U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION
12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
649.COM, INC.
(Name of small business issuer in its charter)
TEXAS 76-0495640
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
1177 WEST HASTINGS, SUITE 1818
VANCOUVER, BC CANADA V6E 2K3
(Address of Principal Executive Offices) (Zip Code)
(604) 669-4771
(Registrant's Telephone Number, Including Area Code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
Title of Class
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TABLE OF CONTENTS
-----------------
PART I
Item 1 Description of Business.
Item 2 Plan of Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial Owners and Management.
Item 5 Directors, Executive Officers, Promoters and Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S
Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
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PART I
This Registration Statement on Form 10-SB includes forward-looking statements
which the Registrant believes are within the meaning of the Securities Exchange
Act of 1934 (the "Exchange Act"). These statements are based on management's
current beliefs and assumptions about the Registrant and the industry in which
the Registrant competes in, and on information currently available to
management. Forward-looking statements include, but are not limited to, the
information concerning possible or assumed future results of operations of the
Registrant set forth under the headings "Plan of Operations," and "Business."
Forward-looking statements also include statements in which words such as
"expect," "anticipate," "intend," "plan," "believe," "estimate," "consider," or
similar expressions are used.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. The Registrant's future results
and shareholder values may differ materially from those expressed or implied in
these forward-looking statements. Readers are cautioned not to put undue
reliance on any forward-looking statements. In addition, the Registrant does
not undertake to update forward-looking statements after the effectiveness of
this Registration Statement, even if new information, future events or other
circumstances have made them incorrect or misleading.
ITEM 1 - DESCRIPTION OF BUSINESS
- - - - - - - -------------------------------------
649.com, Inc. ("649"), is a company currently in the process of developing an
Internet based 6/49 lottery. We are currently in the process of testing our
technology and intend to market our lottery game around the world. Outside of
North America, in jurisdictions which allow online gaming, our contestants will
be able to play a patent-pending, instant-results lottery game for a fee, with
the potential of winning up to $5,000,000 in prizes. Within North America and
for jurisdictions which do not allow online gaming, the lottery game will be
available for contestants to play for free and win various non-cash prizes.
649.com was originally incorporated under the laws of the State of Texas on
March 1, 1996 as Market Formulation and Research Corp. From 1996 until 1999, we
were engaged in the activity of locating potential merger and acquisition
candidates, and thus had no material operations. On May 12, 1999, in
contemplation of acquiring 649.com, Inc., an Alberta, Canada corporation
("649-Canada"), we changed our name to 649.com, Inc. Effective on September 15,
1999, we acquired all of 649-Canada in a business combination described as a
"reverse acquisition." As we had no material operations prior to the
acquisition, the acquisition has been treated for accounting purposes as the
acquisition of 649 (the Registrant) by 649-Canada.
Immediately prior to the acquisition, 649 had 10,725,650 shares of Common Stock
outstanding. As part of our acquisition of 649-Canada, we issued 6,500,000
shares of our Common Stock to the shareholders of 649-Canada. We had no
significant operations prior to our acquisition of 649-Canada. Following the
acquisition of 649-Canada, our former management and Board of Directors resigned
and was replaced by the management of 649-Canada.
BUSINESS OF THE ISSUER
We are an online gaming company operating a simple, easy to play 6/49 lottery
over the Internet. We are lawfully permitted to locate and operate the data
processing component of our lottery game in Costa Rica. We will accept wagers
in an offshore jurisdiction, which we have not yet determined. The
Internet-based game will be available anywhere in the world, where not
prohibited, to anyone with an Internet connection. The lottery game is
appropriately named 6/49 as it involves selecting the six correct winning
numbers out of numbers 1 to 49 produced by a random number generator. The game
is unique in that it offers an instantaneous play feature, and a browser-based
system with minimal download time.
Unlike most lottery games our players do not need to buy tickets or wait for a
specific draw date. The game occurs immediately after the players' numbers are
selected from his current selection, his stored favorites or quick picks.
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The odds for correctly preselecting numbers that are purely random generated
from a field of 49 different numbers are:
the odds of selecting the 6 winning numbers are: 1:13,983,816
the odds of selecting 5 of the winning numbers are: 1: 55,492
the odds of selecting 4 of the winning numbers are: 1: 1,033
the odds of selecting 3 of the winning numbers are: 1: 57
Although we intend to operate our Internet web site on a continual basis, we
cannot provide any assurances that the web site will operate on a 24 hours a
day, seven days a week basis. Our computer systems and operations are
vulnerable to, among other things, damage or interruption from earthquakes,
floods, fires, power loss, telecommunication failures and similar events. These
systems are also potentially subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct. Any damage to, or failure of, our systems
could result in interruptions in our service. In addition, if we experience
demand for our services beyond the capacity of our systems, our web site may
become unstable and may cease to operate for periods of time. Many of our
competitors have experienced periodic unscheduled downtime. Continued
unscheduled downtime could harm our business, discourage users of our web site
and reduce our future revenues, if any.
PRODUCT AND SERVICES
Our core product will be the 6/49 Internet lottery game with the $5 million
grand prize for a six-out-of-six match. The current game is an Internet based
instantaneous lottery game which can be played any time of day or night,
internationally. As soon as the player selects a six number ticket, the six
winning numbers are generated instantly letting the player know if he has won or
lost. This is unlike the traditional lotteries that are played over fixed
intervals, such as weekly or bi-weekly. Lottery players of 649.com will never
have a split pot since a full jackpot is available each and every time a game is
played.
At the 649.com site, the player selects six numbers from a field of 49 by
clicking on six of the numbers on the selection screen or by clicking the "Quick
Pick" (automatic random selection) or "Favorites" (those numbers that are
considered the "lucky" ones by the players) buttons. Right clicking on the
buttons with the mouse can change numbers chosen in error. Once activated by
clicking on the play area, six numbers are selected by the random number
generator and are posted to the area immediately above the players selection
indicating whether some or all of the numbers matched those randomly delivered
by the game.
For those players in jurisdictions where on-line gaming is restricted or
prohibited, we offer a "free play" area where anyone may participate and play
for free in the same manner. A person playing in the free play area has an
opportunity to win a major prize, such as a luxury automobile, with a six out of
six match.
Privacy and Security
It is essential to our gaming operation to understand the status of our own
system and security and control requirements. In our search to identify
security issues, we have focused on three main areas: integrity, reliability,
and security.
Part of our commitment to security is to have the game tested to ensure that it
provides for both security and fairness. We intend to utilize the services of
Testing Services Technologies ("TST") which is an international organization
established in 1993 to provide testing and evaluation services covering design,
evaluation, development, management, testing and training. TST is one of the
world's most experienced testing laboratories for the gaming, wagering and
lotteries industries. TST has gained its reputation by being a fully
independent and impartial laboratory, working primarily with industry
regulators, testing systems to legislative and regulator standards.
The benefits us from such testing supports higher equipment performance,
stability and usability of systems, decreased time to market, improved quality,
early defect detection, and decreased recall/retrofitting costs. We anticipate
the following components in the testing process: hardware review and fault
diagnosis, software review, game design, peripheral device activities and
compatibility, site inspection and systems audit. In addition, communications,
jackpot systems, player tracking systems, and security will be examined fully.
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TST offers an international service for the testing and accreditation of
Internet Gaming systems. This accreditation provides an assurance to the player
that the system is fair and has been tested to the appropriate standards.
We are also in the process of developing a disaster recovery plan. We realize
that we cannot function without computer processing, and thus we are analyzing
our risks, critical business aspects, and plan development. We believe that the
development of a mirrored site will be part of this plan. Our mirrored site
will be one that will be developed in another jurisdiction in the event that
some catastrophe prevents the timely operation of the game from the primary
site.
Our random number generator, which generates the numbers for the game, will be
tested and certified to represent a secure and fair component of the game. The
testing by TST will ensure the randomness of the number generator. Further
testing will be performed to eliminate any possibility of a security breach that
would jeopardize the fairness of the game or the reputation of our gaming web
site.
Transactions Over the Internet
Our customer transactions will be protected by Secure Sockets Layer ("SSL")
protocol, which encrypts all information and confirms the identity of our server
before allowing a transaction to be completed. Data encryption hides sensitive
information such as the customer's name, address, and credit card number. Data
encryption will not allow anyone who obtains a player's personal information to
read or use it. The SSL prevents hackers from monitoring a gaming session
should they be able to intercept communications. The game server and database
system are both protected from external access. The server can only be accessed
using encrypted passwords and other protections.
We have attempted to eliminate any problems for the consumer by providing an
easy to play game concept that is fair and honest coupled with a supportable and
state-of-the-art financial transaction processing environment. The top first
prize will be $5 Million USD, and to ensure payment to the players the top prize
will be insured. We intend to preserve the integrity of the financial
transactions that are executed over the Internet as well as to screen out
potential website customers who may be residents of the jurisdictions blocked
from using the systems by matching the credit card number with the customer's
country, postal code, and address, and thus successfully blocking customers from
those jurisdictions where on line gaming is prohibited. Our website also
clearly states that we do not accept wagers from citizens of North America (US
and Canada), and Costa Rica, nor will we pay out funds to any address within
North America.
We address additional security issues with the issuance of personal
identification numbers to players required before any funds can be withdrawn.
We use a physically secure server which will be stored in a locking case at our
physical location.
The security application will protect the enterprise data which includes
player's private information, random number generation routines, past winners
etc. This information will be contained in a secure database.
The game will use a finite set of cryptographically strong random number
generators to generate the numbers. These will be changed periodically to
discourage any attempts at tracking.
Credit card transaction information must also be protected and we will use an
encrypted card verification system utilizing strong fraud detection devices.
Communication protection will be achieved through the major browser's
implementation to protect communications when the data is sent over the
Internet.
Verification is the final and an important layer of the security model and
players must understand that a complete verification process will be conducted
before a winner will be declared.
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MARKET DESCRIPTION
The increases in computer use, the wealth of information available on the
Internet and the growth of home-based businesses have all contributed to the
increased number of Internet users and businesses. Internet Service Providers
over the past few years have increased from zero to almost 4,000. The reason
for this activity is thought to result from minimal start-up costs and
expertise, the increasing demand to be "connected," and the attraction of
significant marketing opportunities for products and services. Bandwidth and
modem improvements have also had an impact on increased use. Electronic
Commerce over the Internet as a medium for marketing and purchasing has given
rise to many new companies who have exceeded revenue and growth expectations.
The number of users who purchase over the Internet is growing substantially each
month. Overall the Internet user rate continues to climb daily with numbers
reportedly doubling approximately every 100 days. In the U.S. alone there are
more than 70 million Internet users.
According to Nielsen Media Research, almost 200 million people will be Internet
users by the turn of the century. Statistics show that it took only four years
to attain 50 million users. Legalized gambling is one of the fastest growing
industries and the International Gaming and Wagering Business magazine estimated
gambling to be a $1 trillion global business which is reportedly larger than all
the other combined entertainment industries in the world.
The Internet gaming industry primarily started with casino type games in 1995
with reported revenues in excess of $1 billion in 1998. Projections by the
U.K.'s Financial Times estimate that by the year 2001 the total Internet gaming
community which includes casinos, sports books and lotteries will approach $10
billion.
When the universal appeal of gambling is combined with the accessibility and
rapid growth of the Internet, the opportunity becomes evident and that is why
major players like Kenny Rogers casino are joining the market. The River City
Group, LLC has conducted a study which indicates that potential Internet Gaming
Expenditures could reach $8.6 billion by 2000.
There appears to be a demand for in-home gaming services as evidenced by the
more than 700 Internet sites operated by more than 200 different private
companies or government agencies. Many of them are not sophisticated gaming
sites which demonstrates the public's appetite for this type of entertainment.
Many of the sites offer services that are not user-friendly, have bandwidth
restrictions, long download time and offer poor customer service. The most
serious concern of the majority of the Internet users is the security and
privacy of their financial transactions completed over the Internet. A second
concern is the integrity of the various games. Despite these concerns, the
number of users engaged in Internet commerce is growing at a significant rate.
International markets continue to open, presenting yet further opportunities for
the gaming industry. China recently opened up its borders to increased
international trade in telecommunications, including the Internet. Jupiter
Communications estimates that by 2002, nearly 320 million people will be on-line
globally. According to Bear Stearns & Co., Global Intertainment Corp. (GIC),
specializing in the development of new technology related to Internet gambling,
gets approximately two million hits daily from visitors on its website.
Cyberbetz casino indicates nearly 200,000 hits per day to their Web site. Of
these visitors, between 10% and 15% stay and place wagers on-line.
Statistical research revealed that the average player spends $150 per month on
gaming sites. 649 has estimated the first full year at an average of 11,000
regular players per month or $1,650,000 per month. As indicated above, the
Company sees the potential for a 100% growth in market share by the end of year
2001. The Company has conservatively projected growth figures to reflect 18,000
regular players by the end of year three. This would generate $32,400,000 per
annum based on the assumption that the average player spends $150 per month.
Net revenues are calculated by use of the percentages applicable to a number of
government operated lotteries. Their allocations show 45% to prizes, 10% to
overhead and the remainder to profit.
The existing customer base of the established gaming and wagering marketplace
will constitute the primary and major source of the Company's targeted revenues.
Internet gaming sites, like their land-based counterparts, will find it
necessary to build a high level of customer loyalty. This can only be
accomplished through premier customer service programs, easy to play game(s),
sizeable jackpots, and well-thought out marketing, and promotional strategies.
Bear Stearns & Co. commenting on the gaming industry summarizes the potential:
"We believe that future Internet gambling trends will occur on a much larger
scale overall. In a few years, personal computers will be available in nearly
every home in the U.S. and emerging markets such as India should quickly follow
suit. Latin America will catch up, as well. We believe that the Internet will
become one of the most widely accepted tools for information transfer and
commerce in history, and the globe will shrink. As people are brought closer
together, brand name recognition likely will become increasingly important for
all aspects of the economy, including Internet gambling. In our opinion, the
future will bring a swarm of international branding, marketing, and trade.
Regardless of a potential U.S. ban on Internet gambling, other world markets
will embrace Internet gambling and capitalize on the immense potential of the
combination of two very lucrative industries."
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Overall, the changes foreseen in computer performance, improvements in network
infrastructure, player profiles, market shifts, easier and cheaper access to the
Internet, pricing and competition provide the opportunities for our company's
growth and success.
Sources for Market Description include: The Internet Economy Indicators
University of Texas, 1999 (study by UT); www.internetindicators.com;
---------------------------
International Gaming and Wagering Business Magazine; Cyber Dialogue
(conservative estimate); Jupiter/NFO; International Data Corporation; Jupiter
Communications; Bear Stearns & Co. Inc Report; Nielsen Media Research; River
City Group, LLC, Christiansen Cap. Advisors Inc.; and U.K.'s Financial Times.
INTERNATIONAL OPERATIONS
We may be subject to risks of doing business internationally, including the
following:
- - - - - - - - regulatory requirements that may limit or prevent the offering of our
services in local jurisdictions;
- - - - - - - - legal uncertainty regarding liability for the listings of our users,
including less Internet-friendly basic law and unique local laws;
- - - - - - - - government-imposed limitations on the public's access to the Internet;
- - - - - - - - difficulties in staffing and managing foreign operations;
- - - - - - - - cultural nonacceptance of online gaming;
- - - - - - - - political instability;
- - - - - - - - potentially adverse tax consequences; and
- - - - - - - - administrative burdens in collecting local taxes, including value-added
taxes.
DEPENDENCE UPON KEY CUSTOMERS
Our success is dependent on attracting a significant number of Internet users
who feel at ease using their credit card online. We intend to build a
reputation as a site that offers security, safety, privacy and game fairness in
order to attract and retain customers. Since we are restricting the North
American market to free-plays, we are losing a share of the gaming revenue
market, but we feel confident in the number of Internet users throughout the
rest of the world that are attracted to gambling sites. Our primary targets
will be South America, Caribbean countries, Asia, and Europe, to name a few.
There exists well capitalized, branded, Internet gaming sites throughout the
balance of the world that are attracting players from outside North America.
MAJOR SUPPLIERS
The Company does not depend on any major suppliers to conduct its business
operations.
COMPETITION
The current market is one that is primarily dominated by government-sponsored
lotteries. Because most of these lotteries are operated without any
competition, an opportunity to compete in the global marketplace is created.
One of the larger lotteries is Plus Lotto out of Lichenstein that provides for
large jackpots in the millions of dollars. That lottery, however, is not
instantaneous and therefore players must wait for ticket draws and announcements
of winnings. There are numerous countries including Australia and Canada
hosting major prize traditional 6/49 lottery games, but again these involve
ticket purchases and offer an assortment of weekly, monthly and annual drawings.
We are differentiating ourselves from the traditional lottery games where
participants have to leave their home to purchase a ticket for a drawing that is
to occur sometime in the future. The cost of this type of operation with
kiosks, personnel, and equipment is high and only profitable in the higher
populated areas.
We believe that we will benefit from the instantaneous feature of our game, our
browser-based format, minimal download time and the top prize of $5,000,000. In
addition, our prize pay outs will be single lump sum payments unlike many other
lotteries that are paid out over time.
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We will capture a large portion of the market in part by what we consider
significant differences between what is available today and what our game
provides. Overall, we believe the customer will find our site exciting, easy to
play, and attractive because of the potential chance to win the large jackpot,
and thus, the customer will frequent our site more often than others.
REGULATION
There is a current focus on the Internet gaming industry in general with respect
to ways in which to regulate or prohibit it. The extent to which Internet
lotteries or the general gaming industry will become subject to direct
regulation by any governmental agency is unknown. The North American market has
applied regulations against Internet gaming and we are not offering the "play
for pay" game to this market but instead are offering the "play for free"
version. Players attempting to gain access to the "pay for play" will be
blocked by credit card encryption and other means. We will also post notices
advising potential players of the limitations and that they should check with
their state, province or Country laws.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
We currently have no costs associated with compliance with environmental
regulations. However, there can be no assurances that we will not incur such
costs in the future.
TRADEMARKS AND PATENTS
We regard our copyrights, service marks, trademarks, trade secrets and similar
intellectual property as critical to our success, and rely on trademark and
copyright law, trade secret protection and confidentiality and/or license
agreements with our employees, customers, partners and others to protect our
proprietary rights. We have no registered trademarks or service marks to date.
It may be possible for unauthorized third parties to copy some or all of our
products or reverse engineer or obtain and use information that we regard as
proprietary. In addition, the laws of some foreign countries do not protect
proprietary rights to the same extent as do the laws of the United States.
There can be no assurance that our means of protecting our proprietary rights in
the United States or abroad will be adequate.
Other parties may assert, from time to time, infringement claims against us. We
may also be subject to legal proceedings and claims from time to time in the
ordinary course of our business, including claims of alleged infringement of the
trademarks and other intellectual property rights of third parties by us and our
licensees, if any. Such claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources.
There can be no assurance that any such claims would not result in protracted
and costly litigation, having a materially adverse and negative effect on us and
our financial results.
Our intellectual property portfolio includes the Internet domain name 649.com
plus all related intellectual property rights pertaining to the Internet gaming
concept based on the 6/49 lottery. The Company is in the process of
transferring the domain name from Baycove Investments to 649.com, Inc.
Three patents pending have been filed covering the concept of an instant draw
after each bet ("instantaneous concept"), however, there can be no assurances
that such patents will be granted. An application was filed in the Canadian
Patent Office in April 23, 1999, serial number 2,269,851. An additional patent
application was filed with the Patent and Trademark Office of the U.S.
Department on Commerce on June 23, 1999. These patents pending cover playing
for money, playing for free, playing on the Internet or playing on stand-alone
video lottery terminals:
- - - - - - - - The first patent pending covers the method and apparatus for conducting
instantaneous on-line lotteries. An example of this is when a bet is placed on
our website and there is an instant draw of the 6 numbers out of 49 on the
participants computer screen. As a result, the player knows immediately if he
has won or lost.
- - - - - - - - The second patent pending covers the "play for fun" 6/49 concept on the
Internet. Substantial prizes are put up by advertisers (automobiles, etc). If
after a negotiated number of plays, the automobile is not won, then the
automobile is owned by the casino and another vehicle is provided by the
advertisers and so on.
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- - - - - - - - The third related patent pending covers the 6/49 lottery stand-alone video
machines that are normally located wherever electronic gaming video machines are
permitted. Again, the unique concept of the patent is that, upon selecting six
numbers out of forty-nine on the stand-alone video machine, six numbers are
randomly computer generated immediately in front of the player such that, for a
$1.00 wager, the player will know instantly whether he has won $1,000,000 (the
prize for selecting six out of the six numbers chosen from forty-nine).
NUMBER OF EMPLOYEES
As of March 31, 2000, the Company employed three people on a full time basis.
Of these three employees, two are executive officers of the Company. See
"Directors, Executive Officers, Promoters and Control Persons." The third
employee is an administrative support staff person.
ITEM 2 - PLAN OF OPERATION
- - - - - - - -------------------------------
The following discussion contains certain forward-looking statements that are
subject to business and economic risks and uncertainties, and our actual results
could differ materially from those forward-looking statements. The following
discussion regarding the financial statements of the Company should be read in
conjunction with the financial statements and notes thereto.
Our prior full fiscal years ending December 31, 1999 and 1998 are not indicative
of our current business plan and operations. During the years ended December
31, 1998 and 1999, 649 had revenues of $15,500 and $0, respectively, and was in
its development stages. For information concerning our prior fiscal year, we
refer the reader to the financial statements provided under Part F/S contained
herein.
We do not currently generate any revenue from operations and do not expect to
report any revenue from operations at least until after the official launch of
the online lottery game. Even after the launch of the game, there can be no
assurance that we will generate positive cash flow and there can be no
assurances as to the level of revenues, if any, that we may actually achieve
from the online lottery game.
Implementation Plan
We are in the final stages of implementing our Internet gaming web site, and we
expect that our web site will be operational by the third quarter of 2000. We
are currently beta-testing the web site, which we have been doing since the
first quarter of 2000. In addition to the completion of the software for our
website, we will be finalizing our banking relationships for the transactional
processing of user fees and solidifying the relationship with an insurer of the
$5 million grand prize. Subsequent to the final implementation of the website,
we will undertake an advertising and public relations campaign to attract
visitors to the website.
Liquidity
As of December 31, 1999, our current assets consisted of only $7,227 in cash and
an additional $35,000 in prepaid expenses and other current assets. As of that
same date, we had an accumulated deficit from operations of over $2,130,000.
To date, we have been funding our operations through the use of short terms
loans from our majority shareholder, Baycove Investments Limited, and the
issuance of our stock in exchange for services rendered. During the fiscal year
2000, we estimate the need for approximately $3,500,000 in working capital.
Sources of this needed capital will include a limited amount of revenues from
operations, continued loans from shareholders, and the sale of common stock.
There are currently no plans or agreements in place for either source of
financing.
Capital Expenditures
During the next 12 months, we anticipate approximately $350,000 in capital
expenditures relating to research and development, mirrored site installation,
software development, language programs and security testing/backroom set-up.
Sources of this needed capital will include loans from shareholders and the sale
of common stock.
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ITEM 3 - DESCRIPTION OF PROPERTY
- - - - - - - -------------------------------------
At present, in order to reduce overhead expenses, we do not maintain a physical
office in the United States. Our current administrative facility is made
available to us pursuant to a verbal agreement with a major shareholder for
office space located at 1177 West Hastings, Suite 1818, Vancouver, British
Columbia, Canada. The monthly rental rate, which includes administrative costs,
office rent, and related utility charges, is currently $ 3,000 per month.
In November 1999, we entered into an agreement with MillMedia, S.A., a service
company based in Costa Rica that is owned by Larry Burbidge, our President and
Chairman. Under the terms of this agreement, MillMedia, S.A. will arrange and
manage an Internet connection for our computer equipment and provide other
professional services as required. We have agreed to compensate MillMedia, S.A.
for providing such services at an annual rate equivalent to the annual rental
costs of the office/server site, personnel costs and any additional costs
incurred on behalf of 649. The agreement has an initial term of two years, but
automatically renews for successive year to year terms unless terminated in
accordance with its terms. In the event of the death, disability, or
termination of employment of Mr. Burbidge, 649 has an option to purchase all of
the assets of MillMedia, S.A. for the sum of $1.00.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - - - - - - --------------------------------------------------------------------------------
The following table sets forth, as of March 31, 2000 certain information with
respect to our equity securities owned of record or beneficially by (i) each of
our Officers and Directors; (ii) each person who owns beneficially more than 5%
of each class of our outstanding equity securities; and (iii) all Directors and
Executive Officers as a group.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Title Common Stock Percent of
of Class Name and Address of Beneficial Outstanding Outstanding
- - - - - - - -------- Owner ------------- -------------
-------------------------------
Common Stock Larry Burbidge 240,000 (1) 1.34%
1177 West Hastings, Suite 1818
Vancouver, BC Canada V6E 2K3
Common Stock Brandon Moase 135,000 (2) 0.75%
1177 West Hastings, Suite 1818
Vancouver, BC Canada V6E 2K3
Common Stock Baycove Investments Ltd. 7,300,000 (3) 40.81%
Suite 1818-1177 West Hastings Street
Vancouver, BC V6E 2K3
Common Stock Intrepid International, Ltd. 5,272,085 (4) 29.48%
2843 Del Prado, Suite 318
Dana Point, CA 92629
All Directors and 375,000 2.09%
Officers as a Group (2
Persons in total)
</TABLE>
(1) The shares reflected include 240,000 shares of common stock
issuable under the terms of Mr. Burbidge's Employment Agreement. Mr. Burbidge
is entitled to 180,000 shares on January 31, 2000 and 30,000 shares per month
thereafter for a total of 360,000 shares over 12 months with an additional
140,000 shares due at the end of twelve months of continuous employment. Does
not include any options granted to Mr. Burbidge because they are not exercisable
within 60 days. See Executive Compensation.
(2) The shares reflected include 135,000 shares of common stock
issuable under the terms of Mr. Moase's Employment Agreement. Mr. Moase is
entitled to 120,000 shares on March 1, 2000 and 15,000 shares per month
thereafter, for a total of 180,000 shares over 12 months with an additional
70,000 shares due at the end of the 12-month period. Does not include any
options granted to Mr. Moase because they are not exercisable within 60 days.
See Executive Compensation.
10
<PAGE>
(3) Includes 6,500,000 shares held by Karl Rodriguez/William Stocker
Escrow TTEE 4 Baycove Investments, Ltd./649.com, and 800,000 shares held by
Baycove Investments, Ltd. c/o Stoffel & Partner.
(4) Includes 5,205,420 shares held by Intrepid International, Ltd. and
66,665 shares held by Intrepid International, SA.
We believe that the beneficial owners of securities listed above, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for purposes
of computing the percentage of the person holding such options or warrants, but
are not deemed outstanding for purposes of computing the percentage of any other
person.
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
- - - - - - - ------------------------------------------------------------------------------
The following table sets forth the names and ages of our current directors and
executive officers, their principal offices and positions, and the date such
person became a director or executive officer. The executive officers are
elected annually by our Board of Directors. The directors serve one year terms
until their successors are elected. The executive officers serve terms of one
year or until their death, resignation or removal by the Board of Directors.
There are no family relationships between any of the directors and executive
officers. In addition, there was no arrangement or understanding between any
executive officer and any other person pursuant to which any person was selected
as an executive officer.
The directors and executive officers are as follows:
Name Age Positions
- - - - - - - ---- --- ---------
Larry Burbidge 56 President, Secretary, Treasurer, and
Director
Brandon Moase 26 Vice President of Operations and
Director
LARRY BURBIDGE
Mr. Burbidge is currently President and Chief Executive Officer of the Company.
Mr. Burbidge has a strong background of over twenty years in the financial
services sector with areas of experience in business development, strategic
planning, asset management, financial analysis and client relations.
Prior to a private practice in business consulting, financial placement,
appraisals and land development, from 1995 until he joined 649.com, Inc., Mr.
Burbidge served as Executive Vice President and director of a Canadian Trust
Company (Metropolitan Trust, formerly Morguard Trust). The trust company was
primarily involved with sourcing recommendations and administration of
investments for Canadian pension funds and a variety of institutional investors.
Mr. Burbidge was also appointed director and Chief Operating Officer responsible
for the orderly wind-down of a Canadian Schedule B bank under the auspices of
the Canada Deposit Insurance Corporation. This position was occupied 2 1/2 years
simultaneously with Mr. Burbidge's position at Morguard. Burbidge directed the
activities of mortgage banking and Advisory services business units. Mr.
Burbidge has also been an approved registered consultant under the Canadian
Agri-ventures program since 1998. In addition, in 1999 Mr. Burbidge served as a
director on the board of SOVAS, an organization which deals with violence
against women issues. Mr. Burbidge's clients have included provincial and
federal government organizations, lending institutions and a variety of public
and private enterprises.
11
<PAGE>
BRANDON MOASE
Mr. Moase serves as Vice President of Operations and a Director. Mr. Moase was
previously involved in the direct marketing of international lottery products to
the U.S. market. From 1994 to his appointment as Vice President Operations at
649.com, Inc., Mr. Moase was a Principal of a British Columbia, Canada company
that specialized in lottery odds management. His responsibilities included
product marketing, database management, database development, and Information
Technology management. His experience has given him an intimate understanding
of what drives the gaming industry.
ITEM 6 - EXECUTIVE COMPENSATION
- - - - - - - -----------------------------------
On August 9, 1999, the Company entered into a twelve-month Employment Agreement
with Larry Burbidge, the Company's President and C.E.O., whereby the Company
will pay Mr. Burbidge an annual salary of approximately $67,000. In addition to
his salary, Mr. Burbidge was granted an aggregate of 500,000 shares of Company
common stock, 180,000 shares issuable on January 31, 2000 and 30,000 shares per
month thereafter for a total of 360,000 shares over 12 months, with an
additional 140,000 shares due at the end of twelve months of continuous
employment. As of March 31, 2000, 240,000 shares of common stock are due under
the terms of the Agreement, all of which have been issued. Finally, Mr.
Burbidge was granted options to acquire an additional 500,000 shares of Company
common stock at a price of $0.50 per share, exercisable for a period of two
years following his first continuous year of employment with the Company.
On August 12, 1999, the Company entered into a twelve-month Employment Agreement
with Brandon Moase, the Company's Vice President of Operations, whereby the
Company will pay Mr. Moase an annual salary of approximately $53,000. In
addition to his salary, Mr. Moase was granted an aggregate of 250,000 shares of
Company common stock, 120,000 shares issuable on March 1, 2000, and at the rate
of 15,000 shares for each month thereafter, for a total of 180,000 shares over
12 months with an additional 70,000 shares due at the end of the 12-month
period. As of March 31, 2000, 135,000 shares of common stock are due under the
terms of the Agreement, 120,000 of which have been issued. Finally, Mr. Moase
was granted options to acquire an additional 250,000 shares of Company common
stock at a price of $0.50 per share, exercisable for a period of two years
following his first continuous year of employment with the Company.
On December 1, 1999, the Company's Board of Directors and a majority of its
shareholders approved the 649.com, Inc. Omnibus Stock Option Plan, effective
December 1, 1999. Under the terms of the Option Plan, the Board of Directors
has the sole authority to determine which of the eligible persons shall receive
options, the number of shares which may be issued upon exercise of an option,
and other terms and conditions of the options granted under the Plan to the
extent they don't conflict with the terms of the Plan. An aggregate of
1,000,000 shares of common stock are reserved for issuance under the Plan during
year December 1, 1999 to November 30, 2000. For each subsequent year beginning
December 1, 2000, there shall be reserved for issuance under the Plan that
number of shares equal to 10% of the outstanding shares of common stock on
December 1 of that year. The exercise price for all options granted under the
Plan shall be 100% of the fair market value of the company's common stock on the
date of grant, unless the recipient is the holder of more than 10% of already
outstanding securities of the Company, in which case the exercise price shall be
110% of the fair market value of the Company's common stock on the date of rant.
All options shall vest equally over a period of five years from the date
issuance. Currently, the Board of Directors has not issued any options under
the terms of the Plan.
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities for the years ended December 31, 1999 and
1998, and 1997. Other than as set forth herein, no executive officer's salary
and bonus exceeded $100,000 in any of the applicable years. The following
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted and certain other compensation, if any, whether paid or
deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
-------------------------------- --------------------------------------------------
Awards Payouts
-------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS ($) OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) SAR's(#) ($) ($)
Larry Burbidge 1999 27,900 -0- -0- -0- 500,000 -0- -0-
(President,
Secretary,
Treasurer)
1998 0 -0- -0- -0- -0- -0- -0-
1997 0 -0- -0- -0- -0- -0- -0-
Brandon Moase 1999 22,000 -0- -0- -0- 250,000 -0- -0-
(VP Operations)
1998 0 -0- -0- -0- -0- -0- -0-
1997 0 -0- -0- -0- -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<S> <C> <C> <C> <C>
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTIONS/SAR'S GRANTED TO EMPLOYEES EXERCISE OR BASE PRICE
NAME GRANTED (#) IN FISCAL YEAR ($/SH) EXPIRATION DATE
Larry Burbidge 500,000 66.7% $ 0.50 August 2002
Brandon Moase 250,000 33.3% $ 0.50 August 2002
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<S> <C> <C> <C> <C>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE REALIZED OPTIONS/SARS AT FY-END (#) OPTIONSSARS AT FY-END ($)
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
Larry Burbidge -0- -0- -0- / 500,000 -0- / -0-
Brandon Moase -0- -0- -0- / 250,000 -0- / -0-
</TABLE>
COMPENSATION OF DIRECTORS
Our Directors have not yet received any compensation for serving in such
capacity, and we do not currently contemplate compensating our Directors in the
future for serving such capacity.
12
<PAGE>
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - - - - - - --------------------------------------------------------------
Baycove Investments Limited
In order to fund operations, we have, from time to time, made advances to, and
received advances from, our largest stockholder, Baycove Investments Limited,
and affiliated entities. No formal arrangement exists for such advances, which
have historically been made or received on an "as-needed" basis. In addition,
Baycove charges us $3,000 per month for administrative costs that include office
rent and related utility charges. Baycove has also, in the past, paid certain
of our expenses. As a result of the above transactions with Baycove, we owe
net advances to Baycove of $219,340 at December 31, 1999. Such amount is not
collateralized, does not bear interest, and has no stated repayment terms.
As previously discussed, effective on September 15, 1999, 649.com, Inc. acquired
all of the outstanding common stock of 649-Canada in a business combination
described as a "reverse acquisition." For accounting purposes, the acquisition
has been treated as the acquisition of 649 (the Registrant) by 649-Canada. We
acquired the outstanding common stock of 649 from Baycove, and as a result, we
owe Baycove $100,000 in connection with the acquisition.
Intrepid International, Ltd.
During the years ended December 31, 1999 and 1998, we received legal services
from Intrepid International, Ltd., a significant stockholder. As of December
31, 1999, we owed this stockholder $8,242.
During March 1999, we issued 221,860 shares of common stock to Intrepid in
exchange for $44,372 of legal services. In addition, in April 1999, we issued
5,000,000 shares of common stock to Intrepid in exchange for $1,000 of cash.
As the estimated fair market value of our common stock exceeded the estimated
fair value of consideration received by us, compensation expense of $499,000 was
recognized by us in connection with these 5,000,000 shares of common stock
issued to Intrepid.
Also during March 1999, two former officers of 649, who are also partial owners
of Intrepid, received an aggregate of 50,000 shares of our common stock for
prior services performed. We recognized compensation expense of $5,250 in
connection with this stock issuance.
Lease Agreement
In November 1999, we entered into an agreement with MillMedia, S.A., a service
company based in Costa Rica that is owned by Larry Burbidge, our President and
Chairman. Under the terms of this agreement, MillMedia, S.A. will arrange and
manage an Internet connection for our computer equipment and provide other
professional services as required. We have agreed to compensate MillMedia, S.A.
for providing such services at an annual rate equivalent to the annual rental
costs of the office/server site, personnel costs and any additional costs
incurred on behalf of 649. Such agreement has an initial term of two years, but
automatically renews for successive year to year terms unless terminated in
accordance with the terms of the agreement. In the event of the death,
disability, or termination of employment of Mr. Burbidge, 649 has an option to
purchase all of the assets of MillMedia, S.A. for the sum of $1.00.
13
<PAGE>
ITEM 8 - DESCRIPTION OF SECURITIES
- - - - - - - ---------------------------------------
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of 50,000,000
shares of Common Stock, $0.001 par value per share, of which 17,885,650 were
outstanding as of March 31, 2000. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by the
stockhol-ders. Holders of Common Stock have no cumulative voting rights.
Holders of shares of Common Stock are entitled to share ratably in dividends, if
any, as may be declared, from time to time by the Board of Direc-tors in its
discretion, from funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of shares of
Common Stock are entitled to share pro rata all assets remaining after payment
in full of all liabilities. Holders of Common Stock have no pre-emptive rights
to purchase the Company's common stock. There are no conversion rights or
redemption or sinking fund provisions with respect to the common stock. All of
the outstanding shares of Common Stock are fully paid and non-assessable.
In October 1998, the then-outstanding shares of common stock underwent a
1-for-75 reverse stock split, resulting in total outstanding shares at that
time, after rounding fractional shares, of 90,758. In May 1999, the
then-outstanding shares of common stock underwent a 5-for-1 forward stock split,
resulting in total outstanding shares at that time, after rounding fractional
shares, of 10,725,650. All outstanding shares reflected in this Form 10-SB
reflect these two stock splits.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of 5,000,000
shares of Preferred Stock, $0.001 par value per share, none of which are issued
and outstanding. The Company's Board of Directors has authority, without action
by the shareholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other rights
of such series. The issuance of preferred stock may also include restricting
dividends on the common stock, dilute the voting power of the common stock,
and/or impair the liquidation rights of the holders of common stock.
TRANSFER AGENT
The transfer agent for the Common Stock is Madison Stock Transfer, Inc., P.O.
Box 145, 1813 E. 24th Street, Brooklyn, NY 11229, telephone number (718)
627-4453.
14
<PAGE>
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
- - - - - - - --------------------------------------------------------------------------------
OTHER SHAREHOLDER MATTERS
- - - - - - - ---------------------------
MARKET INFORMATION
The following table sets forth the high and low prices for our common stock for
the periods noted, as reported by the National Daily Quotation Service and the
OTC Bulletin Board. Quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions. Our
common stock was not listed on the OTC Bulletin Board during 1997. On June 23,
1998, our common stock began trading on the Bulletin Board under the trading
symbol MFRC. In conjunction with the acquisition of 649, effective on May 27,
1999, the our trading symbol was changed to ABET.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD HIGH LOW
- - - - - - - ----- ------ ------- ---
1998 Second Quarter (June 23, 1998 to June 30, 1998) 0.00 0.00
Third Quarter 0.00 0.00
Fourth Quarter 1.06 0.00
1999 First Quarter 1.50 0.50
Second Quarter 9.00 0.50
Third Quarter 0.50 1.66
Fourth Quarter 1.50 0.56
2000 First Quarter 0.40 0.10 (1)
</TABLE>
(1) During a portion of the first quarter of 2000, our common stock traded
on the "Pink Sheets', and as a result, we are unable to obtain accurate price
information for that period. The price range listed above is an estimate.
Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on January 4, 1999,
issuers who do not make current filings pursuant to Sections 13 and 15(d) of the
Securities Act of 1934 are ineligible for listing on the OTC Bulletin Board.
Pursuant to the Rule, issuers who are not current with such filings are subject
to delisting pursuant to a phase-in schedule depending on each issuer's trading
symbol as reported on January 4, 1999. As previously discussed, our trading
symbol on January 4, 1999 was MFRC. Therefore, pursuant to the phase-in
schedule, our common stock was delisted on February 10, 2000, and is now trading
on the "Pink Sheets" under the symbol ABET.
We are not currently in compliance with the Rule, and in the past, have not made
filings pursuant to Sections 13 and 15(d) of the Securities Act of 1934. We
have filed this Registration Statement on Form 10-SB in order to become a
"reporting" company and therefore comply with the Rule.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. The Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions include any equity security listed on Nasdaq and any equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for three years,
(ii) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average annual revenue
of at least $6,000,000, if such issuer has been in continuous operation for less
than three years. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
15
<PAGE>
NUMBER OF SHAREHOLDERS
The number of beneficial holders of record of our common stock as of the close
of business on March 31, 2000 was approximately 63. Many of the shares are held
in a "street name" and consequently reflect numerous additional beneficial
owners.
DIVIDEND POLICY
To date, we have not declared any cash dividends on our common stock, and do not
expect to pay cash dividends in the next term. Rather, we intend to retain
future earnings, if any, to provide funds for operation of its business.
ITEM 2 - LEGAL PROCEEDINGS
- - - - - - - ------------------------------
We may from time to time be involved in various claims, lawsuits, disputes with
third parties, actions involving allegations of discrimination, or breach of
contract actions incidental to the operation of its business. We are not
currently involved in any such litigation which we believe could have a
materially adverse effect on our financial condition or results of operations.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- - - - - - - --------------------------------------------------------------
Crouch, Bierwolf & Chisholm, Certified Public Accountants, was engaged to audit
the financial statements of Market Formulation and Research Corporation from its
inception through December 31, 1998. In December 1999, the relationship with
Crouch, Bierwolf & Chisholm was terminated. There were no disagreements of the
type required to be reported by this Item 3 between Crouch, Bierwolf & Chisholm
and 649. Subsequently, on December 13, 1999, we retained the services of
Haskell & White LLP to audit our 1999 financial statements.
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
- - - - - - - -------------------------------------------------------
On November 1, 1997, we issued an aggregate of 66,670 shares of common stock to
affiliates of 649 at nominal (after giving effect to the stock splits)
consideration. The issuances were a limited offering not over $1 million
without general advertising and solicitation made under Rule 504 of Regulation D
promulgated under the Securities Act of 1933.
On June 30, 1998, we issued an aggregate of 66,666 shares of common stock to
non-affiliate investors in exchange for nominal (after giving effect to the
stock splits) consideration. The issuances were a limited offering not over $1
million without general advertising and solicitation made under Rule 504 of
Regulation D promulgated under the Securities Act of 1933.
On July 2, 1998, we issued an aggregate of 10,000 shares of common stock to
non-affiliate investors in exchange for nominal (after giving effect to the
stock splits) consideration. The issuances were a limited offering not over $1
million without general advertising and solicitation made under Rule 504 of
Regulation D promulgated under the Securities Act of 1933.
Effective in October 1998, the outstanding shares of common stock underwent a
1-for-75 reverse stock split, reducing the number of issued and outstanding
shares, after giving effect to rounding for fractional shares, to 90,758.
On March 3, 1999, we issued 221,860 shares of common stock to Inteprid
International, Inc. in consideration for services with a value of $44,372. The
issuances were a limited offering not over $1 million without general
advertising and solicitation made under Rule 504 of Regulation D promulgated
under the Securities Act of
1933.
On March 29, 1999, we issued an aggregate of 10,000,000 shares of common stock
to one affiliated and five unaffiliated investors for total cash consideration
of $11,000. The issuances were a limited offering not over $1 million without
general advertising and solicitation made under Rule 504 of Regulation D
promulgated under the Securities Act of 1933.
16
<PAGE>
Effective April 1999, we issued an aggregate of 25,000 shares of common stock to
each of our directors, John Spicer and Karl Rodriguez, as consideration for
services rendered valued at $2,625 each. The shares were restricted securities
when issued, pursuant to ' 4(2) of the 1933 Securities Act.
Effective in May 1999, the outstanding shares of common stock underwent a
5-for-1 forward stock split, increasing the number of issued and outstanding
shares, after giving effect to rounding for fractional shares, to 10,725,650.
Effective on September 15, 1999, we acquired all of the outstanding common stock
of 649-Canada in a business combination described as a "reverse acquisition."
We issued 6,500,000 shares of Common Stock to the shareholders of 649-Canada in
exchange for all of the outstanding shares of common stock of 649-Canada. This
issuance was conducted under an exemption under Section 4(2) of the Securities
Act of 1933.
In December 1999, we issued an aggregate of 300,000 shares to two accredited
investors for total cash consideration of $150,000. The issuances were a
limited offering exempt from registration under Section 4(2) of the Securities
Act of 1933, and thus were restricted in accordance with Rule 144 promulgated
thereunder.
In March 2000, we issued 240,000 shares to our President and Chief Executive
Officer, Larry Burbidge, and 120,000 shares to our Vice President of Operations,
Brandon Moase. These issuances were for services pursuant to their respective
employment agreements, and were issued pursuant to an exemption under Section
4(2) of the Securities Act of 1933.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
- - - - - - - ---------------------------------------------------------
The Corporation Laws of the State of Texas and the Company's Bylaws provide for
indemnification of the Company's Directors for liabilities and expenses that
they may incur in such capacities. In general, Directors and Officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action or proceeding, actions that the indemnitee
had no reasonable cause to believe were unlawful. Furthermore, the personal
liability of the Directors is limited as provided in the Company's Articles of
Incorporation.
PART F/S
FINANCIAL STATEMENTS
- - - - - - - ---------------------
The Financial Statements required by this Item are included at the end of this
report beginning on page F-1.
17
<PAGE>
PART III
ITEM 1 - INDEX TO EXHIBITS
- - - - - - - -------------------------------
EXHIBIT NO. DESCRIPTION
- - - - - - - ------------ -----------
2.1 Plan of Reorganization and Acquisition
3.1 Restated Articles of Incorporation
3.2 Restated Bylaws
10.1 Stock Option Plan
10.2 Employment Agreement for Larry Burbidge
10.3 Employment Agreement for Brandon Moase
10.4 Consulting Agreement with Mindquake Software, Inc.
10.5 Offer to Purchase Patent
10.6 Agreement with Millmedia
10.7 Agreement with TST
23.1 Consent of Haskell & White LLP, Independent Certified
Public Accountants
23.2 Consent of Crouch, Bierwolf & Chisholm, Certified Public
Accountants
27 Financial Data Schedule
__________________
ITEM 2 - DESCRIPTION OF EXHIBITS
- - - - - - - -------------------------------------
Not applicable
18
<PAGE>
Consolidated Financial Statements
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
As of December 31, 1999 and for Each of the
Years in the Two-Year Period Then Ended,
and for the Period from Inception, June 13, 1990
Through December 31, 1999
F-1
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheet F-4
Consolidated Statements of Operations and Comprehensive Loss F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
649.com, Inc. (formerly, Market Formulation and Research Corp.)
(a Development Stage Company)
We have audited the accompanying balance sheet of 649.com, Inc. (formerly,
Market Formulation and Research Corp.) (a Development-Stage Company) (the
"Company") as of December 31, 1999, and the related consolidated statements of
operations and comprehensive loss, stockholders' equity and cash flows for the
year then ended, and the period from inception, June 13, 1990 through December
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 the Company as of December 31,
1999, and the results of its operations and cash flows for the year then ended,
and the period from inception, June 13, 1990 through December 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company's
recurring losses, net working capital deficiency, and lack of revenue-generating
operations raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Haskell & White LLP
HASKELL & WHITE LLP
February 16, 2000
F-3
<PAGE>
To the Board of Directors and Stockholders of
Market Formulation and Research Corp
We have audited the accompanying balance sheets of Market Formulation and
Research Corp (a Development Stage Company) as of March 31, 1999, December 31,
1998 and 1997 and the related statements of operations, stockholders' equity and
cash flows for the three months ended March 31, 1999 and the years ended
December 31, 1998 and 1997 and from inception on June 13, 1990 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Market Formulation and Research
Corp (a Development Stage Company) as of March 31, 1999, December 31, 1998 and
1997 and the results of its operations and cash flows for the three months ended
March 31, 1999 and the years ended December 31, 1998 and 1997 and from inception
on June 13, 1990 through March 31, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company's
recurring operating losses and lack of working capital raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to those matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Crouch Bierwolf & Chisholm
Salt Lake City, Utah
June 3, 1999
F-4
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
Cash $ 7,227
Prepaid expenses and other current assets 35,000
----------
Total current assets 42,227
EQUIPMENT AND SOFTWARE, NET 58,026
GOODWILL, NET OF ACCUMULATED AMORTIZATION
OF $304,757 (NOTE 2) 4,083,746
----------
Total assets $4,183,999
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 49,017
Due to stockholders (Note 3) 327,582
------------
Total current liabilities 376,599
------------
COMMITMENTS AND CONTINGENCIES (NOTES 3 AND 6)
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 5,000,000
shares authorized, 0 shares issued and
outstanding -
Common stock, $.001 par value,
50,000,000 shares authorized,
17,525,650 shares issued and outstanding 17,526
Additional paid-in capital 5,920,285
Deficit accumulated during the development stage (2,130,411)
------------
Total stockholders' equity 3,807,400
------------
Total liabilities and stockholders' equity $ 4,183,999
============
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Period
from Inception,
For the Years Ended June 13, 1990,
December 31, Through
1999 1998 December 31, 1999
--------------------- --------------- ------------------
REVENUES $ - $ 15,500 $ 45,500
--------------------- ---------------- ------------
EXPENSES
Stock-based compensation 1,429,872 - 1,429,872
General and administrative 148,287 58,035 270,070
Depreciation and amortization 307,829 - 308,868
Research and development 67,321 - 67,321
Purchased in-process research and
development (Note 2) 99,780 - 99,780
--------------------- ---------------- ------------
Total expenses 2,053,089 58,035 2,175,911
--------------------- ---------------- ------------
Net loss (2,053,089) (42,535) (2,130,411)
Other items of comprehensive (loss) - - -
--------------------- ---------------- ------------
Comprehensive (loss) $ (2,053,089) $ (42,535) $(2,130,411)
===================== ================ ============
Basic and diluted net loss per share $ (.20) $ (.11) $ (1.85)
===================== ================ ============
Weighted average number of common
shares outstanding 10,200,618 386,925 1,152,979
===================== ================ ============
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
------------ ----------- ------------ --------------- ---------
Inception at June 13, 1990 - $ - $ - $ - $ -
Shares issued for organizational costs 69,265 69 970 - 1,039
Net loss for the period ended December 31,
1991 through 1995 - - - (1,000) (1,000)
------------ ----------- ------------ --------------- ---------
Balance, December 31, 1995 69,265 69 970 (1,000) 39
Shares issued for cash 17,665 18 26,482 - 26,500
Net loss for the year ended December 31, 1996 - - - (21,569) (21,569)
------------ ----------- ------------ --------------- ---------
Balance, December 31, 1996 86,930 87 27,452 (22,569) 4,970
Shares issued for cash 66,670 67 9,933 - 10,000
Net loss for the year ended December 31, 1997 - - - (12,218) (12,218)
------------ ----------- ------------ --------------- ---------
Balance, December 31, 1997 153,600 154 37,385 (34,787) 2,752
</TABLE>
See accompnaying notes to the financial statements.
F-7
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
------------ ----------- ------------- --------------- ------------
Shares issued for cash 200,000 200 29,800 - 30,000
Shares issued for cash 76,665 77 11,423 - 11,500
Rounding of fractional shares 23,525 23 (23) - -
Net loss for the year ended December 31, 1998 - - - (42,535) (42,535)
------------ ----------- ------------- --------------- ------------
Balance, December 31, 1998 453,790 454 78,585 (77,322) 1,717
Shares issued for professional services 221,860 222 44,150 - 44,372
Shares issued to officers for services 50,000 50 5,200 - 5,250
Shares issued for cash and compensation 10,000,000 10,000 990,000 - 1,000,000
Stock options and common stock
earned by officers - - 391,250 - 391,250
Shares issued in connection with acquisition 6,500,000 6,500 4,261,400 - 4,267,900
Shares issued for cash 300,000 300 149,700 - 150,000
Net loss for the year ended December 31, 1999 - - - (2,053,089) (2,053,089)
------------ ----------- ------------- --------------- ------------
Balance, December 31, 1999 17,525,650 $ 17,526 $ 5,920,285 $ (2,130,411) $ 3,087,400
============ =========== ============= =============== ============
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
Statements of Cash Flows
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Period
For the Years Ended From Inception,
December 31, June 13, 1990,
Through
1999 1998 December 31, 1999
--------------------- ----------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,053,089) $ (42,535) $ (2,130,411)
Adjustments to reconcile net loss
to net cash used in operations:
Stock-based compensation 1,429,872 - 1,429,872
Depreciation and amortization 307,829 - 308,868
Write-off of note receivable 1,500 - -
Increase in prepaid expenses and
other current assets (25,000) - (25,000)
Increase (decrease) in accounts
payable and accrued expenses 49,017 (190) 49,017
--------------------- ----------------- -------------------
Net cash flows used in operating
activities (289,871) (42,725) (367,654)
--------------------- ----------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment and software (55,295) - (55,295)
Cash acquired in acquisition 92,484 - 92,484
--------------------- ----------------- -------------------
Net cash flows provided by
investing activities 37,189 - 37,189
--------------------- ----------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash 161,000 41,500 239,000
Net increase in due to stockholders 98,692 - 98,692
--------------------- ----------------- -------------------
Net cash flows provided by
financing activities 259,692 41,500 337,692
--------------------- ----------------- -------------------
NET INCREASE (DECREASE) IN CASH 7,010 (1,225) 7,227
CASH, BEGINNING OF PERIOD 217 1,442 -
--------------------- ----------------- -------------------
CASH, END OF PERIOD $ 7,227 $ 217 $ 7,227
===================== ================= ===================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest $ - $ - $ -
Taxes $ - $ - $ -
</TABLE>
NON-CASH AND INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 1999, the Company issued 6,500,000 shares of
its common stock, acquired assets of $155,722, and assumed liabilities of
$276,155 in connection with its acquisition of 649.com, Inc. (Note 2). The
Company also recorded goodwill of $4,388,503 in connection with this
acquisition.
See accompanying notes to the financial statements.
F-9
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
1. ORGANIZATION, BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
Organization and Business
649.com, Inc. (formerly, Market Formulation and Research Corp.) (a
Development-Stage Company) (the "Company") was originally incorporated under the
laws of the State of Nevada on June 13, 1990 as MMM-Hunter Associates, Inc. The
Company was
re-incorporated in Texas on March 1, 1996, under the name Market Formulation and
Research Corp., for the purpose of providing market formulation and research
services. On May 12, 1999, the Company amended its articles of incorporation,
changed the name of the Company to 649.com, Inc., and effected a 5-for-1 forward
stock split.
As a result of a Plan of Reorganization and Acquisition effected in September
1999 (Note 2), the Company's primary business involves the 6/49 lottery concept,
whereby lottery players outside of North America, and in jurisdictions which
allow online gaming, attempt to pre-select six numbers randomly drawn from a
basket of 49. The Company intends to allow participants to play 6/49 on the
Internet and/or through electronic video terminals.
To date, the Company has not conducted any significant operations, and its
activities have focused primarily on raising capital, developing a business
strategy, and research and development. Since the Company has not yet commenced
its principal operations, and has not yet earned significant revenues, the
Company is considered to be a development-stage enterprise as of December 31,
1999.
Principles of Consolidation
The accompanying consolidated financial statements for the year ended December
31, 1999, include accounts of the Company and its wholly owned subsidiary,
649.com, Inc., since its acquisition on September 15, 1999 (Note 2). All
intercompany accounts and transactions have been eliminated in consolidation.
F-10
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
1. ORGANIZATION, BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Going Concern
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. However, the Company has
experienced recurring net losses, has a net working capital deficiency, and has
no revenue-generating operations. These matters raise substantial doubt about
the Company's ability to continue as a going concern. Management's plan is to
actively search for additional sources of equity financing, complete development
of its 6/49 lottery products, and implement its 6/49 lottery business plan. In
addition, management expects to continue to operate with minimal fixed overhead
expenses. The ultimate outcome of these plans is uncertain and the consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and 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.
Actual results could differ from those estimates.
Equipment and Software
Equipment and software are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets,
which are three-to-five years. Maintenance and repairs are charged to
operations as incurred.
Goodwill and Amortization
Goodwill is amortized over an estimated useful life of three years, which
considers factors such as expected technological obsolescence and related
competition. Related amortization expense aggregated $304,757 during the year
ended December 31, 1999.
F-11
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
1. ORGANIZATION, BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of," requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate the carrying amount of an asset may not be
recoverable. For the purposes of evaluating potential impairment, the Company's
assets are grouped by the entity to which they relate. Since adopting this
statement, the Company gives consideration to events or changes in circumstances
for each of its entities. To date, management has not noted any evidence of
impairment, and no related charges have been recognized by the Company.
Software Development Costs
Costs incurred in the research and development of software products are expensed
as incurred until technological feasibility has been established. After
technological feasibility is established, any additional costs are to be
capitalized in accordance with SFAS No. 86, "Accounting for the Cost of Computer
Software to Be Sold, Leased or Otherwise Marketed." The establishment of
technological feasibility, and the ongoing assessment of the recoverability of
capitalized software development costs, require considerable judgment by
management with respect to certain external factors such as anticipated future
revenues, estimated economic life, and changes in software and hardware
technologies. No software development costs have been capitalized as of
December 31, 1999.
Income Taxes
The Company uses the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Current income taxes are based on the
year's taxable income for federal and state income tax reporting purposes.
F-12
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
1. ORGANIZATION, BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Accounting for Employee Stock Options
In conformity with the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company has determined that it will not utilize the fair
value method prescribed by SFAS No. 123 but will follow the guidance in
Accounting Principles Board Opinion No. 25 for measurement and recognition of
employee stock-based transactions.
Had the Company applied the valuation provisions of SFAS No. 123 to the employee
stock options granted to officers (Note 6), the Company's pro-forma net loss for
the year ended December 31, 1999 would have been $2,120,061 or $.21 per share.
Related fair value estimates were determined using the Black-Scholes Option
Valuation Model, which utilized discount rates of 7.5% and volatility factors
ranging from 52% to 56%.
Loss per Common Share
Loss per common share is computed based on the net loss for each period, and the
weighted average number of common shares outstanding. Common stock equivalents
were not considered in the loss per share calculations, as the effect would have
been anti-dilutive, given the net loss reported in each period. Common stock
and related per-share amounts have been retroactively adjusted for the 5-for-1
forward stock split described above.
Recent Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in an entity's financial statements. This
statement requires an entity to classify items of other comprehensive income, by
their nature in a financial statement, and display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position. The
Company had no items of other comprehensive income (loss) during each of the
periods presented in the accompanying financial statements.
F-13
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
1. ORGANIZATION, BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Standards (continued)
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." This statement requires public enterprises
to report financial and descriptive information about its reportable operating
segments and establishes standards for related disclosures about product and
services, geographic areas, and major customers. Management has determined that
the Company has only one reportable operating segment in each of the periods
presented in the accompanying financial statements.
2. ACQUISITION OF 649.COM, INC.
On September 15, 1999, the Company entered into a Plan of Reorganization and
Acquisition (the "Acquisition Agreement") with 649.com, Inc., a private company
based in Alberta, Canada ("649"). Under the terms of the Acquisition Agreement,
the Company was required to issue 6,500,000 shares of its common stock and
$100,000 cash to the sole stockholder of 649, Baycove Investments Limited, in
exchange for all of the outstanding common shares of 649. As of December 31,
1999, the cash portion of the acquisition price had not yet been paid and,
accordingly, such amount is included in due to stockholders (Note 3). The total
acquisition purchase price was determined to be $4,367,900, based on the
estimated fair value of consideration rendered. The fair value of the Company's
common stock issued in this transaction was estimated based on the average
closing price of the Company's common stock for 30 days prior and subsequent to
the acquisition date, and a 30% discount for restrictions and limitations on the
tradability of such shares, as well as the potentially dilutive effects of
issuing a significant block of common shares. The acquisition was accounted for
using the purchase method of accounting and the purchase price was allocated,
based on estimated fair values, to the net assets of 649 on the date of
acquisition as follows:
Net assets acquired $ 155,772
Net liabilities assumed (276,155)
In-process research and development projects 99,780
Goodwill 4,388,503
---------
$ 4,367,900
=========
F-14
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
2. ACQUISITION OF 649.COM, INC. (CONTINUED)
Management estimated that the fair value of net assets acquired, and net
liabilities assumed, approximated their related book values on the date of
acquisition. In accordance with the provisions of Accounting Principles Board
No. 16, the amount of the purchase price that exceeded the estimated fair value
of the net assets acquired was assigned to goodwill, and such goodwill is being
amortized over its estimated useful life (Note 1).
In connection with the acquisition, management determined that the estimated
fair value of in-process research and development projects approximated $99,780
on the date of acquisition. Management did not obtain a formal, independent
valuation of the projects, but rather estimated the related fair values by
considering factors such as the status of each project and actual project
expenditures. As described in Note 1, the projects acquired by the Company
involve the 6/49 lottery concept and the application of this concept to the
Internet and/or electronic video terminals. On the date of acquisition,
management estimated that the 6/49 Internet project was approximately 20%
complete and that no significant development of the 6/49 electronic video
terminal project had been completed. Management estimates that the 6/49
Internet project will be completed during the year ended December 31, 2000, and
that costs to complete this project will approximate $850,000. Management does
not anticipate developing the 6/49 electronic video terminal project until the
6/49 Internet project is complete, marketed, and generating revenues.
Had the acquisition of 649 occurred on January 1, 1999, and had 649 been formed
on that date, the Company's consolidated net loss for the year ended December
31, 1999 would have been $2,173,472, or $.21 per share.
F-15
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
3. RELATED-PARTY TRANSACTIONS
Baycove Investments Limited
From time to time, the Company makes advances to, and receives advances from,
its largest stockholder, Baycove Investments Limited, and affiliated entities
("Baycove"). No formal arrangement exists for such advances, which have
historically been made or received on an "as-needed" basis. In addition,
Baycove charges the Company $3,000 per month for administrative costs, which
include office rent and related utility charges. Baycove also pays certain
expenses on behalf of the Company. As a result of the above transactions with
Baycove, the Company owes net advances to Baycove of $219,340 at December 31,
1999. Such amount is not collateralized, does not bear interest, and has no
stated repayment terms.
In September 1999, the Company acquired the outstanding common stock of 649 from
Baycove (Note 2). As discussed in Note 2, the Company owes Baycove $100,000 in
connection with the acquisition.
Intrepid International, Ltd.
During the years ended December 31, 1999 and 1998, the Company received legal
services from Intrepid International, Ltd. ("Intrepid"), a significant
stockholder of the Company. As of December 31, 1999, the Company owes this
stockholder $8,242.
During March 1999, the Company issued 221,860 shares of common stock to Intrepid
in exchange for $44,372 of legal services provided to the Company. In addition,
in April 1999, the Company issued 5,000,000 shares of common stock to Intrepid
in exchange for $1,000 of cash. As the estimated fair market value of the
Company's common stock exceeded the estimated fair value of consideration
received by the Company, compensation expense of $499,000 was recognized by the
Company in connection with the 5,000,000 shares of common stock issued to
Intrepid.
Also during March 1999, two former officers of the Company, who are also partial
owners of Intrepid, received an aggregate of 50,000 shares of the Company's
common stock for prior services performed. The Company recognized compensation
expense of $5,250 in connection with this stock issuance.
F-16
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
3. RELATED-PARTY TRANSACTIONS (CONTINUED)
Lease Agreement
In November 1999, the Company entered into an agreement with MillMedia, S.A., a
service company based in Costa Rica that is owned by an officer of the Company.
Under the terms of this agreement, MillMedia, S.A. will arrange and manage an
Internet connection for the Company's computer equipment and provide other
professional services as required by the Company. The Company will compensate
MillMedia, S.A. for providing such services at an annual rate equivalent to the
annual rental costs of the office/server site, personnel costs, and any
additional costs incurred on behalf of the Company. Such agreement has an
initial term of two years, but automatically renews for successive year-to-year
terms, unless terminated in accordance with the terms of the agreement.
4. EQUIPMENT AND SOFTWARE
As of December 31, 1999, equipment and software, net, is comprised of the
following:
Computer equipment $ 50,812
Software 10,286
------------
61,098
Less accumulated depreciation (3,072)
------------
$ 58,026
============
F-17
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
5. INCOME TAXES
The income tax effects of significant items comprising the Company's net
deferred income tax assets and (liabilities) are as follows at December 31,
1999:
Depreciation expense $ (2,702)
Stock based compensation 486,156
NOL carryforwards 125,357
Valuation allowance (608,811)
--------
Current portion of deferred tax assets
and (liabilities) $ -
============
The (benefit) provision for income taxes consisted of the following for the
years ended:
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, December 31,
1999 1998
-------------- --------------
Current:
Federal $ - $ -
State - -
-------------- --------------
- -
-------------- --------------
Deferred:
Federal (594,433) (14,378)
State - -
-------------- --------------
(594,433) (14,378)
-------------- --------------
Valuation allowance 594,433 14,378
-------------- --------------
$ - $ -
============== ==============
</TABLE>
F-18
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
5. INCOME TAXES (CONTINUED)
The reconciliation of income taxes computed at the federal statutory tax rate to
income tax (benefit) expense at the effective income tax rate is as follows for
the years ended:
DECEMBER 31, December 31,
1999 1998
---- ----
Federal statutory income tax rate (34.00%) (34.00%)
Increases (decreases) resulting from:
Permanent differences 5.05 -
Net change in valuation allowance 28.95 34.00
------- ---------
Effective income tax rate -% -%
========= =============
The Company has federal net operating losses ("NOL's") approximating $326,000.
The federal NOL's can be applied to future taxable income and expire at various
dates from 2005 through 2014. The utilization of a portion of the net operating
losses may be limited under Section 382 of the Internal Revenue Code due to
ownership changes.
At December 31, 1999, a valuation allowance was provided to reduce the Company's
net deferred tax assets for the amount by which the deferred tax asset exceeded
the net deferred tax liability resulting from all temporary differences. The
Company provided the allowance since management could not determine that it was
"more likely than not" that the benefits of the deferred tax assets would be
realized.
F-19
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
6. COMMITMENTS AND CONTINGENCIES
Employment Agreements
In August 1999, the Company entered into 12-month management contracts with two
officers. Such contracts provide for minimum base monthly salaries aggregating
$14,000 Canadian dollars ($9,635 U.S. dollars at December 31, 1999). In
addition, the contracts provide for the issuance of up to 750,000 shares of
common stock and 750,000 options to purchase the Company's common stock,
exercisable at $0.50 per share after the twelfth consecutive month of
employment. The 750,000 shares of common stock are issuable during the year
ended December 31, 2000, pursuant to the specific terms of each management
contract. The Company considers these shares of common stock to be earned by
the officers ratably over the terms of the management contracts, and
accordingly, 281,500 shares of common stock are considered earned at December
31, 1999. Further, 281,250 options to purchase the Company's common stock are
vested at December 31, 1999, and no options have yet been exercised by the
officers. During the year ended December 31, 1999, the Company recognized
compensation expense aggregating $391,250 in connection with the earned shares
of common stock and vested stock options described above.
Consulting Agreements
In June 1999, the Company entered into a consulting agreement with a software
development firm. The Company is required to pay hourly rates ranging from $75
to $150 for services performed which include strategic technology consulting and
website design and the development of the Company's 6/49 lottery products.
Either party may terminate the agreement at any time upon request.
In September 1999, the Company entered into a management consulting agreement
with a consulting firm. The Company is obligated to pay $3,000 per month for
consulting services, which include developing investor relations, assistance
with press releases, and various other marketing methods. The agreement expires
in September 2000, but may be terminated at any time upon written notice.
F-20
<PAGE>
649.COM, INC.
(FORMERLY, MARKET FORMULATION AND RESEARCH CORP.)
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR EACH OF THE
YEARS IN THE TWO-YEAR PERIOD THEN ENDED, AND
FOR THE PERIOD FROM INCEPTION, JUNE 13, 1990,
THROUGH DECEMBER 31, 1999
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Consulting Agreements (continued)
In October 1999, the Company engaged an independent gaming evaluation laboratory
to test the randomness, security, and integrity of the Company's 6/49 Internet
lottery game. Related product testing and evaluation is expected to occur
during March 2000 and April 2000, and is expected to cost the Company $20,860
Canadian dollars ($14,356 U.S. dollars at December 31, 1999).
Omnibus Stock Option Plan
Effective December 1, 1999, the Company established an Incentive Stock Option
Plan and a Nonstatutory Stock Option Plan (the "Plans"). The aggregate number
of shares which may be optioned under the Plans shall not exceed 1,000,000
shares during the
12-month period ended November 30, 2000, and 10% of the Company's outstanding
common stock on December 1 for each subsequent 12-month period. Options granted
under the Plans shall have an exercise price of at least the fair market value
of such shares of common stock on the date of grant, and related options are
exercisable six months after the grant date. The Plans shall continue in effect
until November 30, 2009. To date, there have been no options issued under the
Plans.
Year 2000
The Company does not believe that the impact of the year 2000 computer issue
will have a significant impact on its consolidated operations or consolidated
financial position. Also, the Company does not believe that it will be required
to significantly modify its internal computer systems, equipment or software
under development. However, if internal systems, and equipment or software
under development, do not correctly recognize date information in the year 2000,
there could be an adverse impact on the Company's consolidated operations.
Further, there can be no assurance that another entity's failure to ensure year
2000 capability would not have an adverse effect on the Company.
F-21
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
649.COM, INC.
Date: April 14, 2000 By: /s/ Larry Burbidge
-----------------------------
Larry Burbidge
President
Plan of Reorganization and Acquisition
BY WHICH
649.com Inc.
(A TEXAS CORPORATION)
ACQUIRES
649.com Inc.
(AN ALBERTA, CANADA PRIVATE CORPORATION)
This Plan of Reorganization and Acquisition is made and dated this 15th
day of September, 1999 by and between the above referenced corporations, and
shall become effective this day, "the Effective Date" .
I. THE INTERESTED PARTIES
1. 649.COM INC. ("649-Issuer"), formerly Market Formulation and Research Corp.
("MFRC" also "649/MFRC") is a public Texas Corporation, which has duly changed
its name.
2. 649.COM INC. ("649-Target") is an Alberta, Canada private Corporation.
3. BAYCOVE INVESTMENTS LIMITED ("Baycove") is the principle beneficial
shareholder of 649.com Inc.
II. DESCRIPTIVE SUMMARY
This descriptive summary is presented, by way of introduction, to provide an
overview of the Corporate Reorganization agreed to herein, and closing hereby.
Market Formulation and Research Corp. of Texas (the Public Company) changed its
name to 649.com Inc.(Issuer) and has acquired 100% of 649.com Inc. (Target) as
649.com Inc. a wholly-owned subsidiary of the Issuer.
MFRC has effected a forward split its present common stock 5 to 1 and has or
will issue certain post-split shares in connection with the acquisition. The
shares to be issued will fall into two groups: (1) common voting shares of
649IMFRC (the Issuer) will be issued to the shareholders of 649.com Inc. in
exchange for all of the issued and outstanding shares of 649.com Inc., and (2)
additional common voting shares will be issued to accredited investors pursuant
to Regulation D, Rule 505 or 506, or Section 4(2) of the U.S. Securities Act of
1933.
<PAGE>
III. RECITALS
A. THE CAPITAL OF THE PARTIES:
1. THE CAPITAL OF MFRC consists of 50,000,000 shares of common voting stock of
$0.001 par value authorized, of which 10,725,650 shares are issued and
outstanding.
2. THE CAPITAL OF 649.COM INC. of Alberta, Canada consists of the authority to
issue unlimited Class A, B and C Voting Common Stock and E, F and G Non-Voting
Common Stock, of which one (1) share of Class A Voting Common Stock at $1.00
stated par value is issued and outstanding.
B. The Background for the Acquisition: 649IMFRC (the Issuer) desires to acquire
649.com Inc. (the Target) and the shareholders of 649.com Inc. wish to be so
acquired.
C. The Boards of Directors of both Corporations respectively have determined
that, it is advisable and in the best interests of each of them and both of them
to proceed with the acquisition by the public company, in accordance with IRS
368 (a)(1)(B), et seq.
D. The Shareholders of the Issuer, having approved the acquisition, this
agreement was approved and adopted by the Board of Directors of 649IMFRC in a
manner consistent with the laws of its Jurisdiction and its constituent
documents.
E. The Board of Directors of 649.com (Target), having represented that it is
empowered to approve the acquisition, without formal shareholder approval, this
agreement was approved and adopted by the Board of Directors of 649.com Inc.
(Target) in a manner consistent with the laws of its Jurisdiction and its
constituent documents.
F. Conditions of Closing having been met, modified or waived in whole or part,
this acquisition is effective, as between the parties, on the date hereof, but
subject to filing Articles of Share Exchange in the State of Texas.
1. FORWARD SPLIT/NAME CHANGE. As a condition of Closing MFRC has obtained
shareholder approval or authority, pursuant to the laws of Texas and its
constituent documents, for a 5:1 forward split and a name change to 649.com Inc.
Pursuant to the forward split and name change, the reorganized MFRC has applied
for and obtained a new CUSIP number and a symbol change at the direction of
649.com Inc., the Target.
<PAGE>
2. TRANSFER OF CONTROL. Immediately herewith, the Board of Directors of 649IMFRC
hereby appoints two nominees of 649.com Inc. (Target) to become the Directors of
649.com Inc. (Issuer) and the existing directors of the former MFRC hereby
resign.
3. $1,400,000 PRIVATE PLACEMENT. As a condition of Closing, Baycove, as a
consultant to 649.com Inc. is to secure funding of USD$1,400,000 in a private
placement/limited offering by MFRC to accredited investors of 2,800,000 post
forwardsplit shares of the Issuer's common stock at USD$0.50 per share. This
placement is in process of completion, and is deemed satisfied by the parties as
a condition precedent to closing.
4. NO REVERSE STOCK SPLIT. As a mutual covenant and condition of closing, there
shall be no reverse stock split of the reorganized 649/MFRC's (the Target's)
common voting stock for a period of eighteen months from this Closing.
IV. PLAN OF ACQUISITION
A. Reorganization and Acquisition: 649IMFRC and 649.com Inc./Target are hereby
reorganized, such that (i) the Issuer shall acquire all assets, business and
common stock of the Target; and (ii) the Target shall become a subsidiary of the
Issuer.
1. CONVERSION OF OUTSTANDING STOCK: Forthwith upon the date hereof, the 649.com
Inc. Issuer shall issue 6,500,000 new investment shares of its post
forward-split shares of common stock to or for the shareholders of 649.com Inc.
Target, in exchange for all of the issued and outstanding shares of stock
649.com Inc. Target. In addition, 649.com Inc. Issuer shall pay to the
shareholders of 649.com Inc. Target the sum of USD$100,000.00.
2. SURVIVING CORPORATIONS: Both Issuer and Target shall survive the
Reorganization herein contemplated and shall continue to be governed by the laws
of its respective State of Incorporation.
3. SURVIVING ARTICLES OF INCORPORATION AND BY-LAWS: The Articles of
Incorporation and By-Laws of Issuer and Target shall remain in full force and
effect, unchanged.
B. Effective Date: This PLAN OF REORGANIZATION AND ACQUISITION shall become
effective immediately, subject to filing Articles of Share Exchange in Texas.
Rights of Dissenting Shareholders: The Issuer is the entity responsible for the
rights of dissenting shareholders.
<PAGE>
C. Further Assurance, Good Faith and Fair Dealing: the Directors of each Company
shall and will execute and deliver any and all necessary documents,
acknowledgments and assurances and to do all things proper to confirm or
acknowledge any and all rights, titles and interests created or confirmed
herein; and both companies covenant hereby to deal fairly and in good faith with
each other and each others shareholders.
D. General Mutual Representations and Warranties. The purpose and general import
of the Mutual Representations and Warranties, are that each party has made
appropriate full disclosure to the others of all due diligence information that
is customarily exchanged in a transaction such as this, that no material
information has been withheld, and that the information exchanged is accurate,
true and correct.
1. ORGANIZATION AND QUALIFICATION. Each Corporation warrants and represents that
it is duly organized and in good standing, and is duly qualified to conduct any
business it may be conducting, as required by law or local ordinance.
2. CORPORATE AUTHORITY. Each Corporation warrants and represents that it has
Corporate Authority, under the laws of its jurisdiction and its constituent
documents, to do each and every element of performance to which it has agreed,
and which is reasonably necessary, appropriate and lawful, to carry out this
Agreement in good faith.
3. OWNERSHIP OF ASSETS AND PROPERTY. Each Corporation warrants and represents
that it has lawful title and ownership of it property as reported to the other,
and as disclosed in its financial statements.
4. ABSENCE OF CERTAIN CHANGES OR EVENTS. Each Corporation warrants and
represents that there are no material changes of circumstances or events which
have not been fully disclosed to the other party, and which, if different than
previously disclosed in writing, have been disclosed in writing as currently as
is reasonably practicable.
5. ABSENCE OF UNDISCLOSED LIABILITIES. Each Corporation warrants and represents
specifically that it has, and has no reason to anticipate having, any material
liabilities which have not been disclosed to the other, in the financial
statements or otherwise in writing.
6. LEGAL PROCEEDINGS. Each Corporation warrants and represents that there are no
legal proceedings, administrative or regulatory proceeding, pending or
suspected, which have not been fully disclosed in writing to the other.
7. NO BREACH OF OTHER AGREEMENTS. Each Corporation warrants and represents that
this Agreement, and the faithful performance of this agreement, will not cause
any breach of any other existing agreement, or any covenant, consent decree, or
undertaking by either, not disclosed to the other.
<PAGE>
8. CAPITAL STOCK. Each Company warrants and represents that the issued and
outstanding share and all shares capital stock of such corporation, is as
detailed herein, that all such shares are in fact issued and outstanding, duly
and validly issued, were issued as and are fully paid and non-assessable shares,
and that, other than as represented in writing, there are no other securities,
options, warrants or rights outstanding, to acquired further shares of such
Corporation.
9. BROKERS' OR FINDER'S FEES. Each Corporation warrants and represents that
is aware of no claims for brokers' fees, or finders' fees, or other commissions
or fees, by any person not disclosed to the other, which would become, if valid,
an obligation of either company.
E. Miscellaneous Provisions
1. Except as required by law, no party shall provide any information
concerning any aspect of the transactions contemplated by this Agreement to
anyone other than their respective officers, employees and representatives
without the prior written consent of the other parties hereto. The aforesaid
obligations shall terminate on the earlier to occur of (a) the Closing, or (b)
the date by which any party is required under its articles or bylaws or as
required by law, to provide specific disclosure of such transactions to its
shareholders, governmental agencies or other third parties. In the event that
the transaction does not close, each party will return all confidential
information furnished in confidence to the other.
2. This Agreement may be executed simultaneously in two or more counterpart
originals. The parties can and may rely upon facsimile signatures as binding
under this Agreement, however, the parties agree to forward original signatures
to the other parties as soon as practicable after the facsimile signatures have
been delivered.
3. The Parties to this agreement have no wish to engage in costly or
lengthy litigation with each other. Accordingly, any and all disputes which the
parties cannot resolve by agreement or mediation, shall be submitted to binding
arbitration under the rules and auspices of the American Arbitration
Association. Arbitration, if any there be, shall be conducted in Pinellas
County, Texas. As a further incentive to avoid disputes, each party shall bear
its own costs, with respect thereto, and with respect to any proceedings in any
court brought to enforce or overturn any arbitration award. This provision is
expressly intended to discourage litigation and to encourage orderly, timely and
economical resolution of any disputes which may occur.
4. If any provision of this PLAN OF REORGANIZATION AND ACQUISITION or the
application thereof to any person or situation shall be held invalid or
unenforceable, the remainder of the Agreement and the application of such
provision to other persons or situations shall not be effected thereby but shall
continue valid and enforceable to the fullest extent permitted by law.
<PAGE>
5. No waiver by any party of any occurrence or provision hereof shall be deemed
a waiver of any other occurrence or provision.
6. The parties acknowledge that both they and their counsel have boon provided
ample, opportunity to review and revise this agreement and that the normal rule
of construction shall not be applied to cause the resolution of any ambiguities
against any party presumptively. The Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
THIS PLAN OF REORGANIZATION AND MERGER is executed on behalf of each Company by
its duly authorized representatives, and attested to, pursuant to the laws of
its respective place of incorporation and in accordance with its constituent
documents.
649.com Inc. 649.COM Inc.
(a Texas corporation) (an Alberta; Canada corporation)
by by
/s/ John Spicer /s/ Irene Poole
John Spicer Irene Poole
President President
Baycove Investments Limited
(a company incorporated to the
Republic of Ireland)
by
/s/Irene Poole
Irene Poole
President
Filed
In the Office of the
Secretary of State of Texas
Jan 27 2000
Corporations Section
RESTATED
ARTICLES OF INCORPORATION
OF
649.COM, INC.
A TEXAS CORPORATION
I.
The name of the corporation is 649.com, Inc.
II.
The period of its duration is perpetual.
III.
The purpose for which the corporation is organized is to engage in the
transaction of any or all lawful business for which a corporation may be
incorporated under the Texas Business Corporation Act.
IV.
This Corporation is authorized to issue two classes of shares of stock to
be designated as "Common Stock" and "Preferred Stock". The total number of
shares of Common Stock which this Corporation is authorized to issue is Fifty
Million (50,000,000) shares, par value $0.001. The total number of shares of
Preferred Stock which this Corporation is authorized to issue is Five Million
Shares (5,000,000) shares, par value $0.001.
The shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Corporation (the "Board of
Directors") is expressly authorized to provide for the issue of all or any of
the shares of the Preferred Stock in one or more series, and to fix the number
of shares and to determine or alter for each such series, such voting powers,
full or limited, or no voting powers, and such designations, preferences, and
relative, participating, optional, or other rights and such qualifications,
limitations, or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of such shares (a "Preferred Stock Designation") and as may be permitted
by the Texas Business Corporation Act. The Board of Directors is also expressly
authorized to increase or decrease (but not below the number of shares of such
series then outstanding) the number of shares of any series subsequent to the
issue of shares of that series. In case the number of shares of any such series
shall be so decreased, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
<PAGE>
No shares of Common Stock or Preferred Stock shall carry and no shareholder
shall possess or enjoy any preemptive rights to acquire additional or treasury
shares of the Corporation. No shares of Common Stock or Preferred Stock shall
carry and no shareholder shall posses or enjoy any cumulative voting rights in
the election of Directors of the Corporation.
V.
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of a stated sum which shall be
at least one thousand dollars ($1,000.00).
VI.
The street address of the initial registered office of the corporation is
800 Brazos Street, #1100, Austin, Texas 78701, and the name of its initial
registered agent at such address is Paracorp Incorporated.
VII.
The number of directors constituting the Board of Directors is at least one
(1) but no more than seven (7), and the name and address of the person who is to
serve as the Sole Director until the next annual meeting of shareholders, or
until their successors are elected and qualified, is as follows:
Larry Burbidge 1177 West Hastings, Suite 1818
Vancouver, BC Canada V6E 2K3
VIII.
The corporation shall indemnify any and all persons who may serve or who
may have served at any time as directors or officers of the corporation or who,
at the request of the Board of Directors of the corporation, may serve or at any
time have served as directors and officers of another corporation in which the
corporation at such time owned or may own shares of stock or of which it was or
may be a creditor, and their respective heirs, administrators, successors and
assigns, against any and all expenses, including amounts paid upon judgments,
counsel fees and amounts paid in settlement (before or after suit is commenced),
actually and necessarily incurred by such persons in connection with the defense
or settlement of any claim, action, suit or proceeding, in which they, or any of
them, are made parties, or a party, or which may be asserted against them or any
of them, by reason of being or having been directors or officers or a director
or officer of the corporation, or of such other corporation, to the fullest
extent permitted by the Texas Business Corporation Act. The corporation shall
have the power to purchase and maintain at its cost and expense insurance on
behalf of such persons to the fullest extent permitted by the Texas Business
Corporation Act.
<PAGE>
IX.
A director of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for an act or omission in the director's
capacity as a director, except for liability (i) for a breach of a director's
duty of loyalty to the corporation or its stockholders, (ii) for an act or
omission not in good faith or that involves intentional misconduct or a knowing
violation of law, (iii) for a transaction from which a director received an
improper benefit whether or not the benefit resulted from an action taken within
the scope of the director's office, (iv) for an act or omission for which the
liability of a director is expressly provided for by statute, or (v) for an act
related to an unlawful stock repurchase or payment of a dividend.
X.
Any action required by the Texas Business Corporation Act to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a voite, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all the
shares entitled to vote on the action were present and voted.
Any amendment made by these Restated Articles of Incorporation has been
effected in conformity with the provisions of the Texas Business Corporation
Act. These Restated Articles of Incorporation accurately copy the articles of
incorporation and all amendments thereto that are in effect as of the date
hereof and as further amended by these Restated Articles of Incorporation, and
these Restated Articles of Incorporation contain no other change in any
provisions thereof.
These Restated Articles of Incorporation have been unanimously adopted by
the written consent of the Board of Directors of the Corporation on December 1,
1999. The Shareholders of the corporation, by written consent on January 20,
2000, voted 11,705,420 shares in favor of and no shares against these Restated
Articles of Incorporation, representing a total of 11,705,420 votes, or 67.9% of
the total issued and outstanding common stock. Written notice of the
shareholders action has been sent in accordance with the provisions of the Texas
Business Corporation Act.
IN WITNESS WHEREOF, the undersigned officer of the Corporation has executed
these Restated Articles of Incorporation this 21st day of January, 2000.
/s/ Larry Burbidge
__________________________________
Larry Burbidge, President
RESTATED
BYLAWS
OF
649.COM, INC.
<PAGE>
RESTATED
BYLAWS
OF
649.COM, INC.
ARTICLE I
OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Principal Office . . . . . . . . . . . . . . . . 1
-----------------
Section 2. Other Offices . . . . . . . . . . . . . . . . . . 1
--------------
ARTICLE II
DIRECTORS - MANAGEMENT . . . . . . . . . . . . . . . . . . . . 1
Section 1. Powers, Standard of Care . . . . . . . . . . . 1
---------------------------
A. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . 1
------
B. Standard of Care; Liability . . . . . . . . . . . .. . 1
------------------------------
C. Exception for Close Corporation . . . . . . . . . . . 2
----------------------------------
Section 2. Number and Qualification of Directors . . . . 2
-----------------------------------------
Section 3. Election and Term of Office of Directors . . 2
----------------------------------------------
Section 4. Vacancies .. . . . . . . . . . . . . . . . . . . 2
---------
Section 5. Removal of Directors . . . . . . . . . . . . . 3
----------------------
Section 6. Place of Meetings. . . . . . . . . . . . .. . . 3
-------------------
Section 7. Annual Meetings. . . . . . . . . . . . . . . . . 4
----------------
Section 8. Other Regular Meetings . . . . . . . . . .. . . 4
------------------------
Section 9. Special Meetings/Notices. . . . . . . . . . . . . 4
-------------------------
Section 10. Waiver of Notice . . . . . . . . . . . . . . . 5
------------------
Section 11. Quorums. . . . . . . . . . . . . . . . . . . . . 5
-------
Section 12. Adjournment . . . . . . . . . . . . . . . . . . 5
-----------
Section 13. Notice of Adjournment . . . . . . . . . . . . . 5
-----------------------
Section 14. Board of Directors Provided by Articles or
Bylaws . . . . . . . . . . . . . . . . . .. . . . 5
--------------------------------------------------------
Section 15. Directors Action by Unanimous Written Consen. 5
--------------------------------------------------
Section 16. Compensation of Directors. . . . . . . . . . . 6
---------------------------
Section 17. Committees. . . . . . . . . . . . . . . . . .. . 6
----------
Section 18. Meetings and Action of Committees . . . . . . 6
-------------------------------------
Section 19. Advisory Directors . . . . . . . . . . . . . . 6
-------------------
ARTICLE III
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Officers . . . . . . . . . . . . . . . . . .. . 6
--------
Section 2. Election of Officers . . . . . . . . . . . . . 7
----------------------
Section 3. Subordinate Officers, Etc.. . . . . . . . . . . 7
----------------------------
Section 4. Removal and Resignation of Officers . . . . . 7
---------------------------------------
Section 5. Vacancies . . . . . . . . . . . . . . . . . . . 7
---------
Section 6. Chairman of the Board . . . . . . . . . . . . 7
------------------------
Section 7. President and Chief Executive Officer. . . . . 7
-----------------------------------------
Section 8. Vice President . . . . . . . . . . . . . . . . . 8
---------------
Section 9. Secretary . . . . . . . . . . . . . . . . . . . . 8
---------
Section 10. Chief Financial Officer . . . . . . . . . . . . 8
-------------------------
ARTICLE IV
<PAGE>
SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . 9
Section 1. Place of Meetings . . . . . . . . . . . . .. . 9
-------------------
Section 2. Annual Meeting . . . . . . . . . . . . . . . . . 9
---------------
Section 3. Special Meetings . . . . . . . . . . . . . . .. 9
-----------------
Section 4. Notice of Meetings - Reports . . . . . . . . . 10
--------------------------------
Section 5. Quorum . . . . . . . . . . . . . . .. . . . . . . 11
------
Section 6. Adjourned Meeting and Notice Thereof . . . . 11
----------------------------------------
Section 7. Waiver or Consent by Absent Shareholders . . 11
---------------------------------------------
Section 8. Maintenance and Inspection of Bylaws . . . . 12
----------------------------------------
Section 9. Annual Report to Shareholders . . . . . . . . 12
--------------------------------
Section 10. Financial Statements . . . . . . . . . . . . . 13
---------------------
Section 11. Annual Statement of General Information . . . 13
-------------------------------------------
ARTICLE IX
AMENDMENTS TO BYLAWS . . . . . . . . . . . . . . . . . . . . . 14
Section 1. Amendment by Shareholders . . . . . . . .. .. 14
---------------------------
Section 2. Amendment by Directors . . . . . . . . . . . . 14
------------------------
Section 3. Record of Amendments . . . . . . . . .. . . . 14
----------------------
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .. . 14
Section 1. Shareholders' Agreements . . . . . . . . . . . 14
-------------------------
Section 2. Effect of Shareholders' Agreements . . . . . . 14
-------------------------------------
Section 3. Subsidiary Corporations . . . . . . . . . . . . 15
------------------------
Section 4. Accounting Year . . . . . . . . . . . . . . . . 15
----------------
Section 5. Form . . . . . . . . . . . . . . . . . . . . . . 15
----
<PAGE>
RESTATED
BYLAWS
OF
649.COM, INC.
A TEXAS CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office for the transaction
----------------
of business of the Corporation is hereby fixed and located at such place as the
Board of Directors may from time to time designate. The location may be changed
by the Board of Directors in their discretion, and additional offices may be
established and maintained at such other place or places, either within or
outside of Texas, as the Board of Directors may from time to time designate.
Section 2. Other Offices. Branch or subordinate offices may at any
--------------
time be established by the Board of Directors at any place or places where the
Corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. Powers, Standard of Care.
---------------------------
A. Powers: Subject to the provisions of the Texas Business Corporation
------
Act (hereinafter the "Act"), and subject to any limitations in the Articles of
Incorporation of the Corporation relating to action required to be approved by
the Shareholders, or by the outstanding shares, the business and affairs of the
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors. The Board of Directors may
delegate the management of the day-to-day operation of the business of the
Corporation to a management company or other persons, provided that the business
and affairs of the Corporation shall be managed, and all corporate powers shall
be exercised, under the ultimate direction of the Board.
B. Standard of Care; Liability:
------------------------------
(i) Each Director shall exercise such powers and otherwise perform such
duties, in good faith, in the matters such Director believes to be in the best
interests of the Corporation, and with such care, including reasonable inquiry,
using ordinary prudence, as a person in a like position would use under similar
circumstances.
<PAGE>
(ii) In performing the duties of a Director, a Director shall be
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, in which case prepared or
presented by:
(a) One or more officers or employees of the Corporation whom the
Director believes to be reliable and competent in the matters presented,
(b) Counsel, independent accountants or other persons as to which the
Director believes to be within such person's professional or expert competence,
or
(c) A Committee of the Board upon which the Director does not serve, as
to matters within its designated authority, which committee the Director
believes to merit confidence, so long as in any such case the Director acts in
good faith, after reasonable inquiry when the need therefor is indicated by the
circumstances and without knowledge that would cause such reliance to be
unwarranted.
C. Exception for Close Corporation. Notwithstanding the provisions of
--------------------------------
Section 1 of this Article, in the event that the Corporation shall elect to
become a close corporation, its Shareholders may enter into a Shareholders'
Agreement. Said Agreement may provide for the exercise of corporate powers and
the management of the business and affairs of the Corporation by the
Shareholders; provided, however, such agreement shall, to the extent and so long
as the discretion or powers of the Board of Directors in its management of
corporate affairs is controlled by such agreement, impose upon each Shareholder
who is a party hereof, liability for managerial acts performed or omitted by
such person pursuant thereto otherwise imposed upon Directors; and the Directors
shall be relieved to that extent from such liability.
Section 2. Number and Qualification of Directors. The authorized
-----------------------------------------
number of Directors of the Corporation shall be no less than one (1) yet no more
than seven (7) until changed by a duly adopted amendment to the Articles of
Incorporation or by an amendment to this Section 2 of Article II of these
Bylaws, adopted by the vote or written consent of Shareholders entitled to
exercise majority voting power as provided in the Act.
Section 3. Election and Term of Office of Directors. Directors shall
-----------------------------------------
be elected at each annual meeting of the Shareholders to hold office until the
next annual meeting. Each Director, including a Director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 4. Vacancies.
---------
<PAGE>
A. Vacancies on the Board of Directors may be filled by a majority of
the re-maining Directors, though less than a quorum, or by a sole remaining
Director, except that a vacancy created by the removal of a Director by the vote
or written consent of the Shareholders, or by a court order, may be filled only
by the vote of a majority of the shares entitled to vote, represented at a duly
held meeting at which a quorum is present, or by the written consent of holders
of the majority of the outstanding shares entitled to vote. Each Director so
elected shall hold office until the next annual meeting of the Shareholders and
until a successor has been elected and qualified.
B. A vacancy or vacancies on the Board of Directors shall be deemed to
exist in the event of the death, resignation or removal of any Director, or if
the Board of Directors by resolution declares vacant the office of a Director
who has been declared of unsound mind by an order of court or convicted of a
felony.
C. The Shareholders may elect a Director or Directors at any time to
fill any vacancy or vacancies not filled by the Directors, but any such election
by written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
D. Any Director may resign, effective on giving written notice to the
Chairman of the Board, the President, the Secretary, or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a Director is effective at a future time, the
Board of Directors may, prior to the effective date of a Director's resignation,
elect a successor to take office when the resignation becomes effective.
E. No reduction of the authorized number of Directors shall have the
effect of removing any Director before that Director's term of office expires.
Section 5. Removal of Directors.
----------------------
A. The entire Board of Directors, or any individual Director, may be
removed from office as provided by the Act. In such case, the remaining
members, if any, of the Board of Directors may elect a successor Director to
fill such vacancy for the remaining unexpired term of the Director so removed.
B. No Director may be removed (unless the entire Board is removed) when
the votes cast against removal or not consenting in writing to such removal
would be sufficient to elect such Director if voted cumulatively at an election
at which the same total number of votes were cast (or, if such action is taken
by written consent, all shares entitled to vote, were voted) and the entire
num-ber of Directors authorized at the time of the Directors most recent
election were then being elected; and when by the provisions of the Articles of
Incorporation the holders of the shares of any class or series voting as a
class or series are entitled to elect one or more Directors, any Director so
elected may be removed only by the applicable vote of the holders of the shares
of that class or series.
<PAGE>
Section 6. Place of Meetings. Regular meetings of the Board of
-------------------
Directors shall be held at any place within or outside the state that has been
designated from time to time by resolution of the Board. In the absence of such
resolution, regular meetings shall be held at the principal executive office of
the Corporation. Special meetings of the Board shall be held at any place
within or outside the state that has been designated in the notice of the
meeting, or, if not stated in the notice or there is no notice, at the principal
executive office of the Corporation. Any meeting, regular or special, may be
held by conference telephone or similar communication equipment, so long as all
Directors participating in such meeting can hear one another, and all such
Directors shall be deemed to have been present in person at such meeting.
Section 7. Annual Meetings. Immediately following each annual meeting
---------------
of Shareholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, the election of officers and the transaction of other
business. Notice of this meeting shall not be required. Minutes of any meeting
of the Board, or any committee thereof, shall be maintained as required by the
Act by the Secretary or other officer designated for that purpose.
Section 8. Other Regular Meetings.
------------------------
A. Other regular meetings of the Board of Directors shall be held
without call at such time as shall from time to time be fixed by the Board of
Directors. Such regular meetings may be held without notice, provided the time
and place of such meetings has been fixed by the Board of Directors, and further
provided the notice of any change in the time of such meeting shall be given to
all the Directors. Notice of a change in the determination of the time shall be
given to each Director in the same manner as notice for such special meetings of
the Board of Directors.
B. If said day falls upon a holiday, such meetings shall be held on the
next succeeding day thereafter.
Section 9. Special Meetings/Notices.
-------------------------
A. Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Chairman of the Board or the President
or any Vice President or the Secretary or any two Directors.
B. Notice of the time and place for special meetings shall be delivered
personally or by telephone to each Director or sent by first class mail or
telegram, charges prepaid, addressed to each Director at his or her address as
it is shown in the records of the Corporation. In case such notice is mailed,
it shall be deposited in the United States mail at least four days prior to the
time of holding the meeting. In case such notice is delivered personally, or by
telephone or telegram, it shall be delivered personally or be telephone or to
the telegram company at least 48 hours prior to the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
to either the Director or to a person at the office of the Director who the
person giving the notice has reason to believe will promptly communicate same to
the Director. The notice need not specify the purpose of the meeting, nor the
place, if the meeting is to be held at the principal executive office of the
Corporation.
<PAGE>
Section 10. Waiver of Notice.
------------------
A. The transactions of any meeting of the Board of Directors, however
called, noticed, or wherever held, shall be as valid as though had at a meeting
duly held after the regular call and notice if a quorum be present and if,
either before or after the meeting, each of the Directors not present signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes thereof. Waivers of notice or consent need not specify the purposes of
the meeting. All such waivers, consents and approvals shall be filed with the
corporate records or made part of the minutes of the meeting.
B. Notice of a meeting shall also be deemed given to any Director who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such Director.
Section 11. Quorums. A majority of the authorized number of Directors
-------
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 12 of this Article II. Every act or decision done or made
by a majority of the Directors present at a meeting duly held at which a quorum
was present shall be regarded as the act of the Board of Directors, subject to
the provisions of the Act. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of Directors, if
any action taken is approved by at least a majority of the required quorum for
that meeting.
Section 12. Adjournment. A majority of the directors present, whether
-----------
or not constituting a quorum, may adjourn any meeting to another time and place.
Section 13. Notice of Adjournment. Notice of the time and place of the
---------------------
holding of an adjourned meeting need not be given, unless the meeting is
adjourned for more than 24 hours, in which case notice of such time and place
shall be given prior to the time of the adjourned meeting to the Directors who
were not present at the time of the adjournment.
Section 14. Board of Directors Provided by Articles or Bylaws. In the
-------------------------------------------------
event only one Director is required by the Bylaws or the Articles of
Incorporation, then any reference herein to notices, waivers, consents, meetings
or other actions by a majority or quorum of the Board of Directors shall be
deemed or referred as such notice, waiver, etc., by the sole Director, who shall
have all rights and duties and shall be entitled to exercise all of the powers
and shall assume all the responsibilities otherwise herein described, as given
to the Board of Directors.
Section 15. Directors Action by Unanimous Written Consent. Any action
---------------------------------------------
required or permitted to be taken by the Board of Directors may be taken without
a meeting and with the same force and effect as if taken by a unanimous vote of
Directors, if authorized by a writing signed individually or collectively by all
members of the Board of Directors. Such consent shall be filed with the regular
minutes of the Board of Directors.
<PAGE>
Section 16. Compensation of Directors. Directors, and members as such,
-------------------------
shall not receive any stated salary for their services, but by resolution of the
Board of Directors, a fixed sum and expense of attendance, if any, may be
allowed for attendance at each regular and special meeting of the Board of
Directors; provided, however, that nothing contained herein shall be construed
to preclude any Director from serving the Corporation in any other capacity as
an officer, employee or otherwise receiving compensation for such services.
Section 17. Committees. Committees of the Board of Directors may be
----------
appointed by resolution passed by a majority of the whole Board. Committees
shall be composed of two or more members of the Board of Directors. The Board
may designate one or more Directors as alternate members of any committee, who
may replace any absent member at any meeting of the committee. Committees shall
have such powers as those held by the Board of Directors as may be expressly
delegated to it by resolution of the Board of Directors, except those powers
expressly made non-delegable by the Act.
Section 18. Meetings and Action of Committees. Meetings and action of
---------------------------------
committees shall be governed by, and held and taken in accordance with, the
provisions of Article II, Sections 6, 8, 9, 10, 11, 12, 13 and 15, with such
changes in the context of those Sections as are necessary to substitute the
committee and its members for the Board of Directors and its members, except
that the time of the regular meetings of the committees may be determined by
resolution of the Board of Directors as well as the committee, and special
meetings of committees may also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws.
Section 19. Advisory Directors. The Board of Directors from time to
-------------------
time may elect one or more persons to be Advisory Directors, who shall not by
such appointment be members of the Board of Directors. Advisory Directors shall
be available from time to time to perform special assignments specified by the
President, to attend meetings of the Board of Directors upon invitation and to
furnish consultation to the Board of Directors. The period during which the
title shall be held may be prescribed by the Board of Directors. If no period
is prescribed, the title shall be held at the pleasure of the Board of
Directors.
ARTICLE III
OFFICERS
Section 1. Officers. The principal officers of the Corporation shall
--------
be a President, a Secretary, and a Chief Financial Officer who may also be
called Treasurer. The Corporation may also have, at the discretion of the Board
of Directors, a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article III. Any number of offices may be held by the same person.
Section 2. Election of Officers. The principal officers of the
----------------------
Corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be chosen by the
Board of Directors, and each shall serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment.
<PAGE>
Section 3. Subordinate Officers, Etc. The Board of Directors may
----------------------------
appoint such other officers as the business of the Corporation may require, each
of whom shall hold office for such period, have such authority and perform such
duties as are provided in the Bylaws or as the Board of Directors may from time
to time determine.
Section 4. Removal and Resignation of Officers.
---------------------------------------
A. Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by a
majority of the Directors at that time in office, at any regular or special
meeting of the Board of Directors, or, except in the case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
B. Any officer may resign at any time by giving written notice to the
Board of Directors. Any resignation shall take effect on the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Corporation under any contract to which
the officer is a party.
Section 5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for regular appointments to that office.
Section 6. Chairman of the Board.
------------------------
A. The Chairman of the Board, if such an officer be elected, shall, if
present, preside at the meetings of the Board of Directors and exercise and
perform such other powers and duties as may, from time to time, be assigned by
the Board of Directors or prescribed by the Bylaws. If there is no President,
the Chairman of the Board shall, in addition, be the Chief Executive Officer of
the Corporation and shall have the powers and duties prescribed in Section 7 of
this Article III.
Section 7. President and Chief Executive Officer. Subject to such
-----------------------------------------
supervisory powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, if there is such an officer, the President along with the
Chief Executive Officer of the Corporation shall, subject to the control of the
Board of Directors, have general supervision, discretion and control of the
business and officers of the Corporation. The President or the Chief Executive
Officer shall preside at all meetings of the Shareholders and, in the absence of
the Chairman of the Board, or if there be none, at all meetings of the Board of
Directors. The President and Chief Executive Officer, jointly, shall have the
general powers and duties of management usually vested in the office of
President and Chief Executive Officer of a corporation, each shall be ex officio
a member of all the standing committees, including the Executive Committee, if
any, and shall have such other powers and duties as may be prescribed by the
Board of Directors or the Bylaws.
<PAGE>
Section 8. Vice President. In the absence or disability of the
---------------
President or Chief Executive Officer, the Vice Presidents, if any, in order of
their rank as fixed by the Board of Directors, or if not ranked, the Vice
President designated by the Board of Directors, shall perform all the duties of
the President or Chief Executive Officer, as the case may be, and when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the President or the Chief Executive Officer. The Vice Presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them, respectively, by the Board of Directors or the Bylaws, the
President, the Chief Executive Officer, or the Chairman of the Board.
Section 9. Secretary.
---------
A. The Secretary shall keep, or cause to be kept, a book of minutes of
all meetings of the Board of Directors and Shareholders at the principal office
of the Corporation or such other place as the Board of Directors may order. The
minutes shall include the time and place of holding the meeting, whether regular
or special, and if a special meeting, how authorized, the notice thereof given,
and the names of those present at Directors' and committee meetings, the number
of shares present or represented at Shareholders' meetings and the proceedings
thereof.
B. The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation or at the office of the Corporation's transfer agent,
a share register, or duplicate share register, showing the names of the
Shareholders and their addresses; the number and classes or shares held by each;
the number and date of certificates issued for the same; and the number and date
of cancellation of every certificate surrendered for cancellation.
C. The Secretary shall give, or cause to be given, notice of all the
meetings of the Shareholders and of the Board of Directors required by the
Bylaws or by law to be given. The Secretary shall keep the seal of the
Corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 10. Chief Financial Officer or Treasurer.
-----------------------------------------
A. The Chief Financial Officer shall keep and maintain, or cause to be
kept and maintained, in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares issued. The books of account shall, at all reasonable times, be open to
inspection by any Director.
<PAGE>
B. The Chief Financial Officer shall deposit all monies and other
valuables in the name and to the credit of the Corporation with such
depositaries as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, shall render to the President and Directors, whenever
they request it, an account of all of the transactions of the Chief Financial
Officer and of the financial condition of the Corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the Bylaws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings. Meetings of the Shareholders shall be
-------------------
held at any place within or outside the state of Texas designated by the Board
of Directors. In the absence of any such designation, Shareholders' meetings
shall be held at the principal executive office of the Corporation.
Section 2. Annual Meeting.
---------------
A. The annual meeting of the Shareholders shall be held, each year, as
follows:
Time of Meeting: 10:00 A.M.
Date of Meeting: Second Tuesday in November
B. If this day shall be a legal holiday, then the meeting shall be held
on the next succeeding business day, at the same time. At the annual meeting,
the Shareholders shall elect a Board of Directors, consider reports of the
affairs of the Corporation and transact such other business as may be properly
brought before the meeting.
C. If the above date is inconvenient, the annual meeting of
Shareholders shall be held each year on a date and at a time designated by the
Board of Directors within ninety days of the above date upon proper notice to
all Shareholders.
Section 3. Special Meetings.
-----------------
A. Special meetings of the Shareholders for any purpose or purposes
whatsoever, may be called at any time by the Board of Directors, the Chairman of
the Board, the President, or by one or more Shareholders holding shares in the
aggregate entitled to cast not less than 10% of the votes at any such meeting.
Except as provided in paragraph B below of this Section 3, notice shall be given
as for the annual meeting.
<PAGE>
B. If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the Chairman of the Board, the President, any
Vice President or the Secretary of the Corporation. The officer receiving such
request shall forthwith cause notice to be given to the Shareholders entitled to
vote, in accordance with the provisions of Sections 4 and 5 of this Article,
indicating that a meeting will be held at the time requested by the person or
persons calling the meeting, not less than 35 nor more than 60 days after the
receipt of the request. If the notice is not given within 20 days after receipt
of the request, the person or persons requesting the meeting may give the notice
in the manner provided in these Bylaws. Nothing contained in this paragraph of
this Section shall be construed as limiting, fixing or affecting the time when a
meeting of Shareholders called by action of the Board of Directors may be held.
Section 4. Notice of Meetings - Reports.
--------------------------------
A. Notice of any Shareholders meetings, annual or special, shall be
given in writing not less than 10 days nor more than 60 days before the date of
the meeting to Shareholders entitled to vote thereat by the Secretary or the
Assistant Secretary, or if there be no such officer, or in the case of said
Secretary or Assistant Secretary's neglect or refusal, by any Director or
Shareholder.
B. Such notices or any reports shall be given personally or by mail or
other means of written communication as provided in the Act and shall be sent to
the Shareholder's address appearing on the books of the Corporation, or supplied
by the Shareholder to the Corporation for the purpose of notice, and in the
absence thereof, as provided in the Act by posting notice at a place where the
principal executive office of the Corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located.
C. Notice of any meeting of Shareholders shall specify the place, the
day and the hour of meeting, and (i) in case of a special meeting, the general
nature of the business to be transacted and that no other business may be
transacted, or (ii) in the case of an annual meeting, those matters which the
Board of Directors, at the date of mailing of notice, intends to present for
action by the Shareholders. At any meetings where Directors are elected, notice
shall include the names of the nominees, if any, intended at the date of notice
to be presented for election.
D. Notice shall be deemed given at the time it is delivered personally
or deposited in the mail or sent by other means of written communication. The
officer giving such notice or report shall prepare and file in the minute book
of the Corporation an affidavit or declaration thereof.
<PAGE>
E. If action is proposed to be taken at any meeting for approval of (i)
contracts or transactions in which a Director has a direct or indirect financial
interest, (ii) an amendment to the Articles of Incorporation, (iii) a
reorganization of the Corporation, (iv) dissolution of the Corporation, or (v) a
distribution to preferred Shareholders, the notice shall also state the general
nature of such proposal.
Section 5. Quorum.
------
A. The holders of a majority of the shares entitled to vote at a
Shareholders' meeting, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Shareholders for the transaction of
business except as otherwise provided by the Act or by these Bylaws.
B. The Shareholders present at a duly called or held meeting at which a
quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by a majority
of the shares required to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof.
----------------------------------------
A. Any Shareholders' meeting, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at such meeting, either in person or by
proxy, but in the absence of a quorum, no other business may be transacted at
such meeting.
B. When any meeting of Shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than 45 days from the date set for
the original meeting, in which case the Board of Directors shall set a new
record date. Notice of any adjourned meeting shall be given to each Shareholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Section 4 of this Article. At any adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting.
Section 7. Waiver or Consent by Absent Shareholders.
---------------------------------------------
A. The transactions of any meeting of Shareholders, either annual or
special, however called and noticed, shall be valid as though had at a meeting
duly held after regular call and notice, if a quorum be present either in person
or by proxy, and if, either before or after the meeting, each of the
Shareholders entitled to vote, not present in person or by proxy, sign a written
waiver of notice, or a consent to the holding of such meeting or an approval of
the minutes thereof.
<PAGE>
B. The waiver of notice or consent need not specify either the business
to be transacted or the purpose of any regular or special meeting of
Shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in Section E of Section 4 of this
Article, the waiver of notice or consent shall state the general nature of such
proposal. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
C. Attendance of a person at a meeting shall also constitute a waiver
of notice of such meeting, except when the person objects, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice. A Shareholder or Shareholders of the Corporation holding at least
5% in the aggregate of the outstanding voting shares of the Corporation may (i)
inspect, and copy the records of Shareholders' names and addresses and
shareholdings during usual business hours upon five days prior written demand
upon the Corporation, and/or (ii) obtain from the transfer agent by paying such
transfer agent's usual charges for such a list, a list of the Shareholders'
names and addresses who are entitled to vote for the election of Directors, and
their shareholdings, as of the most recent record date for which such list has
been compiled or as of a date specified by the Shareholders subsequent to the
day of demand. Such list shall be made available by the transfer agent on or
before the later of five days after the demand is received or the date specified
therein as the date as of which the list is to be compiled. The record of
Shareholders shall also be open to inspection upon the written demand of any
Shareholder or holder of a voting trust certificate, at any time during usual
business hours, for a purpose reasonably related to such holder's interest as a
Shareholder or as a holder of a voting trust certificate. Any inspection and
copying under this Section may be made in person or by an agent or attorney of
such Shareholder or holder of a voting trust certificate making such demand.
Section 8. Maintenance and Inspection of Bylaws. The Corporation shall
------------------------------------
keep at its principal executive office, or if not in this state, at its
principal business office in this state, the original or a copy of the Bylaws
amended to date, which shall be open to inspection by the Shareholders at all
reasonable times during office hours. If the principal executive office of the
Corporation is outside the state and the Corporation has no principal business
office in this state, the Secretary shall, upon written request of any
Shareholder, furnish to such Shareholder a copy of the Bylaws as amended to
date.
Section 9. Annual Report to Shareholders.
--------------------------------
A. Provided the Corporation has 100 Shareholders or less, the Annual
Report to Shareholders referred to in the Act is expressly dispensed with, but
nothing herein shall be interpreted as prohibiting the Board of Directors from
issuing annual or other period reports to Shareholders of the Corporation as
they deem appropriate.
<PAGE>
B. Should the Corporation have 100 or more Shareholders, an Annual
Report to Shareholders must be furnished not later than 120 days after the end
of each fiscal period. The Annual Report to Shareholders shall be sent at least
15 days before the annual meeting of the Shareholders to be held during the next
fiscal year and in the manner specified in Section 4 of Article V of these
Bylaws for giving notice to Shareholders of the Corporation. The Annual Report
to Shareholders shall contain a Balance Sheet as of the end of the fiscal year
and an Income Statement and Statement of Changes in Financial Position for the
fiscal year, accompanied by any report of independent accountants or, if there
is no such report, the certificate of an authorized officer of the Corporation
that the statements were prepared without audit from the books and records of
the Corporation.
Section 10. Financial Statements.
---------------------
A. A copy of any annual financial statement and any Income Statement of
the Corporation for each quarterly period of each fiscal year, and any
accompanying Balance Sheet of the Corporation as of the end of each such period,
that has been prepared by the Corporation shall be kept on file at the principal
executive office of the Corporation for 12 months from the date of its
execution, and each such statement shall be exhibited at all reasonable times to
any Shareholder demanding an examination of such statement or a copy shall be
made for any such Shareholder.
B. If a Shareholder or Shareholders holding at least 5% of the
outstanding shares of any class of stock of the Corporation make a written
request to the Corporation for an Income Statement of the Corporation for the
three month, six month or nine month period of the then current fiscal year
ended more than 30 days prior to the date of the request, and a Balance Sheet of
the Corporation at the end of such period, the Chief Financial Officer shall
cause such statement to be prepared, if not already prepared, and shall deliver
personally or mail such statement or statements to the person making the request
within 30 days after the receipt of such request. If the Corporation has not
sent to the Shareholders its Annual Report for the last fiscal year, this report
shall likewise be delivered or mailed to such Shareholder or Shareholders within
30 days after such request.
C. The Corporation also shall, upon the written request of any
Shareholder, mail to the Shareholder a copy of the last annual, semi-annual or
quarterly Income Statement which it has prepared and a Balance Sheet as of the
end of such period. This quarterly Income Statement and Balance Sheet referred
to in this Section shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the Corporation or the certificate of
authorized officer of the Corporation such that financial statements were
prepared without audit from the books and records of the Corporation.
<PAGE>
Section 11. Annual Statement of General Information. The Corporation
----------------------------------------
shall, in a timely manner, in each year, file with the Secretary of State of
Texas, on the prescribed form, the statement setting forth the authorized number
of Directors, the names and complete business or residence addresses of all
incumbent Directors, the names and complete business or residence addresses of
the Chief Executive Officer, Secretary and Chief Financial Officer, the street
address of its principal executive office or principal business office in this
state and the general type of business constituting the principal business
activity of the Corporation, together with a designation of the agent of the
Corporation for the purpose of the service of process, all in compliance with
the Act.
ARTICLE IX
AMENDMENTS TO BYLAWS
Section 1. Amendment by Shareholders. New Bylaws may be adopted or
---------------------------
these Bylaws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that if the Articles of Incorporation of the Corporation set forth the
number of authorized Directors of the Corporation, the authorized number of
Directors may be changed only by amendment to the Articles of Incorporation.
Section 2. Amendment by Directors. Subject to the rights of the
------------------------
Shareholders to adopt, amend or repeal the Bylaws, as provided in Section 1 of
this Article IX, and the limitations of the Act, the Board of Directors may
adopt, amend or repeal any of these Bylaws other than an amendment to the Bylaws
changing the authorized number of Directors.
Section 3. Record of Amendments. Whenever an amendment or new Bylaw is
--------------------
adopted, it shall be copies in the corporate book of Bylaws with the original
Bylaws, in the appropriate place. If any Bylaw is repealed, the fact of repeal
with the date of the meeting at which the repeal was enacted or written assent
was filed shall be stated in the corporate book of Bylaws.
ARTICLE X
MISCELLANEOUS
Section 1. Shareholders' Agreements. Notwithstanding anything
-------------------------
contained in this Article X to the contrary, in the event the Corporation elects
to become a close corporation, an agreement between two or more Shareholders
thereof, if in writing and signed by the parties thereto, may provide that in
exercising any voting rights, the shares held by them shall be voted as provided
therein or in the Act, and may otherwise modify the provisions contained in
Article IV, herein as to Shareholders' meetings and actions.
Section 2. Effect of Shareholders' Agreements. Any Shareholders'
-------------------------------------
Agreement authorized by the Act, shall only be effective to modify the terms of
these Bylaws if the Corporation elects to become a close corporation with the
appropriate filing of an amendment to its Articles of Incorporation as required
by the Act and shall terminate when the Corporation ceases to be a close
corporation. Any other provisions of the Act or these Bylaws may be altered or
waived thereby, but to the extent they are not so altered or waived, these
Bylaws shall be applicable.
Section 3. Subsidiary Corporations. Shares of the Corporation owned by
-----------------------
a subsidiary shall not be entitled to vote on any matter.
<PAGE>
Section 4. Accounting Year. The accounting year of the Corporation
----------------
shall be fixed by resolution of the Board of Directors.
Section 5. Form. The corporate seal shall be circular in form, and
----
shall have inscribed thereon the name of the Corporation, the date of its
incorporation, and the word "Texas" to indicate the Corporation was incorporated
pursuant to the laws of the State of Texas.
CERTIFICATE OF SECRETARY
I, the undersigned, certify that:
1. I am the duly elected and acting secretary of 649.com, Inc., a Texas
corporation; and
2. The foregoing Bylaws, consisting of 15 pages, are the Bylaws of this
Corporation as adopted by the Board of Directors in accordance with the Texas
Business Corporation Act and that such Bylaws have not been amended and are in
full force and effect.
IN WITNESS WHEREOF, I have subscribed my name and affixed the seal of this
Corporation on December 1, 1999.
/s/ Larry Burbidge
_________________________________
Larry Burbidge, Secretary
649.COM, INC.
1999 OMNIBUS STOCK OPTION PLAN
<PAGE>
649.COM, INC.
a Texas corporation
OMNIBUS STOCK OPTION PLAN
1. Name, Effective Date and Purpose.
------------------------------------
1.1 This Plan document is intended to implement and govern two separate
stock option plans of 649.COM, INC. (the "Company"): The Incentive Stock option
plan ("Plan A") and the Nonstatutory Stock Option Plan ("Plan B"). Plan A
provides for the granting of options that are intended to qualify as incentive
stock options ("Incentive Stock Options") within the meaning of Section 422A(b)
of the Intenal Revenue Code (the "Code"), as amended. Plan B provides for the
granting of options that are not intended to so qualify. Unless specified
otherwise, all the provisions of this Plan relate equally to both Plan A and
Plan B and are condensed for convenience into one Plan document.
1.2 Plan A and Plan B are each established effective as of December 1, 1999.
The purpose of Plan A and Plan B (sometimes together referred to as the "Plan"
or this "Plan") is to promote the growth and general prosperity of the Company
and its Affiliated Companies. This Plan will permit the Company to grant
options ("Options") to purchase shares of its common stock ("Common Stock").
The granting of Options will help the Company attract and retain the best
available persons for positions of substantial responsibility, and will provide
certain key employees with an additional incentive to contribute to the success
of the Company and its Affiliated Companies. For purposes of this Plan, the
term "Affiliated Companies" shall mean any component member of a controlled
group of corporations, as defined under Code Section 1563, in which the Company
is also a component member.
2. Administration.
--------------
2.1 The Plan shall be administered solely by the Board of Directors
(the "Board"). All decisions, determinations and interpretations of the Board
shall be final and binding on all Optionees.
2.2 The Board shall have sole authority, in its absolute discretion, to
determine which of the eligible persons of the Company and its Affiliated
Companies shall receive Options ("Optionees"), and, subject to the express
provisions and restrictions of this Plan, shall have sole authority, in its
absolute discretion, to determine the time when Options shall be granted, the
terms and conditions of any Option other than those terms and conditions fixed
under this Plan, the number of shares which may be issued upon exercise of an
Option and the means of payment for such shares, and shall have authority to do
everything necessary or appropriate to administer the Plan.
2.3 Aggregate limitations with respect to all participants in the Plan:
2.3.1 The Board shall not grant Options covering more than the number
of Available Shares of Common Stock to any employee in any Plan Year.
<PAGE>
2.4 Aggregate limitations with respect to the participation of
directors and officers in the Plan:
2.4.1 No more than the number of Available Shares of Common Stock may
be optioned and sold to directors of the Company under Plan A and Plan B
considered in the aggregate in any Plan Year.
2.4.2 No more than the Available Shares of Common Stock may be optioned
and sold to non-director officers of the Company under Plan A and Plan B
considered in the aggregate in any Plan Year.
2.5 Definitions:
2.5.1 Available Shares: Those shares specified in Section 4.1 as
available for issuance pursuant to this Plan in any Plan Year.
2.5.2 Officer: The chief executive officer, president, chief financial
officer, chief accounting officer, any vice president in charge of a principal
business function (such as sales, administration, finance, or legal) and any
other person who performs similar policy-making functions for the Company.
2.5.3 Parent Corporation: A corporation as defined in Section 425(e) of
the Code.
2.5.4 Plan Year: Any twelve (12) month period (or shorter period during
the final year of this Plan) commencing December 1 during the term of this Plan.
2.5.5 Restricted Shareholder: An individual who, at the time an Option
is granted under either Plan A or Plan B, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the employer
corporation or of its Parent Corporation or Subsidiary Corporation, with stock
ownership to be determined in light of the attribution rules set forth in
Section 425(d) of the Code.
2.5.6 Subsidiary Corporation: A corporation as defined in Section
425(f) of the Code.
3. Eligibility.
-----------
3.1 Plan A: The Board may, in its discretion, grant one or more Options
under Plan A to any key employee of the Company or its Affiliated Companies,
including any employee who is a director of the Company or of any of its
Affiliated Companies presently existing or hereinafter organized or acquired.
Such Options may be granted to one or more such employees without being granted
to other eligible employees, as the Board may deem fit.
<PAGE>
3.2 Plan B: The Board may, in its discretion, grant one or more options
under Plan B to any key management employee, any employee or non-employee
director of the Company or its Affiliated Companies, including any employee who
is a director of the Company or of any of its Affiliated Companies presently
existing or hereinafter organized or acquired, or any person who performs
consulting or other services for the Company or its Affiliated Companies and who
is designated by the Board as eligible to participate in Plan B. Such Options
may be granted to one or more such persons without being granted to other
eligible persons, as the Board may deem fit.
4. Stock to be Optioned.
-----------------------
4.1 The aggregate number of shares which may be optioned and sold under
Plan A and Plan B in any Plan Year shall not exceed the following amounts of the
shares of Authorized Common Stock of the Company:
<TABLE>
<CAPTION>
<S> <C>
Plan Year Available Shares
- - - - - - - ---------------------------------- ------------------------------------
December 1, 1999 - November 30, 2000 1,000,000 shares
- - - - - - - ------------------------------------- ------------------------------------
Each subsequent Plan Year beginning
December 1, 2000 10% of outstanding stock on December 1
of each such Plan Year
- - - - - - - ------------------------------------ ----------------------------------------
</TABLE>
The foregoing constitutes an absolute cumulative limitation on the total number
of shares, that may be optioned under both Plan A and Plan B in any Plan Year.
Therefore, at any particular date during a Plan Year, the maximum aggregate
number of shares which may be optioned under either Plan A or Plan B or both is
equal to the Available Shares minus the number of shares previously optioned and
sold under both Plan A and Plan B during that Plan Year. All shares to be
optioned and sold under either Plan A or Plan B may be either authorized but
unissued shares or shares held in the treasury.
4.2 Shares of Common Stock that: (i) are repurchased by the Company
after issuance hereunder pursuant to the exercise of an Option, or (ii) are not
purchased by the Optionee prior to the expiration or termination of the
applicable Option, shall again become available to be covered by Options to be
issued hereunder and shall not, as of the effective date of such repurchase or
expiration, be counted as covered by an outstanding Option for purposes of the
above-described maximum number of shares which may be optioned hereunder.
5. Option Price. The Option Price for shares of Common Stock to be
-------------
issued under either Plan A or Plan B shall be 100% of the fair market value of
such shares on the date on which the Option covering such shares is granted by
the Board (or the Committee, if authorized by the Board), except that if on the
date on which such Option is granted the Optionee is a Restricted Shareholder,
then such Option Price for Options granted under Plan A shall be 110% of the
fair market value of the shares of Common Stock subject to the Option on the
date such Option is granted by the Board. The fair market value of the shares
of Common Stock for all purposes of this Plan is to be determined by the Board
in its sole discretion, exercised in good faith.
<PAGE>
6. Term of Plan. Plan A and Plan B shall become effective on
--------------
December 1, 1999. Both Plan A and Plan B shall continue in effect until
November 30, 2009 unless terminated earlier by action of the Board. No Option
may be granted hereunder after November 30, 2009.
7. Exercise of Option. Subject to the actions, conditions and/or
--------------------
limitations set forth in this Plan document and/or any applicable Stock Option
Agreement entered into hereunder, Options granted under this Plan shall be
exercisable in accordance with the following rules:
7.1 No Option granted under Plan A may be exercised in whole or in part
until six (6) months after the date on which the Option is granted by the Board,
or by the Committee if so authorized (hereinafter the "Option Grant Date").
7.2 Subject to the specific provisions of this Section 7, Options shall
become exercisable at such times and in such installments (which may be
cumulative) as the Board shall provide in the terms of each individual Option;
provided, however, each Option granted under the Plan shall become exercisable
in installments of not more than 20% of the number of shares covered by such
Option each year from the Option Grant Date; and provided, further, that by a
resolution adopted after an Option is granted the Board may, on such terms and
conditions as it may determine to be appropriate and subject to the specific
provisions of this section 7, accelerate the time at which such Option or
installment thereof may be exercised. For purposes of this Plan, any accrued
installment of an Option granted hereunder shall be referred to as an "Accrued
Installment."
7.3 Subject to the specific restrictions contained in this Section 7,
an Option may be exercised when Accrued Installments accrue, as provided in the
terms under which such Option was granted, for a period of up to ten (10) years
from the Option Grant Date. In no event shall any Option be exercised on or
after the expiration of said maximum applicable period, regardless of the
circumstances then existing (including but not limited to the death or
termination of employment of the Optionee).
7.4 The Board shall fix the expiration date of the Option (the "Option
Expiration Date") at the time the Option grant is authorized.
8. Rules Applicable to Certain Dispositions.
--------------------------------------------
8.1 Notwithstanding the foregoing provisions of Section 7, in the event
the Company or the shareholders of the Company enter into an agreement to
dispose of all or substantially all of the assets or capital stock of the
Company by means of a sale, merger, consolidation, reorganization, liquidation,
or otherwise, an Option shall become immediately exercisable with respect to the
full number of shares subject to that Option during the period commencing as of
the later of (i) date of execution of such agreement or (ii) six (6) months
after the Option Grant Date, and ending as of the earlier of:
8.1.1 the Option Expiration Date; or
<PAGE>
8.1.2 the date on which the disposition of assets or capital stock
contemplated by the agreement is consummated.
The exercise of any Option made exercisable solely by reason of this Section 8.1
shall be conditioned upon the consummation of the disposition of assets or stock
under the above referenced agreement. Upon the consummation of any such
disposition of assets or stock, the Plan and any unexercised Options issued
hereunder (or any unexercised portion thereof) shall terminate and cease to be
effective.
8.2 Notwithstanding the foregoing, in the event that any such agreement
shall be terminated without consummating the disposition of said stock or
assets, any unexercised non-vested installments that had become exercisable
solely by reason of the provisions of section 8.1 shall again become non-vested
and unexercisable as of said termination of such agreement.
8.3 Notwithstanding the provisions set forth in Section 8.1, the Board
may, at its election and subject to the approval of the corporation purchasing
or acquiring the stock or assets of the Company (the "Surviving Corporation"),
arrange for the Optionee to receive upon surrender of Optionee's Option a new
option covering shares of the Surviving Corporation in the same proportion, at
an equivalent option price and subject to the same terms and conditions as the
old Option. For purposes of the preceding sentence, the excess of the aggregate
fair market value of the shares subject to such new option immediately after
consummation of such disposition of stock or assets over the aggregate option
price of such shares of the Surviving Corporation shall not be more than the
excess of the aggregate fair market value of all shares subject to the old
Option immediately before consummation of such disposition of stock or assets
over the aggregate Option Price of such shares of the Company, and the new
option shall not give the Optionee additional benefits which such Optionee did
not have under the old Option or deprive the Optionee of benefits which the
Optionee had under the old Option. If such substitution of options is
effectuated, the Optionee's rights under the old Option shall thereupon
terminate.
9. Mergers and Acquisitions.
--------------------------
<PAGE>
9.1 If the Company at any time should succeed to the business of
another corporation through a merger or consolidation, or through the
acquisition of stock or assets of such corporation, Options may be granted under
the Plan to option holders of such corporation or its subsidiaries, in
substitution for options or rights to purchase stock of such corporation held by
them at the time of succession. The Board shall have sole and absolute
discretion to determine the extent to which such substitute Options shall be
granted (if at all), the person or persons within the eligible group to receive
such substitute Options (who need not be all option holders of such
corporation), the number of Options to be received by each person, the Option
Price of such Option, and the terms and conditions of such substitute Options;
provided however, that the terms and conditions of the substitute Options shall
comply with the provisions of Section 425 of the Code, such that the excess of
the aggregate fair market value of the shares subject to such substitute Option
immediately after the substitution or assumption over the aggregate option price
of such shares is not more than the excess of the aggregate fair market value of
all shares subject to the substitution Option immediately before such
substitution or assumption over the aggregate option price of such shares, and
the substitution Option or the assumption of the old option does not give the
holder thereof additional benefits which he or she did not have under such old
option.
9.2 Notwithstanding anything to the contrary herein, no Option shall be
granted, nor any action taken, permitted or omitted, which could cause the Plan,
or any Options granted hereunder as to which Rule 16b-3 under the Securities
Exchange Act of 1934 may apply, not to comply with such Rule.
10. Termination of Employment.
----------------------------
10.1 In the event that the Optionee's employment, directorship or
consulting or other arrangement with the Company (or Affiliated Company) is
terminated for any reason other than death or disability, any unexercised
Accrued Installments of the Option granted hereunder to such terminated Optionee
shall expire and become unexercisable as of the earlier of:
10.1.1 the applicable Option Expiration Date; or
10.1.2 a date 30 days after such termination occurs, provided,
however, that the Board may, in the exercise of its discretion, extend said date
up to and including a date three months following such termination with respect
to Options granted under Plan A, or up to and including a date two years
following such termination with respect to Options granted under Plan B.
10.2 In the event that Optionee's employment, directorship or
consulting or other arrangement with the Company is terminated due to the death
or disability of the Optionee, any unexercised Accrued Installments of the
Option granted hereunder to such Optionee shall expire and become unexercisable
as of the earlier of:
10.2.1 the applicable Option Expiration Date; or
10.2.2 the first anniversary of the date of death of such Optionee
(if applicable); or
10.2.3 the first anniversary of the date of the termination of
employment, directorship or consulting or other arrangement by reason of
disability (if applicable). Any such Accrued Installments of a deceased
Optionee may be exercised prior to their expiration by (and only by) the person
or persons to whom the Optionee's Option right shall pass by will or by the laws
of descent and distribution, if applicable, subject, however, to all the terms
and conditions of this Plan and the applicable Stock Option Agreement governing
the exercise of Options granted hereunder.
10.3 For purposes of this section 10, an Optionee shall be deemed
employed by the Company (or Affiliated Company) during any period of leave of
absence from active employment as authorized by the Company (or Affiliated
Company).
<PAGE>
11. Exercise of Options.
---------------------
11.1 An Option shall be deemed exercised when written notice of such
exercise has been given to the Company at its principal business office by the
person entitled to exercise the Option and full payment in cash or cash
equivalents (or with shares of Common Stock pursuant to section 14) for the
shares with respect to which the Option is exercised has been received by the
Company. The Board may cause the Company to give or arrange for financial
assistance (including without limitation direct loans, with or without interest,
secured or unsecured, or guarantees of third party loans) to an Optionee for the
purpose of providing funds for the purchase of shares pursuant to the exercise
of Options, when in the judgment of the Board such assistance is in the best
interests of the Company, is consistent with the Certificate of Incorporation
and Bylaws of the Company and applicable laws, and will permit the shares to be
fully paid and nonassessable when issued.
11.2 An Option may be exercised in accordance with this section 11 as
to all or any portion of the shares covered by an Accrued Installment of the
Option from time to time during the applicable Option period, but shall not be
exercisable with respect to fractions of a share.
11.3 As soon as practicable after any proper exercise of an Option in
accordance with the provisions of this Plan, the Company shall deliver to the
Optionee at the main office of the Company, or such other place as shall be
mutually acceptable, a certificate or certificates representing the shares of
Common Stock as to which the Option has been exercised. The time of issuance
and delivery of the Common Stock may be postponed by the Company for such period
as may be required for it with reasonable diligence to comply with any
applicable listing requirements of any national or regional securities exchange
and any law or regulation applicable to the issuance and delivery of such
shares.
12. Authorization to Issue Options and Shareholder Approval. Unless in
-------------------------------------------------------
the judgment of counsel to the Company such permit is not necessary with respect
to particular grants, Options granted under the Plan shall be conditioned upon
the Company obtaining any required permit from the California Department of
Corporations and/or other appropriate governmental agencies, free of any
conditions not acceptable to the Board, authorizing the Company to grant such
Options, provided, however, such condition shall lapse as of the effective date
of issuance of such permit(s) in a form to which the Company does not object
within sixty (60) days. The grant of Options under the Plan also is conditioned
on approval of the Plan by the vote or consent of the holders of a majority of
the outstanding shares of the Company's Common Stock and no Option granted
hereunder shall be effective or exercisable unless and until the Plan has been
so approved.
13. Limit on Value of Optioned Shares. The aggregate fair market value
---------------------------------
(determined as of the Option Grant Date) of the shares of Common Stock to which
Options granted under Plan A are exercisable for the first time by any employee
of the Company during any calendar year under all incentive stock option plans
of the Company and its Affiliated Companies shall not exceed $100,000. The
limitation imposed by this section 13 shall not apply to Options granted under
Plan B.
<PAGE>
14. Payment of Exercise Price with Company Stock. The Board may
--------------------------------------------------
provide that, upon exercise of the Option, the Optionee may elect to pay for all
or some of the shares of Common Stock underlying the Option with shares of
Common Stock of the Company previously acquired and owned at the time of
exercise by the Optionee, subject to all restrictions and limitations of
applicable laws, rules and regulations, including Section 425(c)(3) of the Code,
and provided that the Optionee will make representations and warranties
satisfactory to the Company regarding his or her title to the shares used to
effect the purchase, including without limitation representations and warranties
that the Optionee has good and marketable title to such shares free and clear of
any and all liens, encumbrances, charges, equities, claims, security interests,
options or restrictions, and has full power to deliver such shares without
obtaining the consent or approval of any person or governmental authority other
than those which have already given consent or approval in a form satisfactory
to the Company. The equivalent dollar value of the shares used to effect the
purchase shall be the fair market value of the shares on the date of the
purchase as determined by the Board in its sole discretion, exercised in good
faith.
15. Stock Option Agreements. The terms and conditions of Options
-------------------------
granted under the Plan shall be evidenced by a Stock Option Agreement
(hereinafter referred to as the "Agreement") executed by the Company and the
person to whom the Option is granted. Each agreement shall contain the
following provisions:
15.1 A provision fixing the number of shares which may be issued upon
exercise of the Option;
15.2 A provision establishing the Option exercise price per share;
15.3 A provision establishing the times and the installments in which
Options may be exercised, provided, however, such times and installments shall
not be more than 20% of the number of shares covered by such Option each year
from the Option Grant Date;
15.4 A provision incorporating therein this Plan by reference;
15.5 A provision clarifying which Options are intended to be Incentive
Stock Options under Plan A and which are intended to be nonstatutory stock
options under Plan B;
15.6 A provision fixing the maximum duration of the Option as not more
than five (5) years from the Option Grant Date for Options granted under Plan A
and not more than ten (10) years from the Option Grant Date for Options granted
under Plan B;
15.7 Such representations and warranties by the Optionee as may be
required by section 25 of this Plan or as may be required by the Board in its
discretion;
15.8 Any other restriction (in addition to those established under this
Plan) as may be established by the Board with respect to the exercise of the
Option, the transfer of the Option, and/or the transfer of the shares purchased
by exercise of the Option, provided that such restrictions are not in conflict
with this Plan; and
<PAGE>
15.9 Such other terms and conditions consistent with this Plan as may
be established by the Board.
16. Taxes, Fees and Expenses. The Company shall pay all original issue
------------------------
and transfer taxes (but not income taxes, if any) with respect to the grant of
Options and/or the issue and transfer of shares pursuant to the exercise of such
Options, and all other fees and expenses necessarily incurred by the Company in
connection therewith, and will from time to time use its best efforts to comply
with all laws and regulations which, in the opinion of counsel for the Company,
shall be applicable thereto.
17. Withholding of Taxes. The grant of Options hereunder and the
----------------------
issuance of Common Stock pursuant to the exercise of such Options is conditioned
upon the Company's reservation of the right to withhold, in accordance with any
applicable law, from any compensation payable to the Optionee any taxes required
to be withheld by federal, state and local law as a result of the grant or
exercise of any such Option.
18. Amendment or Termination of the Plan.
-----------------------------------------
18.1 The Board may amend this Plan from time to time in such respects
as the Board may deem advisable, provided, however, that no such amendment shall
operate to (i) affect adversely an Optionee's rights under this Plan with
respect to any Option granted hereunder prior to the adoption of such amendment,
except as may be necessary, in the judgment of counsel to the Company, to comply
with any applicable law, (ii) increase the maximum aggregate number of shares
which may be optioned and sold under the Plan (unless shareholders approve such
increase), (iii) change the manner of determining the option exercise price,
(iv) change the classes of persons eligible to receive Options under the Plan,
or (v) extend the maximum duration of the Option or the Plan.
18.2 The Board may at any time terminate this Plan. Any such
termination of the Plan shall not, without the written consent of the Optionee,
alter the terms of Options already granted, and such Options shall remain in
full force and effect as if this Plan had not been terminated.
19. Options Not Transferable. Options granted under this Plan may not
-------------------------
be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred or alienated in any manner, either voluntarily or involuntarily by
operation of law, other than by will or the laws of descent of distribution, and
may be exercised during the lifetime of an Optionee only by such Optionee.
20. No Restrictions on Transfer of Stock. Common Stock issued pursuant
------------------------------------
to the exercise of an Option granted under this Plan (hereinafter "Optioned
Stock"), or any interest in such Optioned Stock, may be sold, assigned, gifted,
pledged, hypothecated, uncumbered or otherwise transferred or alienated in any
manner by the holder(s) thereof, subject, however, to any representations or
warranties requested under section 25 of this Plan and also subject to
compliance with any applicable federal, state or other local law, regulation or
rule governing the sale or transfer of stock or securities.
<PAGE>
21. Reservation of Shares of Common Stock. The Company, during the
-----------------------------------------
term of this Plan, shall at all times reserve and keep available such number of
shares of its Common Stock sufficient to satisfy the requirements of the Plan.
22. Restrictions on Issuance of Shares. The Company, during the term
------------------------------------
of this Plan, shall use its best efforts to obtain from the appropriate
regulatory agencies any requisite authorization to grant Options or issue and
sell such number of shares of its Common Stock as necessary to satisfy the
requirements of the Plan. The inability of the Company to obtain from any such
regulatory agency having jurisdiction thereof the authorization deemed by the
Company's counsel to be necessary to the lawful grant of Options or the issuance
and sale of any shares of its stock hereunder or the inability of the Company to
confirm to its satisfaction that any grant of Options or issuance and sale of
any shares of such stock will meet applicable legal requirements shall relieve
the Company of any liability in respect of the non-issuance or sale of such
stock as to which such authorization or confirmation have not been obtained.
23. Notices. Any notice to be given to the Company pursuant to the
-------
provisions of this Plan shall be addressed to the Company in care of its
Secretary at its principal office, and any notice to be given to a person to
whom an Option is granted hereunder shall be addressed to him or her at the
address given beneath his or her signature on his or her Stock Option Agreement,
or at such other address as such person or his or her transferee (upon the
transfer of Optioned Stock) may hereafter designate in writing to the Company.
Any such notice shall be deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, registered or certified, and
deposited, postage and registry or certification fee prepaid, in a post office
or branch post office regularly maintained by the United States Postal Service.
It should be the obligation of each Optionee and each transferee holding
optioned stock to provide the Secretary of the Company, by letter mailed as
provided hereinabove, with written notice of his or her correct mailing address.
24. Adjustments Upon Changes in Capitalization. If the outstanding
----------------------------------------------
shares of Common Stock of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the Company through
reorganization, recapitalization, reclassification, stock dividend, stock split
or reverse stock split, then an appropriate and proportionate adjustment shall
be made in the number or kind of shares which may be issued upon exercise or
Options granted under the Plan; provided, however, that no such adjustment need
be made if, upon the advice of counsel, the Board determines that such
adjustment may result in the receipt of federally taxable income to holders of
Options granted hereunder or the holders of Common Stock or other classes of the
Company's securities.
<PAGE>
25. Representations and Warranties. As a condition to the grant of any
------------------------------
Option hereunder or the exercise of any portion of an Option, the Company may
require the person to be granted or exercising such Option to make any
representations and/or warranty to the Company as may, in the judgment of
counsel to the Company, be required under any applicable law or regulation,
including, but not limited to, a representation and warranty that the Option
and/or shares issuable or issued upon exercise of such Option are being acquired
only for investment, for such person's own account and without any present
intention to sell or distribute such Option or shares, as the case may be, if,
in the opinion of counsel for the Company, such representation is required under
the Securities Act of 1933, the California Corporate Securities Law of 1968 or
any other applicable law, regulation or rule of any governmental agency.
26. No Enlargement of Employee Rights. This Plan is purely voluntary
-----------------------------------
on the part of the Company, and the continuance of the Plan shall not be deemed
to constitute a contract between the Company and any employee, or to be
consideration for or a condition of the employment of any employee. Nothing
contained in the Plan shall be deemed to give any employee the right to be
retained in the employ of the Company or its Affiliated Companies, or to
interfere with the right of the Company or an Affiliated Company to discharge
any employee thereof at any time. No employee shall have any right to or
interest in Options authorized hereunder prior to the grant of such an Option to
such employee, and upon such grant he or she shall have only such rights and
interests as are expressly provided herein, subject, however, to all applicable
provisions of the Company's Certificate of Incorporation, as the same may be
amended from time to time.
27. Information to Option Holders. During the period any options
--------------------------------
granted to employees of the Company remain outstanding, such employee-option
holders shall be entitled to receive, on an annual or other periodic basis,
financial and other information regarding the Company. The Board shall exercise
its discretion with regard to the nature and extent of the financial information
so provided, giving due regard to the size and circumstances of the Company and,
if the Company provides annual reports to its shareholders, the Company's
practice in connection with such annual reports. Notwithstanding the above, if
the issuance of options under either Plan A or Plan B is limited to key
employees whose duties in connection with the company assure their access to
equivalent information, this section 27 shall not apply to such employees and
plan. A copy of this Plan shall be delivered to the Secretary of the Company
and shall be shown by him or her to each eligible person making reasonable
inquiry concerning it. A copy of this Plan also shall be delivered to each
Optionee at the time his or her Options are granted.
28. Legends on Stock Certificates. Each certificate representing
--------------------------------
Common Stock issued under this Plan shall bear whatever legends are required by
federal or state law or by any governmental agency. In particular, unless an
appropriate registration statement is filed pursuant to the Federal Securities
Act of 1933, as amended, with respect to the shares of Common Stock issuable
under this Plan, each certificate representing such Common Stock shall be
endorsed on its face with the following legend or its equivalent:
Neither the Option pursuant to which the shares represented by this certificate
are issued nor said shares have been registered under the Securities Act of
1933, as amended (the "Act"). Transfer or sale of such securities or any
interest therein is unlawful except after registration, or pursuant to an
exemption from the registration requirements, as provided in the Act and the
regulations thereunder.
<PAGE>
29. Specific Performance. The Options granted under this Plan and the
---------------------
Optioned Stock issued pursuant to the exercise of such Options cannot be readily
purchased or sold in the open market, and, for that reason among others, the
Company and its shareholders will be irreparably damaged in the event that this
Plan is not specifically enforced. In the event of any controversy concerning
the right or obligation to purchase or sell any such Option or Optioned Stock,
such right or obligation shall be enforceable in a court of equity by a decree
of specific performance. Such remedy shall, however, be cumulative and not
exclusive, and shall be in addition to any other remedy which the parties may
have.
30. Invalid Provision. In the event that any provision of this Plan is
-----------------
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or enforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.
31. Applicable Law. This Plan shall be governed by and construed in
---------------
accordance with the laws of the State of California.
32. Successors and Assigns. This Plan shall be binding on and inure to
----------------------
the benefit of the Company and the employees to whom an Option is granted
hereunder, and such employees' heirs, executors, administrators, legatees,
personal representatives, assignees and transferees.
IN WITNESS WHEREOF, pursuant to the due authorization and adoption of this
Plan by the Board on December 1, 1999, the Company has caused this Plan to be
duly executed by its duly authorized officers.
649.COM, INC.
/s/ Larry Burbidge
_____________________________________
By: Larry Burbidge
Its: President
This AGREEMENT was made on August 3, 1999.
Between: 649.com inc. ('ABET')
ABET is a public company listed on the US OTC Bulletin Board.
And: Lawrence P Burbidge ('LPB") as Consultant.
LPB is a resident of British Columbia.
ABET is prepared to have LPB act as President and CEO of ABET o the following
terms and conditions:
1. Terms and Starting Date:
The initial term is 12 months, commencing August 9th 1999. Renewable term and
conditions subject to board approval.
2. Compensation
a) Base salary of $8,000 (Canadian)/month paid bi-monthly,
b) Signing bonus of 500,000 shares of ABET to be award LPB or his nominee.
These shares to be released to LPB according to SEC regulations,
c) Stock options: in addition, LPB to be awarded options to purchase an
additional 500,000 shares at 50 cents (US)/share (option good for
2 years),
d) Out of pocket costs to be reimbursed, at cost, to LPB on a monthly basis,
e) The 500,000 share stock option can only be exercised after the 12th month
and only if LPB has remained as a consultant for that period.
f) The 500,000 bonus shares are awarded as follows:
180,000 shares January 31, 2000 and 30,000 share per month, thereafter,
for a total of 360,000 shares over 12 months with an additional 140,000
shares due at the end of the above 12-month period.
3. Duties:
a) LPB to agree to be appointed to the board of ABET as a director and to be
the acting President and DEO,
b) Attached is a preliminary itemized list of things to be done,
c) LPB to be fully in charge of ABET and to report to the Board of
Directors, who in turn, report to the shareholders. The major
shareholder is Baycove Investments Limited who will either appoint a
member to the Board or be a member of the Advisory Board.
4. Trial Period:
There is to be a 30 day trail period, on the 30th day (September 9/99):
a) Should LPB decide that he does not wish to continue in the role of
President and CEO as outlined herein, LPB shall simply be paid $8,000 for the
month plus all of his out of pocket costs,
b) Should the board of ABET, as directed by the major shareholder, Baycove
Investments Limited decide that LPB is not suitable to be President and CEO then
LPB aggress that his total compensation to be $8,000 for the month plus all of
his out of pocket costs plus a termination bonus of $10,000 plus 10,000
free-trading shares of ABET and he shall continue to be employed for a further
month at $8,000/month.
AGREED: SIGNED:
August 9, 1999 August 9, 1999
/s/ Lawrence P Burbidge /s/ Irene Poole
Lawrence P Burbidge Baycove Investments Limited
This AGREEMENT was made on August 12, 1999 and replaces any previous contracts.
Between: 649.com, inc, ('ABET')
ABET is a public company listed on the OTC Bulletin Board.
And: Brandon Moase ('BM') as Consultant.
BM is a resident of British Columbia
ABET is prepared to have BM as the VP Operations under the following terms and
conditions:
1. Term and Starting Date:
The initial term is 12 months starting August 13, 1999. Renewable terms and
conditions subject to board approval.
2. Compensation:
a) Base salary of $6,000 (Canadian)/monthly paid by-monthly.
b) Signing bonus of 250,000 shares of ABET to be awarded BM or his nominee.
These shares to be released to BM according to SEC regulations,
c) Stock Options: in addition, BM to be awarded options to purchase an
additional 250,000 shares at 50 cents (US)/share (option good
for 2 years)
d) Out of pocket costs to be reimbursed, at cost to BM on a monthly basis,
e) The 250,000 share stock option can only be exercised after the 12th month
and only if BM has remained a consultant for that period.
f) The 250,000 bonus shares are awarded as follows:
120,000 shares March 1, 2000 and 15,000 shares per month, thereafter,
for a total of 180,000 over 12 months with an additional 70,000 shares
due at the end of the 12-month period.
3. Duties:
a) Nominated to the Board of ABET as director.
AGREED: SIGNED:
August 12, 1999 August 12, 1999
/s/ Brandon Moase /s/ Lawrence P Burbidge
Brandon Moase 649.com, Inc., Lawrence P Burbidge,
President and CEO
CONSULTING AGREEMENT
THIS AGREEMENT, dated for reference the 1st day of June 1999 ( the "reference
date")
BETWEEN:
649.com, Inc. , a company incorporated in the Province of British Columbia and
having its principal place of business at 1320-925 West Georgia St.; Vancouver,
BC V6C 3L8
("'Company")
AND:
Mindquake Software Inc., a corporation organized under the laws of British
Columbia and having its principal place of business at 300 - 1168 Hamilton St.,
Vancouver, BC Canada V6B 2S2;
("Consultant")
WITNESSES THAT:
A. The Company is in the business of Internet Gaming
B. Consultant is in the business of providing strategic technology
consulting and software development services;
C. Company and Consultant wish to enter into an independent contractor
arrangement whereby Consultant shall perform certain services on the terms and
conditions set forth in this Agreement.
NOW THEREFORE in consideration of the mutual promises and covenants herein
contained, the parties hereby covenant and agree as follows:
General Terms and Conditions
----------------------------
Definitions
- - - - - - - -----------
1. Unless the context requires otherwise, the following terms shall
have the meanings set out below when used in this Agreement:
a) "Confidential Information" means trade secrets and other information not
generally known to the public, that Is owned by Company or Consultant, or by any
company affiliated, associated or related to Company or Consultant, or by any
of their respective suppliers, customers or other business partners.
Confidential information includes, without limitation, all Developments, source
code and related documentation. financial
information, legal, corporate, marketing, product, research, technical,
manufacturing, personnel, customer and supplier information and any other
information, in whatever form or media, specifically identified as confidential
by a party, or the nature of which is such that it would generally be considered
confidential in the industry in which that party operates, or which that party
is obligated to treat as confidential or proprietary;
b) "Consultant's Property" means the know-how, techniques, technologies,
methods, concepts, inventions and programs owned by Consultant prior to
commencing the Services and used by Consultant in performing the Services, that
are identified in a schedule to this Agreement:
<PAGE>
c) "Developments" means all inventions, improvements, discoveries, computer
software, and other results arising from or relating to the Services performed
by Consultant for Company (including, where applicable, all scripts, models,
specifications, source code, design documents, creations, artwork, text,
graphics, photos, pictures, and music); and
d) "Employees" means the one or more individuals who are employees(s) of, or
independent contractors engaged by, Consultant and who will actually perform the
Services.
Particulars of Services
- - - - - - - -------------------------
2. General Obligations of the Parties Consultant shall perform the
Services described in Schedule
"1 ". Company shall pay Consultant for the Services in accordance with the terms
and conditions
set out in Agreement.
3. Term of Agreement - This Agreement shall be deemed to have come into
force and effect as of
the reference date set out on the face page and continues in affect until the
end of the Term identified in Schedule "1", unless one of the parties terminates
the Agreement in accordance
with its termination provisions.
4. Project Manager - Consultant's primary contact at Company shall be
the "Project Manager" identified in Schedule "1". The Project Manager shall
provide Consultant with general instructions and guidance with respect to the
performance of the Services.
Fees and Expenses
- - - - - - - -------------------
5. Payment - As full and complete consideration for the performance of
the Services, Company shall pay Consultant the 'Fees' stipulated In Schedule "1"
plus all applicable taxes. Unless otherwise indicated in Schedule "1", Company
shall pay fees due Consultant within ten calendar days after receipt by Company
of an invoice for those fees. Consultant may charge late fees of 1.5 per month
or portion thereof for lets payment of any amount owing under this Agreement and
if any payment becomes more then 45 days overdue, may suspend performance of the
Services until such payment is made.
6. Invoices - If payment is due upon achievement of an identified
milestone, Consultant shall invoice
Company for the Services upon achievement of the milestone. In any other event,
unless otherwise indicated in Schedule "1", Consultant shall invoice Company for
the Services it performs on a monthly basis in arrears. Each invoice submitted
to Company by Consultant shall detail the nature of the Services performed, the
Fees payable, and the basis on which the calculation of the Fees has been made.
7. Expenses - Company shall reimburse Consultant for all reasonable
expenses incurred by the Employees as the result of Company requiring the
Employees to travel outside of Greater Vancouver, and for all other expenses
pre-approved by Company.
8. Reimbursement of Expenses - Consultant shall submit invoices for
expenses and shall attach the applicable receipts when these are reasonably
available. Company shall reimburse expenses within ten business days after
receipt by Company of the Invoices.
Independent Contractor Status
- - - - - - - -------------------------------
9. Nature of Relationship - Consultant shall perform the Services as an
independent contractor, and nothing contained In this Agreement shall be
construed to create or imply a joint venture, partnership, principal-agent, or
employment relationship between the parties or between Company and the
<PAGE>
Employees. Unless Company specifically authorizes Consultant in writing to do
so, neither Consultant nor the Employees shall act or purport to be acting as
the legal agent of Company, end neither Consultant nor the Employee(s) shall
enter or purport to enter into any agreement on behalf of Company or otherwise
bind or purport to bind Company or cause Company to incur liability in any
manner whatsoever.
10. No Employment Payments or Benefits - Consultant hereby covenants to
pay, at Consultant's expense, all income taxes, unemployment Insurance premiums,
federal pension plan premiums, workers' compensation contributions, and all
other taxes, charges and contributions which competent government authorities
levy or require to be paid on behalf of Consultant or the Employees.
Consultant's Obligations
- - - - - - - -------------------------
11. Representations and Warranties - Consultant represents and warrants
to, and covenants with Company that:
a) Consultant :hall observe and comply with all applicable laws, ordinances,
codes and regulations of governmental agencies, including federal, provincial,
state, municipal and local governing bodies, of any country having jurisdiction
over the Services or any part thereof; and
b) Consultant shall take all reasonable precautions to protect the integrity of
Company's computer systems and, where applicable, Company's customer's computer
systems, including without limitation, taking reasonable steps to ensure the
Employees comply with any Company policies in this regard of which Consultant Is
made aware of in a timely fashion.
Company's Obligations
- - - - - - - ----------------------
12. Indemnity - Company shall indemnify and save harmless Consultant
and its respective agents, independent contractors, directors, officers and
employees from and against any and all damages, losses, injuries, claims,
demands, actions, liabilities, costs and expenses (including reasonable legal
fees) incurred or made against Consultant arising, either directly or
indirectly, from any negligent or wrongful acts) or omissions of Company.
13. Access - Company shall provide to Consultant any assistance or
access to information and facilities reasonably required by Consultant to
perform Its obligations under this Agreement.
14. Care/Insurance for any Item of Consultant's Property on Company's
Site - Company acknowledges that during the term of this Agreement and
thereafter certain items of Consultant's Property may from time to time be left
at Company's site. Company agrees that it shell take reasonable care to protect
these items from lose or damage which shall not be less than the care,
protection, security measures, and shelter from adverse environmental
conditions, that Company provides for its own property. Company further agrees
that it shall obtain/maintain adequate insurance against the loss of
Consultant's Property and shall upon request, deliver evidence of such insurance
to Consultant for inspection.
15. Licenses for Third Party Software - If Consultant Indicates that
third party software is required to perform the Services and does not undertake,
In writing, to provide the identified software, then Company shall ensure it has
acquired the licenses or permissions, necessary to enable Consultant to utilize
this software in the performance of the Services.
<PAGE>
Termination of Agreement
- - - - - - - --------------------------
16. Payment upon Termination - If either party terminates this
Agreement, Company shall pay Consultant for Services performed up to the
effective date of termination. If the Fees for Services under this Agreement are
based on Consultant achieving identified milestones. Company shall pay
Consultant up to and Including the last milestone achieved prior to the
effective date of termination. In addition, Company shall pay to Consultant the
hourly rate specified in Schedule "1" multiplied by the number of hours of
Services that, Consultant can demonstrate, were performed between the date that
milestone was achieved and the effective date of termination.
17. Return of Materials, Equipment and Confidential Information - Upon
termination or expiration of this Agreement, or at any time upon request by
either party (the "disclosing party"), the other party (the "receiving
party") shell immediately deliver up to the disclosing party, at disclosing
party's own expense and risk, all Confidential Information and all copies
thereof, and all other materials, documents, information, contracts,
equipment, materials and property, except items licensed to Company
hereunder, in the receiving party's possession, charge, control or custody
which it obtained from or which is owned by the disclosing party, its customers
or suppliers. Each party shall return any equipment, materials or property
furnished to it by the other party in the some condition as it was when
originally furnished, reasonable wear and tear excepted.
Confidentiality
- - - - - - - ---------------
18. Confidential Information - Each party acknowledges that in order to
enable Consultant to perform the Services properly, Company will disclose to
Consultant or allow Consultant access to, and Consultant will disclose to
Company or allow Company access to, Confidential Information. Each party further
acknowledges that this information has been acquired through the expenditure of
time, effort and money and that certain items of Consultant's Property contain
or embody Confidential Information.
19. Exclusion - The non-disclosure obligations under this Agreement
shall not apply to Confidential
Information which the receiving party can establish:
a) is, or becomes, readily available to the public other then through s breach
of this Agreement;
b) is disclosed, lawfully and not In breach of any contractual or other legal
obligation, to it by a third party; or
c) through written records, was known to it or developed by it, prior to the
date of first disclosure of the Confidential Information under this
Agreement.
20. Ownership of Confidential Information - Consultant and Company each
acknowledge and agree that they shall not acquire any right, title or
interest in or to the other party's Confidential information under this
Agreement.
21. Limited Disclosure, Use and Reproduction - During the term of this
Agreement and thereafter, each party shell maintain in strict confidence all
Confidential Information of the other party disclosed to it, or to which it
obtains access, as a result of this Agreement. Consultant and Company shall
not, and shall take all reasonable steps to ensure their respective employees do
not, directly or indirectly, disclose, allow access to, transmit or transfer the
other party's Confidential Information to a third party without the
disclosing party's consent, or use or reproduce such Confidential
information, in any manner, except as reasonably required to fulfil the
purposes of this Agreement. The receiving party shall ensure that every copy it
makes of the other party's Confidential Information is clearly marked, or
otherwise identified as confidential and proprietary to the other party, and is
stored in a secure location while in the receiving party's possession, control,
charge or custody. Notwithstanding the foregoing, If the receiving party can
establish it is required by law to disclose Confidential Information, it shall
be permitted, to the extent required, to do so, provided that notice of this
requirement to disclose is first delivered to the disclosing party, so that it
may contest this potential disclosure.
<PAGE>
Ownership and Licensing of Developments and Certain Items of Consultant's
- - - - - - - --------------------------------------------------------------------------------
Property
- - - - - - - --------
22. Ownership of Developments - Company shall be the exclusive owner of
the Developments and of all Intellectual property rights In and to such
Developments. Consultant hereby assigns to Company all right, title and
interest throughout the world and universe, Including without limitation,
all copyrights, trade-marks, trade secrets, patent rights, and any other
intellectual property right in and to each Development, effective at the
time each is created.
23. License for Consultant's Property - Consultant hereby grants to
Company, a perpetual non- exclusive, personal, non-transferable license to use
each item of Consultant's Property delivered to Company by Consultant under
this Agreement, solely for the purposes and to the extent set out in
Schedule " 1". It no specifics are included under the heading "Consultant's
Property" in Schedule "1", the licensed Consultant's Property may be used by
only one Individual at a time and solely for Company's own internal business
purposes.
24. Restrictions - Company shall not, without the prior written consent
of Consultant:
a) modify or in any way sitar the whole or any part of an Item of Consultant's
Property;
b) exceed the licensed use of Consultant's Property set out in this Agreement;
c) translate or reverse engineer the whole or any part of an Item of
Consultant's Property;
d) authorize or acquiesce in the use of Consultant's Property by a person other
than the Company or an employee of the Company;
e) remove any proprietary notices, labels or marks from Consultant's Property;
f) defeat any protection method used for preventing the unauthorized use of
Consultant's Property; or
g) copy any item of Consultant's Property, other than to make one archival copy
of any item of software included therein, to be stored In a locked, secure
location and executed only if the operating copy of that software becomes
unusable. For the purposes of this Agreement, copying means copying in any
manner, except copying that naturally results from the execution of software, or
from the regular back-up of the computer systems in which the software Is
installed.
25. If Company breaches any of the terms of the license granted for any
item of Consultant's Property, Consultant may terminate the license for ell
Items of Consultant's Property, by delivering written notice of its
intention to do so to Company. Upon termination of the license, Company
shall Immediately return to Consultant every item of Consultant's Property, in
its possession, custody or control.
26. Disclosure of Developments - Consultant agrees to make full and
prompt disclosure of all Developments to the Project Manager.
27. Further Acts - Consultant agrees to cooperate fully with Company
and to ensure the Employees cooperate fully with the Company, both during and
after the termination of this Agreement, with respect to signing further
documents and doing such acts and other things reasonably requested by Company
to confirm the transfer of ownership of the Developments, the waiver of moral
rights therein, and to obtain or enforce patent, copyright, trade secret or
other protection for Developments. Consultant shall not receive any
consideration or royalties in respect of such transfer of ownership, beyond the
Fees, provided that the expense of obtaining or enforcing the Intellectual
property protection shall be borne by Company."
<PAGE>
Limitation of Liability
- - - - - - - -------------------------
28. THE PARTIES AGREE THAT THEIR RESPECTIVE RIGHTS AND OBLIGATIONS ARE
LIMITED TO THE EXPRESS UNDERTAKINGS MADE IN THIS AGREEMENT, AND THAT NO
TERMS, REPRESENTATIONS, CONDITIONS OR WARRANTIES, INCLUDING ANY WARRANTY OR
CONDITION OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE. PERFORMANCE,
OR DURABILITY, FOR ANY WORK PRODUCT RESULTING FROM THE PERFORMANCE OF THE
SERVICES, ANY ITEM OF CONSULTANT'S PROPERTY LICENSED HEREUNDER, OR FOR ANY THIRD
PARTY PRODUCT, WHETHER RECOMMENDED BY CONSULTANT OR NOT, SHALL BE IMPLIED
BETWEEN THEM.
29. WITH THE EXCEPTION OF THE INDEMNIFICATION SET OUT HEREIN, NEITHER
PARTY NOR THEIR RESPECTIVE AFFILIATES, DIRECTORS. OFFICERS OR EMPLOYEES
SHALL BE LIABLE TO THE OTHER PARTY FOR ANY ECONOMIC, COMMERCIAL, SPECIAL,
CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR INDIRECT DAMAGES, EVEN IF THEY HAVE
SEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS, INCLUDING WITHOUT LIMITATION, LOSS
OF BUSINESS REVENUE OR EARNINGS, LOST DATA, LOST PROFITS, OR A FAILURE TO
REALIZE EXPECTED SAVINGS.
30. WITH THE EXCEPTION OF THE INDEMNIFICATION SET OUT HEREIN, NEITHER
PARTY'S LIABILITY TO THE OTHER PARTY IN CONNECTION WITH THIS AGREEMENT, NOR
THE LIABILITY OF THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS OR
EMPLOYEES, SHALL EXCEED THE TOTAL AMOUNT PAID BY COMPANY TO CONSULTANT FOR THE
SERVICES ASSOCIATED WITH SUCH LIABILITY.
31. THESE LIMITATIONS, EXCLUSIONS AND DISCLAIMERS SHALL APPLY WHETHER
AN ACTION, CLAIM OR DEMAND ARISES PROM A BREACH OF WARRANTY OR CONDITION,
BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY OR ANY OTHER KIND OF CIVIL
LIABILITY CONNECTED WITH THIS AGREEMENT.
General
- - - - - - - -------
32. Enforcement - Each party acknowledges end agrees that damages may
not be en adequate remedy to compensate for any breach of the other party's
intellectual property rights, and accordingly agree that in addition to any
and all other .remedies available, they shall each be entitled to obtain
relief by way of a temporary or permanent injunction to enforce such rights.
33. Maximum Protection Permitted/Severability - If any provision of
this Agreement is declare excessively broad, it shall be construed so as to
afford Consultant the maximum protection permissible by law. If any one or
more of the provisions of this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable In any respect, any such provision shall,
unless Consultant elects otherwise, be severable from this Agreement, In
which event this Agreement shall be construed as if such provision had never
been contained herein.
34. Dispute Resolution/Mediation - The Project Manager, Key Contact and
signatories to this Agreement, and their successors or designates shall work in
good faith to resolve any disputes that arise under this Agreement. Where a
dispute arises out of or in connection with this Agreement that cannot be
resolved by these persons, and it Is not related to either party obtaining,
protecting or enforcing its intellectual property rights, the parties agree to
seek an amicable settlement of that dispute by mediation. If the parties
cannot agree on a mediator, the parties shall make application to court to
appoint one. The mediation shall be held in Vancouver, B.C. in accordance with
the British Columbia International Commercial Arbitration Centre's ("BCICAC")
"Procedures for Cases under the Commercial BCICAC Rules'. and the costs of
mediation shall be shared equally between the parties.
<PAGE>
35. Notice - Any notices, reports or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
sufficient if delivered by hand or sent by double registered mail, courier or
facsimile addressed to Company or Consultant at their respective addresses
shown on the first page of this Agreement, to the attention of the Project
Manager in the case of Company, and to the attention of the Key Contact in
the case of Consultant, or to such other address or Individual as one party
advises the other party in writing. Any such notices, reports, or other
communications shall be deemed to have been received by the party(ies) to whom
they were addressed upon delivery by hand, double registered mail, courier or
facsimile (provided that the receiver acknowledges receipt of the facsimile In
some fashion) when received.
36. Survival - Any provision of this Agreement which, by its nature
would survive the termination or performance of this Agreement shall remain in
full force after the performance of this Agreement or its termination for any
reason.
37. Assignment - Neither party May assign this Agreement or any of Its
rights or obligations hereunder, without the other party's prior written consent
which shall not be unreasonably withhold or delayed.
38. Whole Agreement/Modification - This Agreement is comprised of this
document and the attached Schedules, In the event of any conflict or discrepancy
between this document and a Schedule, the terms of this document shall govern
unless the language in a Schedule indicates that it is the specific Intent
of the parties to overrule or to supplement a particular provision of 'this
document. This Agreement supersedes all previous dealings, understandings
and expectations of the parties and constitutes the whole agreement with respect
to the transactions contemplated hereby, and there are no representations,
warranties, conditions, or collateral agreements between the parties with
respect to such transactions except an expressly set out herein and In the
Instrument(s), if any, executed and delivered pursuant hereto. No amendment,
modification, supplement or other purported alteration of this Agreement
Mall be binding upon a party unless in writing signed by them or on their
behalf by a duly authorized representative(s).
39. Governing Law - This Agreement shall be governed by and interpreted
In accordance with the laws of British Columbia, excluding rules of private
International low that load to the application of the laws of any other
jurisdiction. The courts of British Columbia shall have the non-exclusive
jurisdiction to hear any matter arising in connection with this Agreement.
40. Counterparts - This Agreement may be executed in counterparts, or
facsimile counterparts, each of which when executed by either of the
parties shelf be deemed to be an original and such counterparts shall
together constitute one and the same Agreement.
The parties executed this Agreement on the date(s) set out below after having
the opportunity to discuss this Agreement with their legal advisors. Each party
represents and warrants that its respective signatory is duly authorized to
execute this Agreement an its behalf.
COMPANY: 649. com, Inc. CONSULTANT: Mindquake Software Inc.
By: /s/ Chris Wright By: /s/ Shawn Thomas
Name: Chris Wright Name: Shawn Thomas
Title: CEO Title: Senior Partner
Date: June 1st, 1999 Date: June 22/99
<PAGE>
SCHEDULE "1"
PARTICULARS OF CONSULTANT AGREEMENT
BETWEEN CONSULTANT AND COMPANY
1. Services
a) Feature Requirements Specification
b) Design Document Creation
c) Website development
d) Internet application development
Locations(s) where work to be performed: et Consultant's site; 300 -
1168Hamilton St., Vancouver, 8C Canada V88 282.
2. Term
Start Date: May 1st, 1999
End Date: When complete
3. Key Contact for Consultant
Jesse Dougherty
4. Project Manager for Company
Chris Cooper
5. Fees
a) Senior Partners: Consultant will charge Company - 160 per hour, plus GST.
b) Application Development: Consultant will charge Company $ 100 per hour, plus
GST.
c) Website (HTML) Authoring: Consultant will charge Company 075 per hour, plus
GST.
6. Consultant's GST No.
888611472RT
7. Equipment, Materials Supplied
Not applicable
8. Consultant's Property
Not applicable.
COMPANY: 649.com, Inc. CONSULTANT: Mindquake Software Inc.
By: /s/ Chris Wright By: /s/ Shawn Thomas
May 11, 1999
OFFER TO PURCHASE
BETWEEN: ROZANDA LYN SKALBANIA, as Vendor (RLS)
RLS is a resident of Canada
AND: 649.COM, INC., as Purchaser (SIXF)
SIXF is a private company incorporated in Alberta
RLS filed a patent pending on April 23, 1999 (copy attached as Schedule A) which
forms part of this agreement. RLS has also instructed the patent attorney
(Bruce Green) to file two additional patents which are related to the first
patent.
The patents refer initially to two concepts for playing the 6/49 lottery on the
Internet. The first concept is when a bet is made on the Web site 649.com,
there is an instant draw of the 6 numbers out of 49 on the Internet screen. A
player knows immediately if he has won or lost, and it is intended to insure the
first prize payment.
The second concept is the play for fun 6/49 concept on the Internet.
Substantial prizes are put up by advertisers (automobiles, etc.). Should in a
negotiated number of plays the automobile is not won then the automobile is
owned by the casino and another vehicle is provided by the advertisers and so
on.
The third related patent pending is to play the 6/49 lottery on stand-along
electronic video machines that are normally located wherever electronic gaming
video machines are permitted. Again, the unique concept of the patent is that,
upon selecting six numbers out of forty-nine on the stand-along video machine,
six numbers are randomly computer generated immediately in front of the player
such that, for a $1.00 wager, the player will know instantly whether he has won
$1,000,000 (the prize for selecting six numbers out of forty-nine.
This is SIXF's Offer to Purchase from RLS 100% of her rights and interests in
the three patents pending as outlined.
It is understood that a public company, Market Formulation & Research, Inc.
(MFRC) has agreed to purchase 100% of the shares of SIXF for 6,500,000 common
shares of MFRC - post-split of shares, (a copy of this agreement is attached to
this offer as Schedule B).
<PAGE>
Terms and Conditions:
- - - - - - - ----------------------
1. Price: 1,500,000 shares of the above 6,500,000 shares of MFRC. It is
understood that these shares are reg. 144 shares and have certain SEC
restrictions.
2. Closing date: Same date as MFRC closes on the acquisition of SIXF.
3. Representations and Warranties required of the Purchaser on or before
-------------------------------------------------------------------------
Closing:
-------
a) that he is legally entitled to enter into this agreement,
b) that SIXF will be sold to MFRC as outlined on a timely basis,
c) that MFRC is a public trading company listed on the OTC Electronic
Bulletin Board essentially in full compliance with all regulations,
4. Representations and Warranties required of the Vendor on or before
-------------------------------------------------------------------------
Closing:
-------
a) that she is legally entitled to enter into this transaction,
b) that the patents pending are free and clear of all liabilities.
5. Miscellaneous General Conditions:
----------------------------------
a) time is of the essence and this agreement is governed by the laws of
Alberta,
b) On execution this is a binding agreement but both parties understand that
additional documentation may yet be necessary to properly outline this
transaction. In particular, the documents may need to be modified to
conform to SEC regulations and to mutually minimize both present and
future income tax implications.
6. This Offer is subject to MFRC completing its purchase of 100% of SIXF for
6,500,000 shares of MFRC.
SIGNED:
ROZANDA LYN SKALBANIA
/s/ Rozanda Lyn Skalbania
AGREED:
649.COM, INC.
/s/ Irene Poole
AGREEMENT BETWEEN
649.COM, INC. AND MILLMEDIA, S.A.
649.com, Inc. ("649.com"), and MillMedia, S.A. ("MillMedia"), agree to the
following terms and conditions regarding Internet and related services
("Services"):
1. MILLMEDIA'S RESPONSIBILITIES
MillMedia will arrange and manage an Internet connection for the 649.com, Inc.
server(s). MillMedia will house 649.com's computer in secure accommodations and
will arrange and manage on behalf of and as instructed by 649.com, data
processing services, offices, technical aspects and other professional services
as required by 649.com.
2. COSTS AND TERM
a. Basic Service: 649.com agrees to compensate MillMedia for providing
--------------
those services expressed in this agreement, at the annual rate equivalent to the
annual rental costs of the office/server site, staff costs and professional
costs, and any additional costs incurred on behalf of 649.com, Inc.'s operations
including sales and taxes, office lease, duties, and services imposed by any
authority, government or government agency.
b. Term: The initial term of this agreement will be two years and will
----
commence from the date of this agreement. Unless terminated as provided by this
Agreement, the agreement shall thereafter automatically renew for successive
year to year terms.
c. Taxes: MillMedia will pay for any and all sales and use taxes, duties,
-----
or levies imposed by any authority, government or government agency in
connection with the Internet Services, including property taxes and MillMedia's
income taxes.
3. INDEMNIFICATION
649.com, Inc. hereby agrees to defend, indemnify, and hold MillMedia from and
against any and all claims, damages, judgements, penalties, costs, and expenses
(including attorney fees and court costs now or hereafter arising from the
enforcement of this clause) arising directly or indirectly from all work and/or
services conducted or performed on behalf of 649.com, Inc. Liability for
payment of any services, leases, etc. incurred by MillMedia as a result of this
Agreement, is the sole responsibility of 649.com, Inc.
4. GENERAL
a. MillMedia shall not assign or transfer any rights or obligations under
this Agreement without 649.com's prior written approval;
<PAGE>
b. Breach of any contract provision by MillMedia can only be waived in
writing;
c. Waiver of any breach by MillMedia shall not be deemed to be a waiver of
any other breach;
d. This agreement constitutes the entire agreement between the parties with
respect to Internet Services, and cannot be modified without the express written
consent of all parties;
e. Neither 649.com nor MillMedia has made any promise, representation, or
warranty, explicit or implied, not set forth in this contract;
f. If any portion of this agreement is held by a Court of competent
jurisdiction or mutually agreed on authority, to be invalid, void, or
unenforceable, the remainder will nevertheless continue in full force without
impairment or invalidation;
g. This agreement shall be governed and interpreted by the laws of Texas
applicable to such contracts entirely made and performed in said jurisdiction
and venue.
5. NONDISCLOSURE
MillMedia hereby acknowledges and agrees that all information disclosed to
MillMedia by 649.com, whether written or oral, relating to 649.com's business
activities, its customer names, addresses, all operating plans, information
relating to its existing services, new or envisioned 649.com products or
services and the development thereof, scientific, engineering, or technical
information, 649.com's marketing or product promotional material, including
brochures, product literature, plan sheets, and any and all reports generated to
customers, or to MillMedia with regard to customers, unpublished list of names,
and all information relating to 649.com's order processing, pricing, cost and
quotations, and any and all information relating to 649.com's relationship with
customers and MillMedia, is considered confidential information, and is
proprietary to, and is considered the invaluable trade secret of 649.com
(collectively "Confidential Information").
MillMedia understands that 649.com desires to keep such Confidential Information
in the strictest confidence, and that MillMedia's agreement to do so is a
continuing condition of the receipt and possession of Confidential Information,
and a material provision of this agreement, and a condition that shall survive
the termination of this Agreement. Consequently, MillMedia shall use
Confidential Information for the sole purpose of performing its obligations as
provided herein. MillMedia agrees:
i) not to disclose Confidential Information to future or existing
competitors;
ii) to limit dissemination of Confidential Information to only those MillMedia
employees who have a need to know such Confidential Information in order perform
their duties as set forth herein;
<PAGE>
iii) to return Confidential Information, including all copies and records
thereof, to 649.com upon receipt of a request from 649.com, or termination of
the agreement as provided herein, whichever occurs first.
6. NONCOMPETITION
a. MillMedia covenants and agrees that MillMedia will not directly or
indirectly, own, manage, operate, join, control or work for or permit the use of
its name by, or be connected in any manner with, any Lottery business activity
which is directly competitive with any aspect of the business of 649.com, Inc.
(as set forth in the business plan delivered to MillMedia herewith), which is
the same business of 649.com, Inc. as previously conducted, and as said business
may evolve in the ordinary course between the date of this Agreement and its
termination whether said business is conducted by 649.com or any successor or
assign.
b. Applicability. The parties hereto agree that the provisions of this
-------------
Agreement extend to the employees and officers of their respective
companies/businesses. Said principals further agree to provide the requisite
internal security of the subject data within their respective organizations and
with respect to any and all additional sources who may be parties to the
transactions or proposed transactions.
7. OPTION TO PURCHASE
649.com shall have the option of purchasing the assets of MillMedia at the price
of $1.00 (one U.S. dollar).
8. ATTORNEYS' FEES
Should any party hereto reasonably retain counsel for the purpose of enforcing
or preventing the breach of this Agreement, including, but not limited to,
instituting any arbitration or any action at law or in equity, including an
action for declaratory relief or for any other judicial remedy, then if said
matter is settled by judicial determination (which term includes arbitration),
the prevailing party (whether at trial or appeal), shall be entitled, in
addition to such other relief as may be granted, to be reimbursed by the losing
party for all costs and expenses incurred thereby, including, but not limited to
reasonable attorneys' fees and costs for the services rendered to such
prevailing party.
IN WITNESS WHEREOF, the parties hereto, agreeing to be bound hereby, execute
this Agreement on this 1st day of November 1999.
/s/ Larry Burbidge /s/ Larry Burbidge
- - - - - - - ---------------------------- -------------------------------
Pres and CEO Pres
- - - - - - - ---------------------------- -------------------------------
Name & Title Name & Title
on behalf of 649.com, Inc. on behalf of MillMedia, S.A.
A Proposal for
649.com Inc.
Internet "Lottery" Testing
[GRAPHIC]
Prepared for 649.com Inc., by:
TST Technical Systems Testing North America Inc.
Suite 420, 1367 West Broadway
Vancouver B.C. v6H 4A7
Ph: (604) 873-5833
Fax: (604) 873-1075
10 December 1999
<PAGE>
Table of Contents
1. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . 4
2. OUR UNDERSTANDING OF YOUR REQUIREMENTS . . . . . 5
Overview 5
Specifications 5
3. TESTING & EVALUATION DETAIL . . . . . . . . . . . . 7
Server Evaluation 7
RNG Testing 7
Artwork Evaluation 8
Statistical and Mathematical Evaluation 8
Provision of Test Results & Certifications 8
The Approach 8
Testing Methodologies 9
4. OUR FEES . . . . . . . . . . . . . . . . . . . . . . . 10
Fixed Price Fee 10
Payment 11
Time Period and Validity 11
5. TIMELINES . . . . . . . . . . . . . . . . . . . . . . . . 12
6. CUSTOMER SERVICE . . . . . .. . . . . . . . . . . . 12
7. ACCEPTANCE OF PROPOSAL . . . . . . . . . . . . . . . . . 13
<PAGE>
- - - - - - - ------
1. EXECUTIVE SUMMARY
Technical Systems Testing (TST) is an internationally focused, independent
gaming evaluation laboratory providing evaluation services for the gaming and
information technology industries. TST provides Gaming Product Testing Services,
Development of Gaming Standards and Expert Witness Services to Regulators,
Operators and the Legal Fraternity in a variety of jurisdictions throughout the
world. TST is an independent testing laboratory, ensuring a completely fair
evaluation of Internet and land based games and gaming systems. Furthermore, TST
carries out testing of a number of Information Technology based systems
including e-commerce evaluation and assessment.
It is important to note that TST is committed to developing a long-term active
business relationship with 649.com Inc. This will ensure that a mutually
beneficial service operates between the two organizations, whereby TST can offer
649.com Inc. key account status, which, ideally, will lead to a preferred
contract pricing agreement,
TST's personnel base includes qualified computer scientists, engineers,
mathematicians and information systems auditors. TST's staff possesses extensive
experience in professional services covering hardware and software testing of
games and gaming systems. This includes integration testing, development of
technical standards and expert witness evaluations.
As a service provider, TST will bring a broad and detailed background knowledge
and skill set to 649.com Inc. TST's ISO 9000 accreditation, structured testing
methodologies and worldwide experience enables us to offer jurisdictional
testing, systems and procedures that are of the highest standard. Our evaluation
will guarantee complete confidence and peace of mind that the process is
performed to the highest level of quality available.
<PAGE>
2. OUR UNDERSTANDING OF YOUR REQUIREMENTS
Overview
649.com Inc has contracted Mindquake Software Inc. to provide them with an
interactive Java based solution for a '649-style' lottery game over the Internet
with the server based in Costa Rica. 649.com Inc. is looking for TST to quote on
the testing of the randomness, security and integrity of Mindquake's software
for both a "Pay for Play" and "Free Play" version.
Part One
TST will evaluate the 'lottery' software for 649.com Inc. against TST's
'Internet Gaming Standards and Guidelines V2.1', which will include the
following:
* RNG
* Communications
* Events testing
* Server side testing
* Artwork
* Security
Part Two
Evaluation of Internet Gaming/Transaction/Player Tracking System. This will be
specified in a separate proposal at a later date.
Specifications
Server Platform (to be supplied by 649.com Inc.)
- - - - - - - - Sun Solaris Server (Unix)
* Apache Internet Server using Java Server Pages (JASP)
* Oracle Database 8.1.5
* FTP program for uploading (Cute FTP etc.)
<PAGE>
Client Platform
Web based using a standard Web Browser with a Shockwave plug in, no client side
proprietary software to down load. The browser receives HTML and JASP with Flash
Macromedia or Shockwave to produce the images.
RNG
Uses the "Secure Random Class" from the Java 1.1.8 library.
Game Action
The user picks 6 unique numbers 1 through 49 and then activates the game to show
balls falling into place and to see if the users choice produces a match. Each
game is a unique event and will cause the RNG to pick 6 numbers 1 through 49 to
match against the user. If there is an exact match there is an insured
$5,000,000 USD fixed cash prize and $2,000 USD fixed cash prize for 5 out of 49
and so on for prizes of lesser degrees.
Deliverables
649.com Inc. is looking for TST to provide a report outlining the testing
performed and recommendations. Also, to give a comfort level to their insurers
and stakeholders into whether or not the 649.com lottery game is secure, random
and can be approved by an independent third party testing laboratory.
Assumptions & Conditions
* No games testing will be conducted through TCP/IP connections that are
available to the Internet.
* 649.com Inc. will provide a Sun Server, a client and 649.com system to TST to
conduct testing or access to a secure closed system within TST's Vancouver
Laboratory.
* 649.com Inc. will ensure that the Client - Server application is fully
operational with TST's laboratory, A RAS link can be established for off site
administration.
* Transaction and accounting testing may require travel if a direct link cannot
be established.
<PAGE>
3. TESTING & EVALUATION DETAIL
An illustrative scope of the testing process is detailed below:
Server Evaluation
* Game Evaluation
- - - - - - - - Artwork
- - - - - - - - Game Details
- - - - - - - - Game Control
- - - - - - - - Game Functionality
* Security
- - - - - - - - Password
- - - - - - - - System changes
* Software Applications
- - - - - - - - Code read
* Communications
- - - - - - - - Security
- - - - - - - - Message Authentication
- - - - - - - - Protocol
- - - - - - - - Timestamping
- - - - - - - - Polling End Player
- - - - - - - - Encryption
- - - - - - - - Interface
RNG Testing
* RNG
- - - - - - - - Localize RNG
- - - - - - - - Data Extraction
- - - - - - - - Data Generation
- - - - - - - - RNG Analysis
<PAGE>
Artwork Evaluation
The 'lottery' game artwork will be evaluated to ensure that the graphics are
clear, unambiguous and they comply with the requirements of the Standard.
Statistical and Mathematical Evaluation
Mathematical evaluation covers all relevant areas of game mathematics.
Evaluations of Random Number Generators (RNG) are also conducted. This process
includes:
- - - - - - - - Assessing randomness of data
- - - - - - - - Suitability of the period
- - - - - - - - Seeding of the RNG
- - - - - - - - Mapping of the RNG
Implementation of the games
Provision of Test Results & Certifications
TST will provide 649.com with "Compliance Reports" for areas of non-conformity
to the Standards. TST will also provide comprehensive reports on the outcomes of
testing conducted. The final report will be presented by TST to 649.com in a
format that is suitable to be presented in accordance with the Standards.
The Approach
TST will perform testing and evaluation of the 'lottery' system in compliance to
the Internet Standard, which will ensure the standards of the software works in
an acceptable manner.
TST will develop a battery of test scripts in accordance with the Standards and
these test scripts will ensure that all software, mathematics and artwork will
conform to requirements.
Non-Compliance issues will be raised to the attention of 649.com Inc. who will
then review the non-compliant Issues and discuss how to rectify the
non-conformances. Where 649.com Inc. takes Issue with a reported non-compliant
issue, they may request the jurisdiction to grant a 'dispensation' in relation
to the non-conforming item/s or ensure that the non-conforming issue is
rectified prior to approval or certification being granted.
<PAGE>
Testing Methodologies
TST's testing involves a number of quality assurance policies and procedures.
The following list outlines these tools:
- - - - - - - - Test Scripts for Software, Communications, and Games for use in the test
bed. They provide detailed instructions for the methods and procedures to be
used when testing software systems.
- - - - - - - - Checklists, which are utilized to ensure all relevant tasks are completed
and passed prior to certification or placement on site at casinos.
- - - - - - - - Weekly Status Reports and Project Timelines are generated to ensure that
649.com is fully aware of the status of the project at any given time.
- - - - - - - - Work Instruction Procedures are used to detail performance of certain
tasks to be carried out by the Engineers. They also cover administrative work
practices.
- - - - - - - - Guidelines are used in situations where detailed procedures are not
applicable.
<PAGE>
4. OUR FEES
TST has provided 649.com with a fixed price quotation for Part One- 'first
phase' evaluation of the completely developed software lottery package. A 'first
phase' evaluation is one complete sweep of all test scripts relevant to the
Standards.
Testing of game hardware and software is one of TST's many core competencies. We
have a wealth of experience in testing at the system level and at the component
level. System level testing includes testing of base software systems,
communications and connectivity, security, environment testing and integration
testing. Component level testing covers game design, software evaluation and
functionality testing, mathematics and fairness to player.
As new lottery games are introduced and the system is upgraded there is
increased potential for problems and errors. A comprehensive software and system
testing strategy will mitigate exposure and reinforce the product's image as a
well-controlled, fair, and equitable gaming system.
Fixed Price Fee
Our estimated professional fees for first phase testing and evaluation Is as
follows:
Total Price for Testing & Evaluation CAN$ 20,860.00 (excl. tax)
This is based upon TST performing testing on 1 lottery game and RNG for 649.com
Inc. Software testing takes approximately 13 business days.
Phase Two
Beyond first phase, TST can provide 649.com Inc. with a further fixed price fee
for completion testing of non-compliant issues or will offer working on a 'time
and materials' basis at the following hourly rates:
Staff Category Hourly Rate $CAD*
Project Manager/Principal Consultant $160.00
Senior Consultant/Team Leader $130.00
Test Engineer $100.00
Technical Assistant $85.00
*Hourly Rates exclude taxes and expenses
<PAGE>
Assuming the project commences on Monday 1a` December, it will be completed by
Friday 171" December 1999. If submission occurs beyond this date, a new timeline
will have to be developed, as TST close down over the Christmas/New Year period.
Please refer to the attached Project Management timeline for the time required
to perform the evaluation.
Payment
Our standard charge out rates are based on TST's staff performing 8-hours work
per day. The above rates do not include out of pocket expenses that will be
recharged to 649.com Inc. at cost.
Accounts are to be settled within 30 days of receipt of Invoice. A late payment
charge equal to 4% of the outstanding balance will be applied to invoices after
the expiration of the 30-day period.
Time Period and Validity
Testing will utilize one (1) Test Engineer, a Senior Consultant and a Project
Manager reviewing the work output of the Engineers.
TST will reduce the testing time as outlined in the attached timeline chart if
more resources are available for the project. This will occur where possible and
when requested. TST is aware there are always time Issues to complete this type
of project and therefore the extra manpower will be allocated, where possible,
for the same cost at a reduced time period.
This quotation is valid for a period of sixty days from 26 November 1999.
<PAGE>
5. TIMELINES
TST's has developed a proven record of delivering a testing service that meets
appropriate turn around times for our clients. Evaluations of hardware,
software, mathematical performance and systems have been completed for various
clients in the Internet and Fixed Gaming sectors on time and on budget.
TST can provide both high performance and rapid evaluations because of our
global base and standardized work practices. Software and Payables evaluations
can be continuously conducted almost 16 hours per day, 6 days per week due to
the different time zones of our laboratories in Australia and North America.
Further to this, local staff required for hardware evaluations can be
supplemented by international staff to perform these evaluations. These enhanced
services are provided at no additional cost to our clients. They are part of the
standard, highly competitive package of services that TST provides to clients.
Under general circumstances, it is more cost effective if 3 - 4 weeks notice for
testing services is given. however, TST has been able to make testing services
available within 1 week of notice. TST can supply Technical personnel on site
within 48 hours notice, for International personnel and 24 hours notice for
Canadian personnel where appropriate.
6. CUSTOMER SERVICE
TST's customer service concept is embodied in our mission statement:
"TST provides gaming authorities and operators with a comprehensive,
independently tailored testing and evaluation service aimed at ensuring the
highest possible standards in gaming. This is achieved by a focused, customer
oriented, multi-disciplined team with knowledge and experience on the leading
edge of today's gaming technology."
TST recognizes the relationships with clients and customers are usually
long-term partnerships. Face to face support is provided both during and after
the completion of contracts. TST works closely with clients to meet their
changing needs which are sometimes dictated by the fluid political environment.
TST will sometimes be involved in not just testing gaming equipment, but in
assisting the customers interpret legislation, developing technical
requirements, formulating test scripts and providing advice on both technical
issues and non technical issues such as the social implications of particular
gaming strategies. This provides clients with a single point source of readily
available information and support.
TST strives to provide quality service, by being effective, efficient and
responsive, while maintaining our independent status and integrity. TST
constantly strives to meet and exceed our client's expectation.
7.
<PAGE>
ACCEPTANCE OF PROPOSAL
Our acceptance of the attached proposal is contingent upon 649.com Inc. securing
a server with Oracle and Solarus applications, fully configured, on terms and
conditions acceptable to 649.com Inc.
/s/ Lawrence P. Burbidge /s/ Ross Brierty
Lawrence P. Burbidge Ross Brierty
President & CEO General Manager
649.com Inc. TST Technical Systems Testing North
America INC.
10/12/99 10/12/99
<PAGE>
[649.com Software Analysis Chart
Project: 649_timelineVer2
Date: Mon 11/29/99 Page 1 ]
<PAGE>
[649.com Software Analysis Chart
Project: 649_timelineVer2
Date: Mon 11/29/99 Page 2 ]
INDEPENDENT AUDITORS' CONSENT
We agree to the inclusion in this Form 10-SB of our report, dated February 16,
2000, on our audit of the financial statements of 649.com, Inc. (formerly,
Market Formulation and Research Corp.) as of December 31, 1999 and for Each of
the Years in the Two Year Period Then Ended, and for the Period from Inception,
June 13, 1990 Through December 31, 1999 (unaudited).
/s/ Haskell & White LLP
HASKELL & WHITE LLP
Irvine, California
April 14, 2000
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use of our report, dated June 3, 1999, in their annual
report on Form 10-SB for the period ended March 31, 1999 for Market Formulation
and Research Corp.
/s/ Crouch Bierwolf & Chisholm
CROUCH BIERWOLF & CHISHOLM
Salt Lake City, Utah
April 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's statements of operations, balance sheets and statements of cash flows
and is qualified by reference to such financial statements contained within the
Company's Form 10-SB.
</LEGEND>
<CIK> 0001098344
<NAME> 649.com, Inc.
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<FISCAL-YEAR-END> DEC-31-1999
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