As filed with the Securities and Exchange Commission on April 10, 2000
SEC Registration No. 333-90241
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form SB-2/A-2
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
MEDIACOMM BROADCASTING SYSTEMS, INC.
--------------------------------------------
(Name of small business issuer in its charter)
Colorado 7310 84-1474784
(State or jurisdiction (Primary Standard (IRS Employer
of incorporation Industrial Classification Identification
or organization) Code Number) Number)
925 W. Kenyon Avenue #15
Englewood, Colorado 80110
(303) 762-6444
(Address and telephone number of principal executive offices
and principal place of business)
Don E. Montague
Mediacomm Broadcasting Systems, Inc.
d/b/a Shopbiz.com
925 W. Kenyon Avenue #15
Englewood, Colorado 80110
(303) 762-6444
(Name, address and telephone number of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
Ronald N. Vance, P.C.
A. Reed Reynolds, Esq.
57 West 200 South, Suite 310
Salt Lake City, UT 84101
(801) 359-9300
(801) 359-9310 FAX
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
Calculation of Registration Fee
- --------------------------------------------------------------------------------
Proposed
Title of each Proposed Maximum Amount
Class of Amount Maximum Aggregate Of
Securities to To be Offering Offering Registration
Be registered Registered Price (1) Price (1) Fee
- --------------------------------------------------------------------------------
Common stock, no par
value, Maximum 900,000 $1.00 $900,000 $250
Series "A" Warrants,
each entitling the
holder to purchase
one share of Common
stock, issuable upon
exercise of the
warrants 1,800,000 -0- -0-
Common stock, no par
value, issuable upon
exercise of Series
"A" Warrants (2) 1,800,000 $2.00 $3,600,000 $1,001
- --------------------------------------------------------------------------------
Total Registration Fee $1,251
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) and (g).
(2) Represents shares of common stock underlying warrants held or to be held by
the Selling Security Holders and includes, pursuant to Rule 416, an
additional indeterminate number of shares that may be issuable upon
exercise of the warrants by reason of anti-dilution provisions of the
warrants which prevent dilution resulting from stock splits, stock
dividends or similar transactions.
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Cross Reference Sheet
Form SB-2
Item No. Sections in Prospectus
1 Front of Registration Statement and Outside Cover Page
Front Cover of Prospectus
2 Inside Front and Outside Back Cover Pages Inside Front Cover
of Prospectus Pages (i)(ii); Table of
Contents
3 Summary Information and Risk Factors Prospectus Summary;
Risk Factors
4 Use of Proceeds Use of Proceeds
5 Determination of Offering Price Cover Page;
Subscription and Plan
of Distribution
6 Dilution Dilution and Relative Investments
7 Selling Security Holders Cover Page,
Principal Shareholders-
Concurrent Offering by Principal Shareholders
8 Plan of Distribution Subscription and Plan of Distribution
9 Legal Proceedings Legal Proceedings
10 Directors, Executive Officers, Management; Principal
Promoters and Control Persons Shareholders
11 Security Ownership of Certain Beneficial
Owners and Management Principal Shareholders
12 Description of Securities Description of Securities
13 Interest of Named Experts and Counsel Experts
14 Disclosure of Commission Position on Indemnification of
Indemnification for Securities Act Liabilities Directors, Officers
and Others
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15 Organization within Last Five Years Prospectus Summary;
Business
16 Description of Business Prospectus Summary;
Risk Factors; Business
17 Management's Discussion and Analysis of Business -
Plan of Operation Plan of Operations
18 Description of Property Business
19 Certain Relationships and Management-
Related Transactions Transactions with a Related Party:
Our Affiliate MediaComm Marketing International, Inc.
20 Market for Common Equity and Related Cover Page; Risk
Stockholder Matters Factors, Description of
Securities
21 Executive Compensation Management - Executive
Compensation
22 Financial Statements Index to Financial
Statements
23 Changes in and Disagreements With Experts
Accountants on Accounting and Financial
Disclosure
24 Indemnification of Directors and Officers Indemnification of
Directors and Officers
25 Other Expenses of Issuance and Distribution Other Expenses of
Issuance and Distribution
26 Recent Sales of Unregistered Securities Recent Sales of
Unregistered Securities
27 Exhibits Exhibits
28 Undertakings Undertakings
SUBJECT TO COMPLETION, DATED FEBRUARY *, 2000
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective.
4
<PAGE>
This prospectus is not an offer to sell these securities and it is not a
solicitation of an offer to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS
MEDIACOMM BROADCASTING SYSTEMS, INC.
d/b/a Shopbiz.com
450,000 shares minimum, 900,000
shares maximum of common stock
$1.00 per share
o This is our initial public offering, and no public market currently exists
for our shares.
The Offering
Common Stock: Public Price Total
Number of Shares per Share Minimum Maximum
Minimum: 450,000 $1.00 $450,000
Maximum: 900,000 $1.00 $900,000
-------- --------
Expenses of Offering $ 40,000 $ 40,000
Net Proceeds to Shopbiz.com $410,000 $860,000
-------- --------
o This is a self underwritten offering of 450,000 shares minimum 900,000
shares maximum through our officers and directors without remuneration to
them. The offering is for a period of 60 days beginning with the date of
this prospectus and, at our option, the offering period may be extended for
an additional 60 days. The minimum number of shares one can purchase is
1000 shares.
o Proceeds from sales of the shares are being escrowed at US Bank National
Association, Denver, Colorado, until the sale of the 450,000 minimum number
of shares is achieved. If the minimum of $450,000 in proceeds is not
received prior to the expiration of the offering periods all escrowed funds
will be promptly returned to subscribers without interest or deduction.
o Concurrently with this offering, we are registering for resale by selling
securities holders of 1,800,000 Series "A" Warrants to purchase shares of
common stock of our company and the 1,800,000 shares of common stock
underlying the warrants. We will not receive any of the proceeds from sale
of the warrants or the shares underlying the warrants, except for the
exercise price of the warrants in the aggregate amount of $3,600,000 if all
of the warrants are exercised.
This Offering is Highly Speculative and Involves Special Risks Concerning
Our Company and its Business. See "Risk Factors" beginning on page 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these securities, or determined if the prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
February *, 2000
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TABLE OF CONTENTS
Item Page
---- ----
Prospectus Summary 8
Selected Financial Information 8
Risk Factors 9
Because we are a New Company
With a Brief Operating History
we may not be able to Successfully
Operate our Business or Achieve Profitability 9
Our Limited Liquidity and Capital Resources
May Substantially Restrict Operation of Our Business 9
There May Be No Market for Shares of Our
Common stock You Purchase in This Offering 10
Forward Looking Statements 10
Business 11
Use of Proceeds 29
Management 33
Principal Shareholders 37
Subscription and Plan of Distribution 40
Dilution and Relative Investments 42
Any Shares Purchased In This Offering Will Be
Penny Stock and Subject to Trading Regulations 44
Adverse Effect on Any Market for Our
Shares by Sales of Restricted Shares 44
Description of Securities 46
Legal Matters 49
Experts 49
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PROSPECTUS SUMMARY
We are a new company without significant revenue to date. We are
principally retailing a variety of products of others over our internet website
www.shopbiz.com. Also, under an exclusive license for use of the website
www.denver.theexecutive.com, we propose to provide information of interest to
executives in the geographical area of Denver, Colorado.
We were organized as a corporation under the laws of the State of Colorado
on August 20,1998 and we do business under the assumed name: Shopbiz.com. Our
executive offices are located at 925 W. Kenyon Drive #15, Englewood, Colorado
80110. We have operating computer facilities located in Denver, Colorado. Our
telephone number is: (303) 762-6444.
SELECTED FINANCIAL INFORMATION
Set forth below is selected financial information of our company for the
nine months ended December 31, 1999, for the period from August 20, 1998
(inception) through March 31, 1999, for the period from August 20, 1998
(inception) through December 31, 1999 at March 31, 1999 and at December 31,
1999. The selected financial information should be read in conjunction with the
financial statements included elsewhere in this prospectus and are qualified in
their entirety by reference thereto.
<TABLE>
<CAPTION>
Nine months August 20, 1998 August 20, 1998
Ended (Inception) (Inception)
December 31, Through Through
Operations 1999 March 31, 1999 December 31, 1999
- ---------- ------------- ----------------- -----------------
(Unaudited)
<S> <C> <C>
Net Sales $ 15,263 $ 224 $ 15,487
Loss from operations $ (222,714) $ (44,968) $ (267,682)
Net Loss per common share $ (0.03) $ (0.02) N/A
Average number of common shares
and common share equivalents
outstanding $ 6,920,000 $ 2,775,000 N/A
Balance Sheet
- -------------
December 31, 1999 March 31, 1999
----------------- --------------
Total Assets $ 209,561 $ 72,431
Bridge loans $ 225,000 $ --
Long-term debt $ -- $ --
Total Liabilities $ 244,618 $ 7,989
Stockholders' Equity (Deficit) $ (35,057) $ 64,442
For the period from August 20, 1998 through December 31, 1999 MediaComm
Broadcasting Systems, Inc. had not paid any dividends, and there were no
long-term obligations at December 31, 1999 or March 31, 1999.
</TABLE>
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RISK FACTORS
The shares of common stock we offer by this prospectus involve a high
degree of risk. You should purchase these shares only if you can afford to lose
the total amount of your purchase. If you are considering a purchase of these
shares, you should carefully evaluate the following risk factors and all of the
other information in this prospectus, including the financial statements.
o Because We Are a New Company With a Very Brief Operating History We May Not
Be Able to Successfully Operate Our Business or Achieve Profitability.
We have been operating our fully featured shopping service on website
shopbiz.com since approximately October 15, 1999. We have, therefore, developed
a limited number of sellers, products and purchasers participating in the
services we offer on our website. Based upon this brief period of operations we
are unable to predict or give any assurance that in the future we can
successfully conduct our operation of shopbiz.com and achieve profitability. You
should, therefore, carefully consider these circumstances:
(a) Our activities have been limited to organizing the company,
formulating our business plan, financing our operations with borrowed
funds, and creating our website, shopbiz.com;
(b) We have had insignificant revenues up to the date of this prospectus;
(c) Our technology is unproven;
(d) We are dependent upon satisfactory performance by our sellers, and
(e) We have not yet achieved market acceptance of our services.
o Our Limited Liquidity and Capital Resources May Substantially Restrict
Operation of Our Business.
We have limited capital and are obligated for substantial debt. We have not
been able to commit the amount of funds we deem desirable to promote and market
our shopping service on shopbiz.com. You should, therefore, carefully consider
the following circumstances:
(a) we are dependent upon the proceeds of this offering to retire debt in
the amount of $225,000 plus interest thereon,
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(b) we have budgeted the proceeds of this offering to sustain us as a
going concern for only a period of 12 months following completion of
this offering,
(c) following application of the proceeds of this offering it is highly
likely that we will require additional capital for (1) marketing of
our service on shopbiz.com (2)attracting vendors to offer products on
shopbiz.com (3) employment of personnel and outside consultants.
(d) we can give no assurances that additional capital will be available to
us through equity or debt financing or through the highly unlikely
source of commercial bank loans.
o There May Be No Market for Shares of Our Common Stock You Purchase in This
Offering.
Prior to this offering there has been no public market for our shares of
common stock. We can give no assurance that any public market for our shares
will develop in the future.
9
<PAGE>
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements that address our
electronic commerce strategy, expansion strategy, the development of services,
use of proceeds, projected capital expenditures, liquidity, development of
additional revenue sources, development of marketing and distribution alliances,
market acceptance of the Internet, technological advancement, and the ability to
develop name recognition. These statements may be found in the sections of this
prospectus entitled "Risk Factors", "Use of Proceeds", "Business" and in this
prospectus generally. Our actual results could differ materially from those
anticipated by these forward-looking statements as a result of various factors,
including all the risks and uncertainties discussed in this prospectus.
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by existing public companies does not
currently apply to securities offerings by our company.
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BUSINESS
Organization and Initial Financing
Since incorporation, we have been primarily engaged in organizing
activities, raising funds, purchasing a personal computer, designing computer
software and establishing our website domain, www.shopbiz.com on the Internet.
Over the period from December 1, 1998 to approximately February 5,
1999, we privately issued a total of 6,000,000 shares of our common stock, as
adjusted for a three-for-one forward stock split effective August 4, 1999.
Common Stock Issued at Organization
The following table sets forth the persons to whom 3,600,000 of those
shares were issued:
Number of
Name Shares Consideration
---- ------ -------------
Don E. Montague 3,060,000 $25,000
Steven S. Montague 270,000 2,205
Anthony "Anton" Delgado 90,000 735
J. D. Kish 90,000 735
World Net Trading, Ltd. 90,000 735
--------- -------
Totals 3,600,000 shs $29,410
---------- -------
o The shares issued to Steven S. Montague were issued in exchange for service
rendered to our company in connection with its organization and his
agreement to serve as Vice President of our company. In this transaction,
our shares were valued at $.008 per share.
o The shares issued to Anthony "Anton" Delgado were issued in exchange for
services to our company in relation to its organization and his agreement
to serve as Secretary and Treasurer of our company. The shares issued to
Mr. Delgado were valued at $.008 per share.
o The shares issued to J. D. Kish were issued in payment for accounting
services rendered by him in connection with our organization. These shares
were valued at $.008 per share.
o The shares issued to World Net Trading, Ltd., a corporation controlled by
Randall Stevens, were issued in payment for services rendered by Mr.
Stevens in preparing a business plan for our company and were valued at
$.008 per share.
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Common Stock Issued in Private Placement
The balance of the 6,000,000 shares privately issued, amounting to
2,400,000 shares, were issued pursuant to a private placement offering we
conducted over the period from December 1,1998 to approximately February 5,
1999. The 2,400,000 shares were sold for $.0333 per share for a total of
$80,000. The following table sets forth the names of the purchasers of the
2,400,000 shares and the number of shares purchased, and the consideration paid
for the shares:
Number of
Name Shares Consideration
---- ------ -------------
World Net Trading, Ltd. 30,000 shs $ 1,000
Camille and Michael Snyder 30,000 shs 1,000
GJM Trading Partners, Ltd. 150,000 shs 5,000
Dr. Andrew M. Georgeson 150,000 shs 5,000
Second Chance Investments 600,000 shs 20,000
Tradeco, Corp. 600,000 shs 20,000
View Systems, Inc. 840,000 shs 28,000
------------- -------
Totals 2,400,000 shs $80,000
------------- -------
o World Net Trading, Ltd. is the same corporation that acquired the 90,000
shares listed in the table under the above caption, Common Stock Issued at
Organization.
o Camille Snyder is the daughter and Michael Snyder is the son-in-law of Don
E. Montague, Chief Executive Officer of Shopbiz.com, and Camille is the
sister of Steven S. Montague, President of Shopbiz.com.
o GJM Trading Partners, Ltd. and Second Chance Investments are legal persons
controlled by Gary J. McAdam, who, also, controls Summer Breeze, LLC, one
of the lenders of the $225,000 of loans to Shopbiz.com discussed below.
o Dr. Georgeson is a former Vice President and Director of Shopbiz.com.
o Tradeco Corp. is a company controlled by David R. Nemelka who, also,
controls David's Odyssey, LLC, one of the lenders of the $225,000 of loans
to Shopbiz.com discussed below.
o View Systems, Inc. is a publicly held corporation of which Gunther Than, a
director of our company, is the President.
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Borrowing of $225,000
In August and September 1999, and concurrent with our three-for-one forward
stock split, we borrowed $225,000. As partial consideration for lending these
funds to us, we issued to the six lenders 1,800,000 shares of our common stock
and 1,8000,000 Series "A" Warrants to purchase shares of our common stock at
$2.00 per share. These loans are payable with interest at 10 percent per annum
upon completion of this offering from the proceeds of the offering. If the
offering is not completed, the loans are payable with interest in separate
portions on August 6, 2000, September 1, 2000 and September 30, 2000.
If we should default in payment of these loans, the lenders would have the
right to convert the amount of the loans and accrued interest into shares of our
common stock at the rate of $.10 per share.
The following table sets forth the identity of each of the lenders, the
lender's address, the amount of each loan and the number of shares and warrants
issued to each lender.
<TABLE>
<CAPTION>
Amount Number of Number of
Lenders of Loan Shares Warrants
------- ------- ------ --------
<S> <C> <C> <C>
Business Development
Corporation $45,000 360,000 shs 360,000 wts
Attention: Van R. Perkins,
President
340 Sunset Drive, Suite 1203
Ft. Lauderdale, Florida 33301
Mathis Family Partners 20,000 160,000 shs 160,000 wts
Attn: Earnest Mathis
26 West Dry Creek Circle
Suite 600
Littleton, Colorado 80120
Earnest Mathis IRA Rollover 25,000 200,000 shs 200,000 wts
(same address as Mathis
Family Partners)
Summer Breeze LLC 45,000 360,000 shs 360,000 wts
Attention: Gary J. McAdam,
Manager
14 Red Trail Drive
Highland Ranch, Colorado 80126
David's Odyssey, LLC 45,000 360,000 shs 360,000 wts
Attention: David R. Nemelka,
Manager
1310 East 1600 South
Mapleton, Utah 84664
David N. Nemelka 45,000 360,000 shs 360,000 wts
55 West 200 North --------- ------------- -------------
Provo, Utah 84601
Totals $225,000 1,800,000 shs 1,800,000 wts
--------- ------------- -------------
</TABLE>
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Application of Proceeds from Sale of Shares and Loans
As of December 31, 1999, the proceeds from the sale of our 6,000,000 shares
amounting to $105,000 and the $225,000 of borrowed funds were applied as
follows:
Item Amount
---- ------
Offering costs $ 31,979
Equipment 2,796
Software 1,059
Security deposit 43
Working capital (1) 294,123
---------
Totals $ 330,000
=========
- ---------------
(1) Includes expenditures such as shopbiz.com website development, payroll and
general and administrative expense.
Research and Development
Research
In pursuing our business plan to create our website shopbiz.com, in
consultation with Cygen Technologies, Inc., and as of December 31, 1999, we have
expended approximately $10,000 in investigating and evaluating the following
matters:
o evaluating the technology necessary to present a very large number of
products for sale on the website;
o evaluating the type of database that would be required to achieve records
of thousands of transactions with sellers, buyers and sales.
o investigating state-of-the-art technology for website design;
o evaluating the most favorable framework within which to create databases of
sellers and buyers, and create pages on our website
o consultations with manufacturers and distributors of products to ascertain
their needs in direct marketing of their products to consumers on the
Internet;
o investigating the availability of a third person or persons to act for us
in establishing our affiliate program;
o evaluation of the services and products offered by existing websites such
as: amazon.com, gap.com, ebay.com, landsend.com and many others.
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Development
In consultation with Cygen Technologies, Inc., and as of December 31, 1999,
we have expended $98,280 in developing our website shopbiz.com with the features
discussed below under the heading The Principal Features of shopbiz.com.
Of the $98,280 we expended on development of shopbiz.com, approximately
$50,000 was paid to our consultant Cygen Technologies, Inc. Also, on October 14,
1999, we issued to Cygen Technologies, Inc., a consultant to our company, an
option to purchase 150,000 shares of our common stock at $0.20 per share. The
option must be exercised, during the period beginning October 15, 2000 and
ending October 15, 2002. This option is separate from, and does not relate to,
the shares of common stock reserved under our non-qualified stock option and
stock grant plan.
We propose to expend from approximately $22,000 to $41,000, depending upon
the amount of proceeds of this offering we realize, in developing the new
features discussed below under the heading Development of Our Website
shopbiz.com.
Our Business and the Internet
The success of our business is primarily dependent upon growth of
electronic commerce on the world wide web segment of the Internet, our ability
to provide a marketable service on the Internet and our ability to compete with
other enterprises using the Internet for commercial purposes.
The Internet appears to be growing at an unprecedented speed and volume as
a global means of communicating and doing business. Although estimates of growth
of the Internet vary, they appear to us to be reasonable approximations. For
example, International Data Corporation, a division of International Data Group,
estimates that the number of Internet users worldwide will grow from
approximately 142 million at the end of 1998 to 502 million by the end of 2003,
and employing a once per week use of the Internet as a measurement, the Computer
Industry Almanac, Inc. estimates that such use will grow from 61 million users
in 1996 to 320 million users in 2000 and 720 million users in 2005.
In particular relation to online commerce on the Internet, it appears that
this means of doing business is becoming increasingly accepted. International
Data Corporation projects that worldwide Internet commerce will grow from
approximately $50 billion in sales of goods and services in 1998 to $1.3
trillion of such sales in 2003. Although this approximation does not identify
what portion of the projection represents sales of goods only, we believe the
portion of the projection that is composed of sales of goods will be
substantial.
Notwithstanding the recent growth of activity on the Internet generally,
its use as a commercial marketplace is still at an early stage of development.
Demand and market acceptance for recently introduced products and services such
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as our website shopbiz.com are uncertain. We cannot predict whether sellers and
buyers will be willing to shift their traditional commercial activities to the
Internet. The Internet and the World Wide Web in particular may not prove to be
a viable commercial marketplace for a number of reasons including:
o Concerns about security of transactions;
o Inconsistent and unreliable service;
o Congestion on the Internet; and
o Unacceptable cost of high speed access.
If use of the Internet does not grow and acceptance of it in the
marketplace increase, we likely will be unable to develop a commercially viable
customer base.
Although we cannot provide you with our estimate in numerical terms, we
believe that the magnitude of use of the Internet, its global scope, the manner
of its functioning and its accessibility afford us a reasonable opportunity for
marketing of our shopbiz.com website.
Regulation of the Internet
Congress has recently adopted legislation that regulates certain aspects of
the Internet, including online content, user privacy, taxation, access charges,
liability for third-party activities and jurisdiction. The European Union has
also enacted several directives relating to the Internet, one of which addresses
online commerce. In addition, federal, state, local and foreign governmental
organizations are considering other legislative and regulatory proposals that
would regulate the Internet. Increased regulation of the Internet may decrease
its growth, which may increase the cost of doing business via the Internet, and,
otherwise, materially and adversely affect our business, results of operations
and financial condition.
The Federal Trade Commission has proposed regulations regarding the
collection and use of personal identifying information obtained from individuals
when accessing websites, with particular emphasis on access by minors. These
regulations may include requirements that companies establish certain procedures
to disclose to and notify customers of privacy and security procedures, to
obtain consent from customers for certain collection and use of information and
to provide users with the ability to access, correct and delete personal
information stored by those companies. These proposed regulations may also
include enforcement and redress provisions. There can be no assurance that we
will adopt policies that conform with any regulations adopted by the Federal
Trade Commission. Moreover, even in the absence of those regulations, the
Federal Trade Commission has begun investigations into the privacy practices of
companies that collect information on the Internet. One investigation resulted
in a consent decree pursuant to which an Internet company agreed to establish
programs to implement the practices noted above. We may become subject to a
similar investigation or the Federal Trade Commission's regulatory and
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enforcement efforts may adversely affect our ability to collect demographic and
personal information from customers which could have an adverse effect on our
ability to provide this information from our data base to advertisers and
electronic commerce marketers, including sellers on our website. Any of these
developments would materially and adversely affect our business, results of
operation and financial condition.
The European Union has adopted a directive that imposes restrictions on the
collection and use of personal data. Under the directive, citizens of the
European Union are guaranteed the right to access their data, the right to know
where the data originated, the right to have inaccurate data rectified, the
right to recourse in the event of unlawful processing and the right to withhold
permission to use their data for direct marketing. The directive could, among
other things, affect United States companies that collect information over the
Internet from individuals in European Union member countries, and may impose
restrictions that are more stringent than current Internet privacy standards in
the United States. In particular, companies with offices located in European
Union countries will not be allowed to send personal information to countries
that do not maintain adequate standards of privacy. The directive does not,
however, define what standards of privacy are adequate. As a result, the
directive may adversely affect the activities of enterprises such as ours that
engage in data collection from users in European Union member countries.
Our Current Business
We commenced operating a limited version of our website shopbiz.com on
March 1, 1999. We commenced operating our fully featured website on October 15,
1999 and are now principally engaged in promoting and developing this fully
featured website as a shopping service on the Internet. Essentially, we act as a
retailer of products for manufacturers and distributors who want to make sales
of their goods over the Internet. However, we do not maintain inventories of the
products we sell over shopbiz.com. Purchase orders are filled directly by
sellers and shipped by sellers directly to the purchasers at the address given.
We do not act for sellers of services.
The Principal Features of Shopbiz.com
Features That Serve Shoppers
o Shoppers who visit our website can search for products by keyword, a brand
name and from multiple categories.
o Some products are classified in more than one category.
o Shoppers can select one type of product that is available from more than
one seller.
o Shoppers can purchase one product or multiple products from different
sellers in one purchasing transaction-our multiple-vendor "shopping cart"
feature.
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o Purchases must be made by credit card and upon placing an order by clicking
a button the shopper's request is automatically processed over a secure
line off the Internet and credit is approved or disapproved within
approximately six seconds.
o Following verification by one of our personnel, a shopper's order is
automatically transmitted by e-mail to the seller of the product purchased.
o Contemporaneous with placing of the shopper's order with the seller, the
purchase is immediately confirmed to the shopper by automatic e-mail.
o Shoppers are automatically informed by e-mail that the product purchased
has been shipped and given the relevant details regarding the shipment.
o Only when a product purchased has been shipped is the shopper's purchase
transaction closed and the shopper's credit card account charged for the
amount of the purchase.
o For purposes of security, personal information supplied by the shopper in a
purchase transaction is encrypted.
o Shoppers who elect to do so can participate in a rating system which
affords them the opportunity to rate products and review ratings given by
other shoppers.
o Shoppers who wish, can participate in a shoppers' service which provides
shoppers information by e-mail relating to products they have designated as
products in which they have a particular interest.
o Shoppers can submit questions to sellers over shopbiz.com by e-mail
directed to our website and sellers can respond by e-mail to shoppers over
our website.
Features That Serve Sellers
o Once we have approved a seller the seller can offer products on shopbiz.com
free of charge. For many sellers this arrangement is more attractive than
incurring the cost of establishing their own individual websites.
o By logging-on to shopbiz.com using a passwordchosen by the sellers, they
can upload presentations of their products in the form of images and text,
which includes a picture of the product, its description, its price and its
brand name.
o Sellers can continually manage their presentation of products for sale on
shopbiz.com by editing, amending the content of their presentations and by
adding and deleting products all by merely accessing our website.
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o Sellers can review orders via our website and communicate with us by e-mail
transmitted to our customer service agents at the website.
o Sellers' products are promoted without cost to them by our advertising
efforts such as our affiliate program whereby shopbiz.com and the products
of our sellers are presented on other websites known as our affiliates.
o We offer sellers the opportunity to participate in co-branding marketing
efforts with us where the costs of such marketing are shared.
o Through keywords identifying our sellers' products which are
electronically, though not visibly, embedded in our website system are
automatically picked up and placed in the databases of those enterprises
that search the internet for such information for their particular online
marketing efforts.
Our Administration of shopbiz.com
o We operate on shopbiz.com essentially as a retailer of the products of
manufacturers and distributors.
o Our compensation for our retail services is fixed by a retail mark-up of
products offered on our website in amounts negotiated with each seller
which are variable and arrived at in keeping with our needs and those of
each individual seller.
o Before admitting a seller to our website we review and approve the seller,
the products to be offered for sale and the content of the proposed
presentation of those products.
o During regular business hours our personnel monitor activity on our website
to insure the efficient operation of the site, including our verification
of each purchase made for the purpose of identifying fraudulent
transactions, where possible.
o We continually store the relevant information pertaining to each
transaction over our website on computer disks and on paper copies as a
back-up data source in the event of a disaster which destroys our computer
facilities.
Number of Products Offered on shopbiz.com
Currently we are offering approximately 1,500 products in 80 categories on
shopbiz.com. The number of sellers and products and categories that we will
offer on our website in the future is uncertain.
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Customers of shopbiz.com
To the date hereof we have had a minimal number of shoppers purchase
products on our website. To what extent the number of purchasers on our website
will increase in the future is uncertain.
Revenues of shopbiz.com
To the date hereof our revenues from operation of shopbiz.com have been
insignificant. Whether our revenues from operation of shopbiz.com will be
significant in the future is uncertain.
Our Internet Portal: denver.theexecutive.com
We have obtained a license from Information Highway Inc., a Vancouver
Canada corporation, to operate the website denver.theexecutive.com and offer its
content on the Internet. This website is hosted by Information Highways, Inc.
our Internet service provider for this purpose. The content of
denver.theexecutive.com is intended to interest an executive or business person
in the geographical area of Denver, Colorado pertaining to weather, health,
travel, stock quotations and similar information. Our license is for a period of
two years from November 23, 1998 and may be extended for successive periods of
two years, at our option. Under the terms of the license we were required to pay
a set-up fee of $2,500, a monthly maintenance fee of $300, and a technical
support fee of $2.00 per user. Because we have not implemented fully our
intended use of this license we have incurred no maintenance or user fees. As of
the date of this prospectus we have only displayed a banner ad for shopbiz.com
on the website denver.theexecutive.com and a banner ad on that website for Image
Net, Inc.
We have entered into an agreement with Internet service provider Image Net,
Inc. of Loveland, Colorado whereby Image Net, Inc. will also act as a host for
our website denver.theexecutive.com and we will endeavor to obtain subscribers
for the Internet access services of Image Net, Inc. Our agreement provides that
revenues from subscribers originating on our website denver.theexecutive.com
will be shared by Image Net, Inc., Information Highway, Inc., and ourselves in
the following manner and proportions:
We will share equally with Information Highway, Inc. the full amount of
each subscription fee for the first month. Thereafter, Image Net, Inc., will
receive approximately 77 percent of each fee and we will share the remaining 13
percent of the fee equally with Information Highway, Inc., for every month that
a subscription stays in force.
We propose in the future to promote subscriptions to Image Net, Inc. and to
denver.theexecutive.com. However, due to our currently limited personnel and
financial resources, we are not actively pursuing this segment of our business
and at the date hereof there are no subscriptions for this service and no
revenues from this activity. Whether we will generate significant revenue from
operation of denver.theexecutive.com in the future is highly uncertain.
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In addition, we have agreed to share equally with Information Highway, Inc.
our retail markup on all sales of products occurring on shopbiz.com which have
originated from shopbiz.com links on websites of Information Highway, Inc. We
have no significant revenue from this arrangement to date.
Our Plan Of Operations
Cash Requirements
Based upon our cash requirements to date and our planned expenditure of the
proceeds of this offering, we believe that we will have sufficient funds to
sustain our operations for the 12 months following completion of this offering.
However, if unforeseen events require that we raise additional capital during
that period we cannot give assurance that we will be able to obtain those funds.
We are currently unable to predict to what extent revenues from our operations
will satisfy our cash requirement for the next 12 months following completion of
this offering.
Development of Our Website shopbiz.com
Over the 12 months following completion of this offering we will undertake
to improve the efficiency of our website in the following particulars:
o Our Database.
We intend to update or install new computer software, as in the
circumstances appears to us most feasible to operate our data base compilation.
o Speed in Processes.
Also, we propose to develop a new version of our software which would
enable us to display information in more variable formats at shopbiz.com. These
facilities would speed the time it takes to access and present data at our
website including a faster and easier procedure for sellers to present products
for sale on shopbiz.com
o New Features.
In addition to the foregoing, the new features we intend to add to
shopbiz.com include the following:
o a telephony service that will enable shoppers who visit shopbiz.com to
speak to one of our customer service persons;
o a process that enables the filtering of e-mail by subject matter type which
will permit us to better serve our customers;
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o a process that will inform customers of the availability on shopbiz.com of
products they may wish to purchase based upon their previous purchasing
transactions;
o a process that will enable us to license our website to others for their
individually operated e-commerce enterprises, and an online chat service
that will enable real-time web-based customer service.
Computer Equipment
Depending upon the results of our operation of shopbiz.com and as our
financial resources allow we will either upgrade the computer equipment that we
currently have on loan from our consultant, Cygen Technologies, Inc., or we will
purchase new computer equipment for our company. The functions of our website
which such upgrade or new equipment will serve are:
o Our capacity to digitally store and access information,
o The developing of uploading of products on our website from external
sources such as printed material or information from a separate data source
such as a spreadsheet,
o The organization of our marketing materials such as digital pictures,
banner advertisements, printed material, marketing procedures and marketing
data relevant to buyers and sellers, and
o Our internal back office accounting and accounting for sellers' and buyers'
activities on our website.
Marketing shopbiz.com
Our Proposed Automated Advertising System.
We are developing a system on our Website which will provide enterprises
selling products on shopbiz.com additional procedures to support their marketing
efforts on the Internet. Our Automated Advertising System will provide our
sellers with these two additional marketing tools:
o Sellers of products on shopbiz.com with merely a click on shopbiz.com will
be able to purchase, jointly with us, advertising of their products on the
multiple websites at which we will purchase advertising. In this way we
hope to expand the exposure of advertising for all of our sellers and for
ourselves.
o Sellers can design product promotions such as giveaways and sweepstakes
contests, create advertising banners and hyperlinks that with merely a
click on our website shopbiz.com will be presented on our web pages.
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Internet Advertising.
We propose to expend approximately one-half of the proceeds of this
offering we have budgeted for marketing of shopbiz.com for advertising on the
Internet.
The advertising on the Internet we propose to undertake consists of the
following mediums:
o Banner advertising at our website which consists of a display of our name
and logo to a user who visits shopbiz.com
o Display of our banner on other websites by their owners who are known as
affiliates,
o Text linked advertising that links users at other websites to shopbiz.com,
o Keyword advertising that displays a shopbiz.com banner ad when a user
performs a search that is relevant to our ad message, and
o Contextual advertising which is the display of our products on the websites
of others where the content on those websites has a natural association
with our products. This association is known in e-commerce as affinity.
Our Affiliate Program.
We currently have approximately 4,000 affiliated websites where our banner
and logo are displayed. Our relationship with these affiliates is administered
by Commission Junction which has its website at www.cj.com. Our arrangement with
Commission Junction provides for a sharing of revenues whereby we pay a fee to
Commission Junction and a fee to an affiliate when either a click or an
impression occurs on our website or a sale occurs at shopbiz.com and any of
which events has originated at the website of the affiliate.
Our expenditures for these methods of advertising are consequent upon an
action initiated by others and we, therefore, classify these methods as indirect
advertising.
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Our Direct Purchase of Internet Advertising.
We propose to directly purchase advertising at multiple websites on the
Internet where we expect to achieve exposure of shopbiz.com to thousands of
potential customers on the Internet in the following ways:
o Offering of our products on multiple websites within an auction procedure
o Our purchase of keywords linked to shopbiz.com that are displayed on
multiple websites in a contextual setting.
Conventional Advertising
Approximately one-half of the proceeds of this offering which we have
budgeted for marketing of shopbiz.com, we intend to spend on conventional
advertising in the mediums of television, radio, newspapers, magazines and
outdoors, including banners at stationary locations, and on taxicabs and other
public conveyances.
Competition
General
Competition for customers by manufacturers and distributors of merchandise
on the Internet is growing and we expect that it will increase rapidly in the
future. While we anticipate that the use of the Internet by consumers as a
shopping medium will increase in the future, we expect that competition among
individual sellers will become increasingly intense as manufacturers and
distributors seek to exploit the Internet as a marketplace. While the number of
shopping sites on the web at present is small, relative to the volume of goods
and services consumed in traditional markets in the United States and world
wide, we believe that commerce in goods on the Internet will increase
dramatically in the future.
We are in competition in e-commerce on the Internet with enterprises that
may be identified in four categories as follows:
o call enterprises on the Internet such as America Online and Yahoo.com and
others that are referred to as search engines and are our competitors
simply because they seek to attract user traffic on the World Wide Web just
as we do;
o combinations like: Wal-Mart and America Online, Best Buy and Microsoft,
Circuit City and America Online, K-Mart and Yahoo, and Radio Shack and
Tandy;
o websites that offer single product lines or brands for sale, such as
gap.com, landsend.com, watches.com, bluefly.com, ual.com and many others;
o Shopping malls such as amazon.com, zstores, shopnow.com, StoreRunner.com,
buy.com and others.
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Methods of Competition Employed by Competitors
The methods of competition pursued by our competitors include:
o television commercials
o radio commercials
o print advertising in a variety of publications
o outdoor advertising such as billboards and public transport vehicles
o alliances with websites of others
o advertising done by the traditional brick and mortar segments of a website
enterprise
o affiliate marketing which involves establishing a presence on the websites
of other enterprises on the Internet;
o developing extensive customer services
o concentration on timely and efficient order fulfillment and shipping
facilities
o ads in e-mail sent to lists of potential customers in some cases requested
by those customers and in other cases not requested by those customers,
and
o banner advertising on large networks like Double.Click.com and Fl
Cast.com.
Methods of Competition We Pursue
The methods of competition we pursue and intend to pursue with the proceeds
of this offering are:
o outdoor advertising such as billboards and on public conveyances;
o television, proposed with a portion of the proceeds of this offering;
o radio, proposed with a portion of the proceeds of this offering;
o advertising directly on our website;
o Internet advertising, proposed to be purchased with a portion of the
proceeds of this offering;
o affiliate marketing where we pay a commission to other websites that have
generated sales click-ons, or impressions on our website;
o transmitting e-mail only to persons requesting the communication rather
than indiscriminate transmission of volumes of e-mail;
o targeted marketing to existing customers which includes new products and
our recommendations;
o we are focussing on providing a superior service to customers, and
o we concentrate on fulfilling customers orders as expected and assurances of
rapid and satisfactory shipping of products purchased.
Circumstances We Consider Negative and a Competitive Disadvantage to Us
We consider the following to be negative competitive circumstances:
o the funds we will have available for advertising will be small as compared
to funds apparently available to many of our competitors for advertising
purposes;
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o our small staff employed in formatting of new products for presentation on
shopbiz.com and the speed at which formatting is achieved relative to many
of our competitors
o a small staff devoted to marketing shopbiz.com to potential sellers of
products relative to many of our competitors;
o our inexperience with vendor relationships and co-adventure engagements
compared to many of our competitors;
o our limited experience with customer care matters compared with many of our
competitors;
o our financial resources will be limited relative to many of our
competitors, and will restrict our acceleration of marketing and
development of our website shopbiz.com
Positive Circumstances That May Enhance Our Competitive Position
We consider the following circumstances to be positive factors in our
endeavors to meet competition:
o we have established a presence on the websites of some of our competitors
including: shopnow.com, StoreRunner.com, Respond.com, amazon.com, My
Simon.com, arzoo.com and will pursue this practice in all cases where
possible;
o we do not have the costs associated with maintaining inventories as do some
of our competitors;
o our affiliate program is competitive because we are able to pay a larger
commission to affiliates than many of our competitors;
o we offer many unique products that cannot be found on other websites;
o we have the ability to rapidly create marketing programs on our website;
o we believe we have a growing presence on the Internet;
o we believe the offering of multiple products on our website to afford us a
competitive advantage over single products offered on many websites;
o the experience of our management in advertising and marketing generally we
believe will enhance our ability to perceive trends in e-commerce and act
quickly to secure any potential benefit in these trends;
o we believe the expense of developing our website to be lesser than the
similar expense to many of our competitors.
Notwithstanding any of the foregoing circumstances, we cannot give any
assurance that we will be able to successfully meet our competition or that our
operations will be profitable.
Trademark
Our company has reserved its domain on the Internet under the name
shopbiz.com. This registration is good for a period of two years and may be
renewed by us prior to its expiration. We intend to file for registration of the
name shopbiz.com with the United States Patent and Trademark Office in the near
future. The process for completing such a registration is lengthy, and can
extend to approximately six months. Notwithstanding completion of an application
for name registration, there is no assurance that a name will be accepted for
registration. Unless and until that registration is complete and we have the
protection of Federal trademark statutes, we must rely on court-established
legal principles to protect our rights in the name.
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While we intend to pursue all reasonable means to protect our rights in the
name shopbiz.com, we do not believe trade name protection to be a critical
element for successful operation of our business.
Employees
The company currently has four employees, including its two executive
officers, Messrs. Don E. Montague and Steven S. Montague. In addition to these
executives, we employ two individuals whose employment is at our will. One of
these persons acts as e-commerce development director whose duties encompass
customer services, obtaining sellers and servicing their use of shopbiz.com. The
other non-executive employee acts as our marketing director. We have, also,
engaged, under contract, an individual whose services are devoted to adding
products for sale on shopbiz.com.
Upon receipt of the proceeds of this offering, we intend to hire additional
employees to assist in further development and administration of our websites
shopbiz.com and denver.theexecutive.com. However, technically qualified persons
are currently in high demand and there is no assurance that such individuals can
be obtained on terms acceptable to us. In the event we are unable to obtain
qualified individuals to fill such positions, we will continue to rely on
third-party contractors. We, also, anticipate retaining a financial officer and
additional business development personnel in the future as circumstances and our
financial resources permit.
We, also, have retained the services of third-party contractors to assist
in development of our computer software. In addition, we have retained outside
legal and accounting services. We believe we have satisfactory relations with
our employees and consultants and that such relationships will continue for the
foreseeable future.
Facilities
Our executive and operating offices at 925 W. Kenyon #15, Englewood,
Colorado 80110, are occupied under a rental arrangement with our affiliate
MediaComm Marketing International, Inc. We exclusively occupy approximately
1,000 square feet and we share secretarial, reception, conference and other
common areas with MediaComm Marketing International, Inc. We rent these premises
on a month-to-month basis at a cost of $525 per month. We believe these
facilities are sufficient for our needs for the foreseeable future.
Our computer equipment is on loan from Cygen Technologies, Inc., our
technical consultant, and is located on the premises of that consultant in
Denver, Colorado. For the foreseeable future the loan and use of the computer
equipment and premises are without charge to us.
Legal Proceedings
Neither our company nor any of our properties, nor any of our officers and
directors in their capacities as officers, are the subject of any legal
proceedings, nor are there any such legal proceedings contemplated to the best
of our knowledge and belief.
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USE OF PROCEEDS
The following table sets forth the net proceeds we will receive from this
offering after deducting estimated expenses of this offering in the amount of
$40,000 and our proposed expenditure of these proceeds.
Net Offering Proceeds
Description of Use Minimum Percentage Maximum Percentage
- ------------------ ------- ---------- ------- ----------
Payment of Loans with
Interest $235,000 57% $235,000 27%
Marketing of shopbiz.com 35,000 8-1/2% 264,000 31%
Computer Equipment 7,000 2% 20,000 2%
Development of shopbiz.com 17,000 4% 36,000 4%
General and
Administrative expense 114,000 28% 292,000 34%
Working capital 2,000 1/2% 13,000 2%
-------- ---- -------- ----
Total Net Proceeds $410,000 100% $860,000 100%
-------- --------
o The expenses of this offering are estimated to be $40,000, including legal
and accounting fees, blue sky fees of various states, printing, mailing and
miscellaneous items. As of December 31, 1999 we had paid $31,979 of these
expenses from funds on hand prior to the offering. This $31,979 was
accounted for as deferred offering costs on our balance sheet as of
December 31, 1999.
o The principal of the loans identified in the above table in the amount of
$225,000 together with interest thereon at the rate of 10 percent per annum
is due and payable upon completion of this offering and our receipt of the
proceeds of the offering. Interest on these loans in the amount of
approximately $10,000 has been calculated as of February 2, 2000. The
interest due on these loans will necessarily vary and be dependant upon the
date the loans and interest are actually paid. Accordingly, the amount
shown in the above table will be increased in an amount determined by the
exact amount of interest accrued at the date the loans are paid. If the
offering is not completed, the loans with interest are payable in the
amounts and on the dates specified as follows:
Amount Date Payable
------ ------------
$135,000 with interest On or before August 6, 2000
45,000 with interest On or before September 1, 2000
45,000 with interest On or before September 30,2000
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o The amounts set forth above are estimates only. Consequently, the actual
amounts are likely to vary from that described. To the extent proceeds are
inadequate in any area of expenditure, supplemental amounts may be drawn
from working capital, if available. Any additional proceeds necessary for
operation will be obtained through debt financing or additional equity
financing. However, we have no specific plans for future financing and the
officers and directors have made no commitment to advance funds to us. Any
proceeds not required for one or more of the proposed expenditures listed
above we will retain and use as working capital which we will use for one
or more of the other purposes specified in the above table as in our
discretion will be beneficial to our operations and business. Similarly,
because the use of proceeds described in the above table are estimates we
have allocated $2,000 and up to $13,000 of the proceeds for working capital
to be used for one or more of the other purposes specified when in our
discretion we determine that our operations and business will benefit from
such expenditure. For example, we may use a portion or all of the amounts
allocated to working capital to marketing of our websites.
o Pending utilization, we may make temporary investments of the proceeds in
interest bearing certificates, including United States government
securities, short-term certificates of deposit, money market funds or other
short term interest bearing investments. We do not intend to register as an
Investment Company under the Investment Company Act of 1940. Accordingly,
any investment by us will be made so as to avoid regulation as an
Investment Company.
MANAGEMENT
Officers and Directors
The following individuals are our officers and directors:
<TABLE>
<CAPTION>
Name Age Position Director Since
- ---- --- -------- --------------
<S> <C> <C>
Don E. Montague 59 Chairman of the August 20, 1998
Board of Directors
and Chief Executive Officer
Steven S. Montague 31 President and a Director January 1, 1999
Anthony "Anton" Delgado 48 Secretary Treasurer August 20, 1999
and a Director
Gunther Than 52 Director January 1, 1999
</TABLE>
Don E. Montague is a "founder" and a "parent" of our company, as defined by
rules promulgated under the Securities Act of 1933 and the Securities Exchange
Act of 1934 as he is the principal person who founded and organized our company.
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From inception of our company on August 20, 1998 to February 3, 2000 he acted as
President and Chief Executive Officer. On February 4, 2000 he resigned as
President and Steven S. Montague was appointed to the office of President of our
company.
Mr. Montague's principal occupation is as Chief Executive officer of
MediaComm Marketing International, Inc., a privately held company and an
affiliate of our company, a position he has held since his founding of that
company in 1989. MediaComm Marketing International, Inc., is engaged in public
relations and investor relations services for many business enterprises located
in the United States and Canada.
Prior to founding MediaComm Marketing International, Inc., Mr. Montague was
production manager for KCNC Television in Denver, Colorado, when it was an NBC
affiliate. As production manager he was responsible for operations, personnel
and administration of the production department.
Although Mr. Montague devotes the substantial part of his time and efforts
on behalf of MediaComm Marketing International, Inc., he is able to expend that
time and effort on the business of our company as its affairs require.
Steven S. Montague. Mr. Montague's principal occupation is as President of
our company. He was appointed to this position on February 4, 2000. From January
1, 1999 to February 3, 2000 he was Vice President of our company. From
approximately October 1994 to February 1996 he was a sales representative and
producer of video materials for MediaComm Marketing International, Inc., an
affiliate of our company. From February 1996 to September 1997, he was an
account executive at Rocky Mountain News, a newspaper of general circulation
located in Denver, Colorado. From December 1997 to April 1998, Mr. Montague was
an account executive for Microsoft Sidewalk, a company providing Internet
marketing solutions for local businesses. From April 1998 to August 1998, he was
marketing director for Credit Card Services, Inc., where his principal
responsibilities were the development and oversight of all media campaigns and
the implementation of a telephone call center.
Mr. Montague is, also, a principal member and the manager of Shaw
Communications, LLC, a privately held company previously engaged in consulting
with enterprises operating on the Internet and providing media services to such
enterprises. Shaw Communications, LLC, is currently a dormant enterprise.
Steven S. Montague is the son of Don E. Montague.
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Anthony "Anton" Delgado. Mr. Delgado's principal occupation is as senior
producer and art director for MediaComm Marketing International, Inc., a
position he has held since inception of that company in 1989. He is responsible
for overseeing production of art, graphics and related design products,
coordinating and directing in-house studio and remote location production of
video presentations for clients of that corporation. In addition, he directs
production of promotional pieces, logo development and other print advertising
for clients of MediaComm Marketing International, Inc.
Gunther Than. Mr. Than's principal occupation is as President and Chief
Executive Officer of Views Systems, Inc., a publicly held company engaged in
developing software for compressing, storing, searching for and transmitting
high quality digitized static and cinematic images over the Internet and
surveillance systems over the Internet. He has held that position from 1997 to
the present time. From 1994 to 1997, Mr. Than was President and a founder of
View Technologies, Inc., a privately held company engaged in computer software
development and systems integration. From 1990 to 1994, he was an independent
consultant with respect to computer software programming.
Mr. Than is a graduate of the University of Wisconsin with a dual
Bachelor's Degree in Engineering Physics and Applied Mathematics. He, also, has
completed graduate studies toward a PhD Degree in Mathematics at the University
of Wisconsin and completed graduate studies toward an MBA Degree at Marquette
University.
Mr. Than acts as a consultant to our company with respect to Internet
technology. To the date hereof Mr. Than has received no compensation for
consulting services provided to us. We are unable to estimate the amount of
compensation we may pay Mr. Than for consulting services in the future.
Executive Compensation
The following table sets forth all of the compensation awarded to, earned
by, or paid to our executive officers by any person for all services rendered in
all capacities to our company:
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
Name and
Year Salary Bonus Other annual Restricted Securities LTIP All other
Principal $ $ compensation Stock Award $ Underlying Payouts compensa-
Position Options/SAR $ tion $
- ------------------------------------------------------------------------------------------------------------------
#
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don E. 3/31/99 -0- -0- -0- -0- -0- -0- -0-
Montague 3/31/00 -0- -0- -0- -0- -0- -0- -0-
Chief
Executive
Officer
Steven S. 3/31/99 $40,000 -0- -0- -0- -0- -0- $ 3,400 (1)
Montague 3/31/00 $50,000 -0- -0- -0- 150,000 SHS -0- -0-
President Common Stock
Anthony "Anton"
Delgado 3/31/99 -0- -0- -0- -0- -0- -0- -0-
Secretary/ 3/31/00 -0- -0- -0- -0- -0- -0- -0-
Treasurer
Gunther Than 3/31/99 -0- -0- -0- -0- -0- -0- -0-
Director 3/31/00 -0- -0- -0- -0- 150,000 SHS -0- -0-
Common Stock
</TABLE>
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- -------------------
(1) In our fiscal year ended March 31, 1999 we paid $3,400 to Shaw
Communications, LLC, an affiliate of our company and a company of which
Steven S. Montague is a principal member and its manager. This amount has
been attributed to Mr. Montague in the above table.
Steven S. Montague is employed by our company pursuant to a one-year
written employment contract effective February 4, 2000. His salary is fixed at
$50,000 per annum and he is entitled to participate in employee benefit plans
maintained by our company, including insurance, stock option and profit sharing
plans. His employment contract is renewable from year-to-year unless terminated
by either himself or our company upon not less than 14 days advance written
notice.
We have a written agreement with Mr. Don E. Montague dated February 4, 2000
pursuant to which he has agreed to provide his services to our company as Chief
Executive Officer for a period of four months ending June 1, 2000, without
salary or other compensation. Previously Mr. Don E. Montague provided his
services to our company from its inception to February 3, 2000 without
compensation.
Mr. Delgado, also, performs his duties as Secretary/Treasurer of our
company without compensation.
We have no agreement with either Mr. Don E. Montague or Mr. Delgado for
compensating either of them, at any future time, for the services they have
contributed or will contribute in their capacities as executive officers of our
company. When Mr. Montague's agreement to contribute his services expires on
June 1, 2000, we intend to negotiate compensation for his services as Chief
Executive Officer of our company commensurate with our financial resources at
that time. Commensurate with our financial resources, including revenues from
operations and the proceeds of this offering, we propose from time to time, to
pay Mr. Delgado consulting fees for art work related to our marketing efforts.
We have no compensatory plan or arrangement which results or will result
from the termination of the employment of any of our executive officers or
results from a change-in- control of our company or a change in the
responsibilities of any of our executive officers and, because there is no
compensatory plan or arrangement no payments will be made by our company to any
of our executive officers upon the occurrence of any of those events.
Our directors are not compensated in their capacities as directors.
However, a director is entitled to be reimbursed for travel and other expenses
incurred in connection with his attendance at meetings of the board of
directors. All of our officers, directors and employees except Don E. Montague
are currently entitled to participate in our non-qualified stock option and
stock grant plan discussed below.
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Indemnification of Directors Officers and Others
Article 109 of the Colorado Business Corporation Act expressly authorizes a
Colorado corporation to indemnify its directors, officers, employees,
fiduciaries and agents against claims or liabilities arising out of those
persons' conduct in those capacities if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of their
company. A corporation may also purchase and maintain liability insurance on
behalf of those persons.
Article IX of our Amended and Restated Articles of Incorporation provides
for the indemnification of our directors, officers, employees and agents. We do
not maintain any liability insurance on behalf of any such persons.
Insofar as indemnification by us for liabilities arising under the
Securities Act of 1933 may be permitted to our officers and directors pursuant
to the foregoing provisions, or otherwise, we are informed that in the opinion
of the staff of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
Non-qualified Stock Option and Stock Grant Plan
We have a non-qualified stock option and stock grant plan for the benefit
of key personnel and others providing significant services to our company. An
aggregate of 3,000,000 shares of our common stock has been reserved for issuance
under the plan.
Options Granted to Executives and Directors
The following table provides relevant information pertaining to all
outstanding options granted to our executive officers and directors under the
plan:
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<PAGE>
<TABLE>
<CAPTION>
Options/Granted in Current Fiscal Year
(Individual Grants)
- ----------------------------------------------------------------------------------------------
Number of Percent of Exercise or Expiration
Securities Total Options/ base price Date
Name Underlying Granted to ($)
Options/ Employees in
granted (#) Fiscal Year
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Steven S. Montague, 150,000 shs 40% $.20 11/30/05
President and Director common stock (1)
Gunther Than, Director 150,000 shs 40% $.20 11/30/05
and Consultant common stock (1)
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) The right to exercise these options vests on November 30, 2000.
The right of Steven S. Montague to exercise his option is subject to his
remaining an employee of our company at all times during the option period.
Similarly, the right of Mr. Than to exercise his option is subject to his
remaining a director and a consultant to our company at all times during the
option period.
Options Granted to Non-Executive Employees
Currently, under the plan, there are options entitling one non-executive
employee to purchase 75,000 shares at $0.75 per share. This option is
exercisable at $0.75 per share are exercisable during the period beginning
October 1, 2000 and continuing until October 1, 2005 in increments of 15,000
shares at October 1 of each year during the period. This option is subject to
the employee remaining in the employment of our company at all times during the
relevant period.
At the date of the grant of the options described in the above table, and
the grant of the options to the two non-executive employees, there was no market
price for the shares of our common stock. The exercise price for each of the
options granted we negotiated with each of the persons to whom the options were
granted and based upon the determination by our board of directors that such
prices were fair in the circumstances.
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<PAGE>
Administration of the Plan
The plan is administered by our board of directors, which is empowered to
select optionees and recipients of any stock grants, the number of shares and
the terms and conditions of any options or grants to key persons as defined in
the plan. In determining the value of services rendered to us for purposes of
awards under the plan, the board of directors considers, among other things,
such person's employment position and relationship with our company, that
person's duties and responsibilities, ability, productivity, length of service
or association, morale, interest in our company, recommendation by supervisors
and the value of comparable services rendered by others in the business
community. All options granted pursuant to the plan must be exercisable at a
price not less than the fair market value of our shares of common stock on the
date of a grant.
Federal Income Taxation Applicable to the Plan
There is no federal taxable income to an optionee as the result of the
grant of a non-qualified stock option unless the exercise price is set at less
than fair market value. However, an optionee has income subject to federal
taxation upon the exercise of a non-qualified stock option based on the
difference between the fair market value of the shares acquired at the time of
exercise and the option price. The company is not entitled to a tax deduction
upon the grant of a non-qualified stock option, but is entitled to a federal tax
deduction upon exercise of an option equivalent to the optionee's income subject
to federal income tax.
Transactions with A Related Party: Our Affiliate MediaComm Marketing
International, Inc.
- ---------------------------------------------------------------------
Our company was founded and organized by Don E. Montague who is President
and principal shareholder of the closely held corporation MediaComm Marketing
International, Inc. Mr. Montague is the Chief Executive Officer of our company
and a principal shareholder who owns 2,060,000 shares of our common stock. Mr.
Steve S. Montague, the President of our company and a principal shareholder who
owns 1,420,000 shares of our common stock, is also a director of MediaComm
Marketing International, Inc. Because MediaComm Marketing International, Inc.
and our company can be said to be under the common control of Don E. Montague
and Steven S. Montague, our company and MediaComm Marketing International, Inc.
are affiliates as that term is defined in Rule 405 promulgated under the
Securities Exchange Act of 1934. Our relationship with MediaComm Marketing
International, Inc. creates a potential for conflicts of interest which could be
resolved on terms unfavorable to our company.
35
<PAGE>
Rental of Office Facilities from MediaComm Marketing International, Inc.
Our executive and operating offices at 925 W. Kenyon #15, Englewood,
Colorado 80110, are occupied under a rental arrangement with our affiliate
MediaComm Marketing International, Inc. We exclusively occupy approximately
1,000 square feet and we share secretarial, reception, conference and other
common areas with MediaComm Marketing International, Inc. We rent these premises
on a month-to-month basis at a cost of $525 per month. As of February 1, 2000 we
had paid MediaComm Marketing International, Inc. at total of $7,430 in rental
for these premises. We believe our rental payments and facilities are on terms
as favorable as we could obtain from non-affiliated persons. We believe these
facilities are sufficient for our needs for the foreseeable future.
Purchase of Marketing Services From MediaComm Marketing International, Inc.
To the date hereof we have engaged MediaComm Marketing International, Inc.
for graphic art and design and marketing services for which we have paid it
approximately $1,400. These services were provided to us at the cost to
MediaComm Marketing International, Inc. Over the twelve months following
completion of this offering we propose to obtain similar services from MediaComm
Marketing International, Inc., providing such services are provided to us at its
cost. Under this condition, we could pay MediaComm Marketing International, Inc.
approximately $25,000 for graphic art and design over the twelve months
following completion of this offering.
Also, without additional charge to us, we use office furniture, office
equipment and telephone facilities of MediaComm Marketing International, Inc.
We provide MediaComm Marketing International, Inc. with a high speed
Internet connection for which it pays us $70 per month.
PRINCIPAL SHAREHOLDERS
As of the date of this prospectus, there is a total of 7,800,000 shares of
our common stock outstanding, the only class of our voting securities currently
outstanding. The holders of our common stock are entitled to one vote for each
share held by them of record.
The following table sets forth holdings of our common stock by each person
who, as of the date of this prospectus, holders of record or is known by us to
own beneficially more than five percent of our voting securities outstanding. In
addition, the table sets forth the holdings by all directors and officers of our
company individually and as a group. The table includes pro forma the right of
two of our directors to acquire a total of 300,000 shares of our common stock at
a price of $.20 per share.
36
<PAGE>
<TABLE>
<CAPTION>
Percentage of Voting Securities
After After
Number of Before Offering Offering
Name Shares Offering Minimum Maximum
- ---- ------ -------- ------- -------
<S> <C> <C> <C> <C>
Don E. Montague, 2,060,000 26% 25% 24%
Chairman of the Board
and Chief Executive Officer
Steven S. Montague, 1,420,000 18% 17% 16%
President and
Director
Anthony "Anton"
Delgado, Secretary 90,000 1% 1% 1%
and Treasurer and
Director
Gunther Than, 990,000 12% 12% 11%
Director
Gary J. McAdam 1,470,000 18% 17% 16%
David R. Nemelka 1,320,000 16% 15% 15%
Van R. Perkins 720,000 9% 8% 8%
Earnest Mathis 720,000 9% 8% 8%
David N. Nemelka 720,000 9% 8% 8%
All Officers and Directors
as a Group (4 persons) 4,560,000 56% 53% 51%
</TABLE>
The address of Messrs. Don E. Montague, Steven S. Montague, Anthony "Anton"
Delgado and Gunther Than is 925 W. Kenyon Avenue #15, Englewood, Colorado 80110.
The addresses for Gary J. McAdam, David R. Nemelka, Van R. Perkins, Earnest
Mathis and David N. Nemelka, are set forth under "Borrowing of $225,000" at page
14 of this prospectus.
The shares attributed to Steven S. Montague include one million shares he
acquired from his father, Don E. Montague, and 150,000 shares he could acquire
at $0.20 per share upon exercise of options he holds under our non-qualified
stock option and stock grant plan.
37
<PAGE>
Mr. Than, a director of Shopbiz.com, also acts as a consultant to our
company. Of the 990,000 shares that are attributed to Gunther Than in the above
table, 840,000 shares are held of record by View Systems, Inc., a public company
of which Gunther Than is the President and Chief Executive Officer. Mr. Than
holds voting and investment powers over these shares. The remaining 150,000
shares that are attributed to Mr. Than represent shares he could acquire at
$0.20 per share upon exercise of options he holds under our non-qualified stock
option and stock grant plan.
Beneficial ownership of the 1,470,000 shares shown in the above table has
been attributed to Gary J. McAdam. The record owners of these shares are: Summer
Breeze LLC 360,000 shares; Second Chance Investments 600,000 shares; GJM Trading
150,000 shares, all legal persons controlled by Gary J. McAdam. Also, included
in the 1,470,000 shares tabulated above, are 360,000 shares which could be
acquired by Summer Breeze, LLC upon exercise of 360,000 Series "A" Warrants our
company has granted to Summer Breeze, LLC. Mr. McAdam holds voting and
investment power over all of these securities.
Beneficial ownership of the 1,320,000 shares shown in the above table has
been attributed to David R. Nemelka. The record owners of these shares are:
David's Odyssey LLC 360,000 shares; Tradeco Corp. 600,000 shares; both legal
persons controlled by David R. Nemelka. Also, included in the 1,320,000 shares
tabulated above, are 360,000 shares which could be acquired by David's Odyssey,
LLC upon exercise of 360,000 Series "A" Warrants our company has granted to
David's Odyssey, LLC. He holds voting and investment power over all these
securities.
Beneficial ownership of the 720,000 shares attributed in the above table to
Van R. Perkins are held of record by Business Development Corporation, a
privately held corporation controlled by Mr. Perkins. Included in these 720,000
shares are 360,000 shares which could be acquired by Business Development
Corporation upon exercise of 360,000 Series "A" Warrants our company has granted
to Business Development Corporation. He holds voting and investment power over
all of these securities.
Beneficial ownership of the 720,000 shares attributed in the above table to
Earnest Mathis are held of record by Earnest Mathis IRA Rollover as to 400,000
shares and by Mathis Family Partners as to 320,000 shares both legal persons
controlled by Mr. Mathis. Included in these 720,000 shares are 360,000 shares
that could be acquired by Earnest Mathis IRA Rollover upon exercise of Series
"A" Warrants as to 200,000 shares our company has granted to Earnest Mathis IRA
Rollover and that could be acquired by Mathis Family Partners upon exercise of
Series "A" Warrants as to 160,000 shares our company has granted to Mathis
Family Partners. Mr. Mathis holds voting and investment power over all of these
securities.
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<PAGE>
Beneficial ownership of the 720,000 shares attributed in the above table to
David N. Nemelka includes 360,000 shares Mr. Nemelka could acquire upon exercise
of Series "A" Warrants our company has granted to David N. Nemelka.
Concurrent Offering of Series "A" Warrants by Principal Shareholders
The registration statement of which this prospectus forms a part also
includes a prospectus with respect to the offering by Summer Breeze, LLC,
David's Odyssey, LLC, Business Development Corporation, Earnest Mathis IRA
Rollover, Mathis Family Partners and David N. Nemelka of their holdings of
Series "A" Warrants, amounting in the aggregate to 1,800,000 warrants to
purchase 1,800,000 shares of common stock of our company and the shares of
common stock underlying these warrants. These securities may be sold in
the open market, in privately negotiated transactions, or otherwise directly by
the holders thereof. The Series "A" Warrants were issued as partial
consideration for loans by the selling stockholders to Shopbiz.com in the
aggregate amount of $225,000. We will not receive any proceeds from the sale of
any of the selling securities holders' warrants or shares of common stock. Sales
of these securities or the prevailing perception that these securities are being
offered for sale could have a materially adverse effect on the market price in
any market that may exist for the shares offered hereby.
Changes In Control
We know of no arrangement, including the pledge by any person of our
securities, which may at a subsequent date result in a change of control of our
company.
SUBSCRIPTION AND PLAN OF DISTRIBUTION
The Offering
We are making this offering on a 450,000 shares minimum "all or none",
900,000 shares maximum basis at an offering price of $1.00 per share. The
minimum number of shares one may purchase is 1000. This offering is not
underwritten. No one has made a commitment to purchase any of the shares offered
hereby. Steven S. Montague, our President will sell the shares offered without
any commission or compensation to him for that service. In addition, our Chief
Executive Officer, Don E. Montague, will participate in the offering of our
shares to the limited extent allowed by Rule 3a4-1(a)(4)(iii) of the Securities
and Exchange Commission. Don E. Montague, also, will provide those services
without commission or other compensation to him.
We will inform possible investors that our company is conducting a public
offering of a minimum of 450,000 shares and up to a maximum of 900,000 shares
and provide those possible investors with a procedure for advising us that they
wish a prospectus. If so advised, we will make an offer to sell our shares to
those persons by furnishing the prospectus requested. We anticipate making some
sales of the shares to clients and subscribers of Mediacomm Marketing
International, Inc., our affiliate, and some sales to other persons who have
expressed an interest in our company in the states of Colorado, New York, New
Jersey and the District of Columbia. We may qualify our shares for sale in other
states. We are not obligated to sell shares to any person.
The Offering Period
We are making this offering for a period of 60 days beginning with the date
of this prospectus and ending _____ __, 2000. Provided, however, we may, in our
discretion, extend this offering period for as much as 60 additional days ending
on _____ __, 2000.
39
<PAGE>
Escrow of Minimum Proceeds
All proceeds from subscriptions with respect to the first 450,000 shares
will be deposited promptly with US Bank National Association, Denver, Colorado,
escrow agent for this offering pursuant to the terms of an escrow agreement. All
of the proceeds of this offering, up to $450,000, will be deposited in the
escrow account no later than three business days next following receipt by us.
In the event that 450,000 shares are not sold, on or before *,2000, subject to
an additional period not to exceed sixty days, all funds will be refunded
promptly to subscribers in full without deduction therefrom or interest thereon.
If the minimum proceeds are received before expiration of the offering periods,
these proceeds will be immediately disbursed to us. Following our receipt of the
proceeds from sale of the 450,000 shares minimum, the proceeds from additional
sales of our shares will not be deposited in escrow. The proceeds from these
additional sales of our shares up to the maximum of 900,000 shares will be
directly deposited to our corporate bank account. While the offering period is
open or any extension thereof, no subscriber will be entitled to a refund of any
subscription. We reserve the right to accept or reject any subscription, in
whole or in part.
No Assurance That Minimum Proceeds Will Be Received
Because this offering is not being underwritten, we can give no assurances
that the 450,000 minimum number of shares will be sold or that, if the minimum
number of shares are sold, a significant number of shares over the minimum
number will be sold. Accordingly, there is a risk that insufficient proceeds
will be received for us to undertake our business as proposed.
Purchase of Shares by Officers, Directors and Present Shareholders
Our officers, directors, present shareholders and persons associated with
them, may purchase some of the shares offered hereby. However, officers,
directors, present shareholders and their associates will not be permitted to
purchase more than twenty percent of the shares to be sold hereunder and those
shares will be held by those persons for investment and not for distribution. To
the extent that those persons acquire shares in the offering, the number of
shares required to be purchased by new investors to reach the minimum will be
reduced by a like amount. Any of these sales will be made on the same terms and
conditions as sales made to other purchasers. No proceeds from this offering
will be used to finance any purchases of shares by officers, directors, present
shareholders or their associates.
The Arbitrary Pricing of Our Shares
The offering price of our shares of common stock was determined arbitrarily
by us. Accordingly, the offering price for the shares should not be understood
as an indication of the value of these shares. There is, therefore, the risk
that you will be unable to resell any of these shares you purchase for an amount
equal to or more than the offering price. The offering price of the shares bears
no necessary relationship to our assets, book value, lack of earnings, net worth
or other recognized criterion of value.
In as much as we have not retained an underwriter or broker/dealer to
assist in this offering, the offering price has not been arrived at through a
process of arms-length negotiation. Accordingly, new investors are exposed to a
risk disproportionate to that of existing shareholders attendant to the fact
that the offering price was arrived at arbitrarily, rather than by arms-length
bargaining.
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<PAGE>
Delivery of Common Stock
We intend to timely issue certificates for the shares after completion of
the offering and to forthwith mail such certificates directly to investors at
their addresses as set forth in their subscription agreements.
DILUTION AND RELATIVE INVESTMENTS
Book Value of Our Shares
As of June 30, 1999, there were 2,000,000 shares of our common stock
outstanding. This number of shares was increased to 6,000,000 as a result of a
three for one stock split effective August 4, 1999. Subsequently, in August and
September 1999, the total number of our outstanding shares of common stock was
increased to 7,800,000 by the issue of 1,800,000 shares to the persons who
loaned us $225,000.
The financial statements of our company as of December 31, 1999, show a net
tangible book value of ($145,406) or ($0.018642) per share of common stock
calculated on the basis of 7,800,000 shares outstanding as of that date.
The information presented in the following two tables is based upon
7,800,000 shares of our common stock outstanding having a net tangible book
value of ($0.018642) per share as of December 31, 1999.
Dilution
The term dilution as used in this offering means the reduction in value
which occurs as a result of the purchase of one share of our common stock for
$1.00 which at the time of completion of the offering will have a net tangible
book value ranging from $0.0359 to $0.0858 per share depending upon the exact
number of shares sold in the offering.
Dilution to Investors in This Offering
Minimum 450,000 Shares Sold
Offering price per share $1.00
Net tangible book value per share
prior to the offering $(0.0186)
Increase in net tangible book value
per share after offering
attributable to new investors $ 0.0545
--------
Net tangible book value per share after offering $0.0359
-------
Dilution per share to new investors $0.9640
-------
Maximum 900,000 Shares Sold
Offering price per share $1.00
Net tangible book value per share
prior to the offering $(0.0186)
Increase in net tangible book value
per share after offering
attributable to new investors $ 0.1044
--------
Net tangible book value per share after the offering $0.0858
-------
Dilution per share to new investors $0.9141
-------
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<PAGE>
Relative Investments
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price per
Number Percent Amount Percent Share
------ ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Minimum 450,000 Shares Sold
Existing Shareholders 7,800,000 94.5% $109,410 19.56% $.014
New Investors 450,000 5.5% $450,000 80.44% $1.00
---------- ---- -------- ------
Totals 8,250,000 100% $559,410 100%
Maximum 900,000 Shares Sold
Existing Shareholders 7,800,000 90% $109,410 10.84% $.014
New Investors 900,000 10% $900,000 89.16% $1.00
---------- ---- ---------- ------
Totals 8,700,000 100% $1,009,410 100%
---------- ----------
</TABLE>
Because the greater portion of our required funds will be provided by new
investors in this offering, they will suffer a financial loss disproportionate
to that of the existing share holders in the event that our company is
unsuccessful.
ANY SHARES PURCHASED IN THIS OFFERING WILL BE PENNY STOCK AND
SUBJECT TO TRADING REGULATIONS
Penny Stock
Regulations of the Securities and Exchange Commission define a "penny
stock" to be any equity security that has a market price less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. Initially our stock will be a penny stock. We cannot assure you that
our shares will ever qualify for exemption from these definitions. Being subject
to the penny stock rules, the liquidity in any market that may develop for our
shares could be adversely affected.
Suitability Standards
Because shares purchased in this offering will be penny stock, in any
public market that may develop those shares initially will be subject to Rule
15g-9 under the Securities Exchange Act of 1934. That rule imposes additional
sales practice requirements on broker/dealers that sell low-priced securities to
persons other than established customers and institutional accredited investors.
For transactions covered by this rule, a broker/dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker/dealers to sell our shares and may affect the
ability of shareholders to sell our shares in any trading market that may
develop.
ADVERSE EFFECT ON ANY MARKET FOR OUR SHARES
BY SALES OF RESTRICTED SHARES
Upon sale of the maximum of 900,000 shares offered by this prospectus, and
assuming no further issue of our shares of common stock by exercise of
outstanding options and warrants to acquire our shares, there will be 8,700,000
of our shares outstanding. Of these 8,700,000 shares only the shares issued in
this offering will be freely resaleable without restrictions in accordance with
the Securities Act of 1933 in any public market that may develop. However, such
resales may be limited by the laws of certain states where the holders of such
shares propose to make sales of their shares. Also, however, affiliates of our
company, who are persons that control our company, are controlled by our
company, or under the common control of our company, who purchase shares in this
offering will be subject to certain conditions and limitations on a resale of
those shares imposed by Rule 144 of the Securities and Exchange Commission.
The remaining balance of 7,800,000 shares of our outstanding common stock
are restricted securities which means that these shares cannot be resold without
registration under the Securities Act of 1933 or unless there is an exemption
from registration available. Rule 144 could provide an exemption from
42
<PAGE>
registration as to these 7,800,000 shares. However, under Rule 144 conditions
and limitations on a resale of restricted securities are imposed. In order for
Rule 144 to be available to the holders of restricted securities, it is a
condition that adequate current information regarding the issuer of the
restricted securities is available to the public. We will provide that kind of
information in reports we will be required to file with the Securities and
Exchange Commission following our completion of this offering.
Providing that appropriate current information is available to the public,
any person, including affiliates, or persons who act in concert, who has fully
paid for restricted securities and beneficially owned them for at least one
year, may resell limited amounts of those restricted securities in successive
three-month periods without registration under the Securities Act of 1933.
The limitation on the amounts of restricted securities which may be resold
are:
o one percent of the total outstanding securities of the same class or
o the average weekly trading volume of securities of the same class for the
four weeks immediately preceding the date notice of the proposed sale is
filed with the Securities and Exchange Commission or the sale is made to a
market maker in the securities of the same class.
Also, sales of restricted securities under Rule 144, must be made in normal
brokerage transactions where no more than the usual and customary commission is
paid.
In cases where the restricted securities have been held by a person who is
not an affiliate of the issuer of the securities for a period of at least two
years, those restricted securities may be sold under Rule 144 without limitation
on the number of those securities to be sold. None of our shares of common stock
has been held by anyone for as long as two years.
Also, under Rule 701 of the Securities and Exchange Commission securities
issued without registration under the Securities Act of 1933 pursuant to
compensatory stock based plans such as our non-qualified stock option and stock
grant plan may be sold under Rule 144. None of our current outstanding shares of
common stock has been issued under Rule 701.
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<PAGE>
The following schedule sets forth the number of restricted shares of our
company, and the percentage of a total of 8,700,0900 shares outstanding, which
could be sold pursuant to Rule 144 into any public market that may exist and the
dates when resales of these shares could commence:
Percentage of
Number of Shares Total Date when Resales
Outstanding Outstanding Could Commence
----------- ----------- --------------
6,000,000 shs. 69% July 1, 2000 (1)
1,080,000 shs. 12% August 6, 2000
360,000 shs. 4% September 1, 2000
360,000 shs. 4% September 30, 2000
------------- ----
Totals 7,800,000 shs. 89%
------------- ----
- --------
(1) Ninety days following the effective date of the registration statement of
which this prospectus is a part.
We are unable to predict when any of our restricted securities will be
placed for sale in any public market that may develop or to estimate the number
of our restricted securities that may be sold in any public market. However,
resales of substantial amounts of restricted shares of our common stock under
Rule 144 or the perception that such sales could occur could adversely effect
the market price of our shares in any public market that may exist.
DESCRIPTION OF SECURITIES
Authorized Capital
Our authorized capital consists of 50,000,000 shares of common stock, no
par value, and 5,000,000 shares of preferred stock, no par value. The following
description of our securities is qualified in its entirety by reference to our
Articles of Incorporation, a copy of which is available upon request of us.
Each share of our common stock is entitled to one vote at all meetings of
shareholders. All shares of common stock are equal to each other with respect to
liquidation rights and dividend rights. There are no preemptive rights to
purchase any additional shares of common stock. Our Articles of Incorporation
prohibit cumulative voting for the election of directors. In the event of
liquidation, dissolution or winding up of our company, holders of shares of
common stock will be entitled to receive, on a pro rata basis, all assets of our
company remaining after satisfaction of all liabilities and all liquidation
preferences, if any, which may have been granted to holders of our preferred
stock.
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<PAGE>
All of our currently issued and outstanding shares of common stock are
fully paid and non-assessable and are not subject to any future call. Similarly,
when shares of this offering are paid for according to the terms of the
offering, they will be fully paid and non-assessable and will not be subject to
any future call. At the date of this prospectus there are 19 record holders of
shares of our common stock.
Preferred Stock
Our Articles of Incorporation authorize the board of directors to divide
the preferred stock into series and to fix and determine the relative rights and
preferences of the shares of any such series so established to the full extent
permitted by the laws of the State of Colorado and the Articles of Incorporation
in respect to, o the number of shares to constitute such series and the
distinctive designations thereof;
o the rate and preference of dividends, if any, the time of payment of
dividends, whether dividends are cumulative and the date from which any
dividend shall accrue,
o whether preferred stock may be redeemed and, if so, the redemption price
and the terms and conditions of redemption;
o the liquidation preferences payable on preferred stock in the event of
involuntary or voluntary liquidation;
o sinking funds or other provisions, if any, for redemption or purchase of
preferred stock;
o the terms and conditions by which preferred stock may be converted, if the
preferred stock of any series are issued with the privilege of conversion;
and
o the effect upon the preferred stock of any merger, combination, sale of
substantially all of the assets of our company or re-classification of
shares of our company;
o arrears in the payment of dividends;
o voting rights, and,
o other rights and obligations our board of directors may provide, if any.
Warrants
We have issued 1,800,000 Series "A" Warrants to purchase shares of our
common stock. The exercise price of the warrants is $2.00 per share, subject to
adjustment in the circumstances discussed below. Each warrant entitles the
holder to purchase one share of common stock at the exercise price at any time
during the applicable exercise period. The number of shares purchasable upon
exercise of the warrants and the exercise periods are set forth in the following
table:
Number of Shares Exercise Period
Purchasable Beginning Ending
----------- --------- ------
1,080,000 shs August 6, 2000 August 6, 2005
360,000 shs September 1, 2000 September 1, 2005
360,000 shs September 30, 2000 September 30, 2005
45
<PAGE>
The registration statement of which this prospectus forms a part includes a
concurrent offering of the 1,800,000 Series "A" Warrants, and the shares
underlying the warrants. If the registration statement covering the warrants and
the underlying shares does not remain effective during the period in which the
warrants may be exercised by the current holders of the warrants, the warrants
are convertible, only by those holders, into shares of the common stock of
Shopbiz.com. The number of shares into which the warrants could be converted
would be determined by dividing (a) the aggregate fair market value of the
shares of the common stock issuable upon exercise of the warrant minus the
aggregate warrant price of such shares by (b) the fair market value of one
share.
The Series "A" Warrants are not convertible into shares of common stock by
transferees of the current holders of the warrants.
The Series "A" Warrants are not cancellable or redeemable by our company.
The Series "A" Warrants do not confer upon the holder any voting or
preemptive rights, or any other rights of a stockholder of our company.
The Series "A" Warrant exercise price and the number of shares of common
stock to be obtained upon exercise of the warrants are subject to adjustment in
the event of a stock split or, dividend on, or a subdivision, combination, or
recapitalization of the common stock, or the sale of substantially all the
assets of our company, or a merger or consolidation of our company into another
corporation or other business entity where our company is not the surviving
corporation.
The Series "A" Warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date at our offices, with the
subscription form furnished with the warrant certificate filled out and executed
as indicated, accompanied by payment of the full exercise price for the number
of warrants being exercised.
Reports to Shareholders
Our fiscal year ends March 31. We intend to furnish our shareholders annual
reports containing audited financial statements and other appropriate reports.
Following the completion of this offering of our shares, we will be required to
file certain periodic reports and other information with the Securities and
Exchange Commission. You may read and copy any reports, statements or other
information we file at the public reference room of the Securities and Exchange
Commission in Washington, D.C. You can request copies of these documents, upon
payment of a duplicating fee, by writing the Securities and Exchange Commission
at Washington, D.C. 20549. You can call the Securities and Exchange Commission
at 1-800-SEC-0330 for further information relating to the operation of the
public reference rooms. Our filings with the Securities and Exchange Commission
are also available to the public on the Securities and Exchange Commission
Internet site at http:\\www.sec.gov.
46
<PAGE>
Transfer Agent
We have appointed Interwest Transfer, Inc. as transfer agent for our common
stock. Its address and telephone number are 1981 East Murray-Holladay Blvd,
Holladay, Utah 84117 (801) 272-9294.
Dividends
We have paid no dividend on our shares of common stock since inception and
no dividends on our shares of common stock are contemplated in the foreseeable
future. Any earnings of our company will be reinvested in our business for the
foreseeable future.
LEGAL MATTERS
The legality of the securities of Shopbiz.com offered hereby will be passed
on for Shopbiz.com by Ronald N. Vance P.C., 57 West 200 South, Suite 310, Salt
Lake City, UT 84101.
EXPERTS
Our financial statements for the period from inception (August 20, 1998) to
March 31, 1999, included in this prospectus have been examined by Cordovano and
Harvey, P.C. Certified Public Accountants. The financial statements examined by
these Certified Public Accountants have been included in reliance upon their
audit report.
47
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
Index to Financial Statements
Page
----
Independent auditors' report............................................... F-2
Balance sheets, December 31, 1999 (unaudited) and March 31, 1999........... F-3
Statements of operations, for the nine months ended
December 31, 1999 (unaudited) from August 20, 1998
(inception) through March 31, 1999, and from August 20, 1998
(inception) through December 31, 1999 (unaudited)..................... F-4
Statement of shareholders' equity, from August 20, 1998 (inception)
through December 31, 1999 (unaudited)................................. F-5
Statements of cash flows, for the nine months ended
December 31, 1999 (unaudited), from August 20, 1998
(inception) through March 31, 1999, and from August 20, 1998
(inception) through December 31, 1999 (unaudited)..................... F-6
Notes to financial statements.............................................. F-7
F-1
<PAGE>
To the Board of Directors and Shareholders
Mediacomm Broadcasting Systems, Inc.
Independent Auditors' Report
We have audited the balance sheet of Mediacomm Broadcasting Systems, Inc. as of
March 31, 1999, and the related statements of operations, shareholders' equity
and cash flows for the period from August 20, 1998 (inception) through March 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Mediacomm Broadcasting Systems,
Inc. as of March 31, 1999, and the related statements of operations and cash
flows for the period from August 20, 1998 (inception) through March 31, 1999,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a limited operating history, limited capital and
working capital, an unproven business concept, and unproven technology at March
31, 1999. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding those matters also are
described in Note A. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Cordovano and Harvey, P.C.
- ------------------------------
Cordovano and Harvey, P.C.
Denver, Colorado
June 2, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, March 31,
1999 1999
--------- ---------
(unaudited)
ASSETS
<S> <C> <C>
Cash .............................................................. $ 95,526 $ 60,235
Accounts receivable-trade ......................................... 665 --
Equipment, net of accumulated depreciation of $703
(unaudited), and $169, respectively ............................. 2,093 1,948
Software, net of accumulated depreciation of $174
(unaudited), and $-0-, respectively ............................. 885 --
Security deposit .................................................. 43 500
Debt issue costs, net of accumulated amortization of
$40,430, (unaudited) and -0-, respectively (Note G) ............ 78,370 --
Deferred offering costs ........................................... 31,979 9,748
--------- ---------
$ 209,561 $ 72,431
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Accounts payable, trade ........................................... $ 10,405 $ 86
Accrued payroll taxes payable ..................................... 56 655
Advances payable, related party (Note B) .......................... 1,500 --
Other current accrued liabilities ................................ 7,657 7,248
Bridge loans (Note G) ............................................. 225,000 --
--------- ---------
TOTAL LIABILITIES 244,618 7,989
--------- ---------
SHAREHOLDERS' EQUITY (DEFICIT) (Note D)
Preferred stock, no par value, 5,000,000 shares authorized,
-0-, and -0- shares issued and outstanding, respectively ........ -- --
Common stock, no par value, 50,000,000 shares authorized,
7,800,000 (unaudited), and 6,000,000 (restated) shares
issued and outstanding, respectively ........................... 168,810 109,410
Outstanding common stock options and warrants ..................... 79,800 --
Deferred compensation ............................................. (15,985) --
Deficit accumulated during the development stage .................. (267,682) (44,968)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (35,057) 64,442
--------- ---------
$ 209,561 $ 72,431
========= =========
See accompanying notes to financial statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
August 20, 1998 August 20, 1998
Nine Months (inception) (inception)
Ended through through
December 31, March 31, December 31,
1999 1999 1999
----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
NET SALES AND GROSS REVENUE ..................................$ 15,263 $ 224 $ 15,487
----------- ----------- -----------
COSTS AND EXPENSES
Cost applicable to net sales and gross revenue .......... 9,158 134 9,292
Stock-based compensation (Note D) ....................... 4,415 -- 4,415
Software development .................................... 76,523 21,757 98,280
Payroll leasing service ................................. 40,797 -- 40,797
Interest Expense ........................................ 48,087 -- 48,087
Advertising ............................................. 18,305 -- 18,305
Salaries ................................................ 13,333 -- 13,333
License fees (Note E) ................................... 2,631 1,250 3,881
General and administrative .............................. 19,923 17,076 36,999
General and administrative, related parties (Note B) .... 4,805 4,975 9,780
----------- ----------- -----------
237,977 45,192 283,169
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (222,714) (44,968) (267,682)
INCOME TAX BENEFIT (EXPENSE) (Note C)
Current ................................................. 89,960 9,138 108,801
Deferred ................................................ (89,960) (9,138) (108,801)
----------- ----------- -----------
NET LOSS $ (222,714) $ (44,968) $ (267,682)
=========== =========== ===========
Loss per common share ........................................$ (0.03) $ (0.02)
=========== ===========
Basic weighted average common shares outstanding ............. 6,920,000 * 2,775,000
=========== ===========
* Restated (See Note F)
See accompanying notes to financial statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Preferred Stock Common Stock
--------------------- ----------------------
Shares Amount Shares Amount
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, August 20, 1998, (Inception) ....................... -- $ -- -- $ --
December 1, 1998, sale of common stock ...................... -- -- 3,060,000* 25,000
December 22, 1998, issuance of common stock in
exchange for services ....................................... -- -- 540,000* 4,410
December 22, 1998, sale of common stock .................... -- -- 750,000* 25,000
December 31, 1998, sale of common stock ..................... -- -- 750,000* 25,000
February 17, 1999, sale of common stock ..................... -- -- 900,000* 30,000
Net loss for the period ..................................... -- -- -- --
--------- --------- --------- ---------
BALANCE, MARCH 31, 1999 -- -- 6,000,000* 109,410
August 6, 1999, issuance of common
stock in exchange for finance charges
valued at $.033 per share (unaudited) .................... -- -- 1,080,000 35,640
August 6, 1999, issuance of 1,080,000
common stock warrants in exchange for
finance charges valued at $.033 per share (unaudited) .... -- -- -- --
September 1, 1999, issuance of common
stock in exchange for finance charges
valued at $.033 per share (unaudited) .................... -- -- 360,000 11,880
September 1, 1999, issuance of 360,000
common stock warrants in exchange for
finance charges valued at $.033 per share (unaudited) .... -- -- -- --
September 30, 1999, issuance of common
stock in exchange for finance charges
valued at $.033 per share (unaudited) .................... -- -- 360,000 11,880
September 30, 1999, issuance of 360,000
common stock warrants in exchange for
finance charges valued at $.033 per share (unaudited) .... -- -- -- --
October 14, 1999, issuance of 150,000
common stock options (unaudited) ......................... -- -- -- --
Deferred compensation ....................................... -- -- -- --
Net loss for the period (unaudited) ......................... -- -- -- --
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 1999 (UNAUDITED) -- $ -- 7,800,000* $ 168,810
========= ========= ========= =========
* Restated (See Note F)
Table continues on next page.
See accompanying notes to financial statements
F-5
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(Continued)
Outstanding Deficit
Common Accumulated Total
Stock During the Shareholders'
Options Deferred Development Equity
and Warrants Compensation Stage (deficit)
------------ ------------ --------- ---------
Balance, August 20, 1998, (Inception) ....................... $ -- $ -- $ -- $ --
December 1, 1998, sale of common stock ...................... -- -- -- 25,000
December 22, 1998, issuance of common stock in
exchange for services ....................................... -- -- -- 4,410
December 22, 1998, sale of common stock .................... -- -- -- 25,000
December 31, 1998, sale of common stock ..................... -- -- -- 25,000
February 17, 1999, sale of common stock ..................... -- -- -- 30,000
Net loss for the period ..................................... -- -- (44,968) (44,968)
--------- --------- --------- ---------
BALANCE, MARCH 31, 1999 -- -- (44,968) 64,442
August 6, 1999, issuance of common
stock in exchange for finance charges
valued at $.033 per share (unaudited) .................... -- -- -- 35,640
August 6, 1999, issuance of 1,080,000
common stock warrants in exchange for
finance charges valued at $.033 per share (unaudited) .... 35,640 -- -- 35,640
September 1, 1999, issuance of common
stock in exchange for finance charges
valued at $.033 per share (unaudited) .................... -- -- -- 11,880
September 1, 1999, issuance of 360,000
common stock warrants in exchange for
finance charges valued at $.033 per share (unaudited) .... 11,880 -- -- 11,880
September 30, 1999, issuance of common
stock in exchange for finance charges
valued at $.033 per share (unaudited) .................... -- -- -- 11,880
September 30, 1999, issuance of 360,000
common stock warrants in exchange for
finance charges valued at $.033 per share (unaudited) .... 11,880 -- -- 11,880
October 14, 1999, issuance of 150,000
common stock options (unaudited) ......................... 20,400 -- -- 20,400
Deferred compensation ....................................... -- (15,985) -- (15,985)
Net loss for the period (unaudited) ......................... -- (222,714) (222,714)
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 1999 (UNAUDITED) $ 79,800 $ (15,985) $(267,682) $ (35,057)
========= ========= ========= =========
* Restated (See Note F)
See accompanying notes to financial statements
F-5(a)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
August 20, August 20,
1998 1998
Nine Months (inception) (inception)
Ended through through
December 31, March 31, December 31,
1999 1999 1999
--------- --------- ---------
OPERATING ACTIVITIES (unaudited) (unaudited)
<S> <C> <C> <C>
Net loss ................................................. $(222,714) $ (44,968) $(267,682)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ......................... 41,138 169 41,307
Outstanding options and warrants ...................... 79,800 -- 79,800
Deferred compensation ................................. (15,985) -- (15,985)
Stock issued in exchange for services ................. -- 4,410 4,410
--------- --------- ---------
(117,761) (40,389) (158,150)
Changes in current assets and liabilities:
Security deposit ...................................... 457 (500) (43)
Accounts receivable and prepaid expenses .............. (60,065) -- (60,065)
Accounts payable and accrued expenses ................. 10,129 7,989 18,118
--------- --------- ---------
NET CASH (USED IN)
OPERATING ACTIVITIES (167,240) (32,900) (200,140)
--------- --------- ---------
INVESTING ACTIVITIES
Cash paid for equipment .................................. (1,738) (2,117) (3,855)
--------- --------- ---------
NET CASH (USED IN)
INVESTING ACTIVITIES (1,738) (2,117) (3,855)
--------- --------- ---------
FINANCING ACTIVITIES
Sale of common stock ..................................... -- 105,000 105,000
Offering costs deferred .................................. (22,231) (9,748) (31,979)
Proceeds from loans and advances ......................... 226,500 -- 226,500
--------- --------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 204,269 95,252 299,521
--------- --------- ---------
Net change in cash .......................................... 35,291 60,235 95,526
Cash, beginning of period ................................... 60,235 -- --
--------- --------- ---------
CASH, END OF PERIOD $ 95,526 $ 60,235 $ 95,526
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .............................................. $ -- $ -- $ --
========= ========= =========
Income taxes .......................................... $ -- $ -- $ --
========= ========= =========
Non-cash financing activities:
1,800,000 shares of common stock issued
in exchange for debt issue costs ...................... $ 59,400 $ -- $ 59,400
========= ========= =========
Deferred compensation .................................... $ 15,985 $ -- $ 15,985
See accompanying notes to financial statements
F-6
</TABLE>
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of operations and liquidity
Mediacomm Broadcasting Systems, Inc. (the "Company") was incorporated in
Colorado on August 20, 1998. The Company is a development stage enterprise that
plans to develop and operate a number of Internet-based information and commerce
solutions and to provide data storage and retrieval services. In addition, the
Company has acquired an exclusive license to use content applicable to the
Denver area for which it intends to establish an Internet portal.
The Company has devoted substantially all of its efforts since inception to the
research and development of its web site address shopbiz.com and related matters
and to raising capital and organization matters. The Company plans to finance
its activities through an offering of 900,000 shares of its common stock at a
price of $1.00 per share. See Note D - Shareholders' Equity
The Company's financial statements are prepared in accordance with Statement of
Financial Accounting Standards No. 7 "Accounting for Development Stage
Enterprises".
The Company is in the early period of its development embarking on a new
venture. To date, the Company's product sales and service revenues have been
insignificant. The Company has limited capital, is dependent upon the proceeds
of its proposed initial public offering (See Note D), and achieving profitable
operations. The Company's business plan is based upon the limited experience of
certain other Internet companies. The Company's technology is unproven and will
take additional resources to perfect. The success of the Company's shopbiz.com
web site is dependent on attracting and retaining qualified suppliers. The
Company has not gained market acceptance for any of its products and there can
be no assurance that the Company will be able to gain such acceptance in the
future, that future sales and revenues will be significant, that any sales will
be profitable, or that the Company will have sufficient funds available to
research and develop its proposed products and services. The likelihood of the
success of the Company will depend upon its ability to raise sufficient capital
to overcome the problems, expenses and delays frequently encountered in the
operation of a new business and the competitive environment in which it will be
operating. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern.
In order for the Company to complete implementation of its business plan and
fund anticipated growth, the Company will require financing from outside
sources. Management believes that the Company is not a viable candidate for
commercial bank debt financing due to its lack of operating history and limited
amount of tangible assets. To meet future needs, management contemplates an
initial public offering of the Company's stock.
F-7
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Management of the Company has budgeted the use of proceeds from its proposed IPO
for a period of approximately twelve months. However, no definitive arrangement
with an underwriter exists and there is no assurance that the Company's cash
flow from operations will increase such that a public offering would be
unnecessary. The proposed IPO will be conducted through the Company's officers
and directors. If operations do not provide sufficient cash flow within
approximately twelve months after closing the proposed IPO, the Company will
require additional financing from outside sources. There is no assurance that
the proposed IPO will be successful or that, if successful, the Company's actual
results will meet the objectives of its business plan. Further, there is no
assurance that the Company will be successful in obtaining additional financing
to fund operations if additional financing is needed once expected proceeds from
the anticipated IPO are spent.
Financial instruments
The Company's financial instruments consist of a security deposit, accounts
payable and accrued liabilities. The carrying value of these financial
instruments approximates fair value because of their short-term nature or
because they bear interest at rates which approximate market rates.
Cash and cash equivalents
The Company considers all short-term, highly liquid investments with an original
maturity date of three months or less to be cash equivalents. At March 31, 1999
the Company did not have any cash equivalents. Cash is stated at cost, which
approximates fair value.
Deferred Offering Costs
In connection with the offering of its common shares, the Company incurred
offering costs consisting of legal and accounting costs. The costs are reflected
on the balance sheet as "deferred offering costs" and will be offset against
offering proceeds upon closing of the offering.
During the year ended December 31, 1999 the Company incurred costs related to
two separate proposed offerings of its common stock. The Company canceled its
original proposed offering of common stock by withdrawal of its state
registration statements subsequent to March 31, 1999. Accordingly, the $9,748
recorded as deferred offering costs at March 31, 1999 was charged to operations
during the nine months ended December 31, 1999. In connection with its current
proposed offering, the Company has incurred $31,979 (unaudited) in offering
costs for the nine months ended December 31, 1999, which have been deferred.
F-8
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Income Taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Loss per common share
In February 1997 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share" (SFAS 128). The Company adopted SFAS 128 for the
period ended March 31, 1999. Under SFAS 128, net loss per share-basic excludes
dilution and is determined by dividing loss available to common shareholders by
the weighted average number of common shares outstanding during the period. Net
loss per share-diluted reflects the potential dilution that could occur if
securities and other contracts to issue common stock were exercised or converted
into common stock. As of March 31, 1999 there were no common stock equivalents.
As of December 31, 1999 there were warrants and options outstanding. However,
diluted earnings per share is not presented in the accompanying financial
statements as the options and warrants outstanding would be antidilutive.
F-9
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Computer software developed for internal use
Pursuant to SOP 98-1 "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use", the cost of developing and implementing its web site
and related internal use software is expensed until the Company has determined
that the web site and related internal use software will result in probable
future economic benefits and management has committed to funding the project.
Thereafter, all direct external implementation costs and purchased software
costs are capitalized and amortized using the straight-line method over the
remaining estimated useful lives, not exceeding five years. No software
development costs have been capitalized as of March 31, 1999 or December 31,
1999.
Start up costs
Costs related to the organization of the Company have been expensed as incurred.
Research and development costs
Research and development costs are expensed as incurred.
Fiscal year
The Company operates on a fiscal year ending on March 31.
Stock-based compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" permits the use of
either a fair value based method or the intrinsic value method defined in
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25") to account for stock-based compensation arrangements.
Companies that elect to use the method provided in APB 25 are required to
disclose pro forma net income and earnings per share that would have resulted
from the use of the fair value based method. The Company has elected to continue
to determine the value of stock-based compensation arrangements for employees
and directors under the provisions of APB 25 and, accordingly, has include pro
forma disclosures under SFAS No. 123 in Note E. However, stock-based
compensation arrangements with non-employees are accounted for under the
provisions of SFAS No. 123.
F-10
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
New accounting pronouncements
The Company has adopted the following new accounting pronouncements for the
period ended March 31, 1999. There was no affect on the financial statements
presented from the adoption of the new pronouncements. SFAS No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
The Company did not have comprehensive income for the periods presented;
therefore, comprehensive income and net income are equal. SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," is based
on the "management" approach for reporting segments. The management approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Company's
reportable segments. SFAS No. 131 also requires disclosure about the Company's
products, the geographic areas in which it earns revenue and holds long-lived
assets, and its major customers. SFAS 131 is not applicable, as the Company had
no segment reporting for the periods presented. SFAS No. 132, "Employers'
Disclosures about Pensions and Other Post-retirement Benefits," which requires
additional disclosures about pension and other post-retirement benefit plans,
but does not change the measurement or recognition of those plans.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
requires an entity to recognize all derivatives on a balance sheet, measured at
fair value. Statement of Position ("SOP") 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" requires that entities
capitalize certain internal-use software costs once certain criteria are met.
SOP 98-5, "Reporting on the Costs of Start-Up Activities" provides, among other
things, guidance on the reporting of start-up costs and organization costs. It
requires costs of start-up activities and organization costs to be expensed as
incurred.
The Company will continue to review these new accounting pronouncements over
time to determine if any additional disclosures are necessary based on evolving
circumstances.
Unaudited Interim Financial Information
The interim financial statements as of December 31, 1999, the nine months ended
December 31, 1999, and for the period of August 20, 1998 (inception) through
December 31, 1999 are unaudited, and certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
items, necessary to fairly present the financial position, results of operations
and cash flows with respect to the interim financial statements have been
included. The results of operations for the interim period are not necessarily
indicative of the results for an entire fiscal year.
F-11
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE B: RELATED PARTY TRANSACTIONS
The Company leases office space from an affiliate and shares office expense with
the affiliate. For the period from August 20, 1998 (inception) through March 31,
1999, the Company paid the affiliate $1,575 for rent. For the nine months ended
December 31, 1999 the Company paid the affiliate $4,805 (unaudited) for rent.
The Company purchased consulting services, totaling $3,400, from an affiliate
for the period from August 20, 1998 (inception) through March 31, 1999.
Certain officers have provided services at no charge to the Company. The
accompanying financial statements have not been adjusted for the value of such
services.
The Company has entered into a one-year, renewable, employment agreement with
its vice-president at $50,000 per year, plus benefits.
During the nine months ended December 31, 1999 the Company received $1,500
(unaudited) in working capital advances from a related party.
NOTE C: INCOME TAXES
A reconciliation of U.S. statutory federal income tax rate to the effective rate
follows for the nine months ended December 31, 1999, for the period from August
20, 1998 (inception) through March 31, 1999, and December 31, 1999,
respectively:
<TABLE>
<CAPTION>
August 20, 1998 August 20, 1998
Nine Months (inception) (inception)
Ended through through
December 31, March 31, December 31,
------------ --------- ------------
1999 1999 1999
(unaudited) (unaudited)
<S> <C> <C> <C>
U.S. statutory federal rate, graduated...... 32.10% 15.00% 33.13%
State income tax rate, net of federal....... 3.23% 4.75% 3.18%
Deferred offering costs..................... 4.29% 0.00% 4.29%
Other....................................... 0.00% 0.57% 0.00%
Net operating loss (NOL) for which
no tax benefit is currently available... -39.62% -20.32% -40.60%
------ ------ ------
0.00% 0.00% 0.00%
====== ====== ======
</TABLE>
F-12
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE C: INCOME TAXES, CONCLUDED
The benefit for income taxes from operations consisted of the following
components at December 31, 1999 and March 31, 1999, respectively: current tax
benefit of $89,960 (unaudited) and $9,138, respectively resulting from a net
loss before income taxes, and deferred tax expense of $89,960 (unaudited) and
$9,138, respectively resulting from the valuation allowance recorded against the
deferred tax asset resulting from net operating losses. The change in the
valuation allowance for the nine months ended December 31, 1999, and for the
period from August 20, 1998 (inception) through March 31, 1999 was $89,960
(unaudited) and $9,138, respectively. NOL carryforwards at December 31, 1999
will begin to expire in 2018. The valuation allowance will be evaluated at the
end of each year, considering positive and negative evidence about whether the
asset will be realized. At that time, the allowance will either be increased or
reduced; reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax asset is no
longer impaired and the allowance is no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
NOTE D: SHAREHOLDERS' EQUITY
Preferred stock
The preferred stock may be issued in series as determined by the Board of
Directors. As required by law, each series must designate the number of shares
in the series and each share of a series must have identical rights of (1)
dividend, (2) redemption, (3) rights in liquidation, (4) sinking fund provisions
for the redemption of the shares, (5) terms of conversion and (6) voting rights.
Offering of common stock
The Company plans to offer up to 900,000 shares of its no par value common stock
to qualified investors at an offering price of $1.00 per share pursuant to a
registration statement on Form SB-2 to be filed with the Securities and Exchange
Commission. The shares of common stock will be offered on behalf of the Company
through its officers and directors on a 450,000 share minimum "all or none,"
900,000 share maximum basis for a period of sixty days. Additionally, the
offering can be extended for an additional sixty days. The minimum purchase
price will be $1,000. If the offering is successful, the Company plans to use
the net proceeds for the repayment of debt, the payment of marketing and general
and administrative expenses, the acquisition of equipment, web-site development,
and for working capital.
F-13
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE D: SHAREHOLDERS' EQUITY, CONTINUED
Stock option plan
The Company has adopted a non-qualified stock option and stock grant plan for
the benefit of key personnel and others providing significant services. An
aggregate of three million shares of common stock has been reserved under the
plan. Options granted pursuant to the plan will be exercisable at a price no
less than the fair value of the shares of common stock on the date of grant.
There were no options granted under this plan as of March 31, 1999. There were
600,000 (unaudited) options granted during the nine months ended December 31,
1999. According to the Company's policy, options granted to employees and
directors are accounted for using the intrinsic method, while options granted to
non-employees are accounted for under the fair value method. The fair value of
the Company's common stock was determined by the board of directors based on
equity transactions and other analysis. The board of directors considered the
IPO price in making its determination.
Option Pricing Model
The fair value of each option granted has been estimated as of the grant date
using the Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 5.875 percent, expected volatility of
zero percent, expected life of three to five years, and no expected dividends.
During the nine months ended December 31, 1999, the weighted average exercise
price and fair value of options granted were $.286 and $.199 (unaudited)
respectively on the date of grant for options granted with an exercise price
greater than the fair value of the stock. There were no options granted with
exercise prices that equaled or were less than the fair value of the underlying
stock on the date of grant.
Options granted to employees accounted for under the intrinsic value method
On October 15, 1999, pursuant to an employee agreement, the Company granted two
employees options to purchase 75,000 shares each of the Company's common stock
for $.35 and $.75, respectively. On October 15, 1999 the fair value of the stock
was $.033. The options begin vesting on April 1, 2000 and October 1, 2000,
respectively at the rate of 15,000 shares each year for five years. The options
will expire on April 1, 2005 and October 1, 2005, respectively. In accordance
with APB 25, the Company did not recognize any compensation expense in
connection with the granting of the options (unaudited).
On November 30, 1999, pursuant to an employee agreement, the Company granted two
officers options to purchase 150,000 shares each of the Company's common stock
for $.20 per share. On November 30, 1999 the fair value of the stock was $.033.
The options fully vest on November 30, 2000 and expire on November 30, 2005. In
accordance with APB 25, the Company did not recognize any compensation expense
in connection with the granting of the options (unaudited).
F-14
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE D: SHAREHOLDERS' EQUITY, CONTINUED
Had compensation expense been determined based on the fair value at the grant
date, and charged to expense over vesting periods consistent with the provisions
of SFAS 123, the Company's net loss and net loss per share would have equaled
the pro forma amounts indicated below:
Amount
-----------
As reported: (unaudited)
Net loss ............................. $ 238,699
Net loss per share - basic and diluted $ 0.03
Pro forma:
Net loss ............................. $ 244,811
Net loss per share - basic and diluted $ 0.04
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. Option valuation models also require the input of highly
subjective assumptions such as expected option life and expected stock price
volatility. Because the Company's stock-based awards have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
Company believes that the existing option valuation models do not necessarily
provide a reliable single measure of the fair value of its stock-based awards.
Options granted to non-employees accounted for under the fair value method
The Company has entered into an agreement with an unrelated third party to
provide technical development services to the Company. Upon signing the
agreement, the Company agreed to issue the consultant 150,000 options that will
become fully vested on October 15, 2000. On October 19, 1999 the fair value of
the stock was $.033. The options are exercisable at $.20 and expire on October
15, 2002. The Company determined the fair value of the options in accordance
with SFAS 123 to be $.136 and have accordingly recorded compensation expense of
$4,415, and deferred compensation of $15,985 (unaudited).
F-15
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE D: SHAREHOLDERS' EQUITY, CONCLUDED
Summary
A summary of the Company's stock option awards as of December 31, 1999, and the
changes during the nine months ended December 31, 1999 is presented below
(unaudited):
Fixed Options Number
------------------------------------------
Outstanding at March 31, 1999 .. --
Granted ........................ 600,000
Exercised ...................... --
Canceled ....................... --
-------
Outstanding at December 31, 1999 600,000
=======
The weighted average exercise price per share for the non-vested 600,000
outstanding options at December 31, 1999 was $.29 (unaudited).
NOTE E: LICENSE AGREEMENT
On November 23, 1998, the Company entered into a license agreement with
Information Highway, Inc. (IHI) in order to incorporate customized versions of
the IHI Gateway on Company Internet service provider web sites. The IHI Gateway
is a worldwide web site operated as a web portal for information about Denver,
Colorado. The license was granted for a period of two years. Under the terms of
the license agreement, the Company agreed to pay IHI a set up fee of $2,500; a
monthly maintenance fee of $300; and a technical support fee of $2.00 per user.
The maintenance and the technical support fees will be due after commencement of
the service. For the nine months ended December 31, 1999, the Company had paid
$2,631 (unaudited) under the license agreement.
NOTE F: FORWARD STOCK SPLIT (UNAUDITED)
Effective August 4, 1999, the shareholders approved a forward split of common
stock of three shares for each share of common stock (3:1) held. The
accompanying financial statements have been retroactively restated to give
effect to the forward stock split for all periods presented.
F-16
<PAGE>
MEDIACOMM BROADCASTING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE G: BRIDGE LOANS (UNAUDITED)
Subsequent to March 31, 1999 the Company issued promissory notes in the
aggregate amount of $225,000. The notes bear interest at 10 percent, are
unsecured, and are due upon the closing of the initial public offering. If the
offering is unsuccessful in raising the $450,000 minimum proceeds, $135,000 of
the notes will be due on August 6, 2000, $45,000 will be due on September 1,
2000, and $45,000 will be due on September 30, 2000. If unpaid after these
dates, the notes will be in default and become convertible at the rate of one
share for each $.10 of principal and interest (unaudited).
In consideration for making the bridge loans, the lenders were issued a total of
1,800,000 shares of the Company's common stock. Accordingly, $59,400 (unaudited)
has been capitalized as debt issue costs to account for the stock issuance. The
bridge lenders were also issued common stock warrants to purchase a total of
1,800,000 additional shares of common stock at $2.00 per share. 1,080,000 of the
warrants will vest on August 6, 2000, an additional 360,000 will vest on
September 1, 2000, and 360,000 will vest on September 30, 2000. The warrants
expire on their respective vesting dates in 2005. On December 31, 1999 the fair
value of the stock was $.033. The Company determined the fair value of the
warrants in accordance with SFAS 123. The value of the warrants approximates the
value of the underlying stock since no dividends are expected to be declared.
Accordingly, an additional $59,400 (unaudited) has been capitalized as debt
issue costs to account for the issuance of the warrants. The debt issue costs
for the warrants are being amortized over their respective service periods.
F-17
<PAGE>
[ALTERNATE PAGE]
Prospectus
SUBJECT TO COMPLETION, DATED APRIL *, 2000
The Information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not a solicitation of an offer to buy these
securities in any state where the offer or sale is not permitted.
MEDIACOMM BROADCASTING SYSTEMS, INC.
d/b/a Shopbiz.com
925 W. Kenyon Avenue #15
Englewood, Colorado 80110
(303) 762-6444
------------------------
1,800,000 Series "A" Warrants
1,800,000 Shares of Common Stock
This prospectus relates to 1,800,000 Series "A" Warrants held by six
selling warrant holders. This prospectus also relates to the 1,800,000 shares of
common stock issuable upon exercise of the Series "A" Warrants.
The warrants, and the shares underlying the warrants, may be sold from time
to time by the warrant holders or by their transferees. The distribution of
these securities may be effected in one or more transactions that may take place
on the over-the-counter market, if the warrants and/or common stock are ever
quoted on an over-the-counter market, including ordinary brokers' transactions,
privately negotiated transactions, or through sales to one or more dealers for
their resale of these securities as principals, at market prices prevailing at
the time of sale, at prices related to the prevailing market prices, if any
market exists, or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the selling persons.
We will not receive any of the proceeds from the sale of these shares or
warrants. If any of the warrants are exercised, we will receive the exercise
price of $2.00 per share.
On the date of this prospectus, a registration statement under the
Securities Act of 1933 with respect to a public offering by Shopbiz.com of
450,000 shares minimum and 900,000 shares maximum of common stock at $1.00 per
share was declared effective by the Securities and Exchange Commission.
Shopbiz.com will receive net proceeds from its offering ranging from $410,000 to
$860,000 depending upon the exact number of shares it sells, after payment of
the estimated expenses of its offering and this offering.
This Offering is Highly Speculative and Involves Special Risks Concerning
Shopbiz.com and its Business. Prior to the Offering by Shopbiz.com There Has
Been No Public Market for the Securities of Shopbiz.com. You Should Purchase the
Series "A" Warrants and/or the Underlying Shares Only If You Can Afford a
Complete Loss. See Risk Factors beginning on page 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __*__, 2000.
49
<PAGE>
[ALTERNATE PAGE]
SELLING SECURITIES HOLDERS
An aggregate of up to 1,800,000 Series "A" Warrants and the common stock
underlying these warrants, are being offered for sale by the selling securities
holders listed below.
Shopbiz.com has registered the Series "A" Warrants and the common stock
underlying the warrants, for resale to the public by the selling securities
holders. Shopbiz.com will not receive any of the proceeds from the sale of these
securities unless the warrants are exercised, in which case Shopbiz.com will
receive $2.00 for each share of common stock it issues upon exercise of the
warrants. There are no material relationships between any of the selling
securities holders and Shopbiz.com or any of its predecessors or affiliates, nor
have any material relationships existed between them within the past three years
except as discussed below. Each of the selling securities holders intends to
offer and sell all of the Series "A" Warrants held by it.
The following table sets forth the amount of securities owned by the
selling securities holders prior to this offering, the amount of securities
being offered, the amount of securities and the percent of the same outstanding
class to be owned after the offering:
<TABLE>
<CAPTION>
Amount of Amount of Securities Owned
Name of Selling Securities Securities After Offering and
Securities Holder Before offering Being offered Percent of Class (1)
- ----------------- --------------- ------------- --------------------
<S> <C> <C> <C> <C>
Business
Development 360,000 shs/
Corporation 360,000 wts 360,000 wts 360,000 shs 4%
Mathis Family Partners 160,000 shs/
160,000 wts 160,000 wts 160,000 shs 1.8%
Earnest Mathis, IRA 200,000 shs/
Rollover 200,000 wts 200,000 wts 200,000 shs 2.2%
Summer Breeze, LLC 360,000 shs/
360,000 wts 360,000 wts 360,000 shs 4%
David's Odyssey, LLC 360,000 shs/
360,000 wts 360,000 wts 360,000 shs 4%
David N. Nemelka 360,000 shs/
360,000 wts 360,000 wts 360,000 shs 4%
----------- ------- -------
Totals 1,800,000 shs/ 1,800,000 wts 1,800,000 shs 20%
------------- ------------- ---
1,800,000 wts
-------------
</TABLE>
(1) The percentage of the class outstanding has been calculated on thef
8,700,000 shares of common stock of Shopbiz.com which assumes sale of ae
900,000 shares of that stock being offered by Shopbiz.com concurrently with
this offering by selling securities holders.
50
<PAGE>
[ALTERNATE PAGE]
Identity of Ultimate Beneficiaries of Securities to be Sold
The following table sets forth the ultimate beneficiaries of the securities
to be sold by the above identified selling securities holders pursuant to this
prospectus and the percentages of beneficial ownership of each ultimate
beneficiary.
Percentage
Ultimate of
Beneficial Beneficial
Selling Securities Holder Owners Ownership
- ------------------------- ------ ---------
Business Development Corporation Van R. Perkins 100%
Mathis Family Partners Earnest Mathis 100%
Earnest Mathis, IRA
Rollover Earnest Mathis 100%
Summer Breeze, LLC Gary J. McAdam 26%
Claudia McAdam 25%
Brian McAdam 19.5%
Kevin McAdam 19.5%
The Dream Maker Foundation 10%
(A non-profit public
support organization)
David's Odyssey, LLC David R. Nemelka 100%
David N. Nemelka David N. Nemelka 100%
o Gary J. McAdam is a member and the manager of Summer Breeze, LLC. He holds
sole voting and investment power over the securities being offered for sale
by Summer Breeze, LLC pursuant to this prospectus. He is the sole trustee
and one of the five directors of The Dream Maker Foundation.
o Earnest Mathis is the only owner of the Mathis Family Partners, the entity
through which Mr. Mathis does business. He is the sole legal and 100
percent ultimate beneficial owner of the securitis listed in the above
table as held in the name of Mathis Family Partners and he holds sole
voting and investment power over the above listed securities.
51
<PAGE>
[ALTERNATE PAGE]
PLAN OF DISTRIBUTION
The sale of the Series "A" Warrants or common stock underlying the
warrants, by the selling securities holders may be made from time to time in
transactions, which may include block transactions by or for the account of the
selling securities holders, in the over-the-counter market, if such a market
should develop, or in negotiated transactions or otherwise. Sales may be made at
fixed prices which may be at market prices, if any, prevailing at the time of
sale, or at negotiated prices.
The selling securities holders may make those transactions by selling their
warrants or the shares of common stock underlying the warrants, directly to
purchasers, through broker-dealers acting as agents for the selling securities
holders or to broker-dealers who may purchase the securities as principals and
thereafter sell the common stock from time to time in the over-the-counter
market, if any, in negotiated transactions or otherwise. Compensation to a
particular broker-dealer in any of these transactions may exceed customary
brokerage commissions.
Pursuant to applicable rules and regulations under the Securities Exchange
Act of 1934, any person engaged in the distribution of the selling securities
holders' warrants or shares of common stock underlying the warrants may not
simultaneously engage in market making activities with respect to any securities
of Shopbiz.com for a period of at least two, and in some cases nine, business
days prior to the commencement of the distribution.
The selling securities holders and brokers-dealers, if any, acting in
connection with the sales of the warrants and/or the underlying shares, might be
deemed to be underwriters within the meaning of Section 2(11) of the Securities
Act of 1933, and any commission received by them and any profit on the resale of
these securities might be deemed to be underwriting discounts and commissions
under the Securities Act of 1933.
52
<PAGE>
[ALTERNATE PAGE]
CONCURRENT PUBLIC OFFERING
On the date of this prospectus, a registration statement was declared
effective under the Securities Act of 1933 with respect to an offering by
Shopbiz.com of 450,000 shares minimum and 900,000 shares maximum of common stock
of Shopbiz.com.
53
<PAGE>
[ALTERNATE PAGE]
[OUTSIDE BACK COVER]
TABLE OF CONTENTS
Item Page
---- ----
Prospectus Summary 8
Selected Financial Information 8
Risk Factors 9
Because We Are a New Company With a
Brief Operating History We May Not Be Able
to Successfully Operate Our Business or
Achieve Profitability 9
Our Limited Liquidity and Capital Resources May
Substantially Restrict Operation of Our Business 9
There May Be No Market for Shares of Our
Common Stock You Purchase in This Offering 10
Forward Looking Statements 10
Business 11
Use of Proceeds 29
Management 30
Principal Shareholders 37
Subscription and Plan of Distribution 40
Dilution and Relative Investments 42
Any Shares Purchased In This Offering Will Be Penny
Stock and Subject to Trading Regulations 44
Adverse Effect on Any Market for Our
Shares by Sales of Restricted Shares 44
Description of Securities 46
Legal Matters 49
Experts 49
Until _____, 2000, (ninety days after the date of this prospectus) all
dealers that effect transactions in these securities may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
54
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article 109 of the Colorado Business Corporation Act expressly authorizes a
Colorado corporation to indemnify its directors, officers, employees,
fiduciaries, and agents against claims or liabilities arising out of such
persons' conduct in such capacities if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation. In general, these provisions provide for indemnification in
instances when such persons acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation. A
corporation may also purchase and maintain liability insurance on behalf of such
persons.
Article IX of the Amended and Restated Articles of Incorporation of
MediaComm Broadcasting Systems, Inc. provides for the indemnification of the
corporation officers, directors, employees and agents. The Corporation does not
maintain any liability insurance on behalf of any director, officer, or other
person affiliated with the Corporation.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection with
the offering described in the registration statement:
Item Amount
---- ------
Registration Fee $ 1,251
Escrow Agent Fees 1,000
Blue Sky Fees 4,000
Accounting Fees and Expenses 4,700
Legal Fees and Expenses 25,000
Printing and Engraving 3,000
Transfer Agent Fees 1,000
Miscellaneous 49
-------
Total Expenses $40,000
=======
No part of the expenses of the offering on behalf of the registrant or on
behalf of the selling securities holders is being paid by those selling
securities holders.
55
<PAGE>
Item 26. Recent Sales of Unregistered Securities
In December, 1998 the registrant issued 3,060,000 shares of its common
stock at $.0082 per share, as adjusted for a three-for-one forward stock split
effective August 4, 1999, for a total of $25,000, to Don E. Montague, a founder
and principal promoter, Chief Executive Officer and a director of the
registrant.
Also, concurrent with the issue of shares of common stock to Don E.
Montague, the registrant issued 270,000 shares of its common stock, as adjusted
for the aforesaid three- for-one forward stock split, to Steven S. Montague,
President and a director of the registrant and the son of Don E. Montague,
in exchange for services rendered on a behalf of the registrant in connection
with its organization and in exchange for his agreement to act as Vice President
of the registrant. These shares were valued at $2,205 or $.0082 per share.
Similarly, and concurrent with the issue of shares of common stock to
Messrs. Montague, the registrant issued 90,000 shares of its common stock, as
adjusted for the three-for-one stock split, to Anthony "Anton" Delgado,
Secretary and Treasurer and a director of the registrant, in exchange for
services rendered to the registrant in connection with its organization and in
exchange for his agreement to act as Secretary/Treasurer of the registrant.
These shares were valued at $735 or $.0082 per share.
Messrs. Montague and Delgado each represented to the registrant that he
acquired his shares for investment and without a view to distribution. Each of
these individuals had access to and did afford himself of the information
concerning the registrant that would have been provided by a registered
prospectus. Each of these individuals were fully able to fend for himself in the
transaction whereby each of them acquired his shares of the registrant. Each of
these individuals was in a position to afford the risk of his investment in the
shares of the registrant. The registrant issued these securities without
registration in reliance on the exemption afforded by Section 4(2) of the
Securities Act of 1933 as transactions by an issuer not involving any public
offering.
Contemporaneously, with the issue of shares to Messrs. Montague and
Delgado, the registrant issued 90,000 shares of its common stock to J. D. Kish,
a certified public accountant, for accounting services rendered to the
registrant in connection with its organization valued at $735 or $.0082 per
share. Mr. Kish is a person known to Mr. Don E. Montague, Chief Executive
Officer of the registrant for approximately 15 years and a person who has
performed accounting services for business enterprises of Don E. Montague over
that period of years. Mr. Kish had access to and did afford himself the
information concerning the registrant that would have been provided by a
registered prospectus. In connection with the acquisition of his shares of the
registrant, Mr. Kish represented to the registrant that he was knowledgeable and
experienced in financial and investment matters.
56
<PAGE>
Based upon the association of Don E. Montague with Mr. Kish, the registrant
had reasonable grounds to believe and rely upon and did believe and rely upon
those representations of Mr. Kish in claiming its reliance upon the exemption
from registration of the issue of these shares afforded by Section 4(2) of the
Securities Act of 1933 as a transaction not involving any public offering. Mr.
Kish was, at the time of his acquisition of the shares of the registrant, able
to fend for himself in that transaction. He was also in a financial position to
afford the risk of his investment in the shares of the registrant. He, also,
represented to the registrant that he acquired these shares for investment and
without a view to distribution. He did not need the protection that would have
been afforded by a registered prospectus.
Also, contemporaneously with the issue of shares to Messrs. Montague,
Delgado and Kish, the registrant issued 90,000 shares to World Net Trading, Ltd,
a corporation controlled by Randall Stevens, for services rendered by Mr.
Stevens in the preparation of a business plan for the registrant which services
were valued at $735 or $.0082 per share. Mr. Stevens had access to and afforded
himself the information concerning the registrant that would have been provided
by a registered prospectus. Don E. Montague has known Randall Stevens for six
years. During that period, Mr. Stevens has had various business relations with
Mr. Don E. Montague including Mr. Stevens employment for several years with
MediaComm Marketing International, Inc., a corporation of which Mr. Montague is
the President and principal shareholder. Mr. Stevens represented to the
registrant the following:
o He held a Masters Degree in International Business from Denver University.
o For a period of approximately 20 years he had made venture capital
investments including the acquisition of restricted securities.
o Over that period of time he had at various times acted as a consultant to
corporations engaged in initial public offerings.
o For the previous eight years he had been a consultant to enterprises
developing computer data bases for use on the Internet.
o He had voting and investment authority over the shares acquired by him on
behalf of World Net Trading, Ltd.
o World Net Trading, Ltd. was a closely and privately held corporation, the
voting shares of which were held in trust.
o Acting for World Net Trading, Ltd., Mr. Stevens represented to the
registrant that these shares of the registrant were acquired for investment
and without a view to distribution.
57
<PAGE>
Based upon the association of Don E. Montague with Randall Stevens, the
registrant had reasonable grounds to believe and rely upon and did in fact
believe and rely upon the representation of Randall Stevens and, further,
reasonable grounds to believe that Mr. Stevens was and is a person with
substantial knowledge and experience in financial and investment matters, that
he could fend for himself without the protection a registered prospectus would
have afforded him in acquiring shares of the registrant and that World Net
Trading, Ltd., and that Mr. Stevens could afford the economic risk of that
investment in these shares of the registrant. The registrant issued the
aforesaid shares to World Net Trading, Ltd., without registration in reliance on
the exemption afforded by Section 4(2) of the Securities Act of 1933 as a
transaction not involving any public offering.
There were no general solicitations to sell or solicitations of offers to
buy any of shares of the registrant in connection with the transactions
involving acquisition of shares of the registrant by Messrs. Montague, Delgado,
Kish, Stevens and World Net Trading, Ltd. There was no underwriting discount or
commission paid in connection with the issue of shares of the registrant to any
of those persons.
Pursuant to a private offering memorandum dated December 1, 1998, and
during the period from December 18, 1998 to approximately February 5, 1999, the
registrant issued 2,400,000 shares of its common stock at $.0333 per share,
as
adjusted for the aforesaid three-for-one forward stock split to the following
persons:
Number Date
Name Of Shares Consideration Acquired
---- --------- ------------- --------
World Net Trading Ltd. 30,000 $ 1,000 1-13-99
Camille and Michael Snyder 30,000 1,000 2-1-99
GJM Trading Partners, Ltd. 150,000 5,000 12-18-98
Dr. Andrew M. Georgeson 150,000 5,000 1-29-99
Second Chance Investments 600,000 20,000 12-18-98
Tradeco Corp. 600,000 20,000 1-2-99
View Systems, Inc. 840,000 28,000 2-5-99
--------- -------
Totals 2,400,000 $80,000
========= =======
Randall Stevens, the individual who acquired 90,000 shares on behalf of
World Net Trading, Ltd. referred to above for services rendered to the
registrant, acted for World Net Trading, Ltd. in acquiring the 30,000 shares
listed above. He, also, has voting and investment power over these 30,000
shares.
Camille Snyder is the daughter of Don E. Montague and the sister of Steven
S. Montague, Chief Executive Officer and President, respectively, of the
registrant. Michael Snyder is the husband of Camille. They represented to the
registrant that they are experienced with investment in securities. Mr. Snyder
represented to the registrant that he held a Masters Degree in International
Marketing from the University of Oklahoma. Michael and Camille Snyder
represented to the registrant that they understood that the shares of registrant
that they acquired were restricted securities that would have to be held by them
without resale for an indeterminate period. They, also, represented that they
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could, therefore, afford the economic risk of their investment in those share.
In addition, they represented that the shares they purchased were acquired for
investment and not with a view to distribution. Michael and Camille Snyder had
access to and afforded themselves of the information concerning the registrant
that would have been provided by a registered prospectus. Michael and Camille
Snyder did not require the protection that would have been afforded by a
register prospectus.
Based upon the relationship of Michael and Camille Snyder with Don E.
Montague and Steven S. Montague, the registrant had reasonable grounds to
believe and to rely upon and in fact did believe and rely upon the
representations of Michael and Camille Snyder in support of registrant's claim
of exemption from registration of the sale of those shares afforded by Section
4(2) of the Securities Act of 1933 as a transaction not involving any public
offering.
GJM Trading Partners, Ltd. and Second Chance Investments are legal persons
each controlled by Gary J. McAdam, the same person who controls Summer Breeze,
LLC, the legal person to whom the registrant has given its promissory note,
shares of common stock of the registrant and Series "A" Warrants to purchase
shares of the common stock of the registrant as discussed below.
Mr. Don E. Montague has known Gary J. McAdam for approximately 17 years.
During these years their relationship has encompassed many business transactions
between them. They are both officers, directors and principal shareholders of
the same corporation.
In connection with acquisition of the 150,000 shares of behalf of GJM
Partners, Ltd. and the 600,000 shares on behalf of Second Chance Investments,
Inc., Mr. McAdam represented to the registrant:
o that he was formerly a registered broker/dealer,
o that his principal occupation was as a business consultant and investor,
o that over the past 14 years, in particular, he had made numerous venture
capital investments of the nature of his acquisition of the shares of the
registrant on behalf of GJM Trading Partners, Ltd. and Second Chance
Investments,
o that he was afforded access to all of the financial and other information
relating to the registrant that he required in order to make the investment
decision to acquire the shares on behalf of GJM Trading Partners, Ltd. and
Second Chance Investments listed above,
o that he had a substantial beneficial interest in the shares he acquired for
GJM Trading Partners, Ltd. and Second Chance Investments, that he held
voting and investment power over these shares,
o that he was both a sophisticated and an accredited investor.
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o that he, GJM Trading Partners, Ltd. and Second Chance Investments, were
able to afford the economic risk of the investment in the shares of the
registrant listed above,
o that he knew these shares were restricted securities and must be held
without resale for an indeterminate period of time, and
o that these shares were acquired for investment and not with a view to
distribution.
Based on the relationship of Don E. Montague with Gary J. McAdam, the
registrant had reasonable grounds to believe and rely upon and in fact did
believe and rely upon the foregoing representations of Gary J. McAdam in
determining that Gary J. McAdam was a sophisticated investor with sufficient
knowledge an dexperience in financial and business matters to evaluate the risks
and merits associated with acquisition of the shares specified above and in
claiming, as it hereby does claim, an exemption from registration of the issue
of these shares under Section 4(2) of the Securities Act of 1933 as transactions
not involving any public offering.
Tradeco Corp. is a corporation controlled by David N. Nemelka, the same
person who controls David's Odyssey, LLC, a legal person to whom the registrant
has given its promissory note, issued shares of its common stock and issued
Series "A" Warrants to purchase shares of the common stock of the registrant as
discussed below.
Mr. Don E. Montague has known David N. Nemelka for approximately two years.
During that time Mr. Nemelka has engaged Mr. Montague to do corporate marketing
projects for Mr. Nemelka. In connection with his investment in the shares of the
reigstrant listed above on behalf of Tradeco Corp., Mr. Nemelka represented to
the registrant as follows:
o that he held an MBA degree from the Wharton School of Business,
o that he was a sophisticated and accredited investor,
o that he frequently make venture capital investments and that his investment
in these shars was consistent with that practice,
o that his principal occupation was that of a financial consultant,
o Tradeco Corp. was a privately held corporation controlled by himself,
o that he held 100 percent of the ultimate beneficial interest in the shares
acquired by Tradeco Corp. and that he held voting and investment power over
these shares, and
o that these shares were acquired by him on behalf of Tradeco Corp. for
investment and not with a view to distribution.
Based upon the relationship of Don E. Montague with David N. Nemelka, the
registrant had reasonable grounds to believe and rely upon and in fact did
believe and rely upon the foregoing representations of Mr. Nemelka in
determining that Mr. Nemelka was a sophisticated investor with sufficient
experience in financial and business matters to evaluate the risks and merits
associated with his investment in these shares, and therefore, claims an
exemption from registration of the issue of these shares under Section 4(2) of
the Securities Act of 1933 as a transaction not involving any public offering.
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Mr. Don E. Montague, Chief Executive Officer of the registrant has known
Dr. Andrew M Georgeson for over three years. This association has been primarily
a professional relationship. Dr. Georgeson was a Vice President and a Director
of the registrant for several months prior to his resignation in December 1998
by reason of the demands of his professional affairs. He acquired the above
listed shares of the registrant during his tenure as a Vice President and
Director of the registrant.
Dr. Georgeson had all the information of the kind that would be provided by
a registered prospectus at the time he purchased the above listed shares of the
registrant. He represented to the registrant that he frequently invested in
securities and was knowledgeable and experienced in financial and investment
matters. Dr. Georgeson also represented to the registrant that he could afford
the investment risk of acquiring these shares as restricted securities and that
he purchased these shares for investment and not with a view to distribution.
Based upon the relationship of Don E. Montague with Dr. Georgeson and Dr.
Georgeson's position with the registrant, the registrant had reasonable grounds
upon which to believe and rely upon and did in fact rely upon Dr. Georgeson's
representations in claiming, as it does hereby claim, an exemption from
registration under Section 4(2) of the Securities Act of 1933 of the issue of
the above shares to Dr. Georgeson as a transaction not involving any public
offering.
View Systems, Inc. is a publicly held corporation controlled by Gunther
Than, a director of the registrant.
Don E. Montague has known Gunther Than for 10 years. Mr. Than was a
Director of the registrant at the time of his acquisition of the above listed
shares of the registrant on behalf of View Systems, Inc. He had at that time all
of the information concerning the registrant that would have been provided by a
registered prospectus. Mr. Than is the President of View Systems, Inc. and a
principal shareholder of that corporation. Mr. Than is knowledgeable and
experienced in financial and investment matters. At the time Mr. Than acquired
the above listed shares on behalf of View Systems, Inc., he represented to the
registrant that he had voting and investment power over these shares. He further
represented that View Systems, Inc. could afford the economic risk of investment
in these restricted securities and that View Systems, Inc. acquired these shares
for investment and not with a view to distribution.
Based upon the relationship of Don E. Montague with Gunther Than and Mr.
Than's status as a director of the registrant, the registrant had reasonable
grounds to believe and rely upon and in fact did believe and rely upon the
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representations of Gunther Than in claiming, as it does hereby claim, an
exemption from registration under Section 4(2) of the Securities Act of 1933 of
the issue of these shares to View Systems, Inc. as a transaction not involving
any public offering.
There were no general solicitations to purchase or solicitations of offers
to buy any of the 2,400,000 shares of the registrant listed above. Each of the
sales of these shares was made by Don E. Montague to the individuals identified
above. There were no underwriting discounts or commissions paid to anyone in
connection with sale of these shares.
Pursuant to funding agreements dated August 6, 1999, September 1, 1999, and
September 30, 1999, the registrant borrowed an aggregate of $225,000, and issued
its promissory notes, issued shares of its common stock and issued Series "A"
Warrants to purchase shares of its common stock to the following persons:
Amount of
Promissory Number of Number of
Name Note Shares Warrants
---- ---- ------ --------
Business Development Corp $ 45,000 360,000 360,000
Mathis Family Partnership $ 20,000 160,000 160,000
Earnest Mathis IRA Rollover $ 25,000 200,000 200,000
Summer Breeze, LLC $ 45,000 360,000 360,000
David's Odyssey, LLC $ 45,000 360,000 360,000
David N. Nemelka $ 45,000 360,000 360,000
-------- --------- ---------
Totals $225,000 1,800,000 1,800,000
-------- --------- ---------
See Exhibits 10.2, 10.3 and 10.4 filed herewith.
Van R. Perkins is the President of Business Development Corp. This
corporation is a private investment company that is wholly owned by Mr. Perkins.
Don E. Montague has known Van R. Perkins for approximately three years
during which time they engaged in numerous business transactions. Mr. Montague's
privately held corporation, MediaComm Marketing International, Inc. is currently
performing a business engagement for Mr Perkins.
In connection with issue of the above listed securities to Business
Development Corp. and entering into the funding agreement dated August 6, 1999,
Exhibit 10.2 herein, Mr. Perkins represented to the registrant as follows:
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o He and Business Development Corp. were accredited investors within the
meaning of the federal securities law,
o He, through Business Development Corp., routinely made investments in
aggressive growth oriented development-stage companies,
o He is knowledgeable and experienced in financial and investment matters,
o He was given all of the information that he required concerning the
registrant in order to make the investment decision to make the loan and
acquire the securities listed above,
o He was able to afford the economic risk presented by making the loan and
acquiring the restricted securities provided for in the funding agreement
of August 6, 1999,
o He holds voting and investment power over the securities issued to Business
Development Corp. as listed above, and
o that all of the securities issued to Business Development Corp., as listed
above, were acquired for investment and not with a view to
distribution.
Earnest Mathis is a general partner of the Mathis Family Partnership, and
is the same person identified as Earnest Mathis IRA Rollover.
Don E. Montague has known Earnest Mathis for a period of 10 years. During
that time Mr. Montague has performed numerous business marketing engagements for
Mr. Mathis.
In connection with entering into the funding agreement referred to above,
Exhibit 10-2 herein, and issue of the above listed securities to Earnest Mathis
IRA Rollover and Mathis Family Partners, Mr. Mathis represented to the
registrant the following:
o that his occupation was that of a financial consultant and investor,
o that he was fairly extensively knowledgeable and experienced in financial
and investment matters,
o that he was an accredited investor,
o that he frequently made venture capital investments on behalf or Earnest
Mathis IRA Rollover and Mathis Family Partners,
o that he was afforded access to all of the information concerning the
registrant he required in order to make a decision to enter into the
funding agreement of August 6, 1999 and acquire the securities listed above
in the names of Earnest Mathis IRA Rollover and Mathis Family Partners,
o that he has voting and investment power over the securities issued to
Earnest Mathis IRA Rollover and Mathis Family Partners as listed above,
o That Earnest Mathis IRA Rollover and Mathis Family Partners are able to
afford the economic risk involved in acquiring these securities, and
o that the securities issued to Earnest Mathis IRA Rollover and Mathis Family
Partners were acquired for investment and not with a view to distribution.
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Summer Breeze, LLC, a legal person, is controlled by Gary J. McAdam, who is
the same person that controls GJM Trading Partners, Ltd., and Second Chance
Investments referred to above.
In connection with the transactions provided for in the funding agreements,
Exhibits 10-2 herein and issue of the securities acquired by Summer Breeze, LLC
as listed above, Mr. Gary J. McAdam made representation to the registrant
substantially identical to those representations given to the registrant as set
forth above in relation to the issue by the registrant of shares of its common
stock to GJM Trading Partners Ltd., Second Chance Investments and the ultimate
beneficial interests in the securities issued to Summer Breeze, LLC are held by
the following persons:
Percentage of
Name Beneficial Interest
---- -------------------
o Gary J. McAdam 26%
o Claudia McAdam 25%
o Brian McAdam 19.5%
o Kevin McAdam 19.5%
o The Dream Maker Foundation 10%
(a non-profit public support organization)
Mr. McAdam holds the voting and investment power over the securities issued
to Summer Breeze, LLC.
David's Odyssey, LLC is a legal person controlled by David R. Nemelka.
Mr. Don E. Montague has known David R. Nemelka for approximately four
years. The relationship between Messrs. Montague and Nemelka has been primarily
related to business affairs and they have, also, become personal friends. They
have conducted business transactions with one another and have made investments
together in the same business enterprises. In connection with his investment in
the shares of the registrant listed above on behalf of David's Odyssey, LLC.,
Mr. Nemelka represented to the registrant as follows:
o that David's Odyssey, LLC was controlled by him,
o that he held 100 percent of the beneficial interest in the securities of
the registrant acquired by David's Odyssey, LLC.,
o that he held voting and investment power over the securities acquired by
David's Odyssey, LLC.,
o that he was both a sophisticated and accredited investor,
o that he frequently made venture capital investments and that his investment
in the securities of the registrant acquired by David's Odyssey, LLC., was
consistent with that practice,
o that he considers himself very knowledgeable in financial and investment
matters, that he negotiated the acquisition on behalf of David's Odyssey,
LLC., of the above listed securities of the registrant with Don E. Montague
and took advice from no other person regarding this investment,
o that he received from the registrant all of the information he required
concerning the registrant including a business plan and related disclosure
information necessary to make his decision to invest in the securities
identified above,
o that he was a self-employed business consultant acting primarily for
development stage companies, and
o that the securities acquired by David's Odyssey were acquired for
investment and not with a view to distribution.
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There were no general solicitations to enter into funding agreements with
the registrant or to purchase or of offers to buy the securities issued as above
listed. Each of the funding agreements and the issue of the securities listed
above was negotiated by Don E. Montague with each of the individuals identified.
There was no underwriting discount or commission paid in connection with
entering into each of the funding agreements or issuing of the securities listed
above.
Based upon the relationship of Don E. Montague, Chief Executive Officer of
the registrant, with Messrs. Perkins, Mathis, McAdam, and both Messrs. Nemelka,
and Mr. Montague's knowledge of the knowledge and experience in business and
financial matters of Messrs. Perkins, Mathis, McAdam and both Messrs. Nemelka,
the registrant had reasonable grounds to believe and to rely upon, and did in
fact believe and rely upon, the foregoing representation of each of these
persons. None of those persons required the protection that would have been
afforded by a registered prospectus.
Accordingly, the registrant believed and relied upon the knowledge of Mr.
Montague concerning those persons and the representations of those persons in
entering into the funding agreements of August 6, 1999, September 1, 1999 and
September 30, 1999, Exhibits 10.2, 10.3 and 10.4 herein, and in issuing the
securities listed above. Based upon the knowledge of Mr. Don E. Montague and the
representatives of Messrs. Van R. Perkins, Earnest Mathis, Gary J. McAdam,
David R. Nemelka and David N. Nemelka the registrant determined as follows:
o that Mr. Van R. Perkins held voting and investment power over the
securities identified above and that Mr. Perkins was a sophisticated
investor with sufficient knowledge and experience in business and financial
matters to evaluate the risks and merits associated with the acquisition of
the securities acquired on behalf of Business Development Corporation
pursuant to the Funding Agreement dated August 6, 1999,
o that Mr. Earnest Mathis held voting and investment power over the
securities identified above and that Mr. Mathis was a sophisticated
investor with sufficient knowledge and experience in business and financial
matters to evaluate the risks and merits associated with acquisition of the
securities acquired on behalf of Earnest Mathis IRA Rollover and Mathis
Family Partners pursuant to the Funding Agreement dated August 6, 1999,
o that Mr. Gary J. McAdam held voting and investment power over the
securities identified above and that Mr. McAdam was a sophisticated
investor with sufficient knowledge and experience in business and financial
matters to evaluate the risks and merits associated with acquisition of the
securities acquired on behalf of Summer breeze, LLC pursuant to the Funding
Agreement dated August 6, 1999,
o that Mr. David R. Nemelka held voting and investments power over the
securities identified above and that Mr. Nemelka was a sophisticated
investor with sufficient knowledge and experience in business and financial
matters to evaluate the risks and merits associated with acquisition of the
securities acquired on behalf of David's Odyssey, LLC pursuant to the
Funding Agreement dated September 30, 1999,
o that Mr. David N. Nemelka held voting and investments power over the
securities identified above and that Mr. Nemelka was a sophisticated
investor with sufficient knowledge and experience in business and financial
matters to evaluate the risks and merits associated with acquisition of the
securities acquired on behalf of himself individually pursuant to the
Funding Agreement dated September 1, 1999.
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In accordance with the foregoing determinations regarding Messrs. Perkins,
Mathis, McAdam and both Messrs. Nemelka, the registrant relied upon and hereby
claims the exemption from registration of the transactions whereby Business
Development Corporation, Earnest Mathis, IRA Rollover, Mathis Family Partners,
Summer Breeze LLC, David's Odyssey, LLC and David N. Nemelka acquired the
securities of the registrant specified above afforded by Section 4(2) of the
Securities Act of 1933 as transactions not involving any public offering.
On August 25, 1999, pursuant to the provisions of the stock option and
stock grant plan of the registrant, it granted to Jennifer Lausen, an employee
of the registrant, options to purchase 75,000 shares of its common stock at
$0.35 per share. Ms. Lausen represented to the registrant that the options, and
the shares subject to option, if acquired, would be acquired for investment and
without a view to distribution. The registrant issued these options, and
proposes to issue any shares purchased pursuant to exercise of these options, in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as a transaction not involving any public offering and
the exemption afforded by Rule 701 of Regulation E under the Securities Act of
1933.There were no underwriting discounts or commissions paid in connection with
the grant of these options. Ms. Lausen has terminated her employment with the
registrant and thos options are no longer in force or effect.
On August 25, 1999, the registrant granted to Cygen Technologies, Inc., a
consultant to the registrant, options to purchase 150,000 shares of the common
stock of the registrant at $0.20 per share. Cygen Technologies, Inc. represented
to the registrant that the options, and any shares to be acquired pursuant to
exercise of these options, were acquired for investment and without a view to
distribution. Cygen Technologies, Inc. was represented in this transaction by
legal counsel versed in securities law. The registrant issued these options, and
proposes to issue shares of its common stock on exercise of these options, in
reliance on the exemption afforded by Section 4(2) of the Securities Act of 1933
as transactions not involving any public offering. There were no underwriting
discounts or commissions paid in connection with the issue of these options.
On November 30, 1999, pursuant to its stock option and stock grant plan,
the registrant granted to Steven S. Montague, then Vice President and a director
of the registrant, options to purchase 150,000 shares of the common stock of the
registrant at $.20 per share. Mr. Montague represented to the registrant that
the options, and the shares subject to option, if acquired, would be acquired
for investment and not with a view to distribution. The registrant issued these
options and proposes to issue any shares purchased pursuant to exercise of these
options in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933 as transactions not involving any public offering
and the exemption afforded by Rule 701 of Regulation E under the Securities Act
of 1933. There were no underwriting discounts or commissions paid in connection
with the grant of these options.
On November 30, 1999, pursuant to its stock option and stock grant plan,
the registrant granted to Gunther Than, a director of and consultant to the
registrant, options to purchase 150,000 shares of the common stock of the
registrant at $.20 per share. Mr. Than represented to the registrant that the
options, and the shares subject to option, if acquired, would be acquired for
investment and not with a view to distribution. The registrant issued these
options and proposes to issue any shares purchased pursuant to exercise of these
options in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933 as transactions not involving any public offering
and the exemption afforded by Rule 701 of Regulation E under the Securities Act
of 1933. There were no underwriting discounts or commissions paid in connection
with the grant of these options.
On November 30, 1999, pursuant to its stock option and stock grant plan,
the registrant granted to Christopher Trujillo options to purchase 75,000 shares
of the common stock of the registrant at $.75 per share. Mr. Trujillo
represented to the registrant that the options, and the shares subject to
option, if acquired, would be acquired for investment and not with a view to
distribution. The registrant issued these options and proposes to issue any
shares purchased pursuant to exercise of these options in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 as transactions not involving any public offering and the exemption
afforded by Rule 701 of Regulation E under the Securities Act of 1933. There
were no underwriting discounts or commissions paid in connection with the grant
of these options.
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Item 27. Exhibits
The exhibits set forth in the following index of exhibits are filed as a
part of this registration statement.
Exhibit
Number Description of Exhibit
------ ----------------------
5.1 Opinion of Ronald N. Vance, P.C.
re: Legality of Securities and Consent
(to be supplied with amendment)
23.1 Current Consent of Cordovano and Harvey, PC
23.2 Consent of Ronald N. Vance, P.C.
(contained in Exhibit 5.1)
(to be supplied with amendment)
Item 28. Undertakings
a. The registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to (i) include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement,
and (iii) include any material information with respect to the plan of
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distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) For the purpose of determining liability under the Securities Act
of 1933, treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time shall be
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
b. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
c. The registrant will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in the form of a prospectus filed by
the registrant under Rule 424(b)(1) or (4) or 497(h) under the Act as part of
this registration statement as of the time the Commission declared it effective.
(2) For any liability under the 1933 Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and that the offering of
the securities at that time as the initial bona fide offering of those
securities.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this amendment number
two to its registration statement to be signed on its behalf by the undersigned
in the city of Englewood, State of Colorado, on the 1st day of April 2000.
MediaComm Broadcasting Systems, Inc.
/s/ Don E. Montague
----------------------------------------
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
amendment number one to its registration statement was signed by the following
persons in the capacities and on the dates stated.
Date: April 1, 2000 /s/ Don E. Montague
---------------------------------------
Chairman of the Board of Directors,
Chief Executive Officer, and
Chief Accounting and Financial Officer
Date: April 1, 2000 /s/ Steven S. Montague
---------------------------------------
President, and a Director
Date: April 1, 2000 /s/ Anthony "Anton" Delgado
---------------------------------------
Secretary, Treasurer, and a Director
Date: April 1, 2000 /s/ Gunther Than
---------------------------------------
Director
69
Exhibit 23.1
To: The Securities and Exchange Commission
Re: Mediacomm Broadcasting Systems, Inc.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-90241 of MediaComm Broadcasting Systems, Inc. on Form SB-2 of our report
dated June 2, 1999 on the financial statments of MediaComm Broadcasting Systems,
Inc. appearing in the Prospectus, which is part of this Registration.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Cordovano and Harvey, P.C.
Denver, Colorado
April 6, 2000
