for the six months ended June 30, 1999 compared to $256,806 for the six months
ended June 30, 1998. As a percentage of revenues, selling, general and
administrative expenses increased to 43.7% for the six months ended June 30,
1999 from 29.1% for the six months ended June 30, 1998. This increase is
primarily attributable to the increase in general and administrative personnel
and an increase in corporate expenses. Our corporate general and administrative
expenses, which were not incurred in the seven months ending December 31, 1997,
increased by $103,830.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE SEVEN MONTHS ENDED DECEMBER 31,
1997
REVENUES. Net revenues consist of product sales to customers and charges to
customers for outbound shipping and handling costs and are net of product
returns and promotional discounts. Revenues are recognized upon the shipment of
products from our operations facility. Revenues increased by $621,941 or 40%, to
$2.176 million for the year ended December 31, 1998 from $1.554 million for the
seven months ended December 31, 1997. This increase in revenues resulted from
the Company's first full year of operation compared to the seven months ended
December 31, 1997. On a pro forma annualized basis, our sales would have been
estimated at $2.664 million if we had an additional five months in the seven
months ended December 31, 1997. On a pro forma basis, this decrease in revenues
reflects a decreased number of transactions due to the lack of products due to a
deficiency in our working capital. All of the Company's revenues came in from
its specialty food operations during fiscal years 1997 and 1998. We do not
anticipate the same revenue sources due to our recent divestiture of our food
operations.
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<PAGE>
COST OF GOODS SOLD. Cost of goods sold consists primarily of the costs of
products sold to customers and actual outbound shipping and handling costs. Cost
of goods sold increased by $437,047, or 37%, to $1.614 million for the year
ended December 31, 1998 from $1.177 million for the seven months ended December
31, 1997. This increase was primarily attributable to the increase in our sales
period from seven months ending December 31, 1997 to twelve months ending
December 31, 1998. On a pro forma annualized basis, our cost of goods sold would
have been estimated at $2.017 million. The decrease of cost of goods sold in the
twelve months ended December 31, 1998 compared to the annualized cost of goods
sold for fiscal year 1997 was primarily to the decrease in revenues in the
twelve months ended December 31, 1998. As a percentage of revenues, cost of
goods sold were 74.2% for the year ended December 31, 1998, compared to 75.8%
for the year ended December 31, 1997. Our gross profit margin increased to 25.8%
of net revenues for the twelve months ended December 31, 1998 from 24.2% of net
revenues for the seven months ended December 31, 1997. This increase in gross
profit margin was due to the new products we offered that have slightly higher
margins during fiscal year 1999 to broaden our product offering.
SELLING, GENERAL AND ADMINISTRATIVE. Sales and marketing expenses consist
primarily of advertising and promotional expenditures and payroll and related
expenses for personnel engaged in sales and marketing activities. Selling,
general and administrative expenses increased by $256,922, or 45%, to $827,040
for the year ended December 31, 1998 from $570,118 in the seven months ended
December 31, 1997. This increase was primarily attributable to the increase in
our sales period from seven months ending December 31, 1997 to twelve months
ending December 31, 1998. On a pro forma annualized basis, selling, general and
administrative expenses in fiscal year 1997 would have been estimated at
$977,345. As a percentage of revenues, these expenses were 38.0% for the year
ended December 31, 1998, compared to 36.6% for the year ended December 31, 1997.
This increase in selling, general and administrative expense in dollars and as a
percentage of revenues is primarily attributable to the increase in selling,
general and administrative on the corporate level related on acquisition related
expenses such as legal, accounting and public relations.
LIQUIDITY AND CAPITAL RESOURCES
Our business plan has required, and is expected to continue to require,
substantial capital to fund operations, capital expenditures, expansion of sales
and marketing capabilities and acquisitions.
To date, we have financed our operation primarily through short-term
borrowings and internally generated cash flow form our operations. In addition
since December 31, 1998, we borrowed approximately $415,000 from various
investors and approximately $144,000 from our stockholders in exchange for
promissory notes in these principal amounts which bear interest at the rate of 8
percent per year.
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We believe that the net cash position on a pro forma basis with the
acquisition of Sitestar, together with our existing cash and cash equivalents,
will be sufficient to meet our working capital and capital expenditure
requirements for at least the next 6 months. Thereafter, we may be required to
seek additional sources of financing. We may also be required to raise
additional financing before such time. If additional funds are raised through
the issuance of equity securities, our existing shareholders may experience
significant dilution. Furthermore, additional financing may not be available
when needed or, if available, such financing may not be on terms favorable to us
or our shareholders. If such sources of financing are insufficient or
unavailable, or if we experience shortfalls in anticipated revenue or increases
in anticipated expenses, we may need to slow down or stop the expansion of our
e-commerce business, including our ISPs and reduce our marketing and development
efforts. Any of these events could harm our business, financial condition or
results of operations.
IMPACT OF THE YEAR 2000 ISSUE
Many computer programs have been written using two digits rather than four
to define the applicable year. This poses a problem at the end of the century
because these computer programs may recognize a date using 00 as the year 1900
rather than the year 2000. This, in turn, could result in major system failures
or miscalculations, and is generally referred to as the year 2000 issue. We have
formulated and, to a large extent, implemented a plan to address our year 2000
issues.
During 1999, we established a year 2000 compliance program to coordinate
our efforts to resolve our year 2000 issues. We are addressing our year 2000
issues through a comprehensive assessment of both our internal systems and the
systems of our external operating and suppliers.
INTERNAL SYSTEMS ASSESSMENT AND REVIEW
Our internal systems assessment and review consists of four-phases, which
we expect to complete by the end of the third quarter of 1999:
* ASSESSMENT--We have conducted an inventory of our existing systems,
performed risk assessment on these systems, prioritized the importance
of these systems, and determined appropriate allocation of resources.
This assessment is substantially complete.
* ANALYSIS AND PLANNING--We have selected corrective methods where
needed, developed appropriate test standards, determined conversion
sequences where needed, and established a detailed timeline for
correcting any known year 2000 problems. This analysis and planning is
substantially complete.
* CONVERSION AND TESTING--We are developing and modifying operating
codes, purchasing or installing vendor-provided solutions and
conducting unit and system tests. Our conversion and testing phase is
substantially complete.
* IMPLEMENTATION--We have begun modifying previously non-compliant
systems, installing third party solutions, updating operational
procedures, and training our employees as needed. This implementation
phase is substantially complete.
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We also face risks from customer-provided hardware and software that we
host in our data centers that in many cases has been customized by outside
service providers or customer personnel. While we inform our customers that they
are responsible for year 2000 compliance of their hosted hardware and software,
we cannot assure you that our customers will take the steps necessary to achieve
year 2000 compliance. The failure of our customers and third-party providers to
ensure that their hosted hardware and software is year 2000 compliant could
disrupt our operations and materially adversely affect our financial condition
and operating results.
EXTERNAL SYSTEMS ASSESSMENT AND REVIEW
We have also conducted a four-phase review of the systems of our
operatings, suppliers, and other third parties (including equipment providers
and other telecommunications service providers) to assess their year 2000
compliance efforts. The first phase, which is completed, included identifying
our critical operatings, suppliers, and vendors. This phase involved requesting
information from these critical operatings, analyzing their responses, studying
their published year 2000 statements, performing our own risk assessments,
prioritizing the importance of potential non-compliant systems and determining
appropriate allocation of resources.
Our second phase includes developing personal contacts with critical
operatings' year 2000 staff, articulating our concerns and requesting assistance
from them with respect to their products. This phase is substantially complete.
Our third phase includes receiving information from responses to our requests
for assistance, researching Web sites, making phone contacts and summarizing the
results of the information that we receive. Finally, our fourth phase includes
actively evaluating different systems, testing critical operatings' year 2000
updates, reviewing such information with our management team and identifying any
additional resources that may be needed. We believe that phases three and four
of our review will be substantially complete prior to the end of the third
quarter of 1999.
We have reviewed and analyzed the year 2000 compliance of Sitestar.net,
which we acquired in July 1999. We are in the process of integrating
Sitestar.net into our operations. We do not believe that this integration of
their systems with ours will have an adverse effect on our year 2000 compliance
status.
During the year ended December 31, 1998, we spent over $8,000 in connection
with the upgrade and continuing build-out of our technical operations and
network. We believe that all of this newly acquired equipment is year 2000
compliant. We have incurred costs and expect to incur additional costs in 1999
in connection with our year 2000 program, which we believe will not be material.
We currently believe that our most likely worst case scenario related to
the year 2000 issue is associated with concerns with our suppliers' products and
software. If one or more of our suppliers experience year 2000 problems which
result in decreased Internet usage and that delay or interfere with our ability
to receive or transmit our customers' data, our business and operations could be
adversely affected.
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We believe that our plan to address year 2000 issues will be fully executed
prior to January 1, 2000; however, any failure of this plan could have a
material adverse effect on our operating results. Despite the testing performed
by us and our vendors, our products, services and systems may contain undetected
errors or defects associated with year 2000 date functions. In the event any
material errors or defects are not detected and fixed, or third parties cannot
timely provide us with products, services or systems that meet the year 2000
requirements, our operating results could be materially adversely affected. We
cannot guarantee that we will be able to timely and successfully modify our
products, services and systems to comply with year 2000 requirements if we have
failed to accurately assess, test and correct year 2000 issues. Known or unknown
errors or defects that affect the operation of our products, services or systems
could result in a delay in the receipt of payment, interruption of network
services, cancellation of customer contracts, diversion of development
resources, damage to our reputation and litigation costs. We cannot guarantee
that these or other factors relating to year 2000 compliance issues will not
have a material adverse effect on our business.
We have prepared a contingency plan in the event that any of our products,
services or systems remain non-compliant as of December 31, 1999. As part of
this contingency plan, we may replace any non-compliant suppliers or other third
party providers with those with demonstrated year 2000 compliance.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
We operate in a rapidly changing environment that involves a number of
risks, some of which are beyond our control. Forward-looking statements in this
document and those made from time to time by us are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements concerning the expected future revenues or earnings
or concerning projected plans, performance, product development, product release
or product shipment, as well as other estimates related to future operations are
necessarily only estimates of future results and there can be no assurance that
actual results will not materially differ from expectations. We undertake no
obligation to publicly release the results of any revisions to forward-looking
statements which may be made to reflect events or circumstances occurring after
the date such statements were made or to reflect the occurrence of unanticipated
events.
Factors that could cause actual results to differ materially from results
anticipated in forward-looking statements include, but are not limited to the
following:
RISKS PARTICULAR TO SITESTAR CORPORATION
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE US.
Our new corporate philosophy was formulated in July 1999. Although we have
grown significantly since then, we have a limited operating history upon which
you may evaluate our business and prospects. We and our wholly owned operating
companies are among the many companies that have entered into the emerging
e-commerce market. All of our operating companies are in the early stages of
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their development. Our business and prospects must be considered in light of the
risk, expense and difficulties frequently encountered by companies in an early
stage of development, particularly companies in new and rapidly evolving markets
such as e-commerce. If we are unable to effectively allocate our resources and
help grow existing operating companies, our stock price may be adversely
affected and we may be unable to execute our strategy of developing a
collaborative network of operating companies.
OUR BUSINESS DEPENDS UPON THE PERFORMANCE OF OUR OPERATING COMPANIES, WHICH IS
UNCERTAIN.
Economic, governmental, industry and internal company factors outside our
control affect each of our operating companies. If our operating companies do
not succeed, the value of our assets will decline. The material risks relating
to our operating companies include:
o fluctuations in the market price of the common stock of our future
publicly traded operating companies, which are likely to affect the
price of our common stock;
o lack of the widespread commercial use of the Internet, which may
prevent our operating companies from succeeding; and
o intensifying competition for the products and services our operating
companies offer, which could lead to the failure of some of our
operating companies.
The other material risks relating to our operating companies are more fully
described below under "Risks Particular to Our Operating Companies."
OUR BUSINESS MODEL IS UNPROVEN.
Our strategy is based on an unproven business model. Our business model
depends on the willingness of companies to join our collaborative network and
the ability of the collaborative network to assist our operating companies. Our
business model depends on our ability to share information within our network of
operating companies. If competition develops among our operating companies, we
may be unable to fully benefit from the sharing of information within our
network of operating companies. If we cannot convince companies of the value of
our business model, our ability to attract new companies will be adversely
affected and our strategy of building a collaborative network may not succeed.
WE MAY HAVE TO TAKE CERTAIN ACTIONS TO AVOID REGISTRATION UNDER THE INVESTMENT
COMPANY ACT OF 1940.
We believe that we are actively engaged in the business of e-commerce
through our network of operating companies. However, due to a significant
possibility that many of our future operating companies may not be
majority-owned subsidiaries, changes in the value of our interests in our
operating companies and the income/loss and revenue attributable to our
operating companies could require us to register as an investment company under
the Investment Company Act unless we take action to avoid being required to
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register. For example, we may be unable to sell minority interests we would
otherwise want to sell and may need to sell some assets which are not considered
to be investment securities, including interests in operating companies. We may
also have to ensure that we retain at least a 25% ownership interest in our
operating companies after their initial public offerings. In addition, we may
have to acquire additional income or loss-generating assets that we might not
otherwise have acquired or may have to forgo opportunities to acquire interests
in companies that we would otherwise want to acquire would be important to our
strategy. It is not feasible for us to register as an investment company because
the Investment Company Act regulations are inconsistent with our strategy of
actively managing, operating and promoting collaboration among our network of
operating companies.
FLUCTUATIONS IN OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT OUR STOCK PRICE.
We expect that our quarterly results will fluctuate significantly due to
many factors, including:
* the operating results of our operating companies;
* changes in equity losses or income and amortization of goodwill
related to the acquisition or divestiture of interests in operating
companies;
* changes in our methods of accounting for our operating company
interests, which may result from changes in our ownership percentages
of our operating companies;
* sales of equity securities by our operating companies, which could
cause us to recognize gains or losses under applicable accounting
rules;
* the pace of development or a decline in growth of the e-commerce
market;
* intense competition from other potential acquirors of B2B e-commerce
companies, which could increase our cost of acquiring interests in
additional companies, and competition for the goods and services
offered by our operating companies; and
* our ability to effectively manage our growth and the growth of our
operating companies during the anticipated rapid growth of the
e-commerce market.
We believe that period-to-period comparisons of our operating results are
not meaningful. Additionally, if our operating results in one or more quarters
do not meet securities analysts' or your expectations, the price of our common
stock could decrease.
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OUR SUCCESS IS DEPENDENT ON OUR KEY PERSONNEL AND THE KEY PERSONNEL OF OUR
OPERATING COMPANIES.
We believe that our success will depend on continued employment by us and
our operating companies of senior management and key technical personnel. Our
success also depends on the continued assistance of our Advisory Board members,
some of whom may from time to time leave our Advisory Board. If one or more
members of our senior management, our operating companies' senior management or
our Advisory Board were unable or unwilling to continue in their present
positions, our business and operations could be disrupted.
As of September 30, 1999, all of our management personnel have worked for
us for less than one year. Our efficiency may be limited while these employees
and future employees are being integrated into our operations. In addition, we
may be unable to find and hire additional qualified management and professional
personnel to help lead us and our operating companies.
The success of some of our operating companies also depends on their having
highly trained technical and marketing personnel. Our operating companies will
need to continue to hire additional personnel as their businesses grow. A
shortage in the number of trained technical and marketing personnel could limit
the ability of our operating companies to increase sales of their existing
products and services and launch new product offerings.
Our expenses will increase as we build an infrastructure to implement our
business model. For example, we expect to hire additional employees, expand
information technology systems and lease more space for our corporate offices.
In addition, we plan to significantly increase our operating expenses to:
* broaden our operating company support capabilities;
* explore acquisition opportunities and alliances with other companies;
and
* facilitate business arrangements among our operating companies.
Expenses may also increase due to the potential effect of goodwill
amortization and other charges resulting from completed and future acquisitions.
If any of these and other expenses are not accompanied by increased revenue, our
operating losses will be greater than we anticipate.
OUR OPERATING COMPANIES ARE GROWING RAPIDLY AND WE MAY HAVE DIFFICULTY ASSISTING
THEM IN MANAGING THEIR GROWTH.
Our operating companies have grown, and we expect them to continue to grow,
rapidly by adding new products and services and hiring new employees. This
growth is likely to place significant strain on their resources and on the
resources we allocate to assist our operating companies. In addition, our
management may be unable to convince our operating companies to adopt our ideas
for effectively and successfully managing their growth.
We may compete with some of our shareholders and operating companies, and
our operating companies may compete with each other.
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WE FACE COMPETITION FROM OTHER POTENTIAL ACQUIRERS OF E-COMMERCE COMPANIES.
We face competition from other capital providers including publicly-traded
Internet companies, venture capital companies and large corporations. Many of
these competitors have greater financial resources and brand name recognition
than we do. These competitors may limit our opportunity to acquire interests in
new operating companies. If we cannot acquire interests in attractive companies,
our strategy to build a collaborative network of operating companies may not
succeed.
OUR SUCCESS COULD BE IMPAIRED BY VALUATIONS PLACED ON INTERNET-RELATED COMPANIES
BY THE FINANCIAL MARKETPLACE.
Our strategy involves creating value for our shareholders and the employees
of our operating companies by helping our operating companies grow and access
the capital markets. We are therefore dependent on the market for
Internet-related companies in general and for public offerings of those
companies in particular. To date, there have been a substantial number of
Internet-related initial public offerings and additional offerings are expected
to be made in the future. If the market for Internet-related companies and
initial public offerings were to weaken for an extended period of time, the
ability of our operating companies to grow and access the capital markets will
be impaired, and we may need to provide additional capital to our operating
companies.
WE MAY BE UNABLE TO OBTAIN MAXIMUM VALUE FOR OUR OPERATING COMPANY INTERESTS.
We have significant positions in our operating companies. While we
generally do not anticipate selling our interests in our operating companies, if
we were to divest all or part of them, we may not receive maximum value for
these positions. For future operating companies with publicly-traded stock, we
may be unable to sell our interest at then-quoted market prices. Furthermore,
for those operating companies that do not have publicly-traded stock, the
realizable value of our interests may ultimately prove to be lower than the
carrying value currently reflected in our consolidated financial statements.
RISKS INHERENT TO OUR ACQUISITION STRATEGY
We have in the past, and intend to in the future, to expand through the
acquisition of businesses, technologies, products and services, such as the
recent acquisitions of Sitestar.net, Soccersite.com, Greattools.com and
Holland-American.com. Acquisitions may result in the potentially dilutive
issuance of equity securities, the incurrence of additional debt, development
costs and the amortization of goodwill and other intangible assets. Further,
acquisitions involve a number of special problems, including difficulty
integrating technologies, operations and personnel and diversion of management
attention in connection with both negotiating the acquisitions and integrating
the assets. There can be no assurance that we will be successful in addressing
such problems. In addition, growth associated with numerous acquisitions places
significant strain on our managerial and operational resources. Our future
operating results will depend to a significant degree on its ability to
successfully manage growth and integrate acquisitions. Furthermore, many of our
operating companies are early-stage companies, with limited operating histories
and limited or no revenues; there can be no assurance that we will be successful
in developing such companies.
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UNCERTAINTIES ASSOCIATED WITH SELLING ASSETS
A significant element of our business plan involves selling, in public or
private offerings, portions of the companies it has acquired and developed. The
Company's ability to engage in any such transactions, the timing of such
transactions and the amount of proceeds from such transactions are dependant on
market and other conditions largely beyond our control. Accordingly, there can
be no assurance that we will be able to engage in such transactions in the
future or that when we are able to engage in such transactions they will be at
favorable prices. If we were unable to liquidate portions of its portfolio
companies at favorable prices, our business, financial condition and results of
operations would be adversely affected.
WE MAY NOT HAVE OPPORTUNITIES TO ACQUIRE INTERESTS IN ADDITIONAL COMPANIES.
We may be unable to identify companies that complement our strategy, and
even if we identify a company that complements our strategy, we may be unable to
acquire an interest in the company for many reasons, including:
* failure to agree on the terms of the acquisition, such as the amount
or price of our acquired interest;
* incompatibility between us and management of the company;
* competition from other acquirers of e-commerce companies;
* a lack of capital to acquire an interest in the company; and
* the unwillingness of the company to operating with us.
If we cannot acquire interests in attractive companies, our strategy to
build a collaborative network of operating companies may not succeed.
OUR RESOURCES AND OUR ABILITY TO MANAGE NEWLY ACQUIRED OPERATING COMPANIES MAY
BE STRAINED AS WE ACQUIRE MORE AND LARGER INTERESTS IN E-COMMERCE COMPANIES.
We have acquired, and plan to continue to acquire, significant interests in
both Business to Consumer and Business to Business e-commerce companies that
complement our business strategy. In the future, we may acquire larger
percentages or larger interests in companies than we have in the past, or we may
seek to acquire 100% ownership of companies as we have done in our initial
stages of development. These larger acquisitions may place significantly greater
strain on our resources, ability to manage such companies and ability to
integrate them into our collaborative network. Future acquisitions are subject
to the following risks:
* Our acquisitions may cause a disruption in our ongoing support of our
operating companies, distract our management and other resources and
make it difficult to maintain our standards, controls and procedures.
* We may acquire interests in companies in e-commerce markets in which
we have little experience. * We may not be able to facilitate
collaboration between our operating companies and new companies that
we acquire.
* To fund future acquisitions we may be required to incur debt or issue
equity securities, which may be dilutive to existing shareholders.
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OUR SYSTEMS AND THOSE OF OUR OPERATING COMPANIES AND THIRD PARTIES MAY NOT BE
YEAR 2000 COMPLIANT, WHICH COULD DISRUPT OUR OPERATIONS AND THE OPERATIONS OF
OUR OPERATING COMPANIES.
Many computer programs have been written using two digits rather than four
digits to define the applicable year. This poses a problem at the end of the
century because these computer programs may recognize a date using "00" as the
year 1900, rather than the year 2000. This in turn could result in major system
failures or miscalculations and is generally referred to as the Year 2000 issue.
We may realize exposure and risk if our systems and the systems on which our
operating companies are dependent to conduct their operations are not Year 2000
compliant. Our potential areas of exposure include products purchased from third
parties, computers, software, telephone systems and other equipment used
internally. If our present efforts and the efforts of our operating companies to
address the Year 2000 compliance issues are not successful, or if distributors,
suppliers and other third parties with which we and our operating companies
conduct business do not successfully address such issues, our business and the
businesses of our operational companies may not be operational for a period of
time. If the Web-hosting facilities of our operating companies are not Year 2000
compliant, their production Web sites would be unavailable and they would not be
able to deliver services to their users.
RISKS PARTICULAR TO OUR OPERATING COMPANIES
Sitestar and our operating companies' result of operations, and accordingly
the price of its common stock, may be adversely affected by the following
factors:
* lack of acceptance of the Internet as an advertising medium;
* inability to develop a large base of users of its Web sites who
possess demographic characteristics attractive to advertisers;
* lower advertising rates;
* slow development of the e-commerce market;
* lack of acceptance of its Internet content;
* loss of key content providers;
* intense competition;
* loss of key personnel; and
* inability to manage growth.
THE SUCCESS OF OUR OPERATING COMPANIES DEPENDS ON THE DEVELOPMENT OF THE
E-COMMERCE MARKET, WHICH IS UNCERTAIN.
All of our operating companies rely on the Internet for the success of
their businesses. The development of the e-commerce market is in its early
stages. If widespread commercial use of the Internet does not develop, or if the
Internet does not develop as an effective medium for the provision of products
and services, our operating companies may not succeed.
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Our long-term success depends on widespread market-acceptance of
e-commerce. A number of factors could prevent such acceptance, including the
following:
* the unwillingness of businesses to shift from traditional processes to
e-commerce processes;
* the necessary network infrastructure for substantial growth in usage
of e-commerce may not be adequately developed;
* increased government regulation or taxation may adversely affect the
viability of e-commerce;
* insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times for
the users of e-commerce; and
* concern and adverse publicity about the security of e-commerce
transactions.
OUR OPERATING COMPANIES MAY FAIL IF THEIR COMPETITORS PROVIDE SUPERIOR INTERNET-
RELATED OFFERINGS OR CONTINUE TO HAVE GREATER RESOURCES THAN OUR OPERATING
COMPANIES HAVE.
Competition for Internet products and services is intense. As the market
for e-commerce grows, we expect that competition will intensify. Barriers to
entry are minimal, and competitors can offer products and services at a
relatively low cost. Our operating companies compete for a share of a
customer's: * purchasing budget for services, materials and supplies with other
online providers and traditional distribution channels;
* dollars spent on consulting services with many established information
systems and management consulting firms; and
* advertising budget with online services and traditional off-line
media, such as print and trade associations.
In addition, some of our operating companies compete to attract and retain
a critical mass of buyers and sellers. Several companies offer competitive
solutions that compete with one or more of our operating companies. We expect
that additional companies will offer competing solutions on a stand-alone or
combined basis in the future. Furthermore, our operating companies' competitors
may develop Internet products or services that are superior to, or have greater
market acceptance than, the solutions offered by our operating companies. If our
operating companies are unable to compete successfully against their
competitors, our operating companies may fail.
Many of our operating companies' competitors have greater brand recognition
and greater financial, marketing and other resources than our operating
companies. This may place our operating companies at a disadvantage in
responding to their competitors' pricing strategies, technological advances,
advertising campaigns, strategic partnerships and other initiatives.
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DEPENDENCE ON THIRD-PARTY RELATIONSHIPS
Our operating subsidiaries are currently, and expect to be in the future,
dependent on a number of third-party relationships. These relationships include
arrangements relating to the creation of traffic on Sitestar-affiliated Web
sites and resulting generation of advertising and commerce-related revenue. The
termination of, or the failure of such Sitestar-affiliated Web sites to renew on
reasonable terms, such relationships could have an adverse effect on our
business, results of operations and financial condition. Our operating companies
also are generally dependent on other third-party relationships with
advertisers, sponsors and partners. Most of these arrangements do not require
future minimum commitments to use our services, are often not exclusive and are
often short-term or may be terminated at the convenience of the other party.
There can be no assurance that these third parties will not reassess their
commitment to our operating companies at any time in the future, or that they
will not develop their own competitive services or products. Further, there can
be no assurance that the services of these companies will achieve market
acceptance or commercial success and therefore there can be no assurance that
our existing relationships will result in sustained or successful business
partnerships or significant revenues for us.
SOME OF OUR OPERATING COMPANIES MAY BE UNABLE TO PROTECT THEIR PROPRIETARY
RIGHTS AND MAY INFRINGE ON THE PROPRIETARY RIGHTS OF OTHERS.
Proprietary rights, particularly in the form of copyrights, are important
to the success and competitive position of many of our operating companies.
Although our operating companies seek to protect their proprietary rights, their
actions may be inadequate to protect any trademarks, copyrights and other
proprietary rights. In addition, effective copyright and trademark protection
may be unenforceable or limited in certain countries, and the global nature of
the Internet makes it impossible for some of our operating companies to control
the dissemination of their work and use of their services. Some of our operating
companies also license content from third parties and it is possible that they
could become subject to infringement actions based upon the content licensed
from those third parties. Our operating companies generally obtain
representations as to the origin and ownership of such licensed content;
however, this may not adequately protect them. Any of these claims, with or
without merit, could subject our operating companies to costly litigation and
the diversion of their technical and management personnel. If our operating
companies incur costly litigation and their personnel are not effectively
deployed, the expenses and losses incurred by our operating companies will
increase and their profits, if any, will decrease.
SOURCE OF SUPPLY FOR GREATTOOLS.COM.
Since 1999, Greattools.com has been operating pursuant to an oral agreement
with Global Sourcing Group ("GSG"), a power tool wholesaler located in Thousand
Oaks, California, which supplies 100% of the products sold by the Company in its
Web site. While the Company anticipates that it will continue operating under
the oral agreement, it intends to enter into a written exclusive fulfillment
agreement with GSG as soon as it's practicable. The Company intends to enter
into this fulfillment arrangement to assure it could continue to source all of
its products.
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Gateway Holdings, Inc. the private equity fund managed by our Chairman
Frederick T. Manlunas beneficially owns and controls 14.6% of the total
outstanding shares of Global Sourcing Group. The Company is reliant on Mr.
Manlunas' relationship with GSG for its Greattools.com's fulfillment needs.
SOURCE OF SUPPLY FOR HOLLAND-AMERICAN.COM.
Since September 1999, Holland-American.com has been operating pursuant to
an oral agreement with Holland American International Specialties ("HAIS"), a
specialty foods wholesaler and retailer located in Bellflower, California, which
supplies 100% of the products sold by the Company in its Web site. While the
Company anticipates that it will continue operating under the oral agreement, it
intends to enter into a written exclusive fulfillment agreement with HAIS as
soon as it's practicable. We intend to enter into this fulfillment arrangement
to assure it could continue to source all of its products.
IFCO Group, LLC ("IFCO"), whose members consist of certain shareholders of
the Company, including Frederick T. Manlunas, owns HAIS. Our Chairman of the
Board, Mr. Manlunas, beneficially owns and controls 32.75% of the total
outstanding membership interest of IFCO Group, LLC. However, the Company is not
reliant on Mr. Manlunas' relationship with HAIS for its Holland-American.com's
fulfillment needs.
OUR OPERATING COMPANIES THAT PUBLISH OR DISTRIBUTE CONTENT OVER THE INTERNET MAY
BE SUBJECT TO LEGAL LIABILITY.
Some of our operating companies may be subject to legal claims relating to
the content on their Web sites, or the downloading and distribution of this
content. Claims could involve matters such as defamation, invasion of privacy
and copyright infringement. Providers of Internet products and services have
been sued in the past, sometimes successfully, based on the content of material.
In addition, some of the content provided by our operating companies on their
Web sites is drawn from data compiled by other parties, including governmental
and commercial sources, and our operating companies re-enter the data. This data
may have errors. If any of our operating companies' Web site content is
improperly used or if any of our operating companies supply incorrect
information, it could result in unexpected liability. Any of our operating
companies that incur this type of unexpected liability may not have insurance to
cover the claim or its insurance may not provide sufficient coverage. If our
operating companies incur substantial cost because of this type of unexpected
liability, the expenses incurred by our operating companies will increase and
their profits, if any, will decrease.
OUR OPERATING COMPANIES' COMPUTER AND COMMUNICATIONS SYSTEMS MAY FAIL, WHICH MAY
DISCOURAGE CONTENT PROVIDERS FROM USING OUR OPERATING COMPANIES' SYSTEMS.
All of our operating companies' businesses depend on the efficient and
uninterrupted operation of their computer and communications hardware systems.
Any system interruptions that cause our operating companies' Web sites to be
unavailable to Web browsers may reduce the attractiveness of our operating
companies' Web sites to third party content providers. If third party content
providers are unwilling to use our operating companies' Web sites, our business,
financial condition and operating results could be adversely affected.
Interruptions could result from natural disasters as well as power loss,
telecommunications failure and similar events.
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OUR OPERATING COMPANIES' BUSINESSES MAY BE DISRUPTED IF THEY ARE UNABLE TO
UPGRADE THEIR SYSTEMS TO MEET INCREASED DEMAND.
Capacity limits on some of our operating companies' technology, transaction
processing systems and network hardware and software may be difficult to project
and they may not be able to expand and upgrade their systems to meet increased
use.
As traffic on our operating companies' Web sites continues to increase,
they must expand and upgrade their technology, transaction processing systems
and network hardware and software. Our operating companies may be unable to
accurately project the rate of increase in use of their Web sites. In addition,
our operating companies may not be able to expand and upgrade their systems and
network hardware and software capabilities to accommodate increased use of their
Web sites. If our operating companies are unable to appropriately upgrade their
systems and network hardware and software, the operations and processes of our
operating companies may be disrupted.
OUR OPERATING COMPANIES MAY NOT BE ABLE TO ATTRACT A LOYAL BASE OF USERS TO
THEIR WEB SITES.
While content is important to all our operating companies' Web sites, our
18 market maker operating companies are particularly dependent on content to
attract business. Our success depends upon the ability of these operating
companies to deliver compelling Internet content to their targeted users. If our
operating companies are unable to develop Internet content that attracts a loyal
user base, the revenues and profitability of our operating companies could be
impaired. Internet users can freely navigate and instantly switch among a large
number of Web sites. Many of these Web sites offer original content. Thus, our
operating companies may have difficulty distinguishing the content on their Web
sites to attract a loyal base of users.
OUR OPERATING COMPANIES MAY BE UNABLE TO ACQUIRE OR MAINTAIN EASILY IDENTIFIABLE
WEB SITE ADDRESSES OR PREVENT THIRD PARTIES FROM ACQUIRING WEB SITE ADDRESSES
SIMILAR TO THEIRS.
Some of our operating companies hold various Web site addresses relating to
their brands. These operating companies may not be able to prevent third parties
from acquiring Web site addresses that are similar to their addresses, which
could adversely affect the use by businesses of our operating companies' Web
sites. In these instances, our operating companies may not grow as we expect.
The acquisition and maintenance of Web site addresses generally is regulated by
governmental agencies and their designees. The regulation of Web site addresses
in the United States and in foreign countries is subject to change. As a result,
our operating companies may not be able to acquire or maintain relevant Web site
addresses in all countries where they conduct business. Furthermore, the
relationship between regulations governing such addresses and laws protecting
trademarks is unclear. Some of our operating companies are dependent on barter
transactions that do not generate cash revenue.
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Our operating companies plans to enter into barter transactions in which
they provide advertising for other internet companies in exchange for
advertising for the operating company. In a barter transaction the operating
company will reflect the sales of the advertising received as an expense and the
value of the advertising provided, in an equal amount, as revenue. However,
barter transactions also do not generate cash revenue, which may adversely
affect the cash flows of some of our operating companies. Limited cash flows may
adversely affect a operating company's abilities to expand its operations and
satisfy its liabilities.
RISKS RELATING TO THE INTERNET INDUSTRY
CONCERNS REGARDING SECURITY OF TRANSACTIONS AND TRANSMITTING CONFIDENTIAL
INFORMATION OVER THE INTERNET MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS.
We believe that concern regarding the security of confidential information
transmitted over the Internet prevents many potential customers from engaging in
online transactions. If our operating companies that depend on such transactions
do not add sufficient security features to their future product releases, our
operating companies' products may not gain market acceptance or there may be
additional legal exposure to them.
Despite the measures some of our operating companies have taken, the
infrastructure of each of them is potentially vulnerable to physical or
electronic break-ins, viruses or similar problems. If a person circumvents the
security measures imposed by any one of our operating companies, he or she could
misappropriate proprietary information or cause interruption in operations of
the operating company. Security breaches that result in access to confidential
information could damage the reputation of any one of our operating companies
and expose the operating company affected to a risk of loss or liability. Some
of our operating companies may be required to make significant investments and
efforts to protect against or remedy security breaches. Additionally, as
e-commerce becomes more widespread, our operating companies' customers will
become more concerned about security. If our operating companies are unable to
adequately address these concerns, they may be unable to sell their goods and
services.
RAPID TECHNOLOGICAL CHANGES MAY PREVENT OUR OPERATING COMPANIES FROM REMAINING
CURRENT WITH THEIR TECHNICAL RESOURCES AND MAINTAINING COMPETITIVE PRODUCT AND
SERVICE OFFERINGS.
The markets in which our operating companies operate are characterized by
rapid technological change, frequent new product and service introductions and
evolving industry standards. Significant technological changes could render
their existing Web site technology or other products and services obsolete. The
e-commerce market's growth and intense competition exacerbate these conditions.
If our operating companies are unable to successfully respond to these
developments or do not respond in a cost-effective way, our business, financial
condition and operating results will be adversely affected. To be successful,
our operating companies must adapt to their rapidly changing markets by
continually improving the responsiveness, services and features of their
products and services and by developing new features to meet the needs of their
36
<PAGE>
customers. Our success will depend, in part, on our operating companies' ability
to license leading technologies useful in their businesses, enhance their
existing products and services and develop new offerings and technology that
address the needs of their customers. Our operating companies will also need to
respond to technological advances and emerging industry standards in a
cost-effective and timely manner.
GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES MAY PLACE FINANCIAL BURDENS ON
OUR BUSINESS AND THE BUSINESSES OF OUR OPERATING COMPANIES
As of September 30, 1999, there were few laws or regulations directed
specifically at e-commerce. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may cover issues such as the collection and use of data from Web
site visitors and related privacy issues, pricing, content, copyrights, online
gambling, distribution and quality of goods and services. The enactment of any
additional laws or regulations may impede the growth of the Internet and
e-commerce, which could decrease the revenue of our operating companies and
place additional financial burdens on our business and the businesses of our
operating companies.
Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. For example, Congress recently
enacted laws regarding online copyright infringement and the protection of
information collected online from children. Although these laws may not have a
direct adverse effect on our business or those of our operating companies, they
add to the legal and regulatory burden faced by e-commerce companies.
RISKS RELATING TO FUTURE OFFERINGS
SHARES ELIGIBLE FOR FUTURE SALE BY OUR CURRENT SHAREHOLDERS MAY DECREASE THE
PRICE OF OUR COMMON STOCK.
If our shareholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
following future offerings, then the market price of our common stock could
fall. Restrictions under the securities laws and certain lock-up agreements
limit the number of shares of common stock available for sale in the public
market.
OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
The market price for our common stock is likely to be highly volatile as
the stock market in general and the market for Internet-related stocks and the
stock. The trading prices of many technology and Internet-related company stocks
have reached historical highs within the last year and have reflected relative
valuations substantially above historical levels. During the same period, the
stocks of these companies have also been highly volatile and have recorded lows
well below such historical highs. We cannot assure you that our common stock
will trade at the same levels of other Internet stocks or that Internet stocks
in general will sustain their current market prices.
37
<PAGE>
The following factors will add to our common stock price's volatility:
* actual or anticipated variations in our quarterly operating results
and those of our operating companies;
* new sales formats or new products or services offered by us, our
operating companies and their competitors;
* changes in our financial estimates and those of our operating
companies by securities analysts;
* conditions or trends in the Internet industry in general and the
e-commerce industry in particular;
* announcements by our operating companies and their competitors of
technological innovations;
* announcements by us or our operating companies or our competitors of
significant acquisitions, strategic partnerships or joint ventures;
* changes in the market valuations of our operating companies and other
Internet companies;
* our capital commitments;
* additions or departures of our key personnel and key personnel of our
operating companies; and * sales of our common stock.
Many of these factors are beyond our control. These factors may decrease
the market price of our common stock, regardless of our operating performance.
ITEM 3. DESCRIPTION OF PROPERTY.
We lease our principal executive offices, as well as our administrative
offices, which are located in a 1,084 square feet office facility in Encino,
California at an annual rent of $24,715.20. This facility also houses our
customer service, administrative and corporate center functions. This lease will
expire in June 2001.
We also lease 2,100 square feet of office space in Annapolis, Maryland.
This facility houses Sitestar.net's, Greattools.com's and Holland-American.com's
executive offices, customer service, and administrative functions. This lease is
currently on a month-to-month bases with a rental fee of $33,072 per annum.
Our annual rents are subject to adjustments. We anticipate that we will
require additional space for our ISP operations as we expand, and we believe
that we will be able to obtain suitable space as needed on commercially
reasonable terms.
38
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of September 30, 1999
regarding the record and beneficial ownership of the Common Stock by: (i) any
individual or group (as that term is defined in the federal securities laws) of
affiliated individuals or entities who is known by the Company to be the
beneficial owner of more than five percent of the outstanding shares of our
Common Stock; (ii) each executive officer and Director of the Company; and (iii)
the executive officers and Directors of the Company as a group.
Name and Address of Number of Shares Percent
Beneficial Owner Beneficially Owned (1) of Class (2)
- ------------------ ---------------------- ------------
Frederick T. Manlunas 3,039,255 16.34%
16133 Ventura Blvd., Suite 635
Encino, CA 91436
Clinton J. Sallee 1,926,170 10.35%
16133 Ventura Blvd., Suite 635
Encino, CA 91436
Franklin Christopher 1,466,400 7.88%
326 First Street, Suite 26
Annapolis, MD 21403
Kevorak Zoryan -0- *
16133 Ventura Blvd., Suite 635
Encino, CA 91436
All directors and officers 6,431,825 34.57%
as a group (4 persons)
* Less than 1%
- ----------------------------
(1) We believe that all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially
owned by them. A person is deemed to be the beneficial owner of securities
which may be acquired by such person within 60 days from the date of this
registration statement upon the exercise of options, warrants or
convertible securities. Each beneficial owner's percentage of ownership is
determined by assuming all options, warrants or convertible securities that
are held by such person (but not held by any other person) and which are
exercisable or convertible within 60 days of this registration statement
have been exercised or converted.
(2) Percent of class is based on 18,600,036 shares of Common Stock outstanding
as of September 30, 1999.
39
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following table sets forth certain information with respect to the
directors and executive officers of Sitestar.
Name Age(1) Position
- --------------- ------ -------------------
Frederick T. Manlunas 31 Chairman of the Board and
Managing Director
Clinton J. Sallee 27 President and Chief
Executive Officer
Kevorak Zoryan 26 Director
- ----------------------------
(1) Ages are given as of September 30, 1999
FREDERICK T. MANLUNAS, has been a Director of the Company since October of 1998
and has served as the Company's Chairman of the Board since July 1999. Mr.
Manlunas manages Gateway Holdings, Inc., a private equity fund based in Los
Angeles since 1995. Prior to founding Gateway, Mr. Manlunas was an Associate
with Arthur Andersen LLP's Retail Management Consulting division from 1991 to
1995. Mr. Manlunas also serves as Director for MenuDirect, Inc., a Delaware
corporation, and Xcel Medical Pharmacy, a California corporation. Mr. Manlunas
received a Bachelor of Science degree in Journalism from Florida International
University and he earned a Masters of Business Administration degree from
Pepperdine University.
CLINTON J. SALLEE has been a Director of the Company since May of 1999 and has
served as the Compay's President and Chief Executive Officer since July 1999. In
1996, Mr. Sallee founded Sallee Zoryan, a concept development firm, where he
served as President since inception. Prior to founding Sallee Zoryan, Mr. Sallee
was an Associate with W.E. Myers & Company, a boutique investment bank,
specializing in industry consolidations. Mr. Sallee earned a Bachelor of Science
degree in Business Administration from the Marshall School of Business at the
University of Southern California in 1994.
KEVORK A. ZORYAN has been a Director of the Company since July of 1999. From
March 1997 to July 1999, Mr. Zoryan served on the acquisition team of the Morgan
Stanley Real Estate Fund, a leading international private equity real estate
investment fund. From March 1995 to May 1996, Mr. Zoryan served as an analyst of
the JE Robert Companies, and from June 1993 to February 1995, as a staff analyst
with Ernst & Young. Mr. Zoryan co-founded Sallee Zoryan, a concept development
firm in 1996, and currently serves as its Partner. Mr. Zoryan earned a BS in
Business Administration from the Marshall School of Business at the University
of Southern California in 1994. He currently attends the Harvard Business School
as a member of the MBA Class of 2001.
The Company is currently actively searching for a Chief Financial Officer.
Management has interviewed several candidates and expects to finalize its
selection before the end of the current quarter.
40
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
The following table summarizes the compensation by the Company to Frederick
T. Manlunas, its former President and CEO for the last three fiscal years. No
officer of the Company received compensation in excess of $100,000 during such
years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
---------------------------------------------- ------------------------------------------------
Other Restricted
Annual Stock Options LTIP All Other
Position Year Salary ($) Bonuses($) Compensation Awards SARs Payouts ($) Compensation
- -------- ---- ---------- ---------- ------------ ---------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frederick T. 1998 96,000 -- -- -- -- -- --
Manlunas 1999 120,000 -- -- -- -- -- --
Chairman of the
Board
Clinton J. 1999 120,000 -- -- -- -- -- --
Sallee
President & Chief
Executive Officer
</TABLE>
The Company currently has no long-term compensation, annuity, pension or
retirement plans.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective as of September 30, 1999 we sold the non-Internet assets of HAIS
to IFCO Group, LLC ("IFCO"), whose members consist of certain shareholders of
the Company, including Frederick T. Manlunas, our Chairman of the Board. We
retained the assets consisting of the Internet web site Holland-American.com.
HAIS will continue to serve as Holland-American.com's exclusive fulfillment
center. The purchase consideration for HAIS was $900,000 and was based upon a
business appraisal by an independent third party appraiser. The consideration
included $200,000 which was applied as a discount for services rendered by
members of IFCO in connection to the acquisition of Sitestar, Inc., the
assumption of $654,000 of liabilities and a promissory note in the amount of
$46,000. The note bears interest at a rate of 8% per annum, and is payable in
annual installments of $15,333, and is due and payable on September 30, 2002.
The note is secured by HAIS' accounts receivable and inventory.
41
<PAGE>
On September 30, 1999, we sold our 9% equity interest in SMF to IFCO for
$200,000. The consideration was paid in the form of assumption of $160,000 of
debt related to the investment and the balance of $40,000 paid by a promissory
note payable in three annual installments of $13,334 each. The note bears
interest at a rate of 8% per annum. The purchase consideration was equal to our
original investment in January 1999.
In January 1999, Mr. Manlunas, a majority stockholder of the Company,
loaned $80,300 to the Company for use as working capital based on an oral
agreement. The amounts owed to Mr. Manlunas are not accruing interest, and are
due and payable upon demand. To date, the Company has made no payments to Mr.
Manlunas in satisfaction of this obligation.
ITEM 8. DESCRIPTION OF SECURITIES.
Common Stock
- ------------
We are authorized to issue 75,000,000 shares of common stock, par value
$0.001 per share. Holders of common stock are entitled to one vote for each
share held of record on all matters on which the holders of common stock are
entitled to vote. There are no redemption or sinking fund provisions applicable
to the common stock. The outstanding shares of common stock are, and the common
stock issuable pursuant to this registration statement will be, when issued,
fully paid and non-assessable.
Preferred Stock
- ---------------
We are authorized to issue 10,000,000 shares of "blank check" preferred
stock, par value $0.001 per share, in one or more series from time to time with
such designations, rights and preferences as may be determined from time to time
by the Board of Directors, including, but not limited to (i) the designation of
such series; (ii) the dividend rate of such series, the conditions and dates
upon which such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes or series of
our capital stock and whether such dividends shall be cumulative or
non-cumulative; (iii) whether the shares of such series shall be subject to
redemption for cash, property or rights, including securities of any other
corporation, by Sitestar or upon the happening of a specified event and, if made
subject to any such redemption, the times or events, prices, rates, adjustments
and other terms and conditions of such redemption; (iv) the terms and amount of
any sinking fund provided for the purchase or redemption of the shares of such
series (v) whether or not the shares of such series shall be convertible into,
or exchangeable for, at the option of either the holder or Sitestar or upon the
happening of a specified event, shares of any other class or classes or of any
other series of the same class of Sitestar's capital stock and, if provision be
made for the conversion or exchange, the times or events, prices, rates,
adjustments and other terms and conditions of such conversions or exchanges;
(vi) the restrictions, if any, on the issue or reissue of any additional
preferred stock; (vii) the rights of the holders of the shares of such series
upon the voluntary or involuntary liquidation, dissolution or winding up of
Sitestar; and (viii) the provisions as to voting, optional and/or other special
rights and preferences, if any, including, without limitation, the right to
elect one or more directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which adversely affect the
voting power or other rights of the holders of the common stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances, as
a way of discouraging, delaying or preventing an acquisition or change in
control of Sitestar.
42
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS.
Our Common Stock is traded over-the-counter and is currently quoted on the
OTC Bulletin Board (symbol "SYTE"). On July 14, 1999 we effected a 3-for-1 stock
split. All prices listed below reflect this split. The closing bid price for the
Common Stock was $.53 on October 19, 1999.
Set forth below are the high and low closing bid prices for the Common
Stock of the company for each quarterly period commencing September 30, 1998:
Period Low High
------ --- ----
1998
----
Quarter ended December 31, 1998 1.00 1.03
1999
----
Quarter ended March 31, 1999 1.00 1.03
Quarter ended June 30, 1999 1.00 1.03
Quarter ended September 30, 1999 .875 3.75
Quarter through October 19, 1999 .45 .875
Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not necessarily represent actual transactions.
As of September 30, 1999 the Company had 93 shareholders of record.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not involved in any material pending legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Securities Sold
In October 1998, in connection with the acquisition of Interfoods
Consolidated, Inc., we issued 5,580,000 shares of our Common Stock to the
shareholders of Interfoods Consolidated, Inc. The issuance of these shares was
exempt from the registration an prospectus delivery requirements of the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.
43
<PAGE>
In July 1999, in connection with the acquisition of Sitestar, Inc., we
issued 3,491,428 shares of our Common Stock to the shareholders of Sitestar,
Inc. The issuance of these shares was exempt from the registration an prospectus
delivery requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof.
In August 1999, in connection with the acquisition of Greattools.com, we
issued 49,000 shares of our Common Stock to the shareholders of Sitestar, Inc.
The issuance of these shares was exempt from the registration an prospectus
delivery requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof.
In May 1999, we issued and sold an aggregate of 140,000 shares of our
Common Stock for $140,000. The issuance and sale of these shares was exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933 pursuant to Section 4(2) thereof.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except for acts or omissions which involve intentional misconduct, fraud or
known violation of law or for the payment of dividends in violation of Nevada
Revised Statutes, there shall be no personal liability of a director or officer
to the Company, or its stockholders for damages for breach of fiduciary duty as
a director or officer. The Company may indemnify any person for expenses
incurred, including attorneys fees, in connection with their good faith acts if
they reasonably believe such acts are in and not opposed to the best interests
of the Company and for acts for which the person had no reason to believe his or
her conduct was unlawful. The Company may indemnify the officers and directors
for expenses incurred in defending a civil or criminal action, suit or
proceeding as they are incurred in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount of such expenses if it is ultimately
determined by a court of competent jurisdiction in which the action or suit is
brought determined that such person is fairly and reasonably entitled to
indemnification for such expenses which the court deems proper.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to officers, directors or persons controlling the Company pursuant
to the foregoing, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933, as amended, and is therefore
unenforceable.
44
<PAGE>
PART F/S
Financial Statements
- --------------------
The following financial statements are attached to this report and filed as
a part thereof.
INDEX TO FINANCIAL STATEMENTS
INTERFOODS CONSOLIDATED, INC.
Report of Independent Public Accountants..................................F-2
Balance Sheets as of December 31, 1997 and 1998 and for the
Six Months Ended June 30, 1999 (Unaudited) and 1998 (Unaudited).........F-3
Statements of Operations for the Year Ended December 31, 1998,
Seven Months Ended December 31, 1997 and for the Six Months
Ended June 30, 1999 (Unaudited) and 1998 (Unaudited).....................F-4
Statements of Stockholders' Equity for the Years Ended
December 31, 1998 and 1998 and for the Six Months Ended
June 30, 1999 (Unaudited)................................................F-5
Statements of Cash Flows for the Year Ended December 31, 1998,
Seven Months Ended December 31, 1997 and the Six Months
Ended June 30, 1999 (Unaudited) and 1998 (Unaudited).....................F-6
Notes to Financial Statements.............................................F-8
SITESTAR CORPORATION AND SUBSIDIARY
Report of Independent Public Accountants..................................F-20
Consolidated Balance Sheets as of December 31, 1998 and 1997..............F-21
Consolidated Statements of Operations for the Years Ended
December 31, 1998 and 1997...............................................F-22
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1998 and 1997.........................................F-23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997................................................F-24
Notes to Consolidated Financial Statements................................F-26
INTERFOODS CONSOLIDATED, INC
PROFORMA FINANCIAL INFORMATION ...........................................F-33
Proforma Balance Sheet as of June 30, 1999................................F-34
Proforma Statement of Operations for Six Months
Ended June 30, 1999......................................................F-35
Proforma Statement of Operations for the Year Ended December 31, 1998.....F-36
Notes to Proforma Financial Statements....................................F-37
45/F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
INTERFOODS CONSOLIDATED, INC.
We have audited the accompanying balance sheets of Interfoods Consolidated, Inc.
as of December 31, 1998 and 1997, and the related statements of operations,
stockholders' equity (deficiency) and cash flows for the year ended December 31,
1998 and the initial period June 1, 1997 to December 31, 1997. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Interfoods Consolidated, Inc.
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the year ended December 31, 1998 and the initial period June 1, 1997
to December 31, 1997, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has had net losses and cash flow deficiencies from operations since
inception and the Company is in default on its line of credit and has notes
payable in default. These factors, among others, as discussed in Note 1 to the
financial statements, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
Los Angeles, California
October 12, 1999
F-2
<PAGE>
<TABLE>
INTERFOODS CONSOLIDATED, INC.
BALANCE SHEETS
<CAPTION>
December 31, June 30,
1998 1997 1999 1998
----------- ---------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ - $ 59,306 $ - $ 10,611
Accounts Receivable, Less Allowance for
Doubtful Accounts of $16,378, $10,000,
$16,378 and $10,000, respectively 196,206 356,818 89,210 111,590
Inventories 542,081 661,630 469,004 566,092
Note Receivable - Stockholder 71,657 - 75,310 69,016
Other Current Assets 20,381 45,900 42,966 70,664
----------- ---------- ----------- -----------
Total Current Assets 830,325 1,123,654 676,490 827,973
EQUIPMENT AND FURNITURE, Net 18,643 2,880 56,020 2,880
INVESTMENT 125,000 - 200,000 -
----------- ---------- ----------- -----------
TOTAL ASSETS $ 973,968 $1,126,534 $ 932,510 $ 830,853
=========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICENCY)
CURRENT LIABILITIES
Book Overdraft $ 29,546 - $ 37,956 $ -
Accounts Payable and Accrued Expenses 372,725 692,803 156,198 192,199
Line of Credit 200,000 - 200,000 176,865
Advance from Stockholders 102,960 - 246,702 -
Notes Payable 119,500 - 305,839 19,081
Capital Lease Obligations - Current Portion - - 4,155 -
----------- ---------- ----------- -----------
Total Current Liabilities 824,731 692,803 950,850 388,145
CAPITAL LEASE OBLIGATIONS, Less Current Portion - - 30,262 -
----------- ---------- ----------- -----------
TOTAL LIABILITIES 824,731 692,803 981,112 388,145
----------- ---------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8) - - - -
STOCKHOLDERS' EQUITY (DEFICENCY)
Common Stock, $.001 par value, 25,000,000 shares
authorized, 6,200,012 and 5,580,000 shares
issued and outstanding, respectively 6,200 5,580 6,200 5,580
Additional Paid-in Capital 621,600 622,220 621,600 622,220
Accumulated Deficit ( 478,563) ( 194,069) ( 676,402) ( 185,092)
----------- ---------- ----------- -----------
Total Stockholders' Equity (Deficiency) 149,237 433,731 ( 48,602) 442,708
----------- ---------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICENCY) $ 973,968 $ 1,126,534 $ 932,510 $ 830,853
=========== =========== ========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
<TABLE>
INTERFOODS CONSOLIDATED, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
Seven
Year Ended Months Ended Six Months Ended
December 31, December 31, June 30,
1998 1997 1999 1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
SALES $ 2,175,867 $ 1,553,926 $ 870,249 $ 882,471
COST OF GOODS SOLD 1,614,924 1,177,877 654,011 616,688
------------ ------------ ------------ -----------
GROSS PROFIT 560,943 376,049 216,238 265,783
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 827,040 570,118 380,623 256,806
------------ ------------ ------------ ------------
(LOSS) INCOME FROM OPERATIONS ( 266,097) ( 194,069) ( 164,385) 8,977
INTEREST EXPENSE 18,397 - 33,454 -
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE INCOME TAXES ( 284,494) ( 194,069) ( 197,839) 8,977
INCOME TAXES - - - -
------------ ------------ ------------ ------------
NET (LOSS) INCOME $( 284,494) $( 194,069) $( 197,839) $ 8,977
============ =========== ============ ============
BASIC LOSS PER SHARE $( 0.04) $( 0.03) $( 0.03) $ 0.00
============ =========== ============ ============
DILUTED LOSS PER SHARE $( 0.04) $( 0.03) $( 0.03) $ 0.00
============ =========== ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,693,810 5,580,000 6,200,012 5,580,000
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
INTERFOODS CONSOLIDATED, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIENCY)
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at June 1, 1997 - $ - $ - $ - $ -
Issuance of Shares for Cash 5,580,000 5,580 622,220 - 627,800
Net Loss - - - ( 194,069) ( 194,069)
--------- ---------- ----------- ----------- -----------
Balance at December 31, 1997 5,580,000 5,580 622,220 ( 194,069) 433,731
Issuance of Shares in Merger with
White Dove Systems, Inc. 620,012 620 ( 620) - -
Net Loss - - - ( 284,494) ( 284,494)
--------- ---------- ----------- ----------- ----------
Balance at December 31, 1998 6,200,012 6,200 621,600 ( 478,563) 149,237
Net Loss (unaudited) - ( 197,839) ( 197,839)
--------- ---------- ----------- ----------- -----------
Balance at June 30, 1999 (unaudited) 6,200,012 $ 6,200 $ 621,600 $( 676,402) $( 48,602)
========= ========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
<TABLE>
INTERFOODS CONSOLIDATED, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Seven
Year Ended Months Ended Six Months Ended
December 31, December 31, June 30,
1998 1997 1999 1998
------------ ------------ ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $( 284,494) $( 194,069) $( 197,839) $ 8,977
Adjustments to Reconcile Net (Loss) Income
to Net Cash Used In Operating Activities:
Allowance for Doubtful Accounts 6,378 10,000 - 6,378
Depreciation and Amortization Expense 1,678 - 2,163 -
(Increase) Decrease in:
Accounts Receivable 154,234 ( 366,818) 106,996 238,850
Inventories 87,805 ( 661,630) 69,424 26,522
Other Current Assets ( 14,394) ( 45,900) ( 22,585) ( 24,764)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses ( 320,078) 692,803 ( 216,527) ( 500,604)
Advances from Stockholders 63,000 - 18,000 -
------------ ------------ ------------ -----------
Net Cash Used In Operating Activities ( 305,871) ( 565,614) ( 240,368) ( 244,641)
------------ ------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment and Furniture ( 17,441) ( 2,880) ( 1,200) -
Investment ( 125,000) - ( 75,000) -
------------ ------------ ------------ -----------
Net Cash Used In Investing Activities ( 142,441) ( 2,880) ( 76,200) -
------------ ------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Book Overdraft 29,546 - 8,410 -
Advance from Stockholder, Net 39,960 - 125,742 -
Proceeds from Line of Credit 200,000 - - 176,865
Proceeds from Notes Payable 169,500 - 416,309 19,081
Repayment of Notes Payable ( 50,000) - ( 229,970) -
Repayment of Capital Lease Obligations - - ( 3,923) -
Issuance of Common Stock - 627,800 - -
------------ ------------ ------------ -----------
Net Cash Provided By Financing Activities 389,006 627,800 316,568 195,946
------------ ------------ ------------ -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ( 59,306) 59,306 - ( 48,695)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 59,306 - - 59,306
------------ ------------ ------------ -----------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ - $ 59,306 $ - $ 10,611
============ =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
PAGE>
INTERFOODS CONSOLIDATED, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
During the year ended December 31, 1998 and the seven months ended December 31,
1997, the Company paid no income taxes and interest of approximately $15,000 and
$0, respectively.
During the six months ended June 30, 1999 and 1998, the company paid no income
taxes and interest of approximately $16,750 (unaudited) and $0 (unaudited),
respectively.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS
In 1998, the Company sold its gift basket business, Wrap-It Up, for $71,657. A
note receivable was received for the total sales price.
During the six months ended June 30, 1999, the Company acquired equipment
totaling $38,340 (unaudited) with capital lease obligations.
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
AND 1998 (UNAUDITED)
NOTE 1 - THE ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
---------------------------------
Interfoods Consolidated, Inc. (the "Company"), formerly known as
Holland American International Specialties ("HAIS"), began operations
on June 1, 1997, under a partnership agreement, and was incorporated
in California on November 4, 1997. The Company is in the international
specialty foods distribution business. The Company's customers are
specialty and ethnic grocery stores, gift shops and hotels located
primarily in California. The Company's corporate office is located in
Encino, California and has a warehouse and retail facility located in
Bellflower, California.
Mergers
-------
The Company is the successor by merger, which was effective on October
25, 19998, to White Dove Systems, Inc., a Nevada corporation ("WDVE").
The exchange rate in the reincorporating merger was one and one fifth
shares of WDVE's common stock for one share of the Company's common
stock. Due to WDVE's lack of business activity prior to the merger, no
excess cost over fair value of net assets acquired was recorded.
On March 20, 1998, HAIS completed a stock purchase agreement with DHS
Industries, Inc. ("DHS") whereby DHS issued 31,942,950 shares of its
common stock in exchange for all of the issued and outstanding common
stock of HAIS. The acquisition was accounted for as a pooling of
interest. However, on September 30, 1998 the agreement was rescinded
and the stockholders of HAIS returned the shares of DHS for their
shares of HAIS.
Basis of Presentation
---------------------
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. As shown in the
financial statements, the Company has had net losses and cash flow
deficiencies from operations since inception and the Company is in
default on its line of credit and has notes payable in default. These
issues raise substantial doubt about the Company's ability to continue
as a going concern.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts shown
in the accompanying balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon the
Company's ability to generate positive cash flows from operations. The
financial statements do not include any adjustments, relating to the
recoverability and classification of recorded asset amounts and
classifications of liabilities that might be necessary should the
Company be unable to continue its existence. Management plans to take
the following steps that it believes will be sufficient to provide the
Company with the ability to continue in existence:
F-8
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
AND 1998 (UNAUDITED)
NOTE 1 - THE ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
o Management plans to overhaul the personnel structure of the
Company. It intends to increase income from operations by cutting
back on its work force.
o Management plans to join other specialty foods distributors in
forming a buying cooperative to maximize economies of scale and
cut costs.
o Management intends to raise $500,000 through sale of its common
stock and use the proceeds to pay-off existing debt.
Interim Financial Information
-----------------------------
The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, which in
the opinion of management, are necessary to fairly state the Company's
financial position, the results of operations and cash flows for the
periods presented. The results of operations for the six months ended
June 30, 1999 are not necessarily indicative of results for the entire
year ending December 31, 1999.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results
could differ from those estimates.
Fair Value of Financial Instruments
-----------------------------------
For certain of the Company's financial instruments including cash,
accounts receivable, accounts payable and accrued expenses and advance
from stockholders, the carrying amounts approximate fair value due to
their short maturities. The amounts shown for line of credit and notes
payable also approximate fair value because current interest rates and
terms offered to the Company for similar debt are substantially the
same.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company defines cash
equivalents as all highly liquid debt instruments purchased with a
maturity of three months or less, plus all certificates of deposit.
F-9
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
AND 1998 (UNAUDITED)
NOTE 1 - THE ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk
----------------------------
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist of cash and accounts
receivables. The Company places its cash with high quality financial
institutions and at times may exceed the FDIC $100,000 insurance
limit. The Company sells its products and services predominantly in
California and extends credit based on an evaluation of the customer's
financial condition, generally without collateral. Exposure to losses
on receivables is principally dependent on each customer's financial
condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses, if required.
Inventories
-----------
Inventories consist of certain types of specialty foods, which are
held specifically for resale. Inventories are stated at the lower of
cost or market, with cost determined on a first-in, first-out basis.
Equipment and Furniture
-----------------------
Equipment and furniture are stated at cost. Depreciation is computed
using the straight-line method based on estimated useful lives from 5
to 7 years.
Impairment of Long-Lived Assets
-------------------------------
In accordance with Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standard ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of", long-lived assets are evaluated for
impairment whenever events or changes in circumstances indicate that
the carrying amounts of such assets may not be recoverable. Impairment
losses would be recognized if the carrying amounts of the assets
exceed the fair value of the assets.
Revenue Recognition
-------------------
Product sales are recognized upon delivery of product to the customer.
Sales are adjusted for any future returns or allowances.
F-10
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
AND 1998 (UNAUDITED)
NOTE 1 - THE ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
------------
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Deferred taxes are provided on a
liability method whereby deferred tax assets are recognized for
deductible temporary differences, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of
enactment.
Net Loss Per Share
------------------
In accordance with SFAS No. 128, "Earnings Per Share", the basic loss
per common share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares
outstanding. Diluted loss per common share is computed similar to
basic loss per common share except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the
additional common shares were dilutive.
Comprehensive Income
--------------------
SFAS No. 130, "Reporting Comprehensive Income", establishes standards
for the reporting and display of comprehensive income and its
components in the financial statements. As of December 31, 1998 and
1997, the Company has no items that represent other comprehensive
income and, therefore, has not included a schedule of comprehensive
income in the financial statements.
Impact of Year 2000 Issue
-------------------------
During the year ended December 31, 1998, the Company conducted an
assessment of issues related to the Year 2000 and determined that no
issues existed which would cause its computer systems not to properly
utilize dates beyond December 31, 1999. At this time, the Company
cannot fully determine the impact that Year 2000 issues will have on
its customers or suppliers. If the Company's customers and suppliers
don't convert their systems to become Year 2000 compliant, the Company
may be adversely impacted.
F-11
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
AND 1998 (UNAUDITED)
NOTE 2 - EQUIPMENT AND FURNITURE
The cost of equipment and furniture consisted of the following as of:
December 31, June 30,
-------------------- ---------------------
1998 1997 1999 1998
-------- -------- --------- --------
(Unaudited) (Unaudited)
Computers $ 1,300 $ - $ 36,998 $ -
Furniture and Fixtures 19,021 2,880 22,863 2,880
------- --------- --------- ---------
20,321 2,880 59,861 2,880
Less: Accumulated
Depreciation 1,678 - 3,841 -
-------- -------- --------- ---------
$ 18,643 $ 2,880 $ 56,020 $ 2,880
======== ======== ========= =========
Depreciation expense was $1,678 and $0 for the year ended December 31,
1998 and the seven months ended December 31, 1997, respectively, and
$2,163 (unaudited) and $0 (unaudited) for the six months ended June
30, 1999 and 1998, respectively.
NOTE 3 - NOTE RECEIVABLE - STOCKHOLDER
In 1997, the Company purchased for $2,800 the trade name "Wrap-It Up"
and operated the business through April 1998. In April 1998, the
Company sold the business to a stockholder of the Company for $71,657,
which was equal to the amount of the Company's investment (which was
the cost of inventories used in the operations) at the time of sale.
The sales price was consummated by the stockholder's issuance, to the
Company, of a promissory note for the full sales price. The note
receivable is due on demand, and secured by common stock of the
Company, owned by the stockholder, of an amount equal to the December
31, 1998 market value to cover the face value of the note as of
December 31, 1998.
NOTE 4 - INVESTMENT
As of December 31, 1998, the Company paid a $125,000 deposit on the
acquisition of a 9% interest of Sierra Madre Foods, Inc. (See Note 13
- Subsequent Events "Acquisition.")
F-12
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
AND 1998 (UNAUDITED)
NOTE 5 - LINE OF CREDIT
As of December 31, 1998, the Company had a $200,000 line of credit
that expired on May 4, 1999. On the expiration date the line of credit
was extended to September 4, 1999 and was not paid on the extended
expiration date. The line bears interest at United National Bank
Lending Index ("UNBLI"), plus 1% (UNBLI was 8.25%, 8.25% and 9.00% on
June 30, 1999, December 31, 1998 and 1997, respectively).
The Line of credit is secured by substantially all assets of the
Company and is guaranteed by the Company's general manager and his
spouse. The Company's ability to borrow under this line of credit is
based upon a percentage of defined accounts receivable and inventory.
The outstanding line of credit was $200,000 as of December 31, 1998.
The line of credit agreement contains a covenant that requires the
Company to maintain stockholders' equity of at least $200,000. As of
December 31, 1998 the Company was not in compliance with this covenant
and technically is in default. Also, the line of credit was due in
full on September 4, 1999.
NOTE 6 - ADVANCES FROM STOCKHOLDERS
A majority stockholder of the Company has advanced $80,300 for
operating funds. The advances are non-interest bearing and due on
demand. Also, a minority stockholder of the Company has drawn advances
from his personal credit card accounts for operating funds. The
balance due at December 31, 1998 was $22,660. The Company is making
the minimum payments each month.
F-13
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
AND 1998 (UNAUDITED)
NOTE 7 - NOTES PAYABLE
Notes payable consist of the following as of:
<TABLE>
<CAPTION>
December 31, June 30,
---------------------- --------------------
1998 1997 1999 1998
-------- -------- -------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
12% - Note payable with all accrued
interest and principal due on
December 15, 1999 $ 50,000 $ - $ 50,000 $ -
8% - Note payable with all accrued
interest and principal due on demand 29,000 - 29,000 -
Non-interest bearing note payable
due in March 1999 25,000 - - -
19% - Note payable with all accrued
interest and principal due on demand,
note is secured by certain accounts
receivable of the Company 15,500 - 39,342 -
3% per month notes payable with all
accrued interest and principal due
from November 22, 1999 through
November 30, 1999 - - 144,052 -
15% - Note payable with monthly
interest and principal payments of
$1,662 - - 18,445 -
12% - Note payable with all accrued
interest and principal due on demand - - 25,000 -
-------- -------- -------- --------
Total $119,500 $ - $305,839 $ -
======== ======== ======== =========
</TABLE>
F-14
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
AND 1998 (UNAUDITED)
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities for its corporate offices,
warehouse and retail store under non-cancelable operating leases.
Total rent expense for the year ended December 31, 1998 and the seven
months ended December 31, 1997 and for the six months ended June 30,
1999 (unaudited) and 1998 (unaudited) was $50,000, $21,000, $30,680
(unaudited) and $12,000 (unaudited), respectively.
During the six months ended June 30, 1999, the Company entered into
non-cancelable capital lease agreements for the purchase of equipment.
The obligations are secured by the equipment purchased.
Future minimum lease payments under non-cancelable capital and
operating leases with initial or remaining terms of one year or more
are as follows:
Capital
Leases Operating
(Unaudited) Leases
----------- -----------
Year ending December 31,
1999 $ 6,968 $ 61,000
2000 13,967 63,000
2001 13,967 52,000
2002 6,055 20,000
2003 4,479 -
Thereafter 747 -
--------- -----------
Net Minimum Lease Payments 46,123 $ 196,000
===========
Less: Amounts Representing Interest 11,705
---------
Present Value of Net Minimum
Lease Payments 34,418
Less: Current Portion 4,156
---------
Long-Term Portion $ 30,262
Litigation
----------
The Company is involved in certain legal proceedings and claims that
arise in the normal course of business. Management does not believe
that the outcome of these matters will have a material adverse effect
on the Company's financial position or results of operations.
F-15
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
NOTE 9 - STOCKHOLDERS' EQUITY
Classes of Shares
-----------------
The Company's Articles of Incorporation authorize the issues of up to
35,000,000 shares, consisting of 10,000,000 shares of Preferred Stock,
which have a par value of $.001 per share and 25,000,000 shares of
common stock, which have a par value of $.001.
Preferred Stock
---------------
Preferred Stock, any series, shall have the powers, preferences,
rights, qualifications, limitations and restrictions as fixed by the
Company's Board of Directors in its sole discretions. As of December
31, 1998, the Company's Board of Directors had not authorized or
issued any Preferred Stock.
Common Stock Splits
-------------------
On May 1, 1998, the Company's Board of Directors declared a 100 to 1
common stock split. Also, on October 26, 1998, the Company's Board of
Directors declared a 3 to 1 reverse common stock split. All applicable
share and per share data presented have been adjusted for the stock
splits.
Common Stock
-----------
During 1997, the Company issued 5,580,000 shares of its common stock
for proceeds of $627,800.
During 1998, the Company issued 620,012 shares of its common stock for
the acquisition of White Dove Systems, Inc. (See Note 1).
NOTE 10 - COST OF GOODS SOLD
The Company has a key employee who is the principal contact with the
suppliers for the inventory purchased for the Company's Holland
related products. If the employee was terminated, for any reason, the
Company could potentially lose access to approximately 30% of its
product mix, and would be forced to purchase these items from other
suppliers at a cost approximately 10% - 15% higher than the current
cost, which would have a significant impact on the Company's gross
profit.
F-16
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
NOTE 11 - INCOME TAXES
The reconciliation of the effective income tax rate to the federal
statutory rate is as follows:
December 31, June 30,
1998 1997 1999 1998
------- --------- -------- -------
Federal Income Tax Rate 34.00% 34.00% 34.00% 34.00%
Effect of Valuation
Allowance (34.00) (34.00) (34.00) (34.00)
------- ------- ------- -------
Effective Income Tax Rate 0.0% 0.0% 0.00% 0.00%
======= ======= ======= =======
Deferred tax assets and liabilities reflect the net effect of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and amounts used for
income tax purposes. Significant components of the Company's deferred
tax assets and liabilities are as follows:
December 31, June 30,
1998 1997 1999 1998
--------- -------- --------- --------
Deferred Tax Assets
Loss Carry forwards $ 163,000 $ 66,000 $ 203,000 $ 66,000
Less: Valuation Allowance (163,000) (66,000) (203,000) (66,000)
--------- -------- --------- --------
Net Deferred Tax Assets $ - $ - $ - $ -
========= ======== ========= ========
At December 31, 1998 and 1997, the Company has provided a valuation
allowance for the deferred tax asset since management has not been
able to determine that the realization of that asset is more likely
than not. The net change in the valuation allowance for the year ended
December 31, 1998, the seven months ended December 31, 1997 and the
six months ended June 30, 1999 (unaudited) increased by $97,000,
$66,000 and $40,000 (unaudited), respectively. Net operating loss
carry forwards expire in 2012 and 2013.
F-17
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
NOTE 12 - ACQUISITION
On June 1, 1997, the Company purchased its food inventory and a
business name from an unrelated third party for $500,000. In
conjunction with the purchase, the Company commenced operations of its
international specialty foods business at the same location of the
previous owner.
NOTE 13 - SUBSEQUENT EVENTS
Acquisitions
------------
On July 27, 1999, the Company acquired 100% of the outstanding common
stock of Sitestar Corporation, a Delaware corporation, in exchange for
3,491,428 shares of the Company's common stock. The acquisition was
accounted for by the purchase method of accounting.
On January 8, 1999, the Company acquired for $200,000 a 9% equity
interest in Sierra Madre Foods, Inc ("SMF") formerly known as Queen
International Foods ("QIF") a manufacture and wholesaler of frozen
Mexican food products such as frozen burritos and chimichangas. The
Company acquired its 9% interest from QIF bankruptcy proceedings along
with the Debtor-in-Possession as its joint venture partners.
Sale of Assets
--------------
On September 30, 1999, the Company sold all of the assets related to
the Company's international food distribution business, also, known as
Holland American International Specialties. The assets represent
approximately 99% of the Company's assets as of December 31, 1998 and
June 30, 1999. The acquirer of the assets is a partnership with the
majority partners being the majority stockholders of the Company.
Given that the sale was not an arms-length transaction, the Company
had the business valued by an independent appraiser to determine the
fair value purchase price. The sales price was $900,000, which is to
be paid as follows: 1) $200,000 is to be forgiven for the acquirer's
(majority stockholders') original cost to establish the public status
of the Company, 2) $654,000 for the buyer's assumption of all trade,
short-term and long-term liabilities as of July 31, 1999 and 3) the
remaining $46,000 in the form of a note payable to the Company in
three annual installments of $15,333 each plus accrued interest at 8%
per annum.
F-18
<PAGE>
INTERFOODS CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
NOTE 13 - SUBSEQUENT EVENTS (Continued)
On September 30, 1999, the Company sold its 9% interest in SMF (see
Acquisitions above) for an amount equal to the Company's investment of
$200,000. The purchaser of the assets is a partnership with the
majority partners being the majority stockholders of the Company.
Given that the sale was not an arms-length transaction, the Company
had the business valued by an independent appraiser to determine the
fair value purchase price. The sales price of $200,000 is to be paid
as follows: 1) $160,000 for the buyer's assumption of debt related to
the investment, and 2) the remaining $40,000 in the form of a note
payable to the Company in three annual installments of $13,333 each
plus accrued interest at 8% per annum.
Common Stock
------------
On July 6, 1999, the Company restated its Articles of Incorporation to
increase the authorized number of common shares to be issued to
75,000,000, and authorized a 3-to-1 stock split to increase the number
of shares outstanding from 6,200,012 to 18,600,036.
Company Name
------------
On July 26, 1999, the Company restated its Articles of Incorporation
to change the name of the Company to "Sitestar Corporation".
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SITESTAR CORPORATION
We have audited the accompanying consolidated balance sheets of Sitestar
Corporation and Subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sitestar Corporation and
Subsidiary as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $163,704 and $138,423 for the years ended
December 31, 1998 and 1997, respectively. These factors, among others, as
discussed in Note 1 to the financial statements, raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
October 6, 1999
F-20
<PAGE>
<TABLE>
SITESTAR CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 3,923 $ 4,744
Inventory 15,600 -
----------- ----------
Total Current Assets 19,523 4,744
EQUIPMENT, Net 46,393 16,005
EXCESS OF COST OVER FAIR VALUE OF
NET ASSETS ACQUIRED, Net of
Accumulated Amortization of $376 9,728 -
INVESTMENT IN UNCONSOLIDATED AFFILIATE - 2,800
----------- ----------
TOTAL ASSETS $ 75,644 $ 23,549
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 28,603 $ 825
Advances from Related Party 20,200 12,100
----------- ----------
Total Current Liabilities 48,803 12,925
----------- ----------
COMMITMENTS AND CONTINGENCIES (Note 4) - -
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, 200,000
shares authorized, 92,000 shares
issued and outstanding 920 920
Additional Paid-in Capital 328,048 148,127
Accumulated Deficit ( 302,127) ( 138,423)
----------- ----------
Total Stockholders' Equity 26,841 10,624
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 75,644 $ 23,549
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-21
<PAGE>
<TABLE>
SITESTAR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
REVENUE $ 69,128 $ 51,012
COST OF REVENUE 108,191 60,319
----------- ----------
GROSS LOSS ( 39,063) ( 9,307)
SELLING GENERAL AND ADMINISTRATIVE EXPENSES 123,720 129,116
----------- ----------
EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE ( 921) -
LOSS BEFORE INCOME TAXES ( 163,704) ( 138,423)
INCOME TAXES - -
----------- ----------
NET LOSS $( 163,704) $( 138,423)
=========== ==========
BASIC LOSS PER COMMON SHARE $( 1.78) $( 1.50)
=========== ==========
DILUTED LOSS PER COMMON SHARE $( 1.78) $( 1.50)
=========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 92,000 92,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-22
<PAGE>
<TABLE>
SITESTAR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<CAPTION>
Additional Discount
Common Stock Paid-in on Accumulated
Shares Amount Capital Stock Deficit Total
------ -------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 - $ - $ - $ - $ - $ -
Issuance of Shares as Founder's Stock 92,000 920 - ( 920) - -
Fair Value of Services and Equipment
Contributed by Related Party - - 149,047 - - 149,047
Reclassification of Discount on Stock
to Additional Paid-In Capital - - ( 920) 920 - -
Net Loss - - - - ( 138,423) ( 138,423)
------ -------- ---------- ---------- ---------- ---------
Balance at December 31, 1997 92,000 920 148,127 - ( 138,423) 10,624
Fair Value of Services and Equipment
Contributed by Related Party - - 179,921 - - 179,921
Net Loss - - - - ( 163,704) ( 163,704)
------ -------- ---------- ---------- ---------- ---------
Balance at December 31, 1998 92,000 $ 920 $ 328,048 $ - $( 302,127) $ 26,841
====== ======= ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-23
<PAGE>
<TABLE>
SITESTAR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $( 163,704) $ ( 138,423)
Adjustments to Reconcile Net Loss
to Net Cash Used in Operating
Activities:
Depreciation and Amortization 5,930 2,798
Contribution of Services by Related Party 145,166 132,876
Equity in Loss of Unconsolidated Affiliate 921 -
Changes in Assets and Liabilities:
Increase in Accounts Payable
and Accrued Expenses 8,678 825
----------- -----------
Total Cash Used in Operating Activities ( 3,009) ( 1,924)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Equipment ( 1,187) ( 2,632)
Investment in Soccersite, Inc. - ( 2,800)
Acquisition of Soccersite, Inc.,
Net of Cash Acquired ( 4,725) -
----------- -----------
Total Cash Used in Investing Activities ( 5,912) ( 5,432)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from Related Party 8,100 12,100
----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS: ( 821) 4,744
CASH AND CASH EQUIVALENTS -
Beginning Of Period 4,744 -
----------- -----------
CASH AND CASH EQUIVALENTS -
End Of Period $ 3,923 $ 4,744
========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-24
<PAGE>
SITESTAR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For the years ended December 31, 1998 and 1997, the Company paid no interest or
income taxes.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
A related company owned by the principal stockholder of the Company contributed
services and equipment. The fair value of these services and equipment amounted
to $179,921 and $149,047 for the years ended December 31, 1998 and 1997,
respectively.
The accompanying notes are an integral part of the consolidated financial
statements.
F-25
<PAGE>
SITESTAR CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - THE ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
---------------------------------
Sitestar Corporation (the "Company") began operations on January 1,
1997 as a sole proprietorship and was incorporated on February 20,
1997. Operations are conducted from facilities located in the state of
Maryland. The Company is a full service website marketing company
specializing in developing, marketing and hosting high quality
websites. In addition, the Company sells computer equipment to its
customers.
Acquisition
-----------
In November 1997, the Company entered into a joint venture with two
partners and each purchased a one-third interest in Soccersite, Inc.
In July 1998, the Company purchased the remaining two thirds interest.
This wholly owned subsidiary is a marketing website.
Basis of Presentation
---------------------
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company had minimal
revenue and significant net losses for the years ended December 31,
1998 and 1997. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
In view of the matters described in the preceding paragraph,
recoverability of the equipment and excess cost over fair value of net
assets acquired shown in the accompanying consolidated balance sheets
are dependent upon continued operations of the Company, which in turn
is dependent upon the Company's ability to generate positive cash
flows from operations. The financial statements do not include any
adjustments, relating to the recoverability and classification of
recorded asset amounts and classifications of liabilities that might
be necessary should the Company be unable to continue its existence.
Management plans to take the following steps that it believes will be
sufficient to provide the Company with the ability to continue in
existence:
o The Company has been acquired by a publicly held company (See
Note 7).
o The Company is working to raise additional capital and debt
financing to fund operations, increase revenue, and reduce
operating costs.
F-26
<PAGE>
SITESTAR CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of the Company and Soccersite, Inc. from the date of
acquisition July 7, 1998, after the elimination of intercompany
accounts and transactions.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results
could differ from those estimates.
Fair Value of Financial Instruments
-----------------------------------
For certain of the Company's financial instruments including cash,
accounts payable, accrued expenses and advances from related party,
the carrying amounts approximate fair value due to their short
maturities.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company defines cash
equivalents as all highly liquid debt instruments purchased with a
maturity of three months or less, plus all certificates of deposit.
Concentration of Credit Risk
----------------------------
The Company places its cash in what it believes to be credit-worthy
financial institutions. Cash balances did not exceed FDIC insured
levels during the year.
Inventory
---------
The Company purchases inventory of equipment specifically against
customer orders. Inventory is stated at the lower of cost or market.
Cost is determined by the first-in, first-out method.
Equipment
---------
Equipment is stated at cost. Depreciation is computed using the
straight-line method over the useful lives of the assets of 5 years.
F-27
<PAGE>
SITESTAR CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Long-Lived Assets
-----------------
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. When required, impairment
losses on assets to be held and used are recognized based on the fair
value of the assets and long-lived assets to be disposed of are
reported at the lower of carrying amount of fair value less cost to
sell.
Excess of Cost Over Fair Value of Net Assets Acquired
-----------------------------------------------------
The Company continually monitors its excess of cost over fair value of
net assets acquired (which is amortized over ten years) to determine
whether any impairment of this asset has occurred. In making such
determination with respect to excess cost over fair value of net
assets acquired, the Company evaluates the performance, on an
undiscounted cash flow basis, of the underlying assets or group of
assets which gave rise to this amount.
Revenue Recognition
-------------------
Revenue from the sale of services or products are recognized at the
point the services are performed or products delivered.
Income Taxes
------------
The Company has been a subchapter S corporation. Income is passed
through to the stockholders who pay personally their share of the
applicable taxes. Therefore, no provision for income taxes was made at
December 31, 1998 and 1997.
Subsequent to the termination of the Company's S Corporation election
(See Note 7), provisions for income taxes are based on taxes payable
or refundable for the current year and deferred taxes on temporary
differences between the amount of taxable income and pretax financial
income and between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or
settled as prescribed by Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
F-28
<PAGE>
SITESTAR CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Net Loss Per Share
------------------
In accordance with SFAS No. 128, "Earning Per Share", the basic loss
per share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares
outstanding. Diluted loss per common share is computed similar to
basic loss per common share except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the
additional common shares were dilutive.
Comprehensive Income
--------------------
SFAS No. 130, "Reporting Comprehensive Income", establishes standards
for the reporting and display of comprehensive income and its
components in the financial statements. As of December 31, 1998 and
1997, the Company has no items that represent other comprehensive
income and, therefore, has not included a schedule of comprehensive
income in the financial statements.
Advertising Costs
-----------------
Advertising costs, except for costs associated with direct-response
advertising, are charged to operations when incurred. The costs of
direct-response advertising, if any, are capitalized and amortized
over the period during which future benefits are expected to be
received.
Impact of Year 2000 Issue
-------------------------
During the year ended December 31, 1998, the Company conducted an
assessment of issues related to the Year 2000 and determined that no
issues existed which would cause its computer systems not to properly
utilize dates beyond December 31, 1999. At this time, the Company
cannot fully determine the impact of Year 2000 issues will have on its
customers or suppliers with regard to their own business software. If
the Company's customers or suppliers don't convert their systems to
become Year 2000 compliant, the Company may be adversely impacted.
F-29
<PAGE>
SITESTAR CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - EQUIPMENT
Equipment is summarized as follows at December 31,:
1998 1997
---------- ----------
Computer Equipment $ 54,745 $ 18,803
Less: Accumulated Depreciation 8,352 2,798
---------- ----------
$ 46,393 $ 16,005
========== ==========
Depreciation expense was $5,554 and $2,798 for the years ended
December 31, 1998 and 1997, respectively.
NOTE 3 - RELATED PARTY
A related company owned by the principal stockholder of the Company
provided services (programming and administrative labor, use of
premises, insurance and telephone) and equipment. The fair value of
these services and equipment amounting to $179,921 and $149,047 for
the years ended December 31, 1998 and 1997, respectively, were
recorded as additional paid-in capital.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Office Space
------------
For the years ended December 31, 1998 and 1997, the Company was
provided office space by a related company (See Note3), the fair value
of which was $13,222 and $12,194, respectively. The space was occupied
on a month-to-month basis.
NOTE 5 - ADVERTISING COSTS
Advertising costs incurred and recorded as expense in the consolidated
statements of operations were $13,825 and $12,911 for the years ended
December 31, 1998 and 1997, respectively.
NOTE 6 - ACQUISITION
On July 15, 1998, the Company acquired the remaining two-third
interest of Soccersite, Inc. for $6,000, in addition to the $1,879
original one-third interest for a total purchase price of $7,879. The
acquisition was accounted for by the purchase method of accounting;
accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on the estimated fair values at
the date of acquisition. The excess of the purchase price over
estimated fair value of net assets acquired of $10,104 has been
recorded as excess of cost over fair value of net assets acquired,
which is being amortized over ten years.
F-30
<PAGE>
SITESTAR CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 6 - ACQUISITION (continued)
The estimated fair value of assets acquired and liabilities assumed is
summarized as follows:
Cash $ 1,275
Other Assets 10,104
Liabilities ( 3,500)
--------
Purchase Price $ 7,879
========
NOTE 7 - SUBSEQUENT EVENTS
Leases
------
In 1999, the Company entered into various non-cancelable capital and
operating lease agreements for various equipment. The future minimum
lease payments under non-cancelable capital and operating leases with
initial or remaining terms of one year or more are as follows:
Capital Operating
Year Ended December 31, Leases Lease
---------- -----------
1999 $ 8,357 $ 2,425
2000 16,340 21,065
2001 16,340 -
2002 7,982 -
---------- ----------
Net Minimum Lease Payments 49,019 $ 23,490
==========
Less: Amounts Representing
Interest 4,010
----------
Present Value of Net Minimum
Lease Payment $ 45,009
==========
The assets of the Company are subject to a lien by the lessor of a
capital obligation. In addition, the lease is secured by the personal
guarantee of two stockholders of the Company.
Office Space
------------
In 1999, the Company continued to occupy the office space of a related
party through the termination of the lease. Upon termination of the
lease, the related party vacated the space and the Company is
occupying the premises on a month-to-month basis until such time a
lease is negotiated.
F-31
<PAGE>
SITESTAR CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 7 - SUBSEQUENT EVENTS (continued)
Sale of Company
---------------
On July 27, 1999, the stockholders of the Company consummated an
agreement exchanging all of the issued and outstanding shares of the
Company's common stock for 3,491,428 shares of a publicly held
corporation's common stock.
Income Taxes
------------
As a result of the sale of the Company described above, the Subchapter
S Corporation status has been terminated.
F-32
<PAGE>
PRO FORMA FINANCIAL INFORMATION
INTERFOODS CONSOLIDATED, INC.
Subsequent to June 30, 1999, the latest balance sheet date presented in this
registration statement, the registrant acquired Sitestar Corporation.
Additionally, the Company sold all of the assets relating to its specialty foods
operations. The details of these transactions are presented in the notes to the
financial statements presented elsewhere in this registration statement.
The pro forma balance sheet reflects the historical consolidated balance sheet
of the Company, after the sale of the specialty food assets, and the balance
sheet of Sitestar Corporation as of June 30, 1999. The Company acquired Sitestar
on July 27, 1999 and sold the specialty food assets on September 30, 1999. Pro
forma adjustments have been made to give effect to the acquisition of Sitestar
and the sale of the specialty food assets as if they had occurred on June 30,
1999.
The pro forma statement of operations for the six month period ended June 30,
1999 reflects the historical statement of operations of the Company, after the
sale of the specialty food assets, and the statement of operations of Sitestar
Corporation. Pro forma adjustments have been made to give effect to these
transactions as if they had occurred as of the January 1, 1999.
F-33
<PAGE>
<TABLE>
INTERFOODS CONSOLIDATED, INC.
PROFORMA BALANCE SHEET
JUNE 30, 1999
<CAPTION>
Proforma Adjustments
Proforma Adjustments to to Reflect Sale
Reflect Acquisition of of Specialty food
Sitestar Sitestar As of June Assets As of June
Balance Balance 30, 1999 30, 1999
Sheet Sheet ----------------------- Adjusted ------------------- Proforma
June 30, June 30, Dr Cr June 30, Dr Cr June 30,
1999 1999 1999 1999
--------- --------- --------- ------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ - $ 11,915 $ 11,915 $ 11,915
Accounts Receivable 89,210 89,210 2) 89,210 -
Inventories 469,004 469,004 2) 469,004 -
Note Receivable - Stockholder 75,310 75,310 2) 86,000 161,310
Other Current Assets 42,966 42,966 2) 33,920 9,046
-------- -------- ---------- ---------
Total Current Assets 676,490 11,915 688,405 182,271
Equipment and Furniture, Net 56,020 99,079 155,099 2) 38,020 117,079
Excess Cost Over Fair Value of
Net Assets Acquired - 9,352 1) 7,743,850 3) 387,193 7,366,009 7,366,009
Investment 200,000 200,000 2) 200,000 -
========= =========== ========== ==========
Total Assets $ 932,510 $ 120,346 $8,409,513 $7,665,359
========= =========== ========== ==========
Liabilities and Stockholders'
Equity (Deficiency)
Current Liabilities
Book Overdraft $ 37,956 $ - $ 37,956 $ 37,956
Accounts payable and Accrued
Expenses 156,198 6,008 162,206 2) 156,199 6,007
Line of Credit 200,000 - 200,000 2) 200,000 -
Advance from Stockholders 246,702 - 246,702 117,545 129,157
Notes Payable 305,839 - 305,839 2) 305,839 -
Capital Lease Obligations -
Current Portion 4,155 5,112 9,267 2) 4,155 5,112
--------- --------- ---------- ---------
Total Current Liabilities 950,850 11,120 961,970 178,232
Capital Lease Obligations, Less
Current Portion 30,262 14,705 44,967 2) 30,262 14,705
--------- --------- ---------- ---------
Total Liablities
981,112 25,825 1,006,937 192,937
--------- --------- ---------- ---------
Commitments and Contingencies
Stockholders Equity (Deficiency)
Common Stock, $0.001 par value,
25,000,000 shares authorized,
9,691,440 issued and outstanding 6,200 920 1) 920 1) 3,491 9,691 9,691
Additional Paid-in Capital 621,600 500,357 1) 500,357 1) 7,939,509 8,561,109 8,561,109
Accumulated Deficit (676,402) (406,756) 3) 387,193 1) 302,127 (1,168,224) 4) 69,846 (1,098,378)
--------- --------- ---------- ---------
Total Stockholders
Equity (Deficiency) (48,602) 94,521 7,402,576 7,472,422
--------- --------- ---------- ---------
Total Liabilities and
Stockholders Equity
(Deficiency) $932,510 $ 120,346 $ 8,409,513 $7,665,359
======== ========== =========== ==========
</TABLE>
F-34
<PAGE>
<TABLE>
INTERFOODS CONSOLIDATED, INC.
PROFORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<CAPTION>
Proforma Adjustments
Proforma Adjustments to to Reflect Sale
Sitestar Reflect Acquisition of of Specialty Food
Statement Statement Sitestar As of June Assets As of June
of of 30, 1999 30, 1999
Operations Operations ----------------------- Adjusted --------------------- Proforma
June 30, June 30, Dr Cr June 30, Dr Cr June 30,
1999 1999 1999 1999
--------- --------- --------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 870,249 $ 115,084 $ 985,333 5) 870,249 $ 115,084
Cost of Goods Sold 654,011 124,116 778,127 5) 654,011 124,116
--------- --------- --------- --------
Gross Profit (Loss) 216,238 (9,032) 207,206 ( 9,032)
Selling, General and
Administrative Expenses 380,623 95,597 3) 387,193 863,413 5) 276,793 586,620
--------- --------- --------- ---------
Loss From Operations (164,385) (104,629) (656,207) (595,652)
--------- --------- -------- ---------
Other Income (Expenses)
Gain (Loss) On Sale of Assets - - - 4) 69,846 69,846
Interest Expense (33,454) - (33,454) 5) 33,454 (66,908)
-------- --------- -------- --------
Total Other Income(Expenses) (33,454) - (33,454) 2,938
-------- --------- -------- --------
Loss Before Income Taxes (197,839) (104,629) (689,661) (592,714)
Taxes - - - -
-------- --------- -------- --------
Net Loss $(197,839) $(104,629) $(689,661) $(592,714)
========= ========= ========= =========
Basic Loss Per Share
Historical $( 0.03)
=========
Proforma $( 0.06)
=========
Weighted Average Shares Outstanding
Historical 6,200,012
=========
Proforma 9,691,440
=========
</TABLE>
F-35
<PAGE>
<TABLE>
INTERFOODS CONSOLIDATED, INC.
PROFORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Proforma
Adjustments Proforma Adjustments
to Reflect to Reflect Sale
Sitestar Acquisition of of Specialty Food
Statement Statement Sitestar As of Assets As of
of of December 31,1998 December 31, 1998
Operations Operations ----------------- Adjusted --------------------- Proforma
December 31, December 31, Dr Cr December Dr Cr December 31,
1998 1998 31, 1998 1998
--------- --------- --------- ------ ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $2,175,867 $ 69,128 $2,244,995 5) 2,175,867 $ 69,128
Cost of Goods Sold 1,614,924 108,191 1,723,115 7) 1,614,924 108,191
---------- --------- ---------- ----------
Gross Profit (Loss) 560,943 ( 39,063) 521,880 ( 39,063)
Selling, General and
Administrative Expenses 827,040 123,720 6) 774,385 1,725,145 7) 656,390 1,068,755
---------- --------- ---------- ----------
Loss From Operations (266,097) ( 162,783) (1,203,265) (1,107,818)
---------- --------- ---------- ----------
Other Income (Expenses)
Gain (Loss) On Sale of Assets - - - - -
Interest Expense (18,397) - (18,397) 7) 18,397 (36,794)
---------- --------- ---------- ----------
Total Other Income(Expenses) (18,397) - (18,397) (36,794)
---------- --------- ---------- ----------
Loss Before Income Taxes (284,494) (162,783) (1,221,662) (1,144,612)
Taxes - - - -
---------- --------- ---------- ----------
Net Loss $ (284,494) $(162,783) $(1,221,662) $(1,144,612)
========== ========= =========== ===========
Basic Loss Per Share
Historical $( 0.04)
===========
Proforma $( 0.12)
===========
Weighted Average Shares Outstanding
Historical 5,693,810
===========
Proforma 9,185,238
===========
</TABLE>
F-36
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
INTERFOODS CONSOLIDATED, INC.
Balance Sheet, June 30, 1999
- ----------------------------
1) To reflect the acquisition of Sitestar Corporation as if it occurred on
June 30, 1999. This acquisition closed as of July 27, 1999. The
acquisition, accounted for as a purchase, was achieved through the issuance
of 3,491,428 shares of the Company's common stock in exchange for all of
the issued and outstanding shares of common stock held by Sitestar
Corporation's Stockholders. The total acquisition price is $7,943,000
resulting in excess cost over fair value of net assets acquired of
$7,742,929, calculated as follows:
Acquisition price $ 7,943,000
Net assets acquired 200,071
-----------
Excess cost over fair
Value of net assets
Acquired $ 7,742,929
===========
2) To reflect the sale of the specialty foods assets as if it occurred on June
30, 1999. This transaction closed on September 30, 1999. The sales price
was $1,100,000 with a $200,000 discount, for the stockholders' formation of
the Company for an adjusted price of $900,000. The consideration was a,
assumption of $814,000 of Company's debt, related to the specialty foods
business, and a promissory note for $86,000. The net book value of the
assets was $830,154 for a gain on sale of assets of $69,846.
Statement of Operations, six months ended June 30, 1999
- -------------------------------------------------------
3) To reflect amortization of excess cost over the fair value of net assets
acquired for the six month period.
4) To reflect the gain on sale of the specialty food assets.
5) To restate operations to remove the operations of the Specialty foods
assets.
Statement of Operations, for the year ended December 31, 1998
- -------------------------------------------------------------
6) To reflect amortization of excess cost over the fair value of net assets
acquired for the year ended.
7) To restate operations to remove the operations of the Specialty foods
assets.
F-37
<PAGE>
PART III
Item 1. INDEX TO EXHIBITS
The following exhibits are filed with this Registration Statement:
Exhibit
Number Description
- ------- -------------------------------
2.1 Agreement and Plan of Reorganization, dated October 25, 1998
2.2 Agreement and Plan of Reorganization, dated July 27, 1999
2.3 Asset Sale and Agreement re divestiture of Holland American
Specialties, dated September 30, 1999
2.4 Asset Sale and Agreement re divestiture of Sierra Madre Foods, Inc.,
dated September 30, 1999
2.5 Letter of Intent to Acquire Eastern Shore Net, dated August 17, 1999
2.6 Letter of Intent to Acquire Neocom Microspecialists, Inc., dated
September 2, 1999
3.1(i) Articles of Incorporation of the Registrant (December 17, 1992)
3.1(ii) Amended Articles of Incorporation (July 29, 1998)
3.1(iii) Amended Articles of Incorporation (October 26, 1998)
3.1(iv) Amended Articles of Incorporation (July 14, 1999)
3.1(v) Amended Articles of Incorporation (July 28, 1999)
3.2(i) By-laws of the Registrant (December 17, 1992)
22 Subsidiaries of the Registrant
27 Financial Data Schedule
46
<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.
SITESTAR CORPORATION
(Registrant)
Date: October 21, 1999 By: /s/ Frederick T. Manlunas
-------------------------
Frederick T. Manlunas
Chairman of the Board
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (hereinafter referred to as the
"Agreement") is entered into as of this 25th day of October, 1998, by and
between INTERFOODS CONSOLIDATED, INC. (hereinafter referred to as "HAIS"),
FREDERICK T. MANLUNAS, EDWARD C. REYES, CHRISTOPER P. TSENG, EILEEN LEE,
EMMANUEL CORPUS, RENATO A. LUTTAUA, ROSE FEJARDO, SOCORRO P. GIL and GLEN H.
PEREZ (hereinafter individually and collectively referred to as "Shareholder")
and WHITE DOVE SYSTEMS, INC. (hereinafter referred to as "WDVE").
WITNESSETH
WHEREAS, HAIS is a California corporation with 4,000,000 shares of common
stock issued and outstanding (hereinafter "HAIS Shares"); and
WHEREAS, WDVE is a Nevada corporation with authorized capital stock of
25,000,000 shares of Common Stock $.001 par value per share, of which 1,860,000
shares were issued and outstanding as of October 25, 1998, and
WHEREAS, Shareholder owns all of the issued and outstanding shares of stock
in HAIS; and
WHEREAS, WDVE desires to purchase from Shareholder all of the issued and
outstanding shares of HAIS owned by him in exchange for 5,580,000 shares of
common stock ("Stock"), and
WHEREAS, it is the intention of Shareholder to exchange the HAIS Shares
held by him f or Stock of WDVE, on the terms and conditions set forth herein;
and
WHEREAS, it is the intention of WDVE, HAIS and Shareholder that the
transactions contemplated hereby constitute a tax-free "reorganization" as
defined in Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended
("B Reorganization") and that all the terms and provisions of this Agreement be
interpreted, construed and enforced to effectuate this intent.
NOW THEREFORE in consideration of the foregoing and the mutual covenants,
promises, representations and warranties contained herein, the parties hereto
agree as follows:
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Article I
EXCHANGE
1. 1. Exchange of Stock of HAIS. At the Closing Date (as defined in Article
VIII hereof), in accordance with the provisions of this Agreement and applicable
law, Shareholder shall transfer and WDVE shall acquire all of the stock of HAIS
Shares owned by Shareholder.
Article II
CONSIDERATION
2.1. Exchange. Shareholder and WDVE agree that all of the HAIS Shares owned
by Shareholder shall be exchanged with WDVE for 5,580,000 shares of Stock of
WDVE. Such Stocks shall be issued in Certificates of such denominations, amounts
and names as may be requested by Shareholder.
2.2. Investment Intent and Delivery. Shareholder represents and warrants
that he is acquiring said stock for investment purposes only and not with a view
towards resale or redistribution. Shareholder agrees to deliver to WDVE on the
Closing Date, a letter setting forth an agreement that said Stock is being
acquired for investment purposes only and will not be sold except in compliance
with the Securities Act of 1933, as amended, and the Rules and Regulations
promulgated thereunder. At said closing, WDVE shall deliver certificates for the
HAIS Shares, duly endorsed in negotiable form, with signatures guaranteed, free
and clear from all claims and encumbrances.
Article III
REPRESENTATTONS AND WARRANTIES OF WDVE
WDVE represents the warrants to Shareholder as follows:
3.1. Organization. WDVE is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada, has the
corporate power and authority to own or lease its properties and to carry on
business as now being conducted.
3.2. Capitalization. As of the date hereof, the authorized capital stock of
WDVE consists of 25,000,000 shares of capital stock, of which 1,860,000 shares
are presently issued and outstanding. All said Stock is validly issued and
outstanding, fully paid and nonassessable. As of the Closing Date, there will be
no shares of common stock subject to unexpired exercisable options.
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3.3. Financial Statements. WDVE has furnished to Shareholder financial
statements as of July 30, 1998. Said financial statements contain the balance
sheet and income statement of WDVE. All of said financial statements, (i) are in
accordance with WDVE's books and records, (ii) present fairly and financial
position of WDVE as of such dates, and its results of operations and changes in
financial position for the respective periods indicated, (iii) have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis, and (iv) consistent with prior business practice, contain
adequate reserves for all known or contingent liabilities, losses and refunds
with respect to services or products already rendered or sold.
3.4. Contracts. Prior to the Closing Date, WDVE will furnish HAIS with a
true and complete list and description of all contracts by and between WDVE and
with others. Each of the agreements, contracts, commitments, leases, plans and
other instruments, documents and undertakings to be supplied is valid and
enforceable in accordance with its terms except as the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting the rights of
creditors generally, and by equitable principles. WDVE is not in default of the
performance, observance or fulfillment of any material obligations, covenant or
condition contained therein; and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default
thereunder; furthermore, except as may be disclosed in writing at the time of
delivery, no such agreement, contract, commitment, lease, plan or other
instrument, document or undertaking, in the reasonable opinion of WDVE, contains
any contractual requirement with which there is a likelihood WDVE will be unable
to comply.
3.5. Registration Rights. No shareholder of WDVE has any demands or "piggy
back" registration rights with regards to the outstanding shares or options of
WDVE.
3.6. Authorization. WDVE has the power to enter into this Agreement, and
this Agreement, when duly executed and delivered, will constitute the valid and
binding obligation of WDVE.
3.7. Effect of Agreement. The execution and delivery by WDVE of this
Agreement and the consummation of the transactions herein contemplated, (i) will
not conflict with or result in a breach of the terms of, or constitute any
default under or violation of, any law or regulation of any governmental
authority, or the Articles of Incorporation or By-Laws of WDVE, or any material
agreement or instrument to which WDVE is a party or by which it is bound or is
subject; (ii) now will it give to others any interest or rights, including
rights of termination, acceleration or cancellation, in or with respect to any
of the properties, assets, agreements, leases, or business of WDVE.
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Article IV
REPRESENTATIONS AND WARRANTIES OF HAIS AND SHAREHOLDER
HAIS and Shareholder, and each of them, represent and warrant to WDVE as
follows:
4.1. Organization. HAIS is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, has the
corporate power and authority to own or lease its properties and to carry on
business as now being conducted.
4.2. Capitalization. The authorized capital stock of HAIS consists of one
class of common stock, 20,000,000 shares authorized, of which 4,000,000 are
outstanding Shares are validly issued and outstanding, fully paid and
nonassessable. All of the issued and outstanding shares are owned by
Shareholder.
4.3. Authority. HAIS and Shareholder have the full power and authority to
enter into this Agreement and to carry out its obligations hereunder. Other than
approval by the Board of Directors, no proceedings on the part of Shareholder is
necessary to authorize this Agreement or the transactions completed hereby. This
Agreement constitutes the legal, valid and binding obligation of HAIS and
Shareholder enforceable in accordance with its terms.
4.4. Financial Statements. HAIS and Shareholder had furnished to WDVE its
business plan and current financial statements. Said financial statements
contain the balance sheet and income statement of HAIS. All of said financial
statements, (i) are in accordance with HAIS books and records, (ii) present
fairly the financial position of HAIS as of such dates, and its results of
operations and changes in financial position for the respective periods
indicated, (iii) have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis, and (iv) consistent with
prior business practice, contain adequate reserves for all known or contingent
liabilities, losses and refunds with respect to services or products already
rendered or sold.
4.5. Contracts. Prior to the Closing Date, HAIS will furnish WDVE with a
true and complete list and description of all contracts by and between HAIS and
with others. Each of the agreements, contracts, commitments, leases, plans and
other instruments, documents and undertakings to be supplied is valid and
enforceable in accordance with its terms except as the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting the rights of
creditors generally, and by equitable principles. HAIS is not in default of the
performance, observance or fulfillment of any material obligations, covenant or
condition contained therein; and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default
thereunder; furthermore, except as
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may be disclosed in writing at the time of delivery, no such agreement,
contract, commitment, lease, plan or other instrument, document or undertaking,
in the reasonable opinion of HAIS, contains any contractual requirement with
which there is a likelihood HAIS will be unable to comply.
4.6. Competition. Except as set forth in the contracts described in 4.5
above, neither HAIS, nor any officer or director or Shareholder of HAIS has any
material direct or indirect financial or economic interest in any related
industry entity or in any competition or customer of HAIS.
4.7. Effect of Agreement. The execution and delivery by HAIS of this
Agreement and the consummation of the transactions herein contemplated, (i) will
not conflict with, or result in a breach of the terms of, or constitute and
default under or violation of, any law or regulation of any governmental
authority, or the Articles of Incorporation or By-Laws of RAIS, or any material
agreement or instrument to which HAIS is a party or by which it is bound or is
subject; (ii) nor will it give to rise to any interests or rights, including
rights of termination, acceleration or cancellation, in or with respect to any
of the properties, assets, agreements, leases, or business of HAIS.
4.8. Properties. All of the property, assets and equipment owned by or used
by HAIS is in good repair, well maintained, and in good and satisfactory
operating condition consistent with their age, free from any known defects,
except such minor defects as do not substantially interfere with the continued
use thereof in the conduct of normal operations and such property, assets, and
equipment which is owned by HAIS is valued on the Balance Sheet at original
purchase price less reasonable depreciation consistently applied in accordance
with generally accepted accounting principles.
4.9. Minutes Book. The records of meetings and other corporate actions of
Shareholder and the Board of Directors (including any committees of the Board)
of HAIS which are contained in the Minute Books of HAIS contain complete and
accurate records of the matters reflected in such minutes.
4.10. Litigation; Claims. HAIS is not a party and there are no claims,
actions, suits, investigations or proceedings pending, threatened against HAIS
or its business, at law or in equity, or before or by any governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, which if determined adversely would have a material effect on the
business or financial condition of HAIS or the ability of HAIS to carry on its
business. The consummation of the transactions herein contemplated will not
conflict with or result in the breach or violation of any judgement, order,
writ, injunction or decree of any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
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4.11. Taxes and Reports. At the Closing Date, HAIS (i) will have filed all
tax returns required to be filed by any jurisdiction, domestic or foreign, to
which it is or has been subject, (ii) has paid in full all taxes due and taxes
claimed to be due by each jurisdiction, and any interest and penalties with
respect thereto, and (iii) has adequately reflected as liabilities on its books,
all taxes that have accrued for any period to and including the Closing Date.
4.12. Compliance with Laws and Regulations. HAIS and Shareholder have
complied with, and is not in violation of any federal, state, local or foreign
statute, law, rule or regulation with respect to the conduct of its businesses,
which violation might have a material adverse effect on the business, financial
condition or earnings of HAIS.
4.13. Finders. HAIS is not obligated, absolutely or contingently, to any
person for financial advice, a finder's fee, brokerage commission, or other
similar payment in connection with the transactions contemplated by this
Agreement.
4.14. Nature of Representations. No representation, warranty or agreement
made by HAIS in this Agreement and no statement or disclosure furnished by
Shareholder in connection with the transactions herein contemplated contains, or
will contain, any untrue statement of a material fact necessary to make any
statement, representation, warranty or agreement not misleading.
Article V
ACCESS TO INFORMATION
5.1. Access to Information. HAIS and Shareholder shall afford
representatives of WDVE reasonable access to officers, personnel, and
professional representatives of HAIS and such of the financial, contractual and
corporate records of HAIS as shall be reasonably necessary for WDVE's
investigations and appraisal of HAIS.
5.2. Effect of Investigations. Any such investigation by WDVE of RAIS shall
not affect any of the representations and warranties hereunder and shall not be
conducted in such manner as to interfere unreasonably with the operation of the
business of HAIS.
Article VI
CONDITIONS TO OBLIGATIONS OF WDVE
The obligations of WDVE under this Agreement are, at the option of WDVE, subject
to the satisfaction, at and prior to the Closing Date, of the following
conditions:
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6.1. Fulfillment of Covenants. All the terms, covenants and conditions of
this Agreement to be complied with and performed by HAIS at or before the
Closing Date shall have been duly complied with and performed.
6.2. Accuracy of Representations and Warranties: Other Documents. All of
the representations and warranties made by all parties to this Agreement shall
be true as of the Closing Date.
6.3. No Litigation. Except for certain claims which may have their genesis
in connection with the rescission of that certain transaction by and between
Shareholder and Glenhills Corporation, there shall be no action, proceeding,
investigation or pending or actual litigation the purpose of which is to enjoin
or may be to enjoin the transactions contemplated by this Agreement or which
would have the effect, if successful, of imposing a material liability upon
WDVE, or any of the officers or directors thereof, because of this consummation
of the transactions contemplated by this Agreement.
Article VII
CONDITIONS TO OBLTGATIONS OF SHAREHOLDER
The obligations of Shareholder under this Agreement are, at the option of
Shareholder, subject to the satisfaction, at and prior to the Closing Date, of
the following conditions:
7.1. Fulfillment of Covenants. All the terms, covenants and conditions of
this Agreement to be complied with and performed by WDVE at or before the
Closing Date shall have been duly complied with and performed.
7.2. Accuracy of Representations and Warranties; Other Documents. All of
the representations and warranties made by all parties to this Agreement shall
be true as of the Closing Date.
7.3. No Litigation. There shall be no action, proceeding, investigation or
pending or actual litigation the purpose of which is to enjoin or may be to
enjoin the transactions contemplated by this Agreement or which would have the
effect, if successful, of imposing a material liability upon HAIS, or any of the
officers or directors thereof, because of the consummation of the transactions
contemplated by this Agreement.
7.4. Additional Conditions. Prior to the Closing Date, the Board of
Directors of WDVE will adopt a resolution to amend the Articles of Incorporation
as follows:
Article FIRST is hereby amended to read as follows:
"FIRST. The name of the corporation is: InterFoods Consolidated, Inc.
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Article FOURTH is hereby amended to read as follows:
"FOURTH. The aggregate number of shares which the corporation shall
have the authority to issue is Twenty-Five Million (25,000,000) shares
of common stock at $.001 par value, and Ten Million (10,000,000)
shares of Serial Preferred Stock at $.001 par value.
A. Each share of Common Stock shall entitle the holder thereof to
one vote on any matter submitted to a vote of or for consent of
holders of Common Stock. Subject to the provisions of applicable law
and this Article Fourth, any dividends paid or distributed on or with
respect to the Common Stock of the corporation shall be paid or
distributed ratably to the holders of its Common Stock. In the event
of any liquidation, dissolution or winding-up of the corporation,
whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the corporation and any
amounts to which the holders of any Serial Preferred Stock shall be
entitled, as hereinafter provided, the holders of Common Stock shall
be entitled to share ratably in the remaining assets of the
corporation.
B. Subject to the terms and provisions of this Article Fourth,
the Board of Directors is authorized to provide from time to time for
the issuance of shares of Serial Preferred Stock in series and to fix
and determine from time to time before issuance the designation and
relative rights and preferences of the shares of each series of Serial
Preferred Stock and the restrictions or qualifications thereof,
including, without limiting the generality of the foregoing, the
following:
(1) The series designation and Authorized number of shares;
(2) The dividend rate and the date or dates on which such dividends
will be payable;
(3) The amount or amounts to be received by the holders in the event
of voluntary or involuntary dissolution or liquidation of the
corporation;
(4) The price or prices at which shares may be redeemed, if any, and
any terms, conditions, limitations upon such redemptions;
(5) The sinking fund provisions, if any, for redemption or purchase
of shares; and
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(6) The terms and conditions, if any, on which shares may be
converted at the election of the holders thereof into shares of
other capital stock, or of other series of Serial Preferred
Stock, of the corporation.
C. The holders of the shares of Common Stock or Serial Preferred
Stock shall not be entitled to cumulative voting on any matter.
D. Upon the amendment of this Article Fourth to read as
hereinabove set forth, each three (3) outstanding shares of common
stock is reverse split, reconstituted and converted into one (1)
share. No fractional shares shall be issued.
Article VIII
CLOSING
8.1. Closing Date. The consummation of the exchange shall take place at the
offices of White Dove Systems, Inc. 6767 West Tropicana Avenue, Suite 207, Las
Vegas, Nevada 89103, on November 20, 1998, or such other time or place as shall
be mutually agreed upon by the parties to this Agreement.
8.2. Actions to be Taken by Parties on the Closing Date. On the Closing
Date, each party shall deliver to the other all documents or agreements provided
or herein to be-delivered on the Closing Date.
Article IX
INDEMNIFICATION AND ARBITRATION
9.1. Indemnification. Each of the parties agree to indemnify and hold
harmless the other against any and all damages, claims, losses, expenses,
obligations and liabilities (including reasonable attorney's fees) resulting
from or related to any breach of, or failure by each of the parties to perform
any of their representations, warranties, covenants, conditions or agreements in
this Agreement or in any schedule, certificate, exhibit or other document
furnished, or to be furnished under this Agreement.
9.2. Claims of Indemnification. Any claim for indemnification pursuant to
this Agreement, unless otherwise received by means of direct negotiation among
the parties upon reasonable oral notification by the party seeking
indemnification to all other parties, shall be made by writing of the nature and
amount of the claim to the other.
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Article X
PAYMENT OF EXPENSES
10. 1. Expenses. Each party shall bear its own expenses.
Article XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
11.1. Survival. All statements contained in any schedules, any exhibit or
other instrument delivered by or on behalf of any party or in connection with
the transactions contemplated by this Agreement, shall be deemed to be
representations made by or on behalf of the parties to this Agreement, all
representations, warranties and agreements made by the parties to this Agreement
or pursuant hereto shall survive.
Article XII
GENERAL
12.1. Partial Invalidity. If any term or provision of this Agreement or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby, and each such
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
12.2. Waiver. No waiver of any breach of any covenant or provision herein
contained shall be deemed a waiver of any pre- ceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed and extension of
the time for performance of any other obligation or act.
12.3. Notices. All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed received
upon mailing thereof.
To: White Dove Systems, Inc.
Shareholders
c/o InterFoods Consolidated, Inc.
16133 Ventura Boulevard, Suite 635
Encino, California 91436
InterFoods Consolidated, Inc.
16133 Ventura Boulevard, Suite 635
Encino, California 91436
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Notice of change of address shall be given by written notice in the manner
detailed in this subparagraph 12.3.
12.4. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
12.5. Professional Fees. in the event of the bringing of any action or suit
by a party hereto against another party hereunder by reason of any breach of any
of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorney's fees, accounting fees, and
other professional fees resulting therefrom.
12.6. Entire Agreement. This Agreement is the final expression of, and
contains the entire agreement between, the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
party to be charged or by his agent duly authorized in writing or as otherwise
expressly permitted herein. The parties do not intend to confer any benefit
hereunder on any person, firm or corporation other than the parties hereto.
12.7. Time of Essence. The parties hereby acknowledge and agree that time
is strictly of the essence with respect to each and every term, condition,
obligation and provision hereof and that failure to timely perform any of the
terms, conditions, obligations or provisions hereof by either party shall
constitute a material breach of and non-curable (but waivable) default under
this Agreement by the party so failing to perform.
12-8. Construction. Headings at the beginning of each paragraph and
subparagraph are solely for the convenience of the parties and are not a part of
the Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to paragraphs and subparagraphs are to this Agreement.
In the event the date on which any party is required to take any action under
the terms of this Agreement is not a business day, the action shall be taken on
the next succeeding day.
12.9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which taken together
shall constitute one instrument.
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12.10. Governing Law. The parties hereto expressly agree that this
Agreement shall be governed by, interpreted under, and construed and enforced in
accordance with the laws of the State of Nevada.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date hereof.
INTERFOODS CONSOLIDATED, INC.
By: /s/ Frederick T. Manlunas
-----------------------------------
WHITE DOVE SYSTEMS, INC
By: /s/ Frederick T. Manlunas
-----------------------------------
FREDERICK T. MANLUNAS
-----------------------------------
EDWARD C. REYES
-----------------------------------
CHRISTOPHER P. TSENG
-----------------------------------
EILEEN LEE
-----------------------------------
EMMANUEL CORPUS
-----------------------------------
RENATO A. LITTAUA
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-----------------------------------
ROSE FAJARDO
-----------------------------------
SOCORRO P. GIL
-----------------------------------
GLENN H. PEREZ
INTERFOODS CONSOLIDATED, INC.
By: ____________________________
InterFood:Plan.Reorganization
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Exhibit 2.2
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (hereinafter referred to as the
"Agreement") is entered into as of this 27th day of July, 1999, by and between
SITESTAR CORPORATION (hereinafter referred to as "SCOR"), FRANKLIN CHRISTOPHER,
RICHARD RASCHKE, VANCE STONE, HAROLD SOUTHWELL and WILLIAM McCRACKEN
(hereinafter individually and collectively referred to as "Shareholder") and
INTERFOODS CONSOLIDATED, INC. (hereinafter referred to as "IFCO").
WITNESSETH
WHEREAS, SCOR is a Delaware corporation with 92,000 shares of common stock
issued and outstanding (hereinafter "SCOR Shares"); and
WHEREAS, IFCO is a Nevada corporation with authorized capital stock of
75,000,000 shares of Common Stock $.001 par value per share, of which 18,600,036
shares shall be issued and outstanding by July 27, 1999, and
WHEREAS, Shareholder owns all of the issued and outstanding shares of stock
in SCOR; and,
WHEREAS, IFCO desires to purchase from Shareholder all of the issued and
outstanding shares of SCOR owned by him in exchange for 3,491,428 shares of
common stock ("Stock"); and
WHEREAS, it is the intention of Shareholder to exchange the SCOR Shares
held by him for stock of IFCO, on the terms and conditions set forth herein; and
WHEREAS, it is the intention of IFCO, SCOR and Shareholder that the
transactions contemplated hereby constitute a tax-free "reorganization" as
defined in Section 268 (a) (1) (B) of the Internal Revenue Code of 1986, as
amended ("B Reorganization") and that all the terms and provisions of this
Agreement be interpreted, construed and enforced to effectuate this intent.
NOW THEREFORE in consideration of the foregoing and the mutual covenants,
promises, representations and warranties contained herein, the parties hereto
agree as follows: ARTICLE 1
EXCHANGE
1.1. Exchange of Stock of SCOR. At the Closing Date (as defined in Article
VIII hereof), in accordance with the provisions of this Agreement and applicable
law, shareholder shall transfer and IFCO shall acquire all of the stock of SCOR
shares owned by Shareholder.
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ARTICLE II
CONSIDERATION
2.1. Exchange. Shareholder and IFCO agree that all of the SCOR Shares
owned by Shareholder shall be exchanged with IFCO for 3,491,428 shares of Stock
of IFCO. Such Stocks shall be issued in Certificates of such denominations,
amounts and names as may be requested by Shareholder.
2.2. Investment Intent and Delivery. Shareholder represents and warrants
that he is acquiring said Stock for investment purposes only and not with a view
towards resale or redistribution. Shareholder agrees to deliver to IFCO on the
Closing Date, a letter setting forth an agreement that said Stock is being
acquired for investment purposes only and will not be sold except in compliance
with the Securities Act of 1933, as amended, and the Rules and Regulations
promulgated thereunder. At said closing, IFCO shall deliver certificates for the
SCOR Shares, duly endorsed in negotiable form, with signatures guaranteed, free
and clear from all claims and encumbrances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IFCO
IFCO represents the warrants to Shareholder as follows:
3.1. Organization. IFCO is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada, has the
corporate power and authority to own or lease its properties and to carry on
business as now being conducted.
3.2. Capitalization. As of the date hereof, the authorized capital stock of
IFCO consists of 75,000,000 shares of capital stock, of which 18,600,036 shares
shall be issued and outstanding by July 27, 1999. All said stock shall be
validly issued and outstanding, fully paid and nonassessable. As of the Closing
Date, there will be no shares of common stock subject to unexpired exercisable
options.
3.3. Financial Statements. IFCO has furnished to Shareholder financial
statements as of June 30, 1999. Said financial statements contain the balance
sheet and income statement of IFCO. All of said financial statements, (I) are in
accordance with IFCO's books and records, (ii) present fairly and financial
position of IFCO as of such dates, and its results of operations and changes in
financial position for the respective periods indicated, (iii) have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis, and (iv) consistent with prior business practice, contain
adequate reserves for all known or contingent liabilities, losses and refunds
with respect to services or products already rendered or sold.
3.4. Contracts. Prior to the Closing Date, IFCO will furnish SCOR with a
true and complete list and description of all contracts by and between IFCO and
with others. Each of the agreements, contracts, commitments, leases, plans and
other instruments, documents and undertakings to be supplied is valid and
enforceable in accordance with its terms except as the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting the rights of
creditors generally, and by equitable principles. IFCO is not in default of the
performance, observance or fulfillment of any material obligations, covenant or
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condition contained therein; and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default
thereunder; furthermore, except as may be disclosed in writing at the time of
delivery, no such agreement, contract, commitment, lease, plan or other
instrument, document or undertaking, in the reasonable opinion of IFCO, contains
any contractual requirement with which there is a likelihood IFCO will be unable
to comply.
3.5. Registration Rights. No shareholder of IFCO has any demands or "piggy
back" registration rights with regards to the outstanding shares or options of
IFCO.
3.6. Authorization. IFCO has the power to enter into this Agreement, and
this Agreement, when duly executed and delivered, will constitute the valid and
binding obligation of IFCO.
3.7. Effect of Agreement. The execution and delivery by IFCO of this
Agreement and the consummation of the transactions herein contemplated, (I) will
not conflict with, or result in a breach of the terms of, or constitute any
default under or violation of, any law or regulation of any governmental
authority, or the Articles of Incorporation or By-Laws of IFCO, or any material
agreement or instrument to which IFCO is a party or by which it is bound or is
subject; (ii) now will it give to others any interest or rights, including
rights of termination, acceleration or cancellation, in or with respect to any
of the properties, assets, agreements, leases, or business of IFCO.
3.8. Minute Book. The records of meetings and other corporate actions of
shareholders and the Boards of Directors (including any committees of the Board)
of IFCO which are contained in the Minute Books of IFCO contain complete and
accurate records of all corporate actions are reflected in such minutes.
3.9. Litigation; Claims. IFCO is not a party and there are no claims,
actions, suits, investigations or proceedings pending, threatened against or
affecting IFCO or its business, at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which if determined adversely would have a material effect
on the business or financial condition of IFCO or the ability of transactions
herein contemplated will not conflict with or result in the breach or violation
of any judgement, order, writ, injunction or decree of any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
3.10. Taxes and Reports. Prior to the Closing Date, IFCO (I) will have
filed all tax returns required to be filed by any jurisdiction, domestic or
foreign, to which it is or has been subject, (ii) has paid in full all taxes due
and taxes claimed to be due by each jurisdiction, and any interest and penalties
with respect thereto, and (iii) have adequately reflected as liabilities on its
books, all taxes that have accrued for any period to and including January 31,
1994.
3.11. Compliance with Laws and Regulations. IFCO has complied with, and is
not in violation of any federal, state, local or foreign statute, law, rule or
regulation with respect to the conduct of its businesses, which violation might
have a material adverse effect on the business, financial condition or earnings
of IFCO.
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3.12. Finders. IFCO is not obligated, absolutely or contingently, to any
person for financial advice, a finder's fee, brokerage commission, or other
similar payment in connection with the transactions contemplated by this
Agreement.
3.13. Nature of Representations. No representations, warranty or agreement
made by IFCO in this Agreement and no statement or disclosure furnished by IFCO
in connection with the transactions herein contemplated contains, or will
contain, any untrue statement of a material fact necessary to make any
statement, representation, warranty or agreement not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCOR AND SHAREHOLDER
SCOR and Shareholder, and each of them, represent and warrant to IFCO as
follows:
4.1. Organization. SCOR is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has the corporate
power and authority to own or lease its properties and to carry on business as
now being conducted.
4.2. Capitalization. The authorized capital stock of SCOR consists of one
class of common stock, 92,000 shares authorized, of which 92,000 are outstanding
Shares are validly issued and outstanding, fully paid and nonassessable. All of
the issued and outstanding shares are owned by Shareholder.
4.3. Authority. SCOR and Shareholder have the full power and authority to
enter into this agreement and to carry out its obligations hereunder. Other than
approval by the Board of Directors, no proceedings on the part of Shareholder is
necessary to authorize this Agreement or the transactions completed hereby. This
Agreement constitutes the legal, valid and binding obligation of SCOR and
Shareholder enforceable in accordance with its terms.
4.4. Financial Statements. SCOR and Shareholder had furnished to IFCO its
business plan and current financial statements. Said financial statements
contain the balance sheet and income statement of SCOR. All of said financial
statements, (I) are in accordance with SCOR books and records, (ii) present
fairly the financial position of SCOR as of such dates, and its results of
operations and changes in financial position for the respective periods
indicated, (iii) have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis, and (iv) consistent with
prior business practice, contain adequate reserves for all known or contingent
liabilities, losses and refunds with respect to services or products already
rendered or sold.
4.5. Contracts. Prior to the Closing Date, SCOR will furnish IFCO with a
true and complete list and description of all contracts by and between SCOR and
with others. Each of the agreements, contracts, commitments, leases, plans and
other instruments, documents and undertakings to be supplied is valid and
enforceable in accordance with its terms except as the enforceability thereof
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may be limited by bankruptcy, insolvency or similar laws affecting the rights of
creditors generally, and by equitable principles. SCOR is not in default of the
performance, observance or fulfillment of any material obligations, covenant or
condition contained therein; and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default
thereunder; furthermore, except as may be disclosed in writing at the time of
delivery, no such agreement, contract, commitment, lease, plan or other
instrument, document or undertaking, in the reasonable opinion of SCOR, contains
any contractual requirement with which there is a likelihood SCOR will be unable
to comply.
4.6. Competition. Except as set forth in the contracts described in 4.5
above, neither SCOR, nor any officer or director or Shareholder of SCOR has any
material direct or indirect financial or economic interest in any related
industry entity or in any competition or customer of SCOR.
4.7. Effect of Agreement. The execution and delivery by SCOR of this
Agreement and the consummation of the transactions herein contemplated, (i) will
not conflict with, or result in a breach of the terms of, or constitute and
default under or violation of, any law or regulation of any governmental
authority, or the Articles of Incorporation or By-Laws of SCOR, or any material
agreement or instrument to which SCOR is a party or by which it is bound or is
subject; (ii) nor will it give to rise to any interests or rights, including
rights of termination, acceleration or cancellation, in or with respect to any
of the properties, assets, agreements, leases, or business of SCOR.
4.8. Properties. All of the property, assets and equipment owned by or used
by SCOR is in good repair, well maintained, and in good and satisfactory
operating condition consistent with their age, free from any known defects,
except such minor defects as do not substantially interfere with the continued
use thereof in the conduct of normal operations and such property, assets, and
equipment which is owned by SCOR is valued on the Balance Sheet at original
purchase price less reasonable depreciation consistently applied in accordance
with generally accepted accounting principles.
4.9. Minutes Book. The record of meetings and other corporate actions of
Shareholder and the Board of Directors (including any committees of the Board)
of SCOR which are contained in the Minute Books of SCOR contain complete and
accurate records of the matters reflected in such minutes.
4.10. Litigation; Claims. SCOR is not a party and there are no claims,
actions, suits, investigations or proceedings pending, threatened against SCOR
or its business, at law or in equity, or before or by any governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, which is determined adversely would have a material effect on the
business or financial condition of SCOR or the ability of SCOR to carry on its
business. The consummation of the transactions herein contemplated will not
conflict with or result in the breach or violation of any judgement, order,
writ, injunction or decree of any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
4.11. Taxes and Reports. At the Closing Date, SCOR (i) will have filed all
tax returns required to be filed by any jurisdiction, domestic or foreign, to
which it is or has been subject, (ii) has paid in full all taxes due and taxes
claimed to be due by each jurisdiction, and any interest and penalties with
respect thereto, and (iii) has adequately reflected as liabilities on its books,
all taxes that have accrued for any period to and including the Closing Date.
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4.12. Compliance with Laws and Regulations. SCOR and Shareholder have
complied with, and is not in violation of any federal, state, local or foreign
statute, law, rule or regulation with respect to the conduct of its businesses,
which violation might have a material adverse effect on the business, financial
condition or earnings of SCOR.
4.13. Finders. SCOR is not obligated, absolutely or contingently, to any
person for financial advice, a finder's fee, brokerage commission, or other
similar payment in connection with the transactions contemplated by this
Agreement.
4.14. Nature of Representations. No representation, warranty or agreement
made by SCOR in this Agreement and no statement or disclosure furnished by
Shareholder in connection with the transactions herein contemplated contains, or
will contain, any untrue statement of a material fact necessary to make any
statement, representation, warranty or agreement not misleading.
ARTICLE V
ACCESS TO INFORMATION
5.1. Access to Information. SCOR and Shareholder shall afford
representatives of IFCO reasonable access to officers, personnel, and
professional representatives of SCOR and such of the financial, contractual and
corporate records of SCOR as shall be reasonably necessary for IFCO's
investigations and appraisals of SCOR.
5.2. Effect of Investigations. Any such investigation by IFCO of SCOR shall
not affect any of the representations and warranties hereunder and shall not be
conducted in such manner as to interfere unreasonably with the operation of the
business of SCOR.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF IFCO
The obligations of IFCO under this Agreement are, at the option of IFCO,
subject to the satisfaction, at and prior to the Closing Date, of the following
conditions:
6.1. Fulfillment of Covenants. All the terms, covenants and conditions of
this Agreement to be complied with and performed by SCOR at or before the
Closing Date shall have been duly complied with and performed.
6.2. Accuracy of Representations and Warranties; Other Documents. All of
the representations and warranties made by all parties to this Agreement shall
be true as of the Closing Date.
6.3. No Litigation. There shall be no action, proceeding, investigation or
pending or actual litigation to purpose of which is to enjoin or may be to
enjoin the transactions contemplated by this Agreement or which would have the
effect, if successful, of imposing a material liability upon IFCO, or any of the
officers or directors thereof, because of this consummation of the transactions
contemplated by this Agreement.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SHAREHOLDER
The obligations of Shareholder under this Agreement are, at the option of
Shareholder, subject to the satisfaction, at and prior to the Closing Date, of
the following conditions:
7.1. Fulfillment of Covenants. All the terms, covenants and conditions of
this Agreement to be complied with and performed by IFCO at or before the
Closing Date shall have been duly complied with and performed.
7.2. Accuracy of Representations and Warranties; Other Documents. All of
the representations and warranties made by all parties to this Agreement shall
be true as of the Closing Date.
7.3. No Litigation. There shall be no action, proceeding, investigation or
pending or actual litigation the purpose of which is to enjoin or may be to
enjoin the transactions contemplated by this Agreement or which would have the
effect, if successful, of imposing a material liability upon SCOR, or any of the
officers or directors thereof, because of the consummation of the transactions
contemplated by this Agreement.
ARTICLE VIII
CLOSING
8.1. Closing Date. The consummation of the exchange shall take place at the
offices of Interfoods Consolidated, Inc. 16133 Ventura Boulevard, Suite 635,
Encino, California 91436 on July 27, 1999, or such other time or place as shall
be mutually agreed upon by the parties to this Agreement.
8.2. Actions to be Taken by Parties on the Closing Date. On the Closing
Date, each party shall deliver to the other all documents or agreements provided
or herein to be delivered on the Closing Date.
ARTICLE IX
INDEMNIFICATION AND ARBITRATION
9.1. Indemnification. Each of the parties agree to indemnify and hold
harmless the other against any all damages, claims, losses, expenses,
obligations and liabilities (including reasonable attorney's fees) resulting
from or related to any breach of, or failure by each of the parties to perform
any of their representations, warranties, covenants, conditions or agreements in
this Agreement or in any schedule, certificate, exhibit or other document
furnished, or to be furnished under this Agreement.
9.2. Claims of Indemnification. Any claim for indemnification pursuant to
this Agreement, unless otherwise received by means of direct negotiation among
the parties upon reasonable oral notification by the party seeking
indemnification to all other parties, shall be made by writing of the nature and
amount of the claim to the other.
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ARTICLE X
PAYMENT OF EXPENSES
10.1. Expenses. Each party shall bear its own expenses.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
11.1. Survival. All statements contained in any schedules, any exhibit or
other instrument delivered by or on behalf of any party or in connection with
the transactions contemplated by this Agreement, shall be deemed to be
representations made by or on behalf of the parties to this Agreement, all
representations, warranties and agreements made by the parties to this Agreement
or pursuant hereto shall survive.
ARTICLE XII
GENERAL
12.1. Partial Invalidity. If any term or provision of this Agreement or the
application thereof to any person or circumstances shall, to any extent, be
valid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby, and each such
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
12.2. Waiver. No waiver of any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed and extension of
the time for performance of any other obligation or act.
12.3. Notices. All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by registered or certified
mail, postage prepaid, return receipt requested, and shall de deemed received
upon mailing thereof.
To: Interfoods Consolidated, Inc.
16133 Ventura Boulevard
Suite 635
Encino, California 91436
Sitestar Corporation
Shareholders
326 First Street
Suite 26
Annapolis, Maryland 21403
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Notice of change of address shall be given by written notice in the manner
detailed in this subparagraph 12.3.
12.4. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
12.5. Professional Fees. In the event of the bringing of any action or suit
by a party hereto against another party hereunder by reason of any breach of any
of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorney's fees, accounting fees, and
other professional fees resulting therefrom.
12.6. Entire Agreement. This Agreement is the final expression of, and
contains the entire agreement between, the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
party to be charged or by his agent duly authorized in writing or as otherwise
expressly permitted herein. The parties do not intend to confer any benefit
hereunder on any person, firm or corporation other than the parties hereto.
12.7. Time of Essence. The parties hereby acknowledge and agree that time
is strictly of the essence with respect to each and every term, condition,
obligation and provision hereof and that failure to timely perform any of the
terms, conditions, obligations or provisions hereof by either party shall
constitute a material breach of and non-curable (but waivable) default under
this Agreement by the party so failing to perform.
12.8. Construction. Headings at the beginning of each paragraph and
subparagraph are solely for the convenience of the parties and are not a part of
the Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by on of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to paragraphs and subparagraphs are to this Agreement.
In the event the date on which any of the party is required to take any action
under the terms of this Agreement is not a business day, the action shall be
taken on the next succeeding day.
12.9. Counterparts. This Agreement may be executed in on or more
counterparts, each of which shall be an original and all of which taken together
shall constitute on instrument.
12.10. Governing Law. The parties hereto expressly agree that this
Agreement shall be governed by, interpreted under, and construed and enforced in
accordance with the laws of the State of California.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date hereof.
SITESTAR CORPORATION
/s/ Clinton J. Sallee
By:____________________________
President
INTERFOODS CONSOLIDATED, INC.
/s/ Frederick Manlunus
By:_________________________________
Chief Executive Officer
/s/ Franklin Christopher
---------------------------
Franklin Christopher
/s/ Richard Raschke
---------------------------
Richard Raschke
/s/ Vance Stone
---------------------------
Vance Stone
/s/ Harold Southwell
---------------------------
Harold Southwell
/s/ William McCracken
---------------------------
William McCracken
/s/ Clinton J. Sallee
By:___________________________
Sitestar Corporation
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EXHIBIT 2.3
ASSET SALE AND PURCHASE AGREEMENT
THIS AGREEMENT, is made and entered into this 30th day of September, 1999,
by and between SITESTAR CORPORATION, a Nevada corporation, hereinafter called
"Seller" or the "Company" and IFCO GROUP, a California partnership, hereinafter
called "Purchaser."
Purchaser hereby agrees to purchase and the Seller agrees to sell all of
the assets presently used in the operation of the Company's business, including
but not limited to the business name "HOLLAND AMERICAN INTERNATIONAL
SPECIALTIES"; telephone number(s) and fax number(s); Seller's office furniture
and equipment; all vehicles and operating equipment; telephone number (s);
telephone equipment; computers and software; supplies; inventories; licenses;
work in progress; and all other items used in the operation of the business in
its present form, historic and present customer and vendor records and
relationships; customer and vendor contracts and agreements, goodwill and all
other assets used in the operation of the business known as HOLLAND AMERICAN
INTERNATIONAL SPECIALTIES, located at 10343 E. Artesia Blvd., Bellflower, CA
90706 (a non-exclusive list of such assets is attached hereto as Exhibit "A" and
by reference incorporated herein).
Purchaser is to receive all of the business assets other than cash or cash
equivalents, all as more fully described on Exhibit "B" which is attached hereto
and by reference incorporated herein, and Purchaser is to assume no debts and
/or liabilities of the Company.
1. PURCHASE PRICE The total purchase price of $900,000.00 is payable as
follows:
a. $ 200,000.00 Amount equivalent for the cost of
Sitestar, Inc. with the "Public" status
of Sitestar Corporation (f/k/a Interfoods
Consolidated, Inc.).
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b. $654,000.00 The Assumption of all trade, short and
long term liabilities as of July 31, 1999.
c. $46,000.00 Balance of purchase price to be paid to
Seller pursuant to terms of promissory
note in said amount, in the form attached
hereto as Exhibit "C" and by reference
incorporated herein, payable in four (3)
annual installments of $15,333.00 each
plus accrued interest or more including
interest at eight percent (8%) per annum,
accruing from close of acquisition, until
paid in full.
$900,000.00 Total Purchase Price.
2. PURCHASE PRICE ADJUSTMENT/COMPENSATION AND BENEFITS.
(a) PURCHASE PRICE ADJUSTMENT. The purchase price of Nine Hundred Thousand
and /100 Dollars ($900,000.00) described above is based upon the
company's aggregate assets (current assets plus fixed assets, plus
inventory less prepaid taxes, less all cash and cash equivalents) at
closing being not less than the company's aggregate assets on the
balance sheet dated September 30, 1999, a copy of which is attached
hereto as Exhibit "B" and by reference incorporated herein. In the
event the current aggregate assets at the closing are different than
as stated on the September 30, 1999 balance sheet, the purchase price
shall be subject to adjustment accordingly.
(b) EMPLOYEE BENEFITS. Seller and Purchaser have further agreed that the
Seller will assume 100% responsibility for all obligations to all
personnel of the business for all matters related to accrued vacation
and sick leave incurred by the business prior to the date of closing.
Attached hereto as Exhibit "H", Purchaser and Seller have agreed to
the amounts to which Seller is obligated to employees and this amount
will be paid to the employees by Seller prior to the Date of Closing
(outside of escrow) , or will be given as a credit to Purchaser and
debit Seller, whereupon Purchaser shall assume all such obligations to
said employees.
3. SECURITY. All of the Purchaser's obligations under this Agreement including
the Promissory Note and the Non-Compete Agreement shall be secured by two
(2) Security Agreements in form attached hereto as Exhibits "D" and "E" and
by reference incorporated herein, covering the assets being purchased as a
part of this transaction, including its leasehold interest, approximate
$500,000.00 inventory, of Holland American International Specialties, Inc.
and corporate guarantees of Purchaser. If Purchaser is in material breach
of any of the terms, conditions covenants or obligations to be performed
under any of said instruments or under the underlying Lease, Seller shall
provide written notice to Purchaser, and Purchaser shall have thirty (30)
days from the date of such written notice to cure the material breach. If,
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at the expiration of such thirty (30) day period the material breach has
not been cured, Purchaser shall be in default of such terms, conditions,
covenants or obligations. In the event that Purchaser is in default of any
of the terms, conditions, covenants or obligations to be performed under
any of said instruments or under the underlying lease, said default shall
constitute a default under all of said instruments. In such event Seller is
authorized, at its sole option, to exercise any and all remedies available
to it at law or at equity, as well as by the terms of any or all of said
instruments or the Lease.
4. INVENTORY All inventory used in this business is to be transferred to
Purchaser at close of escrow, see Exhibit "L".
5. AGREEMENT NOT TO COMPETE. Seller and Selling Shareholders, individually,
agree that they will not engage, either directly or indirectly, in any
business whose products or activities compete in whole or in part with the
products or activities of Purchaser within the states of Washington and/or
Oregon for a period of three (3) years after cessation of the Selling
Shareholder's employment with the Purchaser all as more fully described in
the Non-Compete Agreement attached hereto as Exhibit "F" and by reference
incorporated herein.
6. TRAINING, TRANSITION AND CONSULTING. Transition training services shall be
provided over a period of three (3) months from the Date of Closing of the
transaction at no cost to Purchaser.
After expiration of the transition training by Seller, if so desired by
both parties, then Seller and Purchaser may enter into a longer term
possible employment contract under such terms as the parties may mutually
agree.
7. SELLER AND SELLING SHAREHOLDERS REPRESENTATIONS AND WARRANTIES. Seller and
Selling Shareholders hereby represent and warrant to Purchaser as follows:
(a) Organization. That Seller is a corporation duly organized and
validly existing under the laws of the State of Nevada and is in good
standing.
(b) Authorization. That the execution, delivery, and performance of
this Agreement by Seller has been duly and effectively authorized by
Seller's Board of Directors and Shareholders.
(c) Binding Obligation. That the officer Of Seller executing this
Agreement on its behalf is duly authorized to do so and to deliver the
same on behalf of Seller, and that this Agreement constitutes a valid
and binding obligation of Seller and Selling Shareholders in
accordance with its terms.
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(d) Business operations. That Seller has not materially altered the
conduct of its business, and has not taken any action; made any sales,
loans, or liquidation outside the ordinary course of business; altered
any business or accounting practices; changed business hours; or
entered into any unusual transactions that are likely to have any
adverse affect on the value of the business from the time of the
mutually agreed upon letter of intent up through the date of closing.
(e) Title. That Seller is the true and lawful owner of all of the
assets and inventory of the business, including, without limitation,
those listed on Exhibit "A," free and clear of all title defects,
security interests, claims, liens or encumbrances and that such assets
and inventory are not subject to any agreement for their sale to or
use by any third party.
(f) Condition. At Closing, to Seller's and Selling Shareholders'
actual knowledge, the leased premises, equipment and other tangible
assets of Seller are in good operating condition and repair. subject
to ordinary wear and tear, are adequate for the uses to which they are
being put, and to the best of Seller's and Selling Shareholders'
knowledge are not in need of maintenance or repairs except for
ordinary, routine maintenance and repairs.
(g) Supplies and Sample Materials. Prior to Closing, Purchaser will
review and agree in writing with Seller as to quantities of supplies
and materials that are transferred.
(h) Taxes. Seller shall pay and shall hold Purchaser harmless from all
taxes due to any governmental body from activities prior to Closing.
Seller has in a timely manner filed all federal, state and local tax
returns relating to the assets or the business, including, but not
limited to, those taxes with respect to income, property, worker's
compensation, Medicaid and unemployment, and has paid all taxes,
penalties and interest on said returns or arising therefrom.
(i) Compensation and Benefits. Attached hereto as Exhibit "H" is an
accurate list and description of all employee compensation rates,
accrued vacation time, sick leave and retirement benefits, bonus,
profit sharing, retirement, stock purchase, stock option, insurance,
hospitalization, or other benefit plans or programs for Seller's
employees in the business, and a statement of their obligations under
such programs.
(j) Labor. Seller is not a party to any labor agreement with any labor
organization. Seller has experienced no attempt by organized labor to
conform to labor demands in any manner. To its best knowledge, Seller
is in compliance with all applicable laws respecting employment and is
not engaged in any unfair labor practice.
(k) Default. Seller is not in default under any contract for work or
services to be performed. There has been no unresolved claim for
negligence or breach of warranty or breach of contract arising out of
services delivered or installed, or services rendered by the business.
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(l) Litigation. There is no pending or anticipated litigation,
proceeding, investigation, controversy, judgment, order, writ,
injunction or decree which would jeopardize the business or
Purchaser's title to the assets being sold.
(m) Compliance With Law and Other Instruments. Seller holds, and has
at all times held, all material licenses, permits and authorizations
necessary for the lawful conduct of its business pursuant to all
applicable statutes, laws, ordinances, rules and regulations of all
federal, state and local governmental agencies having jurisdiction
over it or over any part of its operations or the Assets, and Seller
knows of no violations thereof. The execution and delivery of this
Agreement and the compliance with the provisions hereof by Seller will
not conflict with or result in any breach of any of the terms,
conditions and provisions of, or constitute a default under, or result
in the creation of a lien, charge or encumbrance upon any of the
assets or outstanding capital stock of Seller pursuant to any charter
documents, indenture, mortgage, lease, agreement or other instrument
to which Seller is a party or by which it is bound.
(n) Environmental. Seller has not: caused or permitted its business to
generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce or process any "hazardous substances" or
other toxic substances, except in compliance with all applicable
federal, state and local laws or regulations.
(o) Material Misstatements or Omissions. No representations or
warranties by Seller or Selling Shareholders in this Agreement nor any
document, statement, certificate or schedule provided by seller or
Selling Shareholders, contains any untrue statement of a material
fact. Seller and Selling Shareholders have not withheld knowledge of
any material event, condition or fact which they know or have
reasonable grounds to believe may affect Seller's business.
(p) Sufficiency of the Assets. The assets sold pursuant to this
Agreement include all assets necessary to the operation of the
business. Said assets are sufficient to carry on the business as
carried on by Seller prior to Closing.
(q) Terminability Of Employees. The employment of all employees of
Seller is terminable at will. Seller will terminate the employment of
all employees as of the Closing Date. Purchaser may, but is not
required to, employ one or more said employees following Closing on
terms to be determined by Purchaser and said employee(s).
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(r) No Violations. Neither this Agreement nor the transactions
contemplated herein shall cause seller to be in violation of any
order, decree or law, or in violation of any contract or other
document by which Seller is or may be bound.
(s) Vendors & Suppliers. At closing, to Seller's and Selling
Shareholders, actual knowledge, no notice has been received from any
current vendors stating their intentions to cease selling products to
Seller on substantially the same terms and conditions as said products
have been sold in the past.
(t) Current Customers. At closing, to Seller's and Selling
Shareholders, actual knowledge, no notice has been received from any
current customer who accounts for more than 5% of the prior twelve
(12) months revenue of the Seller that said customer no longer intends
to purchase products from Seller on substantially the same terms and
conditions as said customer has purchased products in the past;
provided however these warranties and representation do not pertain to
customers whose business is obtained via public bids.
8. PURCHASER REPRESENTATIONS AND WARRANTIES. Purchaser represents and warrants
to Seller as follows:
(a) That Purchaser is a corporation duly organized and validly
existing under the laws of the State of California.
(b) That the execution, delivery, and performance of this Agreement by
Purchaser has been duly and effectively authorized by Purchaser's
Board of Directors.
(c) That the officer of Purchaser executing this Agreement on its
behalf is duly authorized to do so and to deliver the same on behalf
of Purchaser, and that this Agreement constitutes a valid and binding
obligation of Purchaser in accordance with its terms.
(d) The Purchaser has had full opportunity to review any and all
financial information from Seller, including financial statements, tax
returns, income and expense information, and all other information
related to the business that Purchaser deems important in evaluating
this business.
(e) Financial statements and any other financial records which
Purchaser has provided to Seller are true and correct in every respect
as of the dates thereof; and that there have been no material changes
in Seller's financial position since the dates thereof.
9. SURVIVAL 0F REPRESENTATIONS AND WARRANTIES. Seller's and Purchaser's
representations and shall survive the closing of this transaction.
10. AGENCY DISCLOSURE. At the signing of this Agreement the selling/listing
agent and Acquisition Services Group, Inc. represented Seller. Each party
signing this document confirms that prior oral and/or written disclosure of
agency was provided to him/her in this transaction.
6
<PAGE>
11. LIABILITIES. Purchaser assumed only those liabilities that are expressly
set forth in the agreements between the parties. Seller warrants that at
Closing it will give a good, clear and marketable title to business or
business assets being sold; and that it has disclosed all known liabilities
of any kind to the Purchaser regardless of whether such liabilities affect
title to the assets and expressly agrees to hold Purchaser free and
harmless from any such liabilities. Seller agrees to furnish to Purchaser a
copy of a Uniform Commercial Code 11R showing no encumbrances except for
those mentioned above.
12. ATTORNEY'S FEES - Purchaser and Seller agree that in the event of any
litigation, between any of the parties, arising out of the transaction
(whether closed or not), is instituted, the prevailing party or parties
shall be entitled to recover from the other(s) their reasonable attorney's
fees and reasonable costs incurred (whether or not statutory).
13. PRO-RATIONS. The sales (use) tax on furniture and equipment shall be paid
by the Purchaser at settlement through escrow and personal property taxes,
other taxes, and similar expenses shall he prorated as of the date of
transfer of ownership.
14. SEVERABILITY. Each paragraph, section and/or provision of this agreement
shall be considered severable, and if, for any reason, any paragraph,
section and/or provision herein is determined to be invalid and contrary to
any existing or future law or regulation, such shall not impair the
operation of or affect the remaining paragraphs, sections and/or provisions
of this agreement.
15. GENERAL PROVISIONS.
AS TO PURCHASER: By signing this agreement, Purchaser hereby acknowledges that
Purchaser is relying solely on Purchaser's own inspection of the business
and its assets and representations of seller with regard to the prior
operating history of the business and all other material facts relating to
Purchaser's decision to purchase.
AS TO SELLER: Seller acknowledges no representations were made concerning
the credit-worthiness or ability of Purchaser to complete this transaction
and relies solely on Purchaser's representations.
16. ALLOCATION OF VALUES SHALL BE:
Vehicles: $_________
Machinery & Equipment: $_________
Non-Competition Agreement: $_________
Goodwill: $_________
Net Other Assets Transferred: $_________
----------
TOTAL: $900,000.00
7
<PAGE>
17. DATE OF CLOSING. The Date of Closing of this transaction shall be defined
as September 30, 1999. Purchaser is entitled to possession on October 1,
1999 at 12:01 a.m. At closing, Purchaser shall deposit all funds required
to close this along with all executed original documents required by Seller
to close this transaction.
18. ASSET SALE AND INDEMNIFICATIONS. This is a purchase of certain specified
assets and the assumption of certain specified liabilities of seller, as
set forth elsewhere in this document and attached Exhibits.
(a) Seller and Selling Shareholders agree to indemnify and hold
Purchaser harmless with respect to any and all obligations and claims
arising from the operation of the business, including but not limited
to taxes due (except as assumed), wages payable, and accounts payable
(except as assumed), which indebtedness or claims arose or were
incurred prior to the date of possession by Purchaser. In the event
Purchaser is required to satisfy any obligation or claim arising from
Seller's operation of the business, Purchaser may deduct said amount
from the next installment(s) after a minimum fifteen (15) day notice
to Seller and-Seller shall thereafter have a period of thirty (30)
days (or such greater time as may be mutually agreed to by the
parties) to settle, compromise or otherwise resolve said claim.
Provided, however, Purchaser's right of offset shall be cumulative and
not an exclusive remedy for any such default and Purchaser shall have
any and all legal and equitable remedies available to it in addition
to such right of offset. It is further agreed that said right of
offset shall cover claims for a period of one (1) year following the
close of escrow.
(b) Purchaser agrees to indemnify and hold Seller harmless with
respect to any loss, liability, cost, expense, or claim arising out of
Purchaser's operation of the business after the date of possession by
Purchaser.
19. PREMISES LEASE. Purchaser acknowledges receipt of a valid Lease Agreement
from the landlord for the premises occupied by the business prior to the
Date of Closing, which Lease Agreement is a condition of closing.
20. EQUIPMENT LEASES. There are no leased items of personal property subject to
leases with Seller.
21. NOTICES. Any notice, request, or other document to be given under this
Agreement after the date hereof by any party to any other, shall be in
writing and shall be sent by hand delivery, or by mail, postage prepaid,
return receipt requested. The effective date of mailed notice shall be
deemed to be three (3) calendar days following mailing.
PURCHASER: IFCO Group
c/o Frederick Manlunas
10343 E. Artesia Blvd.
Bellflower, CA 90706
8
<PAGE>
SELLER: Sitestar Corporation
C/O Clinton J. Sallee
16133 Ventura Blvd., Suite 635
Encino, CA 91436
25. WAIVERS/EXTENSION. The parties may, by written instrument, extend the time
for the performance for any of the obligations or other act of any other
party and (a) waive any inaccuracy of such other party in any
representation or warranties contained herein or in any document delivered
pursuant to this Agreement; (b) waive compliance with any of the covenants
of such other parties' performance of any of the obligation set out in this
Agreement. Any waiver or extension hereunder shall not constitute a waiver
or extension of any other provision of this Agreement.
26. SUCCESSORS/ASSIGNS. This Agreement shall be binding on the parties, their
successors, assigns and subsidiaries.
27. REMEDIES IN EQUITY. The parties agree that damages at law may be an
inadequate remedy for breach or threatened breach of the terms of this
Agreement and agree that the respective rights and obligations hereunder
shall be enforceable, pending ultimate resolution of any dispute by
arbitration or appeals therefrom, by specific enforcement, injunction, or
other equitable remedy, as well as at law.
28. PERIODIC FINANCIAL STATEMENTS. Purchaser hereby agrees to provide accurate
and timely financial statements on a quarterly basis to Seller throughout
the term of this Agreement so long as there is a balance due and owing to
Seller under the Promissory Note, the Non-Compete Agreements and/or the
Employment Agreement (if any), and anticipating breach provisions will be
included.
29. WORK IN PROCESS. Work in Progress will be memorialized by schedules
supplied as of the closing of business on October 30, 1999, and attached as
Exhibit "K".
30. ENTIRE AGREEMENT. This Agreement together with its exhibits and attachments
contains the entire agreement between the Seller and Purchaser, and
supersedes or cancels any prior agreements, understandings or inducements
relating to the transaction provided for herein.
31. TRANSFER DOCUMENTS. At closing, Seller shall execute and deliver to
Purchaser a Bill Of Sale in the form attached hereto as Exhibit "G".
32. COOPERATION AND ADJUSTMENTS. The parties agree to take all steps, and to
execute all documents, whether before, at or after Closing, reasonably
necessary or advisable to carry out this Agreement and the transactions
described herein. The parties recognize that there may be some overlooked
or unclear. technicalities that need to be cleared up after Closing, and
they shall attempt to resolve those by mutual agreement.
9
<PAGE>
33. CROSS-DEFAULT. Since the obligations of the parties are interdependent, the
parties intend for such obligations to be cross-secured. Therefore, a
default by a party under this Agreement, the Lease Agreement or any of the
agreements referenced herein, subject to the provisions of paragraph 3
above, shall be a default under the others as well, at the option of the
non-defaulting party-
34. ARBITRATION. All disputes relating to this Agreement and/or the
relationship of the parties hereunder shall be settled and finally
determined by arbitration in Vancouver under the American Arbitration
Association (AAA) Commercial Arbitration Rules with Expedited Procedures in
effect on the date hereof. There shall be one arbitrator, who shall be an
attorney with at least 15 years commercial law experience, selected by the
parties as follows: each party shall submit a list of three proposed
arbitrators within ten (10) days of the arbitration demand, and if the
parties do not select an arbitrator within five (5) days, then within three
(3) days one impartial arbitrator shall be appointed by the Presiding
Judge. California law shall apply and arbitrator may award attorneys fee.
The judgment upon the award rendered in any such arbitration shall be final
and binding upon the parties, and may be entered in any court having
jurisdiction thereof.
SIGNED and DATED this 30th day of September, 1999.
SELLER: PURCHASER:
Sitestar Corporation IFCO Group
/s/ Clinton J. Sallee /s/ Frederick Manlunas
By: _____________________ By: __________________________
Clinton J. Sallee, President and CEO Frederick Manlunas, President
10
EXHIBIT 2.4
ASSET SALE AND PURCHASE AGREEMENT
THIS AGREEMENT, is made and entered into this 30th day of September, 1999,
by and between SITESTAR CORPORATION, a Nevada corporation, hereinafter called
"Seller" or the "Company" and IFCO GROUP, a California partnership, hereinafter
called "Purchaser."
Purchaser hereby agrees to purchase and the Seller agrees to sell all of
the assets presently used in the operation of the Company's business, including
but not limited to the business name " Sierra Madre Foods, Inc. "; telephone
number(s) and fax number(s); Seller's office furniture and equipment; all
vehicles and operating equipment; telephone number (s); telephone equipment;
computers and software; supplies; inventories; licenses; work in progress; and
all other items used in the operation of the business in its present form,
historic and present customer and vendor records and relationships; customer and
vendor contracts and agreements, goodwill and all other assets used in the
operation of the business known Sierra Madre Foods, Inc., located at 10343 E.
Artesia Blvd., Bellflower, CA 90706 (a non-exclusive list of such assets is
attached hereto as Exhibit "A" and by reference incorporated herein).
Purchaser is to receive all of the business assets other than cash or cash
equivalents, all as more fully described on Exhibit "B" which is attached hereto
and by reference incorporated herein, and Purchaser is to assume no debts and
/or liabilities of the Company.
1. PURCHASE PRICE The total purchase price of $200,000.00
is payable as follows:
a. $ 160,000.00 Assumption of $160,000 of debt related
services.
40,000.00 Promissory note, payable in three (3)
annual installments of $13,334.00 each
plus accrued interest or more including
interest at eight percent (8%) per annum,
accruing from close of acquisition, until
paid in full.
$ 200,000.00 Total Purchase Price.
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<PAGE>
2. PURCHASE PRICE ADJUSTMENT/COMPENSATION AND BENEFITS.
(a) Purchase Price Adjustment. The purchase price of Two Hundred Thousand
and 00/100 Dollars ($200,000.00) described above is based upon the
company's aggregate assets (current assets plus fixed assets, plus
inventory less prepaid taxes, less all cash and cash equivalents) at
closing being not less than the company's aggregate assets on the balance
sheet dated September 30, 1999, a copy of which is attach hereto as Exhibit
"B" and by reference incorporated herein. In the event the current
aggregate assets at the closing are different than as stated on the
September 30, 1999 balance sheet, the purchase price shall be subject to
adjustment accordingly.
(b) Employee Benefits. Seller and Purchaser have further agreed that the
Seller will assume 100% responsibility for all obligations to a personnel
of the business for all matters related to accrued vacation and sick leave
incurred by the business prior to the date of closing. Attached hereto as
Exhibit "H", Purchaser and Seller have agreed to the amounts to which
Seller is obligated to employees and this amount will be paid to the
employees by Seller prior to the Date of Closing (outside of escrow) , or
will be given as a credit to Purchaser and debit Seller, whereupon
Purchaser shall assume all such obligations to said employees.
3. SECURITY. All of the Purchaser's obligations under this Agreement including
the Promissory Note and the Non-Compete Agreement shall be secured by two
(2) Security Agreements in form attached hereto as Exhibits "D" and "E" and
by reference incorporated herein, covering the assets being purchased as a
part of this transaction, including its leasehold interest, approximate
$500,000.00 inventory, of Sierra Madre Foods, Inc. and corporate guarantees
of Purchaser. If Purchaser is in material breach of any of the terms,
conditions covenants or obligations to be performed under any of said
instruments or under the underlying Lease, Seller shall provide written
notice to Purchaser, and Purchaser shall have thirty (30) days from the
date of such written notice to cure the material breach. If, at the
expiration of such thirty (30) day period the material breach has not been
cured, Purchaser shall be in default of such terms, conditions, covenants
or obligations. In the event that Purchaser is in default of any of the
terms, conditions, covenants or obligations to be performed under any of
said instruments or under the underlying lease, said default shall
constitute a default under all of said instruments. In such event Seller is
authorized, at its sole option, to exercise any and all remedies available
to it at law or at equity, as well as by the terms of any or all of said
instruments or the Lease.
4. INVENTORY All inventory used in this business is to be transferred to
Purchaser at close of escrow, see Exhibit "L".
5. AGREEMENT NOT TO COMPETE. Seller and Selling Shareholders, individually,
agree that they will not engage, either directly or indirectly, in any
business whose products or activities compete in whole or in part with the
products or activities of Purchaser within the state of California for a
period of three (3) years after cessation of the Selling Shareholder's
employment with the Purchaser all as more fully described in the
Non-Compete Agreement attached hereto as Exhibit "F" and by reference
incorporated herein.
2
<PAGE>
6. TRAINING, TRANSITION AND CONSULTING. Transition training services shall be
provided over a period of three (3) months from the Date of Closing of the
transaction at no cost to Purchaser.
After expiration of the transition training by Seller, if so desired by
both parties, then Seller and Purchaser may enter into a longer term
possible employment contract under such terms as the parties may mutually
agree.
7. SELLER AND SELLING SHAREHOLDERS REPRESENTATIONS AND WARRANTIES. Seller and
Selling Shareholders hereby represent and warrant to Purchaser as follows:
(a) Organization. That Seller is a corporation duly organized and validly
existing under the laws of the State of Nevada and is in good standing.
(b) Authorization. That the execution, delivery, and performance of this
Agreement by Seller has been duly and effectively authorized by Seller's
Board of Directors and Shareholders.
(c) Binding Obligation. That the officer Of Seller executing this Agreement
on its behalf is duly authorized to do so and to deliver the same on behalf
of Seller, and that this Agreement constitutes a valid and binding
obligation of Seller and Selling Shareholders in accordance with its terms.
(d) Business operations. That Seller has not materially altered the conduct
of its business, and has not taken any action; made any sales, loans, or
liquidation outside the ordinary course of business; altered any business
or accounting practices; changed business hours; or entered into any
unusual transactions that are likely to have any adverse affect on the
value of the business from the time of the mutually agreed upon letter of
intent up through the date of closing.
(e) Title. That Seller is the true and lawful owner of all of the assets
and inventory of the business, including, without limitation, those listed
on Exhibit "A," free and clear of all title defects, security interests,
claims, liens or encumbrances and that such assets and inventory are not
subject to any agreement for their sale to or use by any third party.
(f) Condition. At Closing, to Seller's and Selling Shareholders' actual
knowledge, the leased premises, equipment and other tangible assets of
Seller are in good operating condition and repair. subject to ordinary wear
and tear, are adequate for the uses to which they are being put, and to the
best of Seller's and Selling Shareholders' knowledge are not in need of
maintenance or repairs except for ordinary, routine maintenance and
repairs.
(g) Supplies and Sample Materials. Prior to Closing, Purchaser will review
and agree in writing with Seller as to quantities of supplies and materials
that are transferred.
(h) Taxes. Seller shall pay and shall hold Purchaser harmless from all
taxes due to any governmental body from activities prior to Closing. Seller
has in a timely manner filed all federal, state and local tax returns
relating to the assets or the business, including, but not limited to,
those taxes with respect to income, property, worker's compensation,
Medicaid and unemployment, and has paid all taxes, penalties and interest
on said returns or arising therefrom.
3
<PAGE>
(i) Compensation and Benefits. Attached hereto as Exhibit "H" is an
accurate list and description of all employee compensation rates, accrued
vacation time, sick leave and retirement benefits, bonus, profit sharing,
retirement, stock purchase, stock option, insurance, hospitalization, or
other benefit plans or programs for Seller's employees in the business, and
a statement of their obligations under such programs.
(j) Labor. Seller is not a party to any labor agreement with any labor
organization. Seller has experienced no attempt by organized labor to
conform to labor demands in any manner. To its best knowledge, Seller is in
compliance with all applicable laws respecting employment and is not
engaged in any unfair labor practice.
(k) Default. Seller is not in default under any contract for work or
services to be performed. There has been no unresolved claim for negligence
or breach of warranty or breach of contract arising out of services
delivered or installed, or services rendered by the business.
(l) Litigation. There is no pending or anticipated litigation, proceeding,
investigation, controversy, judgment, order, writ, injunction or decree
which would jeopardize the business or Purchaser's title to the assets
being sold.
(m) Compliance With Law and Other Instruments. Seller holds, and has at all
times held, all material licenses, permits and authorizations necessary for
the lawful conduct of its business pursuant to all applicable statutes,
laws, ordinances, rules and regulations of all federal, state and local
governmental agencies having jurisdiction over it or over any part of its
operations or the Assets, and Seller knows of no violations thereof. The
execution and delivery of this Agreement and the compliance with the
provisions hereof by Seller will not conflict with or result in any breach
of any of the terms, conditions and provisions of, or constitute a default
under, or result in the creation of a lien, charge or encumbrance upon any
of the assets or outstanding capital stock of Seller pursuant to any
charter documents, indenture, mortgage, lease, agreement or other
instrument to which Seller is a party or by which it is bound.
(n) Environmental. Seller has not: caused or permitted its business to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process any "hazardous substances" or other toxic
substances, except in compliance with all applicable federal, state and
local laws or regulations.
(o) Material Misstatements or Omissions. No representations or warranties
by Seller or Selling Shareholders in this Agreement nor any document,
statement, certificate or schedule provided by seller or Selling
Shareholders, contains any untrue statement of a material fact. Seller and
Selling Shareholders have not withheld knowledge of any material event,
condition or fact which they know or have reasonable grounds to believe may
affect Seller's business.
(p) Sufficiency of the Assets. The assets sold pursuant to this Agreement
include all assets necessary to the operation of the business. Said assets
are sufficient to carry on the business as carried on by Seller prior to
Closing.
5
<PAGE>
(q) Terminability Of Employees. The employment of all employees of Seller
is terminable at will. Seller will terminate the employment of all
employees as of the Closing Date. Purchaser may, but is not required to,
employ one or more said employees following Closing on terms to be
determined by Purchaser and said employee(s).
(r) No Violations. Neither this Agreement nor the transactions contemplated
herein shall cause seller to be in violation of any order, decree or law,
or in violation of any contract or other document by which Seller is or may
be bound.
(s) Vendors & Suppliers. At closing, to Seller's and Selling Shareholders,
actual knowledge, no notice has been received from any current vendors
stating their intentions to cease selling products to Seller on
substantially the same terms and conditions as said products have been sold
in the past.
(t) Current Customers. At closing, to Seller's and Selling Shareholders,
actual knowledge, no notice has been received from any current customer who
accounts for more than 5% of the prior twelve (12) months revenue of the
Seller that said customer no longer intends to purchase products from
Seller on substantially the same terms and conditions as said customer has
purchased products in the past; provided however these warranties and
representation do not pertain to customers whose business is obtained via
public bids.
8. PURCHASER REPRESENTATIONS AND WARRANTIES. Purchaser represents and warrants
to Seller as follows:
(a) That Purchaser is a corporation duly organized and validly existing
under the laws of the State of California.
(b) That the execution, delivery, and performance of this Agreement by
Purchaser has been duly and effectively authorized by Purchaser's Board of
Directors.
(c) That the officer of Purchaser executing this Agreement on its behalf is
duly authorized to do so and to deliver the same on behalf of Purchaser,
and that this Agreement constitutes a valid and binding obligation of
Purchaser in accordance with its terms.
(d) The Purchaser has had full opportunity to review any and all financial
information from Seller, including financial statements, tax returns,
income and expense information, and all other information related to the
business that Purchaser deems important in evaluating this business.
(e) Financial statements and any other financial records which Purchaser
has provided to Seller are true and correct in every respect as of the
dates thereof; and that there have been no material changes in Seller's
financial position since the dates thereof.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Seller's and Purchaser's
representations and shall survive the closing of this transaction.
6
<PAGE>
10. AGENCY DISCLOSURE. At the signing of this Agreement the selling/listing
agent and Acquisition Services Group, Inc. represented Seller. Each party
signing this document confirms that prior oral and/or written disclosure of
agency was provided to him/her in this transaction.
11. LIABILITIES. Purchaser assumed only those liabilities that are expressly
set forth in the agreements between the parties. Seller warrants that at
Closing it will give a good, clear and marketable title to business or
business assets being sold; and that it has disclosed all known liabilities
of any kind to the Purchaser regardless of whether such liabilities affect
title to the assets and expressly agrees to hold Purchaser free and
harmless from any such liabilities. Seller agrees to furnish to Purchaser a
copy of a Uniform Commercial Code 11R showing no encumbrances except for
those mentioned above.
12. ATTORNEY'S FEES - Purchaser and Seller agree that in the event of any
litigation, between any of the parties, arising out of the transaction
(whether closed or not), is instituted, the prevailing party or parties
shall be entitled to recover from the other(s) their reasonable attorney's
fees and reasonable costs incurred (whether or not statutory).
13. PRO-RATIONS. The sales (use) tax on furniture and equipment shall be paid
by the Purchaser at settlement through escrow and personal property taxes,
other taxes, and similar expenses shall he prorated as of the date of
transfer of ownership.
14. SEVERABILITY. Each paragraph, section and/or provision of this agreement
shall be considered severable, and if, for any reason, any paragraph,
section and/or provision herein is determined to be invalid and contrary to
any existing or future law or regulation, such shall not impair the
operation of or affect the remaining paragraphs, sections and/or provisions
of this agreement.
15. GENERAL PROVISIONS.
AS TO PURCHASER: By signing this agreement, Purchaser hereby acknowledges
that Purchaser is relying solely on Purchaser's own inspection of the
business and its assets and representations of seller with regard to the
prior operating history of the business and all other material facts
relating to Purchaser's decision to purchase.
AS TO SELLER: Seller acknowledges no representations were made concerning the
credit-worthiness or ability of Purchaser to complete this transaction and
relies solely on Purchaser's representations.
16. ALLOCATION OF VALUES SHALL BE:
Vehicles: $_________
Machinery & Equipment: $_________
Non-Competition Agreement: $_________
Goodwill: $_________
Net Other Assets Transferred: $_________
----------
TOTAL: $200,000.00
7
<PAGE>
17. DATE OF CLOSING. The Date of Closing of this transaction shall be defined
as September 30, 1999. Purchaser is entitled to possession on October 1,
1999 at 12:01 a.m. At closing, Purchaser shall deposit all funds required
to close this along with all executed original documents required by Seller
to close this transaction.
18. ASSET SALE AND INDEMNIFICATIONS. This is a purchase of certain specified
assets and the assumption of certain specified liabilities of seller, as
set forth elsewhere in this document and attached Exhibits.
(a) Seller and Selling Shareholders agree to indemnify and hold Purchaser
harmless with respect to any and all obligations and claims arising from
the operation of the business, including but not limited to taxes due
(except as assumed), wages payable, and accounts payable (except as
assumed), which indebtedness or claims arose or were incurred prior to the
date of possession by Purchaser. In the event Purchaser is required to
satisfy any obligation or claim arising from Seller's operation of the
business, Purchaser may deduct said amount from the next installment(s)
after a minimum fifteen (15) day notice to Seller and-Seller shall
thereafter have a period of thirty (30) days (or such greater time as may
be mutually agreed to by the parties) to settle, compromise or otherwise
resolve said claim. Provided, however, Purchaser's right of offset shall be
cumulative and not an exclusive remedy for any such default and Purchaser
shall have any and all legal and equitable remedies available to it in
addition to such right of offset. It is further agreed that said right of
offset shall cover claims for a period of one (1) year following the close
of escrow.
(b) Purchaser agrees to indemnify and hold Seller harmless with respect to
any loss, liability, cost, expense, or claim arising out of Purchaser's
operation of the business after the date of possession by Purchaser.
19. PREMISES LEASE. Purchaser acknowledges receipt of a valid Lease Agreement
from the landlord for the premises occupied by the business prior to the
Date of Closing, which Lease Agreement is a condition of closing.
20. EQUIPMENT LEASES. There are no leased items of personal property subject to
leases with Seller.
21. NOTICES. Any notice, request, or other document to be given under this
Agreement after the date hereof by any party to any other, shall be in
writing and shall be sent by hand delivery, or by mail, postage prepaid,
return receipt requested. The effective date of mailed notice shall be
deemed to be three (3) calendar days following mailing.
PURCHASER: IFCO Group
10343 E. Artesia Blvd.
Bellflower, CA 90706
SELLER: Sitestar Corporation
C/O Clinton J. Sallee
16133 Ventura Blvd., Suite 635
Encino, CA 91436
8
<PAGE>
25. WAIVERS/EXTENSION. The parties may, by written instrument, extend the time
for the performance for any of the obligations or other act of any other
party and (a) waive any inaccuracy of such other party in any
representation or warranties contained herein or in any document delivered
pursuant to this Agreement; (b) waive compliance with any of the covenants
of such other parties' performance of any of the obligation set out in this
Agreement. Any waiver or extension hereunder shall not constitute a waiver
or extension of any other provision of this Agreement.
26. SUCCESSORS/ASSIGNS. This Agreement shall be binding on the parties, their
successors, assigns and subsidiaries.
27. REMEDIES IN EQUITY. The parties agree that damages at law may be an
inadequate remedy for breach or threatened breach of the terms of this
Agreement and agree that the respective rights and obligations hereunder
shall be enforceable, pending ultimate resolution of any dispute by
arbitration or appeals therefrom, by specific enforcement, injunction, or
other equitable remedy, as well as at law.
28. PERIODIC FINANCIAL STATEMENTS. Purchaser hereby agrees to provide accurate
and timely financial statements on a quarterly basis to Seller throughout
the term of this Agreement so long as there is a balance due and owing to
Seller under the Promissory Note, the Non-Compete Agreements and/or the
Employment Agreement (if any), and anticipating breach provisions will be
included.
29. WORK IN PROCESS. Work in Progress will be memorialized by schedules
supplied as of the closing of business on October 30, 1999, and attached as
Exhibit "K".
30. ENTIRE AGREEMENT. This Agreement together with its exhibits and attachments
contains the entire agreement between the Seller and Purchaser, and
supersedes or cancels any prior agreements, understandings or inducements
relating to the transaction provided for herein.
31. TRANSFER DOCUMENTS. At closing, Seller shall execute and deliver to
Purchaser a Bill Of Sale in the form attached hereto as Exhibit "G".
32. COOPERATION AND ADJUSTMENTS. The parties agree to take all steps, and to
execute all documents, whether before, at or after Closing, reasonably
necessary or advisable to carry out this Agreement and the transactions
described herein. The parties recognize that there may be some overlooked
or unclear. technicalities that need to be cleared up after Closing, and
they shall attempt to resolve those by mutual agreement.
33. CROSS-DEFAULT. Since the obligations of the parties are interdependent, the
parties intend for such obligations to be cross-secured. Therefore, a
default by a party under this Agreement, the Lease Agreement or any of the
agreements referenced herein, subject to the provisions of paragraph 3
above, shall be a default under the others as well, at the option of the
non-defaulting party.
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34. ARBITRATION. All disputes relating to this Agreement and/or the
relationship of the parties hereunder shall be settled and finally
determined by arbitration in Vancouver under the American Arbitration
Association (AAA) Commercial Arbitration Rules with Expedited Procedures in
effect on the date hereof. There shall be one arbitrator, who shall be an
attorney with at least 15 years commercial law experience, selected by the
parties as follows: each party shall submit a list of three proposed
arbitrators within ten (10) days of the arbitration demand, and if the
parties do not select an arbitrator within five (5) days, then within three
(3) days one impartial arbitrator shall be appointed by the Presiding
Judge. California law shall apply and arbitrator may award attorneys fee.
The judgment upon the award rendered in any such arbitration shall be final
and binding upon the parties, and may be entered in any court having
jurisdiction thereof.
SIGNED and DATED this 30th day of September, 1999.
SELLER: PURCHASER:
Sitestar Corporation IFCO Group.
/s/ Clinton J. Sallee /s/ Frederick Manlunas
By: _____________________ By: __________________________
Clinton J. Sallee, President and CEO Frederick Manlunas, President
10
Exhibit 2.5
CONFIDENTIAL August 17, 1999
LETTER OF INTENT
Stock Purchase Agreement
Eastern Shore Net Incorporated
I. ACQUIRING ENTITY
Sitestar Corporation (the "Buyer" "Sitestar"),
incorporated in the State of Nevada, will purchase
(the "Purchase") Eastern Shore Net Incorporated, a
Nevada corporation (the "Company" "ESN"); its
principal owner being Mr. Gary Thompson (the
"Principal Shareholder"). The Company is represented
by Optimum Strategic Finance (OSF) through Mr. Roger
Morrison. (the "Intermediary").
II. STRUCTURE AND CONSIDERATION
Buyer will purchase 100% the Company's stock. The
aggregate consideration for the transaction will be
approximately $192,000 paid in common stock in
Sitestar at a $3.00 per share strike price.
III. PURCHASE CONSIDERATION
Purchase consideration is based on the Company's
aggregate net worth and general financial performance
at closing being not less than as reflected on data
provided to the Buyer during negotiations. Should the
aggregate net worth and/or the general financial
performance at the closing differ, the purchase price
shall be subject to adjustment accordingly. Assets of
the Company are to include all balance sheet items
and other assets presently utilized in the ISP
business. A definitive list of assets and
accompanying obligations shall be compiled and agreed
upon by Buyer and the Company. The additional terms
and conditions of the purchase consideration will be
addressed in the definitive agreement.
IV. PAYMENT STRUCTURE
Buyer will deliver to the Shareholders stock
certificates equal to the purchase price at the
closing and the execution of a definitive agreement.
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CONFIDENTIAL August 17, 1999
V. COVENANTS
A. Purchase price will be adjusted to reflect a multiple
of one (1) year's gross revenues, based on number of
accounts at the close of the transaction. Should the
number of accounts differ from the current 800, the
purchase price will be adjusted accordingly. The
current offer of $192,000 is based on ESN delivering
Sitestar 800 customers at closing.
B. One half (50%) of the shares issued to ESN in
consideration of this transaction will be registered in
Sitestar's SB-2 Registration Statement. ESN will have
the option to sell these shares as soon as the
Registration statement is deemed effective. The SB-2
will begin no later than 150 days from the close of
this transaction. The remaining shares will be
restricted from sale on the public market for a period
of one (1) year from the date of the transaction.
C. At the end of the period of restriction, in the event
that the per share value should fall below $3.50 for a
consecutive ten (10) day period, Sitestar will issue
ESN additional shares, on a dollar-for-dollar basis, to
eliminate any ESN loss in value due to market decline.
D. ESN will structure a fair-market lease for a Sitestar
office in its existing facility for a period of one (1)
year. Included in this agreement will be the right for
Sitestar to display signage on ESN's marquis.
E. Each party shall be responsible for their own legal and
transactional expenses.
F. Sitestar will provide seven (7) employees, to be named
by Mr. Thompson at closing, unlimited dial-up internet
access, free of charge. This access will only be
subject to termination in the event that Sitestar
divests its ISP operations.
VI. NON-COMPETE CONTRACTS
Principal Shareholder will enter into a non-compete
contract pertaining to internet access, web
development and web hosting with Buyer for a period
of thirty six (36) months. This agreement will be in
effect for all customers acquired during the
transaction. ESN will have the right to solicit new
web development customers,
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CONFIDENTIAL August 17, 1999
not included in the transaction. The non-compete
agreement will not include designated unpaid accounts
(which will not be included in determining the size
of the transaction) or other e-commerce sites
currently under development by ESN. The terms and
conditions of this agreement will be addressed in the
definitive agreement.
VII. TIMETABLE FOR CLOSING
It is the objective of the Buyer to close the
acquisition within thirty (30) days from the
execution of this letter. Buyer's obligation to close
the acquisition will be subject to (i) the execution
of the definitive purchase agreement and related
documentation (collectively the "Definitive
Agreement") reflecting the terms of the acquisition
as set forth herein and containing representations,
warranties covenants and agreements of the Seller,
satisfactory in form and substance to Buyer; (ii) the
receipt of all material consents and approvals
necessary for the consummation of the acquisition and
the ongoing operation of the business of the Seller;
(iii) the absence of any material adverse change in
the business, assets, condition (financial or
otherwise), or prospects of the Seller.
VIII. CONDUCT OF BUSINESS
From the date of your acceptance hereof, through the
closing date, the Seller shall conduct its business
only in the ordinary course and consistent with
relationships and goodwill existing on the date
hereof and promptly notify Buyer of any emergency or
other change in the ordinary course of the Seller's
business
IX. EXCLUSIVITY
For a period of thirty (30) days following the
execution of this agreement, the Seller will not
directly or indirectly through any officer, employee,
stockholder, director, agent, affiliate or otherwise
(i) enter into any agreement, agreement in principal
or commitment (whether or not legally binding)
relating to any business combination with,
recapitalization of, or acquisition or purchase of
all or a significant portion of the assets of , or a
material portion of the equity interest in the Seller
or relating to any similar transaction (a "Competing
Transaction"), (ii) solicit, initiate or encourage
the submission of any proposal or offer from any
person or entity relating to any Competing
Transaction, or (iii) participate in any discussions
or negotiations regarding a
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<PAGE>
CONFIDENTIAL August 17, 1999
Competing Transaction. The Seller shall notify the
Buyer promptly if any proposal regarding a Competing
Transaction (or any inquiry or any contact with any
person or entity with respect thereto) is made and
shall advise Buyer of the contents thereof. In
addition, the Seller will immediately terminate all
discussions, negotiations or agreements now pending
with other potential participants in a Competing
Transaction.
X. ACCESS
Seller agrees to provide Buyer and its advisors with
timely and reasonable access to the Company and all
information that any of them reasonably requests.
XI. CONFIDENTIALITY
The purchase price and terms of this agreement and
acquisition will be held by the parties in strict
confidence and will not be disclosed to anyone other
than the agents or representatives and financing
sources of the parties who need to know such
information in connection with the transaction
completed hereby.
XII. BINDING EFFECT
This letter does not constitute a binding obligation
to effect the acquisition, it is understood that such
obligation shall arise only from the Definitive
Agreement.
XIII. CLOSING
A. Subject to completion of final due diligence,
accounting review and the completion of legal
documentation, the closing date of this transaction
will be at a place, and on a date mutually
acceptable to Buyer and the Company, and the date at
the very latest September 17, 1999.
B. Buyer and the Company agree that OSF has represented
the Company on this transaction, and that the
Company is solely responsible for all fees.
4
<PAGE>
CONFIDENTIAL August 17, 1999
Please evidence your agreement with the foregoing by executing this agreement in
the space provided below. We very much look forward to working with you towards
the successful completion of this transaction and building a mutually beneficial
relationship.
AGREED AND ACCEPTED:
Eastern Shore Net Incorporated Sitestar Corporation
/s/ Gary R. Thompson /s/ Clinton J. Sallee
- ------------------------- ------------------------
By: Gary Thompson By: Clinton J. Sallee
President President
Date: August 17, 1999 Date: August 17, 1999
5
EXHIBIT 2.6
CONFIDENTIAL September 2, 1999
- --------------------------------------------------------------------------------
LETTER OF INTENT
Stock Purchase Agreement
NEOCOM Microspecialists, Inc.
I. ACQUIRING ENTITY
Sitestar Corporation (the "Buyer" "Sitestar"), incorporated
in the State of Nevada, will purchase (the "Purchase") all
the outstanding shares of NEOCOM Microspecialists, Inc., a
Virginia corporation (the "Company" "NEOCOM"); its principal
owners being Mr. Tom Albanese, Mr. Joe Albanese and Mr. Fred
Herring (the "Principal Shareholders"). The Company is
represented by Optimum Strategic Finance (OSF) through Mr.
Roger Morrison. (the "Intermediary").
II. STRUCTURE AND CONSIDERATION
Buyer will purchase 100% of the total outstanding stock of
the Company. The aggregate consideration for the transaction
will be $6.918 million paid as follows:
A. $5.995 million in common stock in Sitestar at $3.50 per
share.
B. Conversion of $123,000 of NEOCOM debt to Sitestar
common stock at $3.50 per share.
C. The retirement of $800,000 in NEOCOM debt.
III. PURCHASE CONSIDERATION
Purchase consideration is based on the Company's aggregate
net worth and general financial performance at closing being
not less than as reflected on data provided to the Buyer
during negotiations. Should the aggregate net worth and/or
the general financial performance at the closing differ, the
purchase price shall be subject to adjustment accordingly.
Assets of the Company are to include all balance sheet items
and other assets presently utilized in the business and any
and all equipment, machines or material that do not appear
on the balance sheet, such as the business name and
licenses, but are used in the business. A definitive list of
assets shall be compiled and agreed upon by Buyer and the
Company. The additional terms and conditions of the purchase
consideration will be addressed in the definitive agreement.
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CONFIDENTIAL September 2, 1999
IV. PAYMENT STRUCTURE
Buyer will deliver to the Shareholders stock certificates
equal to the purchase price at the closing and the execution
of a definitive agreement.
V. COVENANTS
A. Sitestar shares will list on the NASD Bulletin Board
within sixty (60) days of the execution of this
agreement with an opening price of $3.50 per share.
B. For a period of thirty (30) days from the consummation
of this transaction, Buyer will compensate Seller in
additional shares in Sitestar should Sitestar stock
fall below $1.75 per share for a consecutive ten (10)
day period. Said compensation will be designed to make
Seller whole in original purchase price.
C. Buyer will initiate an SB-2 fundraising effort within
thirty (30) days from the listing of Sitestar. Barring
unforeseen delays by the Securities and Exchange
Commission (SEC), the SB-2 fundraising effort will be
completed within 120 days from the close of this
transaction.
D. Buyer will raise a minimum of $2 million during the
prescribed fundraising effort.
E. Commensurate with the Buyer's Virginia-area ISP
consolidation strategy, Buyer will commit a minimum of
$500,000 in capital resources to said strategy. The
Buyer intends for Seller to serve as foundation for
said strategy and, as such, will commit a minimum of
$200,000 directly to Company to facilitate growth.
F. At the close of the transaction, Seller will personally
assume all debt currently charged to NEOCOM. Cash flow
from NEOCOM operations will continue to service said
debt during the Buyer's fundraising efforts. Buyer will
issue free trading shares during SB-2 fundraising
effort to be utilized to retire said debt and eliminate
Seller's personal guarantees. Buyer intends to retire
said debt within (120) days from the close of the
transaction.
G. Buyer agrees to assume any tax consequences faced by
Seller in accordance with the retirement of debt
described in Section V(F).
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CONFIDENTIAL September 2, 1999
H. Seller's Board of Directors will remain in effect until
which time as all contingencies are satisfied or waived
by both parties.
I. Each party shall be responsible for their own legal and
transactional expenses. Buyer will be responsible for
the travel expenses of one principal Shareholder to Los
Angeles during the due diligence period.
VI. EMPLOYMENT CONTRACTS
A. Principal Shareholders will enter into an employment /
management contract with the Buyer for a minimum of
twenty four (24) months with further compensation from
Buyer, with a reasonable compensation package, the
terms and conditions of which will be addressed in the
definitive agreement.
B. Buyer and Seller have an understanding as to the
specific needs of Mr. Herring's employment / management
contract. During the due diligence period, Parties will
structure an agreement that enables Mr. Herring to
receive compensation and benefits for a period of sixty
(60) months.
VII. NON-COMPETE CONTRACTS
Principal Shareholders will enter into a non-compete
contract with Buyer after the term of the management
contract for an additional period of thirty six (36) months
the terms and conditions of which will be addressed in the
definitive agreement.
VIII. TIMETABLE FOR CLOSING
It is the objective of the Buyer to close the acquisition
within thirty (30) days from the execution of this letter.
Buyer's obligation to close the acquisition will be subject
to (i) the execution of the definitive purchase agreement
and related documentation (collectively the "Definitive
Agreement") reflecting the terms of the acquisition as set
forth herein and containing representations, warranties
covenants and agreements of the Seller, satisfactory in form
and substance to Buyer; (ii) the receipt of all material
consents and approvals necessary for the consummation of the
acquisition and the ongoing operation of the business of the
Seller; (iii) the absence of any material adverse change in
the business, assets, condition (financial or otherwise), or
prospects of the Seller.
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<PAGE>
CONFIDENTIAL September 2, 1999
IX. Conduct of Business
From the date of your acceptance hereof, through the closing
date, the Seller shall conduct its business only in the
ordinary course and consistent with relationships and
goodwill existing on the date hereof and promptly notify
Buyer of any emergency or other change in the ordinary
course of the Seller's business
X. EXCLUSIVITY
For a period of thirty (30) days following the execution of
this agreement, the Seller will not directly or indirectly
through any officer, employee, stockholder, director, agent,
affiliate or otherwise (i) enter into any agreement,
agreement in principal or commitment (whether or not legally
binding) relating to any business combination with,
recapitalization of, or acquisition or purchase of all or a
significant portion of the assets of , or a material portion
of the equity interest in the Seller or relating to any
similar transaction (a "Competing Transaction"), (ii)
solicit, initiate or encourage the submission of any
proposal or offer from any person or entity relating to any
Competing Transaction, or (iii) participate in any
discussions or negotiations regarding a Competing
Transaction. The Seller shall notify the Buyer promptly if
any proposal regarding a Competing Transaction (or any
inquiry or any contact with any person or entity with
respect thereto) is made and shall advise Buyer of the
contents thereof. In addition, the Seller will immediately
terminate all discussions, negotiations or agreements now
pending with other potential participants in a Competing
Transaction.
XI. ACCESS
Seller agrees to provide Buyer and its advisors with timely
and reasonable access to the Company and all information
that any of them reasonably requests.
XII. CONFIDENTIALITY
The purchase price and terms of this agreement and
acquisition will be held by the parties in strict confidence
and will not be disclosed to anyone other than the agents or
representatives and financing sources of the parties who
need to know such information in connection with the
transaction completed hereby.
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CONFIDENTIAL September 2, 1999
XIII. BINDING EFFECT
This letter does not constitute a binding obligation to
effect the acquisition, it is understood that such
obligation shall arise only from the Definitive Agreement.
XIV. CLOSING
A. Subject to completion of final due diligence,
accounting review and the completion of legal
documentation, the closing date of this transaction
will be at a place, and on a date mutually acceptable
to Buyer and the Company, and the date at the very
latest September 30, 1999.
B. Buyer and the Company agree that OSF has represented
the Company on this transaction, and that the Company
is solely responsible for all fees.
Please evidence your agreement with the foregoing by executing this agreement in
the space provided below. We very much look forward to working with you towards
the successful completion of this transaction and building a mutually beneficial
relationship.
AGREED AND ACCEPTED:
NEOCOM Microspecialists, Inc. Sitestar Corporation
/s/ Tom Albanese /s/ Clinton J. Sallee
- ------------------------- ------------------------
By: Tom Albanese By: Clinton J. Sallee
President President
/s/ Joe Albanese
- -------------------------
By: Joe Albanese
Vice President
/s/ Fred Herring
- -------------------------
By: Fred Herring
Vice President
Date: August 31, 1999 Date: September 2, 1999
5
Exhibit 3.1(i)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
DEC 17 1992
CHERYL A. LAU SECKTARY OF STATE
No. 13820-92
ARTICLES OF INCORPORATION
OF
WHITE DOVE SYSTEMS, INC.
FIRST. The name of the Corporation is:
WHITE DOVE SYSTEMS. INC.
SECOND. Its registered office in the State of Nevada is located at 2810 W.
CHARLESTON BLVD., SUITE G6723, LAS VEGAS, NV 89102 that this corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said corporation, and that this Corporation may conduct all
Corporation business of every kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada.
THIRD. The objects for which this Corporation is formed are: in any lawful
activity, including, but not limited to the following:
(A) Shall have such rights, privileges and powers as may be conferred
upon corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when
not inconsistent with the purposes and objects for which this corporation is
organized.
(C) Shall have power to have succession by its corporate name for the
period limited in its certificate or articles of incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.
(D) Shall have power to sue and be sued in any court of law or equity.
(E) Shall have power to make contracts.
1
<PAGE>
(F) Shall have power to hold, purchase and convey real and personal
estate and to mortgage or lease any such real and personal estate with its
franchises. The power to hold real and personal estate shall include the power
to take the same by devise or bequest in the State of Nevada, or in any other
state, territory or country.
(G) Shall have power to appoint such officers and agents as the affairs
of the corporation shall require, and to allow them suitable compensation.
(H) Shall have power to make bylaws not inconsistent with the
constitution or laws of the United States, or of the State of Nevada, for the
management, regulation and government of its affairs and property, the transfer
of its stock, the transaction of its business, and the calling and holding of
meetings of its stockholders.
(I) Shall have power to wind up and dissolve itself, or be wound up or
dissolved.
(J) Shall have power to adopt and use a common seal or stamp, and alter
the same at pleasure. The use of a seal or stamp by the corporation on any
corporate documents is not necessary. The corporation may use a seal or stamp,
if it desires, but such use or non-use shall not in any way affect the legality
of the document.
(K) Shall have power to borrow money and contract debts when necessary
for the transaction of its business, or for the exercise of its corporate
rights, privileges or franchises, or for any other lawful purpose of its
incorporation; to issue bonds, promissory notes, bills of exchange, debentures,
and other obligations and evidences of indebtedness, payable at a specified time
or times, or payable upon the happening of a specified event or events, whether
secured by mortgage, pledge or otherwise, or unsecured, for money borrowed, or
in payment for property purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of the shares of the capital
stock of, or any bonds, securities or evidences of the indebtedness created by,
any other corporation or corporations of the State of Nevada, or any other state
of government, and, while owners of such stock, bonds, securities or evidences
of indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its
own capital stock, and use therefor its capital, capital surplus, surplus, or
other property or fund.
(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia and any foreign
countries.
2
<PAGE>
(0) Shall have power to do all and everything necessary and proper for
the accomplishment of the objects enumerated in its certificate or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the objects of the
corporation, whether or not such business is similar in nature to the objects
set forth in the certificate or articles of incorporation of the corporation, or
any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities.
FOURTH. That the total number of voting common stock authorized that may be
issued by the Corporation is TWENTY-FIVE THOUSAND (25,000) shares of stock
without nominal or par value and no other class of stock shall be authorized.
Said shares without nominal or par value may be issued by the corporation from
time to time for such considerations as may be fixed from time to time by the
Board of Directors.
FIFTH. The governing board of this corporation shall be known as directors,
and the number of directors may from time to time be increased or decreased in
such manner as shall be provided by the By-Laws of this Corporation, providing
that the number of directors shall not be reduced to less than one (1).
The name and post office address of the first Board of Directors shall be
1) in number and listed as follows:
NAME POST OFFICE ADDRESS
CORT W. CHRISTIE 2810 W. CHARLESTON BLVD
SUITE G6723
LAS VEGAS, NV 89102
SIXTH. The capital stock, after the amount of the subscription price, or
par value' has been pain in, shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH. The name and post office address of the Incorporator signing the
Articles of Incorporation is as follows.
NAME POST OFFICE ADDRESS
CORT W. CHRISTIE 2810 W. CHARLESTON BLVD
SUITE G6723
LAS VEGAS, NV 89102
EIGHT. The resident agent for this corporation shall be:
NEVADA CORPORATE HEADQUARTERS, INC
The address of the said agent, and, the principal or statutory address of this
corporation in the state of Nevada, shall be:
2810 W. CHARLESTON BLVD.
SUITE G6723
LAS VEGAS, NV 89102
3
<PAGE>
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized.
Subject to the By-Laws, if any, adopted by the Stockholders, to make, alter
or amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate
one (1) or more committees, each committee to consist of one or more of the
Directors of the Corporation, which, to the extent provided in the
resolution, or in the By-Laws of the Corporation, shall have and may
exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation. Such committee, or committees,
shall have such name, or names, as may be stated in the By-Laws of the
Corporation, or as may be determined from time to time by resolution
adopted by the Board of Directors.
When and as authorized by the affirmative vote of the Stockholders
holding stock entitling them to exercise at least a majority of the voting
power given at a Stockholders meeting called for that purpose, or when
authorized by the written consent of the holders of at least a majority of
the voting stock issued and outstanding, the Board of Directors shall have
power and authority at any meeting to sell, lease or exchange all of the
property and assets of the Corporation, including its good will and its
corporate franchises, upon such terms and conditions as its board of
Directors deems expedient and for the best interests of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in its discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
such director or officer; provided, however, that the foregoing provision shall
not eliminate or limit the liability of a director or officer (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes. Any repeal or modification of this Article by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director or
officer of the Corporation for acts or omissions prior to such repeal or
modification.
THIRTEENTH. This corporation reserves the right to amend, alter, change or
repeal any provision contained in the Articles of Incorporation, in the manner
now or hereafter prescribed by statute, or by the Articles of Incorporation, and
all rights conferred upon Stockholders herein are granted subject to this
reservation.
4
<PAGE>
I, THE UNDERSIGNED, being the Incorporator hereinbefore named
for the purpose of forming a Corporation pursuant to the General Corporation Law
of the State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 4th day of December, 1992.
/s/ Cort W. Christie
CORT W. CHRISTIE
On this 4th day of December, 1992, in Tehachapi, California, before me, the
undersigned,,a Notary Public in and for Tehachapi, State of California,
personally appeared:
CORT W. CHRISTIE
Known to me to be the person whose name is subscribed to the foregoing document
and acknowledged to me that he executed the same.
/s/ Lois L. Becher
Notary Public
I, NEVADA CORPORATE HEADQUARTERS, INC. hereby accept as Resident Agent for
the previously named Corporation.
December 4th, 1992 Cort W. Christie
- -------------------- ------------------------
Date Office Administrator
OFFICIAL NOTARY SEAL:
Seal LOIS L. BECHER
Of Notary Public - California
California KERN COUNTY
My Comm. Exp. DEC 10, 1993
5
Exhibit 3.1 (ii)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 29 1998
No. C13820-98
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
Filed by:
WHITE DOVE SYSTEMS, INC.
Name of Corporation
We, the undersigned LORETTA A. INGLISH, President
BART W. ANDRE, Secretary of WHITE DOVE SYSTEMS, INC.
do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held on the 1st day of May, 1998, adopted a resolution to amend the original
articles as follows:
Article FOURTH is hereby amended to read as follows:
"FOURTH. That the total number of shares of stock which the
Corporation shall have authority to issue is Twenty Five Million
(25,000,000). The par value of each of such shares is $.001. All such
shares are one class and are shares of Common Stock. Upon the amendment of
this Article to read as herein above set forth, each one (1) outstanding
shares is split, reconstituted and converted into one hundred (100)
shares."
1
<PAGE>
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation is 18,600 voting in favor; that the
said change (s) and amendment have been consented to and approved by a majority
vote of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ Loretta A. Inglish
President or Vice President
LORETTA A. INGLISH
/s/ Bart W. Andre
Secretary or Assistant Secretary
BART W. ANDRE
State of NEVADA
County of Clark
On July, 1998, personally appeared before me, a Notary Public, Loretta A.
Inglish, Bart W. Andre who acknowledged that they executed the above instrument.
/s/ Felicia Nilson
Signature of Notary
Notary Seal of Felicia Nilson
2
EXHIBIT 3.1(iii)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 26 1998
No. C13820-92
DEAN HELLER, SECRETARY OF STATE
CERTIFICATTE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
Filed by:
WHITE DOVE SYSTEMS, INC.
Name of Corporation
We, the undersigned LORETTA A. INGLISH, President
BART W. ANDRE, Secretary of WHITE DOVE SYSTEMS, INC.
do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held on the 26th day of October, 1998, adopted a resolution to amend the
original articles as follows:
Article FIRST is hereby amended to read as follows:
"FIRST. The name of the corporation is: InterFoods Consolidated, Inc."
Article FOURTH is hereby amended to read as follows:
"FOURTH. The aggregate number of shares which the corporation shall
have the authority to issue is Twenty-Five Million (25,000,000) shares
of common stock at $.001 par value, and Ten Million (10,000,000)
shares of Serial Preferred Stock at $.001 par value.
1
<PAGE>
A. Each share of Common Stock shall entitle the holder thereof to
one vote on any matter submitted to a vote of or for consent of
holders of Common Stock. Subject to the provisions of applicable
law and this Article Fourth, any dividends paid or distributed on
or with respect to the Common Stock of the corporation shall be
paid or distributed ratably to the holders of its Common Stock.
In the event of any liquidation, dissolution or winding-up of the
corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the
corporation and any amounts to which the holders of any Serial
Preferred Stock shall be entitled, as hereinafter provided, the
holders of Common Stock shall be entitled to share ratably in the
remaining assets of the corporation.
B. Subject to the terms and provisions of this Article Fourth, the
Board of Directors is authorized to provide from time to time for
the issuance of shares of Serial Preferred Stock in series and to
fix and determine from time to time before issuance the
designation and relative rights and preferences of the shares of
each series of Serial Preferred Stock and the restrictions or
qualifications thereof, including, without limiting the
generality of the foregoing, the following:
(1) The series designation and Authorized number of shares;
(2) The dividend rate and the date or dates on which such
dividends will be payable;
(3) The amount or amounts to be received by the holders in the
event of voluntary or involuntary dissolution or liquidation
of the corporation;
(4) The price or prices at which shares may be redeemed, if any,
and any terms, conditions, limitations upon such
redemptions;
(5) The sinking fund provisions, if any, for redemption or
purchase of shares; and
(6) The terms and conditions, if any, on which shares may be
converted at the election of the holders thereof into shares
of other capital stock, or of other series of Serial
Preferred Stock, of the corporation.
C. The holders of the shares of Common Stock or Serial Preferred
Stock shall not be entitled to cumulative voting on any matter.
D. Upon the amendment of this Article Fourth to read as herein-
above set forth, each three (3) outstanding shares of common
stock is reverse split, reconstituted and converted into one (1)
share. No fractional shares shall be issued."
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 1,860,000; that the said change
(s) and amendment have been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon.
/s/ Loretta A. Inglish
President or Vice President
LORETTA A. INGLISH
/s/ Bart W. Andre
Secretary or Assistant Secretary
BART W. ANDRE
2
<PAGE>
State of NEVADA
County of Clark
On October 26, 1998, before me, Loretta A. Inglish, personally appeared LORETTA
A. INGLISH, known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and by
his signature on the instrument the person, or the entity upon which the person
acted, executed the instrument.
Witness my hand and official seal.
/s/ Felicia Nilson
Notary Public in and for said
County and State
Notary Seal of Felicia Nilson
State of NEVADA
County of Clark
On October 26, 1998, before me, Bart W. Andre, personally appeared BART W.
ANDRE, known to me (or proved to me on the basis of satisfactory evidence) to be
the person whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his authorized capacity, and by his signature on
the instrument the person, or the entity upon which the person acted, executed
the instrument.
Witness my hand and official seal.
/s/ Felicia Nilson
Notary Public in and for said
County and State
Notary Seal of Felicia Nilson:
EXHIBIT 3.1(iv)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 14 1999
No. C13820-99
IN THE OFFICE OF
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
Filed by:
INTERFOODS CONSOLIDATED, INC.
We the undersigned - - FREDERICK T. MANLUNAS, President
FREDERICK T. MANLUNAS, Secretary of INTERFOODS CONSOLIDATED, INC.
do hereby certify
That the Board of Directors of said corporation at a meeting duly convened,
held on the _6th_ day of July, 1999, adopted a resolution to amend the origina
articles as follows:
Article of Fourth is hereby amended to read as follows:
"FOURTH, The Aggregate number of shares which the corporation shall
have the authority to issue is Seventy-Five Million (75,000.000)
shares of common stock at $. 001 par value, and Ten Million
(10,000,000) shares of Serial Preferred Stock at $, 001 par value.
A. Each share of Common Stock shall entitle the holder thereof to
one vote on any matter submitted to a vote of or for consent of
holders of Common Stock. Subject to the provisions of applicable
law and this Article Fourth, any dividends paid or distributed on
or with respect to the Common Stock of the corporation shall be
paid or distributed ratably to the holders of its Common Stock.
In the event of any liquidation, dissolution or winding-up of the
corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the
corporation and any amounts to which the holders of any Serial
Preferred Stock shall be entitled, as hereinafter provided, the
holders of Common Stock shall be entitled to share ratably in the
remaining assets, of the corporation.
1
<PAGE>
B. Subject to the terms and provisions of this Article Fourth, the
Board of Directors is authorized to provide from time to time for
the issuance of shares of Serial Preferred Stock in series and to
fix and determine from time to time before issuance the
designation and relative rights and preferences of the shares of
each series of Serial Preferred Stock and the restrictions or
qualifications thereof, including, without limiting the
generality of the foregoing, the following:
(1) The series designation and Authorized number of shares;
(2) The dividend rate and the date or dates on which such
dividends will be payable;
(3) The amount or amounts to be received by the holders in the
event of voluntary or involuntary dissolution or liquidation
of the corporation.
(4) The price or prices at which shares may be redeemed, if any,
and any terms, conditions, limitations upon such
redemptions,
(5) The sinking fund provisions, if any, for redemption or
purchase of shares; and
(6) The terms and conditions, if any, on which shares may be
converted at the election of the holders thereof into shams
of other capital stock, or of other series of Serial
Preferred Stock, of the corporation.
C. The holders of the shares of Common Stock or Serial Preferred
Stock shall not be entitled to cumulative voting on any matter,
D. Upon the amendment of this Article Fourth to read as hereinabove
set forth, each one (1) outstanding share of common stock is
forward split, reconstituted and converted into three (3) shares
of common stock. No fractional shares shall be issued.
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 6,200,000; that the
said change(s) and amendment have been consented to and approved by a majority
vote of the stockholders holding at least a majority of each class stock
outstanding and entitled to vote thereon.
/s/ Frederick T. Manlunas
President or Vice President
FREDERICK T. MANLUNAS
/s/ Frederick T. Manlunas
Secretary or Assistant Secretary
FREDERICK T. MANLUNAS
Exhibit 3.1(v)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 28 1999
No. C13820-99
IN THE OFFICE OF
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
Filed by:
INTERFOODS CONSOLIDATED, INC.
We the undersigned - - FREDERICK T. MANLUNAS, President
FREDERICK T. MANLUNAS. Secretary of INTERFOODS CONSOLIDATED, INC.
do hereby certify
That the Board of Directors of said corporation at a meeting duly convened,
held on the _26th_ day of July, 1999, adopted a resolution to amend the original
articles as follows:
Article First is hereby amended to read as follows:
"FIRST. The name of the corporation is: Sitestar Corporation.'
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 18,600,036; that the said
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class stock outstanding
and entitled to vote thereon.
/s/ Frederick T. Manlunas
President or Vice President
FREDERICK T. MANLUNAS
/s/ Frederick T. Manlunas
Secretary or Assistant Secretary
FREDERICK T. MANLUNAS
EXHIBIT 3.2
BY-LAWS
Of
WHITE DOVE SYSTEMS, INC.
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the transaction of
business of the corporation shall be fixed or may be changed by approval of a
majority of the authorized Directors, and additional offices may be established
and maintained at such other place or places as the Board of Directors may from
time to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any time be
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the provisions
of applicable law and to any limitations in the Articles of Incorporation of the
corporation relating to action required to be approved by the Shareholders, or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the Board of Directors. The Board may delegate the management of the day-to-day
operation of the business of the corporation to an executive committee or
others, provided that the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised under the ultimate direction
of the Board.
Section 2. STANDARD OF CARE. Each Director shall perform the duties of a
Director, including the duties as a member of any committee of the Board upon
which the Director may serve, in good faith, in a manner such Director believes
to be in the best interests of the corporation, and with such care, including
reasonable inquiry, as an ordinary prudent person in a like position would use
under similar circumstances.
Section 3. NUMBER AND OUALIFICATION OF DIRECTORS. The authorized number of
Directors shall be nine (9) until changed by a duly adopted amendment to the
Articles of Incorporation or by an amendment to this by-law adopted by the vote
or written consent of holders of a majority of the outstanding shares entitled
to vote.
1.
<PAGE>
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting of the Shareholders to hold office until the next
annual meeting. Each Director, including a Director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.
Section 5. VACANCIES. Vacancies in the Board of Directors may be filled by
a majority of the remaining Directors, though less than a quorum, or by a sole
remaining Director, except that a vacancy created by the removal of a Director
by the vote or written consent of the Shareholders or by court order may be
filled only by the vote of a majority of the shares entitled to vote represented
at a duly held meeting at which a quorum is present, or by the written consent
of holders of a majority of the outstanding shares entitled to vote. Each
Director so elected shall hold office until the next annual meeting of the
Shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
in the event of the death, resignation, or removal of any Director, or if the
Board of Directors by resolution declares vacant the office of a Director who
has been declared of unsound mind by an order of court or convicted of a felony,
or if the authorized number of Directors is increased, or if the Shareholders
fail, at any meeting of Shareholders at which any Director or Directors are
elected, to elect the number of Directors to be voted for at that meeting.
The Shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the Direct-tars, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
Any Director may resign effective on giving written notice to the Chairman
of the Board, the President, the Secretary, or the Board of Directors, unless
the notice specifies a later time for that resignation to become effective. If
the resignation of a Director is effective at a future time, the Board of
Directors may elect a successor to take office when the resignation becomes
effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director before that Directors' term of office expires.
Section 6. REMOVAL OF DIRECTORS. Subject to applicable law, the entire
Board of Directors or any individual Director may be removed from office. In
such case, the remaining Board members may elect a successor Director to fill
such vacancy for the remaining unexpired term of the Director so removed.
2.
<PAGE>
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the Board of
Directors may be called by the Chairman of the Board, or the President, or any
Vice President, or the Secretary, or any two (2) Directors and shall be held at
the principal executive office of the corporation, unless some other place is
designated in the notice of the meeting. Members of the Board may participate in
a meeting through use of a conference telephone or similar communications
equipment so long as all members participating in such a meeting can hear one
another. Accurate minutes of any meeting of the Board or any committee thereof,
shall be maintained by the Secretary or other Officer designated for that
purpose.
Section 8. ORGANIZATIONAL MEETINGS. The organizational meetings of the
Board of Directors shall be held immediately following the adjournment of the
Annual Meetings of the Shareholders.
Section 9. OTHER REGULAR MEETTNGS. Regular meetings of the Board of
Directors shall be held at the corporate offices, or such other place as may be
designated by the Board of Directors, as follows:
Time of Regular Meeting: 9:00 A.M.
Date of Regular Meeting: Last Friday of every month
If said day shall fall upon a holiday, such meetings shall be held on the
next succeeding business day thereafter. No notice need be given of such regular
meetings.
Section 10. SPECIAL MEETTNGS - NOTICES - WATVERS. Special meetings of the
Board may be called at any time by the President or, if he or she is absent or
unable or refuses to act, by any Vice President or the Secretary or by any two
(2) Directors, or by one (1) Director if only one is provided.
At least forty-eight (48) hours notice of the time and place of special
meetings shall be delivered personally to the Directors or personally
communicated to them by a corporate officer by telephone or telegraph. If the
notice is sent to a Director by letter, it shall be addressed to him or her at
his or her address as it is shown upon the records of the corporation, or if it
is not so shown on such records or if not readily ascertainable, at the place in
which the meetings of the Directors are regularly held. In case such notice is
mailed, it shall be deposited in the United States mail, postage prepaid, in the
place in which the principal executive officer of the corporation is located at
least four (4) days prior to the time of the holding of the meeting. Such
mailing, telegraphing, telephoning or delivery as above provided shall be due,
legal and personal notice to such Director.
3.
<PAGE>
When all of the Directors are present at any Directors' meeting, however,
called or noticed, and either (I) sign a written consent thereto on the records
of such meeting, or, (ii) if a majority of the Directors is present and if those
not present sign a waiver of notice of such meeting or a consent to holding the
meeting or an approval of the minute thereof, whether prior to or after the
holding of such meeting, which said waiver, consent or approval shall be filed
with the Secretary of the corporation, or, (iii) if a Director attends a meeting
without notice but without protesting, prior thereto or at its commencement, the
lack of notice, then the transactions thereof are as valid as if had at a
meeting regularly called and noticed.
Section 11. DIRECTORS' ACTION BY UNANIMOUS WRITTEN CONSENT. Any action
required or permitted to be taken by the Board of Directors may be taken without
a meeting and with the same force and effect as if taken by a unanimous vote of
Directors, if authorized by a writing signed individually or collectively by all
members of the Board. Such consent shall be filed with the regular minutes of
the Board.
Section 12. OUORUM. A majority of the number of Directors as fixed by the
Articles of Incorporation or By-Laws shall be necessary to constitute a quorum
for the transaction of business, and the action of a majority of the Directors
present at any meeting at which there is a quorum, when duly assembled, is valid
as a corporate act; provided that a minority of the Directors, in the absence of
a quorum, may adjourn from time to time, but may not transact any business. A
meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of Directors, if any action taken is
approved by a majority of the required quorum for such meeting.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned meeting need not be given to absent Directors if the time and place
be fixed at the meeting adjourned and held within twenty-four (24) hours, but if
adjourned more than twenty-four (24) hours, notice shall be given to all
Directors not present at the time of the adjournment.
Section 14. COMPENSATION OF DIRECTORS. Directors, as such, shall not
receive any stated salary for their services, but by resolution of the Board a
fixed sum and expense of attendance, if any, may be allowed for attendance at
each regular and special meeting of the Board; provided that nothing herein
contained shall be construed to preclude any Director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 15. COMMITTEES. Committees of the Board may be appointed by
resolution passed by a majority of the whole Board. Committees shall be composed
of two (2) or more members of the Board and shall have such powers of the Board
as may be expressly delegated to it by resolution of the Board of Directors,
except those powers expressly made non-delegable by applicable law.
4.
<PAGE>
Section 16. ADVISORY DIRECTORS. The Board of Directors from time to time
may elect one or more persons to be Advisory Directors who shall not by such
appointment be members of the Board of Directors. Advisory Directors shall be
available from time to time to perform special assignments specified by the
President, to attend meetings of the Board of Directors upon invitation and to
furnish consultation to the Board. The period during which the title shall be
held may be prescribed by the Board of Directors. If no period is prescribed,
the title shall be held at the pleasure of the Board.
Section 17. RESIGNATIONS. Any Director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary or the
Board of Directors of the Corporation, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The Officers of the corporation shall be a President,
a Secretary, and a Chief Financial officer. The corporation may also have, at
the discretion of the Board of Directors, a Chairman of the Board, one or more
Vice Presidents, one or more Assistant Secretaries, or one or more Assistant
Treasurers, and such other Officers as may be appointed in accordance with the
provisions of Section 3 of this Article. Any number of offices may be held by
the same person.
Section 2. ELECTION. The Officers of the corporation, except such Officers
as may be appointed in accordance with the provisions of Section 3 or Section 5
of this Article, shall be chosen annually by the Board of Directors, and each
shall hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve or a successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint
such other Officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided by the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of any Officer under any contract of employment, any Officer may be
removed, either with or without cause, by the Board of Directors, at any regular
or special meeting of the Board, or except in case of an Officer chosen by the
Board of Directors by any officer upon whom such power of removal may be
conferred by the Board of Directors.
5.
<PAGE>
Any Officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filed in the
manner prescribed in the By-Laws for regular appointment to that office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned by the Board of Directors or prescribed by the By-Laws. If
there is no President, the Chairman of the Board shall in addition be the Chief
Executive Officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article.
Section 7. PRESIDENT/CHIEF EXECUTIVE OFFICER. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the Chairman of the
Board, if there be such an Officer, the President shall be the Chief Executive
Officer of the corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business and
Officers of the corporation. He or she shall preside at all meetings of the
Shareholders and in the absence of the Chairman of the Board, or if there be
none, at all meetings of the Board of Directors. The President shall be ex
officio a member of all the standing committees, including the Executive
Committee, if any, and shall have the general powers and duties of management
usually vested in the office of President of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President,
the Vice Presidents, if any, in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to, all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-Laws.
6.
<PAGE>
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book
of minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
he Secretary shall keep, or cause to be kept, at the principal office or at
the office of the corporation's transfer agent, a share register, or duplicate
share register showing the names of the Shareholders and their addresses, the
number and classes of shares held by each, the number and date of certificates
issued for the same, and the number and date of cancellation of every
certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the Shareholders and of the Board of Directors required by the By-Laws or by
law to be given. He or she shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep
and maintain, or cause to be kept and maintained in accordance with generally
accepted accounting principles, adequate and correct accounts of the properties
and business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, earnings (or
surplus) and shares. The books of accounts shall at all reasonable times be open
to inspection by any Director.
This Officer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the Board of Directors. He or she shall disburse the funds of the corporation as
may be ordered by the Board of Directors, shall render to the President and
Directors, whenever they request it, an account of all of his or her
transactions and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall be
held at the principal executive office of the corporation unless some other
appropriate and convenient location be designated for that purpose from time to
time by the Board of Directors.
7.
<PAGE>
Section 2. ANNUAL MEETINGS. The annual meetings of the Shareholders shall
be held, each year, at the time and on the day following:
Time of Meeting: 10: 00 A.M.
Date of Meeting: April 20th
If this day shall be a legal holiday, then the meeting shall be held on the
next succeeding business day, at the same hour. At the annual meeting, the
Shareholders shall elect a Board of Directors, consider reports of the affairs
of the corporation and transact such other business as may be properly brought
before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders may be
called at any time by the Board of Directors, the Chairman of the Board, the
President, a Vice President, the Secretary, or by one or more Shareholders
holding not less than one-tenth (1/10) of the voting power of the corporation.
Except as next provided, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the Chairman, President,
vice President, or Secretary, mailed or delivered personally to such officer by
any person (other than the Board) entitled to call a special meeting of
Shareholders, such officer shall cause notice to be given, to the Shareholders
entitled to vote, that a meeting will be held at a time requested by the person
or persons calling the meeting, not less than thirty-five (35) nor more than
sixty (60) days after the receipt of such request. If such notice is not given
within twenty (20) days after receipt of such request, the persons calling the
meeting may give notice thereof in the same manner provided by these By-Laws.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual or
special, shall be given in writing not less than ten (10) nor more than sixty
(60) days before the date of the meeting to Shareholders entitled to vote
thereat. Such notice shall be given by the Secretary or the Assistant Secretary,
or if there be no such Officer, or in the case of his or her neglect or refusal,
by any Director or Shareholder.
Such notices or any reports shall be given personally or by mail and shall
be sent to the Shareholder's address appearing on the books of the corporation,
or supplied by him or her to the corporation for the purpose of the notice.
Notice of any meeting of Shareholders shall specify the place, the day and
the hour of meeting, and (1) in case of a special meeting, the general nature of
the business to be transacted and no other business may be transacted, or (2) in
the case of an annual meeting, those matters which Board at date of mailing,
intends to present for action by the Shareholders. At any meetings where
Directors are to be elected notice shall include the names of the nominees, if
any, intended at date of notice to be presented by management for election.
8.
<PAGE>
If a Shareholder supplies no address, notice shall be deemed to have been
given if mailed to the place where the principal executive office of the
corporation is situated, or published at least once in some newspaper of general
circulation in the County of said principal office.
Notice shall be deemed given at the time it is delivered personally or
deposited in the mail or sent by other means of written communication. The
officer giving such notice or report shall prepare and file an affidavit or
declaration thereof.
When a meeting is adjourned for forty-five .(45) days or more, notice of
the adjourned meeting shall be given as in case of an original meeting. save, as
aforesaid, it shall not be necessary to give any notice of adjournment or of the
business to be transacted at an adjourned meeting other than by announcement at
the meeting at which said adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions of any meeting of Shareholders, however called and notice, shall be
valid as through had at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the Shareholders entitled to vote, not present in person or
by proxy, sign a written waiver of notice, or a consent to the holding of such
meeting or an approval shall be filed with the corporate records or made a part
of the minutes of the meeting. Attendance shall constitute a waiver of notice,
unless objection shall be made as provided in applicable law.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING - DIRECTORS. Any action
which may be taken at a meeting of the Shareholders, may be taken without a
meeting or notice of meeting if authorized by a writing signed by all of the
Shareholders entitled to vote at a meeting for such purpose, and filed with the
Secretary of the corporation, provided, further, that while ordinarily Directors
can be elected by unanimous written consent, if the Directors fail to fill a
vacancy, then a Director to fill that vacancy may be elected by the written
consent of persons holding a majority of shares entitled to vote for the
election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise provided for
under applicable law or the Articles of Incorporation, any action which may be
taken at any annual or special meeting of Shareholders may be taken without a
meeting and without prior notice, if a consent in writing, setting forth the
action so taken, signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize to take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
9.
<PAGE>
Unless the consents of all Shareholders entitled to vote have been
solicited in writing,
(1) Notice of any Shareholder approval without a meeting by
less than unanimous written consent shall be given at least ten (10)
days before the consummation of the action authorized by such approval,
and
(2) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting be less
than unanimous written consent, to each of those Shareholders entitled
to vote who have not consented in writing.
Any Shareholder giving a written consent, or the Shareholder's
proxyholders, or a transferee of the shares of a personal representative of the
Shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the corporation.
Section 8. QUORUM. The holder of a majority of the shares entitled to vote
thereat, present in person,, or represented by proxy, shall constitute a quorum
at all meetings of the Shareholders for the transaction of business except as
otherwise provided by law, by the Articles of Incorporation, or by these
By-Laws. If, however, such majority shall not be present or represented at any
meeting of the Shareholders, the shareholders entitled to vote thereat, present
in person, or by proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting shares shall be present. At such
adjourned meeting at which the requisite amount of voting shares shall be
represented, any business may be transacted which might have been transacted at
a meeting as originally notified.
If a quorum be initially present, the Shareholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken is approved by a
majority of the Shareholders required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled to vote
stand on the stock records of the corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board of Directors for the
determination of Share- holders of record, and then on such other day, shall be
entitled to vote at such meeting.
10.
<PAGE>
Provided the candidate's name has been placed in nomination prior to the
voting and one or more Shareholders has given notice at the meeting prior to the
voting of the Shareholder's intent to cumulate the Shareholder's votes, every
Shareholder entitled to vote at any election for Directors of any corporation
for profit may cumulate their votes and give one candidate a number of votes
equal to the number of Directors to be elected multiplied by the number of votes
to which his or her shares are entitled to, or distribute his or her votes on
the same principle among as many candidates as he or she thinks fit.
The candidates receiving the highest number of votes up to the number of
Directors to be elected are elected.
The Board of Directors may fix a time in the future not exceeding thirty
(30) days preceding the date of any meeting of Shareholders or the date fixed
for the payment of any dividend or distribution, or for the allotment of rights,
or when any change or conversion or exchange of shares shall go into effect, as
a record date for the determination of the Shareholders entitled to notice of
and to vote at any such meeting, or entitled to receive any such dividend or
distribution, or any allotment of rights or to exercise the rights in respect to
any such change, conversion or exchange of shares. In such case only
Shareholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting, to receive such dividends, distribution or allotment of
rights, or to exercise such rights, as the case may be notwithstanding any
transfer of any share on the books of the corporation after any record date
fixed as aforesaid. The Board of Directors may close the books of the
corporation against transfers of shares during the whole or any part of such
period.
Section 10. PROXIES. Every Shareholder entitled to vote, or to execute
consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of applicable law filed with the Secretary of the
corporation.
Section 11. ORGANIZATION. The President, or in the absence of the
President, any Vice President, shall call the meeting of the Shareholders to
order, and shall act as Chairman of the meeting. In the absence of the President
and all of the Vice Presidents, Shareholders shall appoint a Chairman for such
meeting. The Secretary of the corporation shall act as Secretary of all meetings
of the Shareholders, but in the absence of the Secretary at any meeting of the
Shareholders, the presiding officer may appoint any person to act as Secretary
of the meeting.
Section 12. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Board of Directors may, if they so elect, appoint inspectors
of election to act at such meeting or any adjournment thereof. If inspectors of
election be not so appointed, or if any persons so appointed fail to appear or
refuse to act, the chairman of any such meeting may, and on the request of any
Shareholder or his or her proxy shall, make such appointment at the meeting in
which case the number of inspectors shall be either one (1) or three (3) as
determined by a majority of the Shareholders represented at the meeting.
11.
<PAGE>
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be of
such form and device as the Board of Directors may designate and shall state the
name of the record holder of the shares represented thereby; its number; date of
issuance; the number of shares for which it is issued; a statement of the
rights, privileges preferences and restriction, if any; a statement as to the
redemption or conversion, if any; a statement of liens or restrictions upon
transfer or voting, if any; if the shares be assessable or, if assessments are
collectible by personal action, a plain statement of such facts.
All certificates shall be signed in the name of the corporation by the
Chairman of the Board or Vice Chairman of the Board or the President or Vice
President and by the Chief Financial officer or an Assistant Treasurer or the
Secretary or any Assistant Secretary, certifying the number of shares and the
class or series of shares owned by the Shareholder.
Any or all of the signatures on the certificate may be facsimile. In case
any Officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that Officer,
transfer agent, or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent, or registrar at the date of issuance.
Section 2. TRANSFER ON THR BOOKS. Upon surrender to the Secretary or
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and shall, if the Directors so require, give the
corporation a bond of indemnity, in form and with one or more sureties
satisfactory to the Board, in at least double the value of the stock represented
by said certificate, whereupon a new certificate may be issued in the same
tender and for the same number of shares as the one alleged to be lost or
destroyed.
12.
<PAGE>
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint one or more transfer agents or transfer clerks, and one or more
registrars which shall be an incorporated bank or trust company, either domestic
or foreign, who shall be appointed at such times and places as the requirements
of the corporation may necessitate and the Board of Directors may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS - RECORD DATE. In order that the
corporation may determine the Shareholders entitled to notice of any meeting or
to vote or entitled to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect to any
other lawful action, the Board may fix, in advance, a record date, which shall
not be more than sixty (60) days nor less than ten (10) days prior to the date
of such meeting nor more than sixty (60) days prior to any other action.
If no record date is fixed; the record date for determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders shall be at the
close of business on the business day next preceding the day on which notice is
given or if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held. The record date for determining
Shareholders entitled to give consent to corporate action in writing without a
meeting, when no prior action by the Board is necessary, shall be the day on
which the first written consent is given.
The record date for determining Shareholders for any other purpose shall be
at the close of business on the day on which the Board adopts the resolution
relating thereto, or the sixtieth (60th) day prior to the date of such other
action, whichever is later.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. The corporation shall maintain, in accordance with
generally accepted accounting principles, adequate and correct accounts, books
and records of its business and properties. All of such books, records and
accounts shall be kept at its principal executive office as fixed by the Board
of Directors from time to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records shall be
open to inspection of the Directors and Shareholders from time to time and in
the manner provided under applicable law.
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS. The original or a copy
of these By-Laws, as amended or otherwise altered to date, certified by the
Secretary, shall be kept at the corporation's principal executive office and
shall be open to inspection by the Shareholders at all reasonable times during
office hours.
13.
<PAGE>
Section 4. CHECK, DRAFTS, ETC. All checks, drafts, or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by the Board
of Directors.
Section 5. CONTRACT, ETC, -- HOW EXECUTED. The Board of Directors, except
as in the By-Laws otherwise provided, may authorize any Officer or Officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the corporation. Such authority may be general or
confined to specific instances. Unless so authorized by the Board of Directors,
no Officer, agent or employee shall have any power or authority to bind the
corporation by any contract or agreement, or to pledge its credit, or to render
it liable for any purpose or to any amount except as may be provided under
applicable law.
ARTICLE VII
ANNUAL REPORTS
Section 1. REPORT TO SHAREHOLDERS, DUE DATE. The Board of Directors shall
cause an annual report to be sent to the Shareholders not later than one hundred
twenty (120) days after the close of the fiscal or calendar year adopted by the
corporation. This report shall be sent at least fifteen (15) days before the
annual meeting of Shareholders to be held during the next fiscal year and in the
manner specified in Section 4 of the Article IV of these By-Laws for giving
notice to Shareholders of the corporation. The annual report shall contain a
balance sheet as of the end of the fiscal year and an income statement and
statement of changes in financial position for the fiscal year, accompanied by
any report of independent accountants or, if there is no such report, the
certificate of an authorized officer of the corporation that the statements were
prepared without audit from the books and records of the corporation.
ARTICLE VIII
AMENDMENTS TO BY-LAWS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be adopted or these
By-Laws may be amended or repealed by the vote or written consent of holders of
a majority of the outstanding shares entitled to vote; provided, however, that
if the Articles of Incorporation of the corporation set forth the number of
authorized Directors of the corporation, the authorized number of directors may
be changed only by an amendment of the Article of Incorporation.
14.
<PAGE>
Section 2. POWERS OF DIRECTORS. Subject to the right of the Shareholders to
adopt, amend or repeal By-Laws, as provided in Section 1 of this Article VIII,
and the limitations, if any, under law, the Board of Directors may adopt, amend
or repeal any of these By-Laws other than a By-Law or amendment thereof changing
the authorized number of Directors.
Section 3. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law is
adopted, it shall be copied in the book of By-Laws with the original By-Laws, in
the appropriate place. If any By-Law is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
ARTICLE IX
CORPORATE SEAL
Section 1. Seal. The corporate seal shall be circular in form, and shall
have inscribed thereon the name of the corporation, the date and State of
incorporation.
ARTICLE X
MISCELLANEOUS
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President
and the Secretary or an Assistant Secretary.
Section 2. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one (1) or more subsidiaries.
Section 3. INDEMNITY. Subject to applicable law, the corporation may
indemnify any Director, Officer, agent or employee as to those liabilities and
on those terms and conditions as appropriate. In any event, the corporation
shall have the right to purchase and maintain insurance on behalf of any such
persons whether or not the corporation would have the power to indemnify such
person against the liability insured against.
15.
<PAGE>
Section 4. ACCOUNTING YEAR. The accounting year of the corporation shall be
fixed by resolution of the Board of Directors.
16.
White Dove: By-Laws
EXHIBIT 21
The following are the subsidiaries of Sitestar Corporation:
Sitestar.net
Soccersite.com
Greattools.com
Holland-American.com
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> Dec-31-1999 DEC-31-1998
<PERIOD-START> Jan-01-1999 JAN-01-1998
<PERIOD-END> Jun-30-1999 DEC-31-1998
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 115,588 212,584
<ALLOWANCES> 16,378 16,378
<INVENTORY> 469,004 542,081
<CURRENT-ASSETS> 676,490 830,325
<PP&E> 59,861 20,321
<DEPRECIATION> 3,841 1,678
<TOTAL-ASSETS> 932,510 973,968
<CURRENT-LIABILITIES> 950,650 824,731
<BONDS> 0 0
0 0
0 0
<COMMON> 6,200 6,200
<OTHER-SE> (54,802) 143,037
<TOTAL-LIABILITY-AND-EQUITY> 932,510 973,968
<SALES> 870,249 2,175,867
<TOTAL-REVENUES> 870,249 2,175,867
<CGS> 654,011 1,614,924
<TOTAL-COSTS> 1,034,634 2,441,964
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 33,454 18,397
<INCOME-PRETAX> (197,839) (284,494)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (197,839) (284,494)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (197,839) (284,494)
<EPS-BASIC> (0.03) (0.04)
<EPS-DILUTED> (0.03) (0.04)
</TABLE>
