UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SYCONET.COM, INC.
(Name of Small Business Issuer in its charter)
Delaware 54-1838089
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9208A Venture Court
Manassas, Virginia 20111
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (703) 366-3900
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of Class)
<PAGE>
Information Required in Registration Statement
This registration statement on Form 10-SB, including, without limitation,
Item 1, Business, and Item 2, Management's Discussion and Analysis or Plan of
Operation, contains forward-looking statements. We intend to identify
forward-looking statements in this registration statement using words such as
"believes," "intends," "expects," "may," "will," "should," "plan," "projected,"
"contemplates," "anticipates," or similar statements. These statements are based
on our beliefs as well as assumptions we made using information currently
available to us. Because these statements reflect our current views concerning
future events, these statements involve risks, uncertainties, and assumptions.
Actual future results may differ significantly from the results discussed in the
forward-looking statements. Factors that may cause these differences include,
without limitation, our inability to obtain additional capital, competition from
other, significantly larger distributors of Anime products, and our dependence
on third parties as our source of Anime products. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this registration statement.
PART I
Unless the context otherwise requires, all references in this registration
statement to "us," "we," "our" or "SyCo" mean SyCoNet.Com, Inc.
Item 1. Business.
A. Overview.
SyCoNet.Com, Inc. was formed in Delaware in June 1997 under the name SyCo
Comics and Distribution Inc. and is the successor to a limited partnership named
SyCo Comics and Distribution formed under the laws of the Commonwealth of
Virginia on February 1, 1997, by Sy Robert Picon and William Spears, the
co-founders and principal shareholders of SyCoNet.Com. On February 17, 1999,
SyCo Comics and Distribution Inc. changed its name to SyCoNet.Com, Inc.
Our principal place of business is 9208A Venture Court, Manassas, Virginia
20111, and our telephone number is (703) 366-3900.
Our common stock is listed on NASDAQ's Over-the-Counter Bulletin Board
under the symbol "SYCD".
As more fully described below, SyCoNet.Com, Inc. is a development stage
corporation which is engaged principally in the distribution and direct
marketing of Anime - animated cartoons produced in Japan and shipped to the
United States where English subtitles or dialogue are inserted prior to
distribution on videocassettes -- and Anime-related toys and other merchandise.
We sell directly to individuals over the Internet and at Anime conventions. We
are
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also a wholesale distributor to small retail outlets such as Anime specialty
stores, comic book specialty stores, video stores, toy stores and electronic
stores.
B. Business Development.
Our original plan of operation was to distribute comic books and comic book
character-based trading cards and T-shirts to comic book specialty stores and
traditional outlets. The response from the comic book retailers to our efforts
was minimal because we could not offer them the comics published by Marvel
Entertainment Group, Inc. and the other principal comic book publishers, all of
which had entered into and were subject to exclusive distribution agreements
with Diamond Comic Distributors, Inc. Accordingly, we incurred substantial
losses in the first three quarters of 1997. In the fourth quarter of 1997, we
refocused our operations on the distribution of Anime. We are no longer involved
in comic-book distribution. Distribution of Anime currently accounts for
approximately 90% of our revenues, and Anime-related merchandise, including toys
and trading cards, accounts for 10%. 85% of our catalog is devoted to VCR tapes,
10% to DVD, and 5% to toys and trading cards. Our VHS products are priced from
28% to 50% less than the manufacturer's suggested retail price and our DVD
products are priced 28% to 30% less than the manufacturer's suggested retail
price. Notwithstanding our rapid growth, we cannot assure you that our growth
will be sustained or that we will gain significant market share in the future.
C. Description of Our Business.
Anime
Anime differs from American animation in several important ways. Unlike
American animation, which is created mainly for children, Anime is targeted for
specific age groups which range from young children to adults. Therefore, Anime
has more developed storylines and more lifelike characters, which grow
emotionally and socially throughout the story. The storylines and characters can
be as varied and detailed as in a feature-length movie or long-running
television series. In addition, the characters' actions and characteristics
drive stories more than they do with American animation. Characters learn how to
obtain help from their friends and overcome their own weaknesses. That internal
growth is the focus of the story , which makes the overall plot far more
compelling, believable and relevant to the audience.
Anime videos also have a high degree of sensory appeal, due to the
high-quality music and graphics. Also, the graphic style of most Anime is
focused more on the visual context and use of backgrounds and less on the
simulations of fluid body movements and other action. This method provides more
information about the overall impression of the scene than with American
cartoons, while the lower priority assigned to life-like body movement enables
Anime to be produced at a far lower cost per frame.
Unlike American animation, Anime appeals to both males and females. Anime
makes liberal use of romantic themes, and 60% of all Anime films and series have
female leads as either the hero or the love interest.
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Market
The market for Anime and related merchandise in the United States has grown
dramatically since its introduction almost ten years ago. In 1989, the market
for Anime was $5.5 million. The market has been increasing substantially since
then, with sales of almost $35 million in 1993, $110 million in 1995 and $225
million in 1997. By the year 2000, United States sales are expected to reach
$500 million, although no assurance can be given.
Nearly 2,500 Anime titles are now available in the United States,
principally through national chains selling or renting videocassettes. We
distribute virtually the entire line of Anime videos, as well as ancillary
products such as toys and trading cards based on the Anime movies.
Product
We obtain product on a non-exclusive basis from 15 Anime suppliers,
including Central Park Media, Pioneer, A.D. Vision, Viz Communications, Irwin
Toys, ADV Films and MGM's Orion Pictures. Since we obtain our Anime cassettes
from multiple sources, we believe we have a secure source of product, although
we cannot give any assurances. We distribute all of the nearly 2,500 available
video titles, including Pokemon, Dragon Ball Z and Sailor Moon videos, as well
as select Anime-related toys and other merchandise. We maintain an inventory of
products in high demand so as to offer prompt service and fast delivery, and we
obtain other products to fulfill orders we receive. Between October 31 and
December 30, 1999, we fulfilled 98.7% of over 4000 orders within our stated
delivery time frame of two days and 100% of our orders were filled in time for
Christmas. Approximately 85% of the videos we purchase from suppliers are
returnable.
Marketing and Distribution
Initially our products were offered only through our own catalogs to small
retail customers that focused almost exclusively on Anime products. We plan to
continue providing wholesale services to retail stores that are interested in
the Anime product line. However, now we are focusing on direct marketing to the
individual consumer through the Internet. Currently, all of our products can be
ordered through our two websites "www.animedepot.com" and "www.altvidwar.com".
We intend to make the Internet our primary distribution channel to retail
customers since Anime buyers are opting for this method of buying over
traditional shopping malls and specialty shops. We believe that this medium will
significantly reduce our expenses. We also market our products to individuals
and retailers at trade shows and conventions, as well as through trade
publications and headers on selected Internet search engines.
We rely on agreements with United Parcel Service and R.P.S. to deliver
products from suppliers as well as to customers. Charges associated with
delivery of products to us are frequently borne by our suppliers. We intend to
establish facilities in various regions of the United States to allow for faster
receipt and distribution of our products if warranted by new business and
subject to the availability of the necessary capital.
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Competition
Anime producers have not granted exclusive distribution agreements to any
distributor, although we cannot assure you that this situation will continue.
The four major wholesale distributors of Anime videos in the United States
are Bandai, Pioneer, Baker & Taylor, and Ingram Entertainment. They specialize
in providing products to large general retailers, toy retailers and video chains
that are interested primarily in selling only the 20 to 30 most popular Anime
titles. We do not sell to large retail accounts and therefore we do not compete
with these large distribution companies.
We focus on providing a high degree of service to smaller retailers. We
have our main competitors who, like us, are relatively small privately held
companies that serve the Anime niche market of small specialty retailers. These
companies are Central Park Media, Media Blasters, Animego, and AD Vision, and
they have greater financial, personnel, marketing and sales resources than we
do. We compete with these companies on the basis of price, service, selection,
availability and product knowledge. We also compete with many smaller retail
outlets that sell Anime either by itself or as part of a product line that
includes role playing games, video games, and other hobbyist activities.
Intellectual Property
We have service mark applications pending for the following:
"SYCO","ANIMEDEPOT.COM", "YUGI-OH" "YUGI-OH.COM", "YUGI-OH DEPOT", "YUGI- OH
DEPOT.COM", "OTAKU", "OTAKU USA", "OTAKU USA.COM", "ANIME USA", ANIME USA.COM",
"SYCONET" and "SYCONET.COM".
Employees
As of January 24, 1999, we had 24 employees, 23 of whom are full-time.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Overview
The following is a discussion of certain factors affecting our results for
the two fiscal years ended December 31, 1997 and 1998, and the nine months ended
September 30, 1999, and our liquidity and capital resources. This discussion and
analysis should be read along with our financial statements and their notes,
contained elsewhere in this registration statement.
As a reminder, our fiscal year ends on December 31. The years mentioned
throughout this prospectus are fiscal years.
Since inception, we have incurred losses, and as of September 30, 1999, we
had an accumulated deficit of $1.6 million. We believe that sales growth will be
contingent on our ability to (a) establish name recognition among fans of Anime
and capitalize on up-selling and cross-selling opportunities; (b) select and
market product lines that will gain popularity among Anime fans and will have
cross-over potential to mainstream animation fans; (c) provide our customers
good value, in terms of competitive pricing and order fulfillment; (d) identify
and capitalize on advertising media
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that will best reach our target customers; (e) acquire and successfully market
product licenses or alternatively, acquire emerging companies that have
specialized skills, particularly in gaming and web entertainment technologies.
During the past three months, we entered into short-term (under six months)
on-line advertising agreements with World Wrestling Federation and Lycos. Within
the next six months, we plan to launch an Internet, and possibly television,
advertising campaign, as well as consummate partnering agreements with USA
Networks, SCI-FI Channel, and other arrangements that are in negotiation. We
plan to expand our consumer oriented e-commerce business, and we expect that
additional spending will occur in this area. We believe that achieving
profitability will be highly dependent on our ability to grow this segment of
the business, in addition to increasing our licensing and advertising revenues.
We have expanded our product lines from primarily comics in 1997 to
sub-titled and dubbed videos, DVDs, trading cards, toys and apparel during 1998
and 1999. Because of these changes in the product line mix and the recent
increase in our on-line customer sales, a historical comparative analysis may
not necessarily be meaningful or indicative of our future operating results.
Overall, our sales may fluctuate as a result of promotional discounts,
convention marketing, current trends which influence the popularity of certain
of our product lines, inventory levels, and seasonal demand. Other factors that
may impact sales in the future include unforeseen technological problems
associated with web traffic and server availability, government regulations on
web transactions, and the general state of the economy. In order to carve a
significant niche in the largely untapped Anime market, which by various
independent estimates may approximate half a billion dollars in the next two
years, we will incur additional expenditures in marketing costs, web technology,
e-commerce solutions, enhancing our web presence, establishing a highly
automated order fulfillment system, and upgrading back-office and infrastructure
support. Although we expect sales to have sufficient capital to make these
expenditures and that our sales will grow as a result of these expenditures, we
cannot assure you that we will have the necessary funds or that the anticipated
level of growth will occur or will offset the planned expenditures.
Operating margins will be significantly impacted by (a) our ability to
maintain and satisfy our existing repeat customers, as well as attract new
customers with the same level of loyalty; (b) competitive pricing pressures; (c)
the effectiveness of advertising and marketing expenditures and management's
ability to measure and evaluate results; (d) the effectiveness of our web design
and content in attracting and leading consumers to consummate on-line sales; (e)
shipping efficiencies; and (f) general economies of scale.
Results of Operations
Comparison of the nine months ended September 30, 1999 and 1998
Net sales, consisting of the selling price of VHS and DVD products, trading
cards, toys and apparel, net of discounts and customer returns were $773,000
during the nine months ended September 30, 1999, an increase of 98% from net
sales of $391,000 during 1998. Most of the sales increase in 1999 occurred
during the third quarter, which we attribute to the effectiveness of on-line
advertising in generating on-line customer sales, the popularity of certain
video titles in the product
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line, an increased customer base, and continued repeat sales. Increased sales
also arose from the Company's presence at tradeshows and conventions.
The following table sets forth certain financial data for us as a
percentage of net sales for the indicated periods:
(Unaudited)
Nine months ended September 30
1999 1998
------ ------
Net Sales 100.00% 100.00%
Cost of Goods Sold 77.42 82.49
Gross Margin 22.58 17.51
Selling, General and Administrative
Expenses 75.86 125.79
Operating Loss (53.28) (108.29)
Other Expense (00.30) (00.77)
Net Loss (53.58) (109.05)
Gross profit is defined as sales less cost of sales, which consists of the
cost of product sold to the customers and related shipping costs. Our gross
margin increased as a result of increased on-line consumer sales, which
generally yield higher margins than sales to retailers. Our gross profit was
$175,000 for the nine months ended September 30, 1999, a 156% increase over the
gross profit for the same period in 1998.
Selling, general and administrative expenses include the costs of
advertising, customer service, investor relations, and administrative personnel.
The cost components did not change significantly during all periods presented.
Expenses totaled $586,000 for the nine months ended September 30, 1999 compared
to $491,000 for the same period in 1998. The costs have increased during 1999
largely due to requirements for additional order fulfillment personnel to
service on-line customers; casual labor support and travel related to trade
conventions; grass roots marketing; and professional services associated with
development of web content, primarily on our animedepot.com and altvidwar.com
web sites. We believe that these costs will continue to increase as a result of
our commitment to build and enhance our infrastructure. During the next six
months, we expect our increased costs to result from marketing and advertising
expenditures; warehouse and office expansion; additional customer service, order
fulfillment, and warehouse personnel to process an anticipated increase in
on-line sales; amortization of software associated with e-commerce solutions;
depreciation of newly purchased PCs and computer peripherals; network
engineering and telecommunications to continuously secure our various web sites;
and the build-out of more web sites to increase Anime market penetration and to
cater to specific market segments. Despite our focused efforts, we cannot assure
you that we will achieve a level of sales commensurate with the increase in
expenditures.
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Comparison of the fiscal years ended December 31, 1998 and 1997
No meaningful comparison can be made between 1998 and 1997 sales because
during 1998 we changed our product line to consist primarily of Anime videos and
DVDs. In 1997, sales consisted primarily of comic books. Our decision to change
our product line resulted in a 358% increase in net sales, from $175,000 in 1997
to $626,000 in 1998.
The negative profit margin for 1997 reflects a provision for the write-off
of the remaining inventory, consisting primarily of comic books, at the end of
that year. As a result, the 1997 fiscal year's negative gross margin of
$(71,000) is not comparable with the gross margin of $114,000 for the full 1998
fiscal year, which did not reflect a similar write-off.
Selling, general and administrative expenses were $771,000 for the fiscal
year ended December 31, 1999 compared to $416,000 for the fiscal year ended
December 31, 1997. We attribute the increase to additional personnel necessary
to service and warehouse greater inventory as a result of the new product line.
Income Taxes
We made no provision for any current or deferred U.S. federal, state income
tax or benefit for any of the periods presented. Since inception, we have
experienced operating losses, which have recently been declining in relation to
sales. Although management expects the improved trend to continue, we cannot
provide any assurance as to when profits will materialize. Therefore, we cannot
predict when we can use the net operating loss carry-forwards which begin to
expire in 2017, and which may be subject to certain limitations imposed under
Section 382 of the Internal Revenue Code of 1986. Due to the uncertainty
concerning our ability to realize the related tax benefit, we have provided a
full valuation allowance on the deferred tax asset, which consists primarily of
net operating loss carry-forwards.
Year 2000
As of the end of 1999, we substantially replaced disparate financial,
purchasing, and customer order databases with a fully integrated Y2K-compliant
enterprise-wide platform of front office, back office, financial and e-business
solutions. Although we do not expect to experience business disruptions
associated with Y2K-related problems, we cannot assure you that all potential
Y2K defects have been uncovered or corrected in our internal systems, including
third party software and related products.
Impact of Recently Issued Accounting Standards
Comprehensive Income (Loss)
As of January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130") entitled "Reporting Comprehensive Income,"
which establishes standards
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for the reporting and display of comprehensive income and its components in the
financial statements. Currently, there are no reportable items of comprehensive
income (loss).
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-1 ("SOP 98-1"), entitled "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which requires all
costs related to the development of internal use software other than those
incurred during the application development stage to be expensed as incurred.
Costs incurred during the application development stage are required to be
capitalized and amortized over the estimated useful life of the software. SOP
98-1 will be effective for our fiscal year ending December 31, 1999. Projected
expenditures for our e-commerce infrastructure will be capitalized in compliance
with this pronouncement.
In April 1998, the American Institute of Certified Public Accountants
issued SOP 98- 5, entitled "Reporting on the Costs of Start-Up Activities." SOP
98-5 is effective for our fiscal year ending December 31, 1999. SOP 98-5
requires costs of start-up activities and organization costs to be expensed as
incurred. We do not expect adoption of the subject pronouncement to have a
material effect on the financial statements.
Liquidity and capital resources
As of September 30, 1999, our cash position consisted of $100,000 in cash
compared to $32,000 in cash for the same period in 1998.
We have funded our operations primarily through private equity financing
pursuant to Regulation D, which is a limited offer and sale of securities
without registration under the Securities Act of 1933. Our primary sources of
cash were funds raised through numerous private placements during 1997, 1998,
and 1999. During the nine months ended 1999, net cash provided by financing
included $775,000 in private placement funds compared to $363,000 for the same
period in 1998, and $523,000 for all of 1998. The Company raised $512,000
through private placements during 1997.
Net cash used in operations were $682,000 for the first nine months of 1999
compared to $412,000 during the same period in 1998, and $587,000 and $448,000
for 1998 and 1997, respectively. The use of cash was due primarily to loss from
operations which was $426,000 and $ 403,000 during the nine-month periods in
1999 and 1998, respectively. Cash flows were impacted in both years with the
growth in inventories to ensure product availability. Losses for the full years
of 1998 and 1997 were $661,000 and $490,000 respectively.
For all comparative periods net cash used in investing activities consisted
primarily of purchases of PCs and peripheral equipment. Towards the end of 1999
and into the year 2000, we expect that we will incur significant capital
expenditures to enhance our technological capabilities in e-commerce and web
deployable order fulfillment solutions.
Subsequent to the date of the financial statements, we received a
$2,000,000 funding commitment from a venture capital firm that has funded
numerous emerging growth companies. The
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money will be made available to us in four $500,000 tranches as follows: (a) the
date we file with the SEC a registration statement on Form 10; (b) the date on
which the SEC declares effective our Form SB-2; (c) 60 days following the
effectiveness of our SB-2, and (d) 120 days following the effectiveness of our
SB-2.
We believe that we will require additional financing, credit facilities and
cash to be generated from operations to build our e-commerce infrastructure and
undertake major marketing programs to help boost our sales during 2000 and
beyond. Working capital and other capital needs may also increase as result of
changes in corporate strategy, product diversification, and order fulfillment
process improvements. Accordingly, we may seek such capital through additional
bank borrowings, debt or equity offerings or other sources. Subject to
shareholder approval, we will increase the number of authorized shares from
15,000,000 to 40,000,000 to provide greater financing flexibility and capability
for us. We have been in discussions with a number of parties regarding obtaining
additional financing, however, we cannot assure you that our financing
requirements can be met by current available facilities or that additional
facilities will be available on terms and conditions favorable to us, if at all.
Item 3. Description of Property
The Company leases from an unaffiliated landlord approximately 6,000 square
feet of office and warehouse space in Manassas, Virginia for $2,325 per month,
pursuant to an eight month lease extension that expires in September 2000.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Unless otherwise indicated, we believe that the individuals listed in this
Item have the sole power to vote and dispose of the number of shares listed
opposite their respective names.
(a) Security ownership of certain beneficial owners
The following table contains information regarding ownership of our common
stock, which are our only voting securities, which are deemed under the current
rules of the Securities and Exchange Commission to be beneficially owned by any
person -- including any "group" as that term is used in Instruction No. 4 to S-B
Item 403 -- known by us to be the beneficial owner of more than five percent
(5%) of our common stock as of January 14, 2000:
Name and address No. of
of beneficial owner Shares Owned Percentage of Class
- ------------------- ------------ -------------------
Sy Robert Picon 7,540,300(1) 43%
c/o SyCoNet.Com, Inc.
9208A Venture Court
Manassas, VA 20111
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William Spears 5,816,706(2) 34
c/o SyCoNet.Com, Inc.
9208A Venture Court
Manassas, VA 20111
J. Larry Hineline 650,753(3) 5
9266 Oak Hammock Lane
Jupiter, FL 33478
- ----------
(1) Includes options to purchase 5,285,000 shares and 250,000 shares owned by
Mr. Picon's wife, as to which he disclaims beneficial ownership.
(2) Includes options to purchase 5,115,000 shares.
(3) Includes options to purchase 280,000 shares.
(b) Security Ownership of Management.
The following table contains information regarding ownership of our common
stock, which are our only voting securities, which are deemed under the current
rules of the Securities and Exchange Commission to be beneficially owned by our
directors, our executive officers named in Item 5 below, and our directors and
executive officers as a group, as of January 14, 2000:
<TABLE>
<CAPTION>
No. of
Name and Address Office Shares Owned Percentage of Class
- ---------------- ------ ------------ -------------------
<S> <C> <C> <C>
Sy Robert Picon President, Chief 7,540,300(1) 43%
c/o SyCoNet.Com, Inc. Executive Officer,
9208A Venture Court Treasurer and
Manassas, VA 20111 Director
William Spears Executive Vice 5,816,706(2) 34
c/o SyCoNet.Com, Inc. President,
9208A Venture Court and Director
Manassas, VA 20111
J. Larry Hineline Secretary and 650,753(3) 5
9266 Oak Hammock Lane Director
Jupiter, FL 33478
Edward E. Kramer Director 245,000(4) 2
2480 Honeycomb Way
Duluth, GA 30096
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Philip Jacobson Executive 60,500(5) (6)
9029 Edgepark Road Vice President
Vienna, Virginia 22182
Kathryn Jacobson Chief Financial 60,500(7) (6)
9029 Edgepark Road Officer
Vienna, Virginia 22182
All Officers and 14,313,259 68
Directors as a Group
(6 individuals)
</TABLE>
- ----------
(1) Includes options to purchase 5,285,000 shares and 250,000 shares owned by
Mr. Picon's wife, as to which he disclaims beneficial ownership.
(2) Includes options to purchase 5,115,000 shares.
(3) Includes options to purchase 280,000 shares.
(4) Includes options to purchase 215,000 shares.
(5) Includes options to purchase 25,000 shares owned by his wife Kathryn
Jacobson, as to which Mr. Jacobson disclaims beneficial ownership.
(6) Less than one percent.
(7) Includes options to purchase 25,000 shares and includes 35,500 shares owned
by her husband, Philip Jacobson, as to which Mrs. Jacobson disclaims
beneficial ownership.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
(a) Officers and directors: The following table provides information
concerning each of our executive officers and directors. All directors hold
office until the next annual meeting of shareholders or until their successors
have been elected and qualified, or until a director's death, resignation or
removal.
Name Age Position
- ---- --- --------
Sy Robert Picon 41 President, Chief Executive Officer,
Treasurer and Director
William Spears 37 Executive Vice President and Director
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Jean-Claude Geha 36 Executive Vice President and Chief
Operating Officer
Philip Jacobson 39 Executive Vice President
Kathryn T. Jacobson 43 Chief Financial Officer
J. Larry Hineline 54 Secretary and Director
Edward E. Kramer 38 Director
Sy Robert Picon: Mr. Picon is one of our co-founders along with William
Spears. He has been our Chairman of the Board, Chief Executive Officer and
Treasurer since our inception and was elected our President in June 1998. He was
a co-founder of the Virginia limited partnership formed on February 1, 1997
which is our predecessor. He has been involved in the comic book industry for
over ten years. In 1991, he founded SyCo Comics, a supplier of comic books and
related media to disabled individuals, which he sold in 1996. Mr. Picon has also
worked as a chief administrator for a major telecommunications firm.
William Spears: Mr. Spears is one of our co-founders along with Mr. Picon.
He has been one of our Directors since our inception. He was our President from
inception until June 1998, when he became our Executive Vice President. He was a
co-founder of the Virginia limited partnership formed on February 1, 1997 which
is our predecessor. He has been in the comic book industry since 1989 when he
created a comic book title which he published. In 1995, he opened a retail comic
book specialty store in San Carlos, California and expanded onto the Internet in
1996. Since 1982, he has owned and operated the Perfect Shirt & Sign Company, a
promotional screen printing facility which in 1990 expanded into supplying
computer accessories.
Jean-Claude Geha: Mr. Geha has been an Executive Vice President and our
Chief Operating Officer since January 2000. He has more than 10 years of senior
management experience and has worked in the fields of engineering, operating and
marketing at MCI. From 1998 until he joined us, Mr. Geha was the Director of
Product Management and Market Communications for Apex Global Internet Services,
a Tier 1 Internet backbone company, where his responsibilities included the
design and implementation of AGIS' domestic and international Internet and data
products and services. From 1996 to 1999, he was the Senior Marketing Manager
and Consultant for Broadband Marketing at Bell Canada/Stentor. From 1991 to 1996
he worked at MCI, first as a Special Services Engineer, then as a Manager of
Global Data Engineering and Provisioning, and later of Internet MCI Services
and, finally, as a Senior Sales Support Manager in Customer Business Solutions.
Mr. Geha has an M.S. in Telecommunications Management from Southern Methodist
University and a B.S. in Electrical Engineering from the University of Maryland.
Philip Jacobson: Mr. Jacobson joined us as Executive Vice President in
January 2000. From July 1999 to January 2000, he was the founder and President
of a financial planning and partner marketing consulting firm called Network
Conceptions LLC. From April 1998 to July 1999, he was Director of Business
Development for Apex Global Internet Services and from January 1984
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to January 1998 he worked for MCI Communications managing a series of financial
and marketing departments, with an emphasis on Internet services and advanced
products, most recently as Senior Manager, Partner Marketing. Mr. Jacobson has a
B.A. in Accounting from the University of Massachusetts and he is a certified
public accountant. He is the husband of Kathryn Jacobson.
Kathryn T. Jacobson: Mrs. Jacobson has been our Chief Financial Officer
since November 1999. Her background includes controllership, Enterprise Resource
Planning systems conversions, treasury functions, financing and acquisitions.
From July 1998 to September 1999, she was Controller at Information Systems
Support Inc. From October 1987 to July 1998, she worked at CACI Technologies,
Inc., a division of CACI, Inc. (NASDAQ: CACI), formerly QuesTech, Inc., first as
a Senior Accountant, then Manager of Financial Reporting, then Assistant
Controller and finally as Director of Accounting and Financial Reporting,
managing that company's accounting and SEC reporting functions. Prior CACI, she
worked in various professional capacities in finance and accounting at Computer
Sciences Corporation, and MCI Worldcom (formerly MCI). Mrs. Jacobson is a
certified public accountant and received her M.B.A. in Finance and a Masters in
Accounting from George Washington University. She is a member of the American
Institute of Certified Public Accountants and the Institute of Management
Accountants. She is the wife of Philip Jacobson.
J. Larry Hineline: Mr. Hineline has been one of our Directors since January
1998 and our Secretary since June 1998. From 1978 to 1991 he was employed at
U.S. Surgical, most recently as Senior Director of Operations, a position he
held for seven years. From 1991 to 1992, he was the Vice-President of Product
Operations for Joint Medical Products Corporation. Since October 1993 he has
been the owner of JVR Systems Inc. and Bear Services Inc., computer and
consulting companies, respectively. Since February 1997 he also has been the
owner of DavDez Arts Inc., a publisher of comic books, short stories and graphic
novels. Mr. Hineline received his undergraduate degree from Troy State
University in 1976 and his M.B.A from California Coast University in 1999. He is
currently working towards a Ph.D. in Business Administration.
Edward E. Kramer: Mr. Kramer has been one of our Directors since October
1997. He has been in the comic book industry since 1987, when he became a
co-owner of Titan Games and Comics, a position that he currently holds. Since
1992, Mr. Kramer also has been a Technology Associate at Metropolitan Regional
Educational Service Agency, a division of the Georgia Department of Education,
in Atlanta, Georgia. Mr. Kramer is also an award-winning writer and editor of
nearly two dozen books in the science fiction and horror genres. He received his
undergraduate degree in Psychology from Emory University and a Master's Degree
in Administration and Planning from Emory University School of Medicine.
(b) Key employees:
R. Scott Murphy: Mr. Murphy, age 41, joined us in January 2000 as the
Director of Technical Services and Web Design. From September 1999 to January
2000, he was a Senior Systems Programmer at Command Technologies, Inc. From June
1998 to September 1999, he held a management position at KPMG where he led a
project to create an intranet portal service that allows KPMG employees
worldwide to access a complete library of tax services. Mr. Murphy was
14
<PAGE>
employed by West Virginia University since February 1997 as its coordinator of
all user access and systems security. He received a B.A. in Computer Art from
Davis and Elkins College and is working on the requirements for an M.S. in
Computer Science from West Virginia University.
Keith Impink: Mr. Impink, age 37, joined us in January 2000 as our Creative
Director and Webmaster. Mr. Impink is a professional artist and web designer who
is responsible for the design of our corporate and e-commerce websites, as well
as all of our marketing and convention materials. For the last five years Mr.
Impink has worked as a free-lance web developer and graphic designer based in
California. During those five years, he worked as Webmaster for companies such
as M.P. Mountanos, Inc. and Oscar Knows, which runs the www.oscarknows.com site.
From 1981 to 1995, Mr. Impink was a free-lance commercial artist designing
t-shirts, album covers, convention materials and marketing literature for
clients such as Hewlett-Packard, BMW, the American Heart Association, Capitol
Records and rock bands such as The Grateful Dead and Lynryd Skynryd.
Item 6. Executive Compensation.
(a) Summary Compensation: The following table summarizes the compensation
for the fiscal year ended December 31, 1999 and the prior two fiscal years
earned by or paid to our chief executive officer. No other executive officer
earned more than $100,000 for these years.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards
------------------- Securities
Name and Underlying
principal position Year Salary Bonus Options(#)/SARS
- ------------------ ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Sy R. Picon, CEO 1999 $103,955 $0 2,000,000
1998 $ 58,231 $0 0
1997 $ 42,058 $0 2,285,000
</TABLE>
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARS
Underlying Granted to Exercise or Market Price
Options/SARS Employees Base Price Expiration on Date of
Name Granted (#) in Fiscal Year ($/share) Date of Grant ($)
- ---- ------------------- -------------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sy R. Picon 1,000,000 10% $0.51 01/03/10 $2.03
1,000,000 10% $2.03 01/03/10 $2.03
</TABLE>
15
<PAGE>
Item 7. Certain Relationships and Related Transactions.
None.
Item 8. Description of Securities.
Authorized Capitalization
Our authorized capital stock consists of 15,000,000 shares, of which
14,500,000 shares are common stock, par value $.0001, and 500,000 shares are
preferred stock, par value $.0001.
Common Stock
We currently have 12,140,635 shares of common stock outstanding. All
outstanding shares of common stock are duly authorized, validly issued, fully
paid and nonassessable.
Holders of common stock are entitled to receive dividends, when and if
declared by the board of directors, out of funds legally available for that
purpose and to share ratably in our net assets upon liquidation, after provision
has been made for each class of stock, if any, having preference over the common
stock.
Holders of common stock are entitled to one vote per share on all matters
requiring a vote of shareholders. Since the common stock does not have
cumulative voting rights in electing directors, the holders of more than a
majority of the outstanding shares of common stock voting for the election of
directors can elect all of the directors whose terms expire that year, if they
choose to do so.
Holders of common stock do not have preemptive or other rights to subscribe
for additional shares, nor are there any redemption or sinking fund provisions
associated with the common stock.
Preferred Stock
We currently have no shares of preferred stock outstanding. However, our
board of directors is authorized to issue up to 500,000 shares of preferred
stock in series and to establish from time to time the number of shares to be
included in each series and to fix the designations, powers and other rights and
preferences of the shares of each series as may be determined from time to time
by our board of directors, as well as any qualifications, limitations or
restrictions. Accordingly, our board of directors, without stockholder approval,
may issue preferred stock with dividend, liquidation, conversion, voting,
redemption or other rights which could adversely affect the voting power or
other rights of the subscribers for our common stock. The preferred stock thus
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of us, which could have the effect of
discouraging hostile bids for control of us in which stockholders may receive
premiums for their shares of common stock or otherwise dilute the rights
16
<PAGE>
of holders of common stock and the market price of the common stock. Although we
have no present intention to issue any shares of our preferred stock, we may do
so in the future. Delaware anti-takeover law
We are subject to the General Corporation Law of the State of Delaware,
including Section 203, an anti-takeover law enacted in 1988. In general, the law
prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested stockholder
unless:
(1) prior to the date of the transaction, the board of directors approved
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder; or
(2) upon becoming an interested stockholder, the stockholder then owns at
least 85% of the voting securities, as defined in Section 203; or
(3) after the date of the transaction, the business combination is approved
by both the board of directors and the stockholders.
"Business combination" generally is defined to include mergers, asset sales
and certain other transactions with an "interested stockholder." An "interested
stockholder" generally is defined as a person who, together with affiliates and
associates, owns, or within the prior three years did own, 15% or more of a
corporation's voting stock. Although Section 203 permits us to elect not to be
governed by its provisions, to date we have not made this election. As a result
of the application of section 203, potential acquirers of the company may be
discouraged from attempting to effect an acquisition transaction with us,
thereby possibly depriving holders of our securities of certain opportunities to
sell or otherwise dispose of their securities at above-market prices in these
transactions.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
(a) Market information.
Our common stock is listed on the Over-the-Counter Bulletin Board under the
symbol "SYCD".
The following table sets forth the range of high and low bid closing
quotations for our common stock for each quarter within the last two fiscal
years since quotation commenced. These quotes were provided by the National
Quotation Bureau, Inc. and reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not represent actual transactions.
17
<PAGE>
<TABLE>
<CAPTION>
Period Closing Bid Closing Ask
------ --------------------- ---------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
October 13 (first
availability) through
December 31, 1998 $.62 $.01 $1.25 $.44
January 4 through
March 31, 1999 .56 .19 .62 .25
April 1 through
June 30, 1999 .73 .22 .78 .25
July 1 through
September 30, 1999 2.40 .42 2.45 .45
October 1 through
December 31, 1999 2.69 1.19 2.75 1.22
</TABLE>
(b) Holders
As of January 14, 2000, there were 78 holders of record of our common
stock.
(c) Dividends
Since our inception, we have not declared any dividends on our common stock
and, since we currently intend to retain earnings for use in operations and the
expansion of our business, we do not anticipate paying any cash dividends in the
foreseeable future.
Item 2. Legal Proceedings.
None.
Item 3. Changes in and Disagreements with Accountants.
None.
Item 4. Recent Sales of Unregistered Securities.
In June 1997, we sold our 31 founders 4,592,053 shares for an aggregate
price of $457 ($.0001 per share) in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), for transactions not involving a public offering.
18
<PAGE>
In September, November and December 1997, we sold to 40 investors 686,000
shares of common stock for an aggregate price of $343,000 ($.50 per share) in a
private placement made pursuant to the exemption from registration provided by
Section 3(b) of the Securities Act and Rule 504 of Regulation D promulgated
under the Securities Act. The investors paid cash for their shares.
In March, April, May and June 1998, we sold to 39 investors 728,000 shares
of common stock for an aggregate price of $364,000 ($.50 per share) in a private
placement made pursuant to the exemption from registration provided by Section
3(b) and Rule 504.
In October 1998 we issued 400,000 shares of common stock to two consultants
for services rendered aggregating $200,000. This issuance was in reliance on the
exemption from registration provided by Section 3(b) and Rule 504.
From November 1998 through February 1999, in connection with a private
placement made pursuant to the exemption from registration provided by Rule 504,
we (a) sold 2,012,500 shares of common stock to 12 private investors at a price
of $.20 per share, for an aggregate price of $402,500 in cash, and (b) issued
180,000 shares to five consultants for services rendered valued at $36,000.
In March and April 1999, we sold to three investors 667,500 shares of
common stock at a price of $.20 per share, for an aggregate price of $133,500,
in cash, in a private placement made pursuant to the exemption from registration
provided by Section 3(b) and Rule 504.
In June 1999, we sold to two accredited investors 1,520,000 shares of
common stock at a price of $.15 per share, for an aggregate price of $228,000,
in a private placement made pursuant to the exemption from registration provided
by Section 3(b) and Rule 504 of the Securities Act and Section 203(t) of the
Pennsylvania Securities Act of 1972.
In October 1999, we sold to one accredited investor 394,000 shares of
common stock at a price of $.75 per share, for an aggregate price of $295,500,
in a private placement made pursuant to the exemption from registration provided
by Section 3(b) and Rule 504 of the Securities Act and Section 203(t) of the
Pennsylvania Securities Act of 1972.
In November and December 1999, we sold to 21 accredited investors 610,377
shares of common stock at a price of $.85 per share, for an aggregate price of
$518,820, in a private placement made pursuant to the exemption from
registration provided by Section 4(2) and 4(6) of the Securities Act and Rule
506 of Regulation D promulgated under the Securities Act.
Item 5. Indemnification of Directors and Officers.
As permitted by Section 102(b)(7) of the General Corporation Law of the
State of Delaware (the "DGCL"), article tenth of our certificate of
incorporation provides that our directors can't be held liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director
other than (i) for any breach of the director's duty of loyalty to us or our
stockholders, (ii) for acts or omissions not in good faith or which involved
intentional misconduct or a knowing
19
<PAGE>
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
Section 145 of the DGCL provides that a corporation may, under certain
circumstances, indemnify its directors and officers against expenses, judgments,
fines, and amounts paid in settlement, provided that these expenses have been
actually and reasonably incurred by the directors and officers by reason of
their capacity as such. Article tenth of our certificate of incorporation
requires us to indemnify, to the fullest extent permitted by the DGCL, as
amended from time to time, any person who is, was, or has agreed to become a
director or officer of the company against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person.
FINANCIAL STATEMENTS
20
<PAGE>
SYCONET.COM, INC.
Balance Sheets
September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30,
--------------------------
Assets 1999 1998
----------- -----------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 99,969 $ 32,470
Accounts receivable, net of allowance for
doubtful accounts of $8,202 and $900, respectively 49,555 37,090
Prepaids expenses -- 5,000
Inventory 366,869 135,399
----------- -----------
Total current assets $ 516,393 $ 209,959
----------- -----------
Property and equipment, at cost $ 25,703 $ 19,277
Less accumulated depreciation (9,330) (3,414)
----------- -----------
Total property and equipment $ 16,373 $ 15,863
----------- -----------
Other Assets $ 5,000 $ 5,000
----------- -----------
Total assets $ 537,766 $ 230,822
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Current maturities of long-term debt $ 32,311 $ 36,500
Accounts payable and accrued expenses 221,660 164,201
Stock subscription refund payable 22,500 22,500
Payroll taxes payable 16,771 48,554
----------- -----------
Total liabilities $ 293,242 $ 271,755
----------- -----------
Stockholders' Equity
Preferred Stock, authorized 500,000 shares; issued none $ -- $ --
Common stock, $0.0001 par value, authorized 14,500,000 shares;
issued and outstanding 10,786,052 and 5,901,053 shares in
1999 and 1998, respectively 1,078 590
Additional paid-in capital 1,808,440 874,134
Retained earnings (deficit) (1,564,994) (915,657)
----------- -----------
Total stockholders' equity $ 244,524 $ (40,933)
----------- -----------
Total liabilities and stockholders' equity $ 537,766 $ 230,822
=========== ===========
</TABLE>
See Note to Financial Statements.
<PAGE>
SYCONET.COM, INC.
Statements of Operations
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
1999 1998
--------- ---------
Net sales $ 773,134 $ 390,570
Cost of goods sold 598,527 322,194
--------- ---------
Gross profit (loss) $ 174,607 $ 68,376
General and administrative expenses 586,521 491,307
--------- ---------
Operating loss $(411,914) $(422,931)
Nonoperating income (expense):
Interest income -- --
Interest expense (2,316) (2,989)
--------- ---------
Net loss $(414,230) $(425,920)
========= =========
Loss per common share, basic and diluted $ (.04) $ (.08)
========= =========
See Note to Financial Statements.
<PAGE>
SYCONET.COM, INC.
Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
1999 1998
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $(414,230) $(425,920)
Adjustments to reconcile net income to net cash
(used in) operating activities:
Depreciation 3,855 2,490
Changes in assets and liabilities:
(Increase) in accounts receivable (9,049) (19,078)
(Increase) in inventory (199,362) (135,399)
Increase in accounts payable and accrued expenses 2,726 124,188
Increase in stock subscription fund payable 0 22,500
Decrease in payroll taxes payable (65,597) 19,666
--------- ---------
Net cash (used in) operating activities $(681,657) $(411,553)
--------- ---------
Cash Flows From Investing Activities,
Purchase of property, plant and equipment $ -- $ (10,047)
--------- ---------
Cash Flows From Financing Activities
Proceeds from issuance of stock $ 774,980 $ 362,935
Short-term loans from officers (10,000) --
Short-term loans to employees 2,000 (12,130)
Principal payments on long-term debt (6,030) --
--------- ---------
Net cash provided by financing activities $ 760,950 $ 350,805
--------- ---------
Increase in cash and cash equivalents $ 79,293 $ (70,795)
Cash and Cash Equivalents
Beginning 20,676 103,265
--------- ---------
Ending $ 99,969 $ 32,470
========= =========
Supplemental Disclosures of Cash Flow Information,
cash payments for interest $ 1,469 $ 2,034
========= =========
</TABLE>
See Note to Financial Statements.
<PAGE>
SYCONET.COM, INC.
Notes to Financial Statements
Note 1. Significant Accounting Policies
Unaudited Interim Financial Information
The interim financial statements as of September 30, 1999 and 1998
have been prepared by Syconet.com, Inc. (the "Corporation") pursuant
to the rules and regulations of the Securities and Exchange Commission
(the "SEC") for interim financial reporting. These statements are
unaudited and, in the opinion of management, include all adjustments
(consisting of normal recurring adjustments and accruals) necessary to
present fairly the balance sheets, operating results, and cash flows
for the periods presented in accordance with generally accepted
accounting principles. Operating results for the nine-month periods
ended September 30, 1999 and 1998 may not be indicative of the results
for the years ending December 31, 1999 and 1998. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted in accordance with the rules and regulations of the
SEC. These financial statements should be read in conjunction with the
audited financial statements, and accompanying notes, included in the
Corporation's financial statements for the year ended December 31,
1998.
A summary of the Corporation's accounting policies are as follows:
Cash and Cash Equivalents
For purposes of reporting the statements of cash flows, the
Corporation includes all cash accounts, which are not
subject to withdrawal restrictions or penalties, and all
highly liquid debt instruments purchased with a maturity of
three months or less as cash and cash equivalents on the
accompanying balance sheets.
Accounts Receivable
Accounts receivable are shown net of related allowance for
doubtful accounts. The allowance for doubtful accounts is
$8,200 and $900 for September 30, 1999 and 1998,
respectively.
Inventories
Inventories are stated at the lower of cost (first-in,
first-out method) or market. Inventories at September 30,
1999 and 1998 consisted of goods, primarily anime videos,
purchased for redistribution.
<PAGE>
Notes to Financial Statements
Property and Equipment
Property and equipment, principally computer hardware and
software, are stated at historical cost less accumulated
depreciation. The costs of additions and improvements are
capitalized, while maintenance and repairs are charged to
expense. Depreciation is provided using the straight-line
method over a three to five-year estimated life.
Depreciation expense totaled $3,855 and $2,490 for the nine
months ended September 30, 1999 and 1998, respectively.
Earnings Per Share
Per Financial Accounting Standards Board Statement No. 128,
"Earnings Per Share," basic earnings per share is computed
on the weighted average number of shares outstanding and
excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is
computed in a manner similar to basic EPS, except for
certain adjustments to the numerator and the denominator.
Diluted EPS gives effect to all dilutive potential common
shares that were outstanding during the period. Dilution
reduces EPS and results from the assumption that convertible
securities were converted, that options or warrants were
exercised, or that other shares were issued upon the
satisfaction of certain conditions. Common equivalent shares
are excluded from the computation if their effect is
antidilutive.
Revenue Recognition
Sales are recorded net of discounts, which range from 28% to
50%. Right of return is granted in exchange for cash refund
or merchandise exchange contingent upon receipt of the
returned inventory.
Advertising Costs
Advertising costs are expensed as incurred.
Income Taxes
Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards
and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the
differences between the reported amounts of asset and
liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of
enactment.
<PAGE>
Notes to Financial Statements
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and 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.
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of operations 3
Statements of stockholders' equity 4
Statements of cash flows 5
Notes to financial statements 6-12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Syconet.com, Inc.
Manassas, Virginia
We have audited the accompanying balance sheets of Syconet.com, Inc. as of
December 31, 1998 and 1997 and the related statements of operations, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Syconet.com, Inc. as of
December 31, 1998 and 1997 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Yount, Hyde & Barbour, P.C.
Winchester, Virginia
December 31, 1999
1
<PAGE>
SYCONET.COM, INC.
Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
December 31,
--------------------------
Assets 1998 1997
----------- -----------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 20,676 $ 103,265
Accounts receivable, net of allowance for
doubtful accounts of $8,202 and $910 at
December 31, 1998 and 1997, respectively 40,506 18,012
Due from employee 2,000 --
Prepaid expenses -- 5,000
Inventory 167,507 --
----------- -----------
Total current assets $ 230,689 $ 126,277
----------- -----------
Property and Equipment, at cost $ 25,703 $ 9,230
Less accumulated depreciation (5,475) (923)
----------- -----------
Total property and equipment $ 20,228 $ 8,307
----------- -----------
Other Assets $ 5,000 $ 5,000
----------- -----------
Total assets $ 255,917 $ 139,584
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Current maturities of long-term debt $ 22,483 $ 16,840
Accounts payable and accrued expenses 218,934 40,013
Payroll taxes payable 82,368 28,888
Stock subscription refund payable 22,500 --
Loans from officers 10,000 --
----------- -----------
Total current liabilities $ 356,285 $ 85,741
Long-Term Debt, less current maturities 15,858 31,790
----------- -----------
Total liabilities $ 372,143 $ 117,531
----------- -----------
Stockholders' Equity
Preferred stock, authorized, 500,000 shares; no shares
outstanding $ -- $ --
Common stock, $0.0001 par value, authorized 14,500,000 and
7,500,000 shares in 1998 and 1997, respectively; issued
and outstanding 6,500,053 and 5,153,053 shares in 1998
and 1997, respectively 650 515
Additional paid-in capital 1,033,888 511,273
Retained earnings (deficit) (1,150,764) (489,735)
----------- -----------
Total stockholders' equity $ (116,226) $ 22,053
----------- -----------
Total liabilities and stockholders' equity $ 255,917 $ 139,584
=========== ===========
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
SYCONET.COM, INC.
Statements of Operations
For the Year Ended December 31, 1998 and
for the Period from January 15, 1997 (Date of Inception)
to December 31, 1997
Period from
January 15, 1997
Year Ended (Date of Inception)
December 31, to December 31,
1998 1997
--------- ---------
Net sales $ 625,955 $ 174,880
Cost of goods sold 512,024 246,222
--------- ---------
Gross profit (loss) $ 113,931 $ (71,342)
Selling, general and administrative expenses 771,395 415,971
--------- ---------
Operating loss $(657,464) $(487,313)
Nonoperating income (expense):
Interest income 420 106
Interest expense (3,985) (2,528)
--------- ---------
Net loss $(661,029) $(489,735)
========= =========
Loss per common share, basic and diluted $ (0.12) $ (0.10)
========= =========
See Notes to Financial Statements.
3
<PAGE>
SYCONET.COM, INC.
Statements of Stockholders' Equity
For the Year Ended December 31, 1998 and
the Period from January 15, 1997 (Date of Inception)
to December 31, 1997
<TABLE>
<CAPTION>
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit)
----------- ----------- -----------
<S> <C> <C> <C>
Balance, January 15, 1997 (date of inception) $ -- $ -- $ --
Net (loss) -- -- (489,735)
Sale of 5,153,053 shares of common stock 5,153 506,635 --
----------- ----------- -----------
Balance, December 31, 1997 $ 5,153 $ 506,635 $ (489,735)
Net (loss) -- -- (661,029)
Sale of 1,347,000 shares of common stock 1,347 521,403 --
----------- ----------- -----------
Balance, December 31, 1998 $ 6,500 $ 1,028,038 $(1,150,764)
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
SYCONET.COM, INC.
Statements of Cash Flows
For the Year Ended December 31, 1998 and
the Period from January 15, 1997 (Date of Inception)
to December 31, 1997
<TABLE>
<CAPTION>
Period from
January 15, 1997
Year Ended (Date of Inception)
December 31, to December 31,
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $(661,029) $(489,735)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation 4,552 923
Changes in assets and liabilities:
(Increase) in accounts receivable (22,494) (18,012)
(Increase) decrease in prepaid expenses 5,000 (5,000)
(Increase) in inventory (167,507) --
(Increase) in other assets -- (5,000)
Increase in accounts payable and accrued expenses 178,921 40,285
Increase in stock subscription refund payable 22,500 --
Increase in payroll taxes payable 53,480 28,616
--------- ---------
Net cash (used in) operating activities $(586,577) $(447,923)
--------- ---------
Cash Flows From Investing Activities,
purchase of property and equipment $ (16,473) $ (9,230)
--------- ---------
Cash Flows From Financing Activities
Proceeds from issuance of stock $ 522,750 $ 511,788
Short-term loans from officers 10,000 --
Short-term loans to employees (2,000)
Proceeds from long-term borrowing -- 50,000
Principal payments on long-term debt (10,289) (1,370)
--------- ---------
Net cash provided by financing activities $ 520,461 $ 560,418
--------- ---------
Increase (decrease) in cash and cash
equivalents $ (82,589) $ 103,265
Cash and Cash Equivalents
Beginning 103,265 --
--------- ---------
Ending $ 20,676 $ 103,265
========= =========
Supplemental Disclosures of Cash Flow Information,
cash payments for interest $ 2,712 $ 1,630
========= =========
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
SYCONET.COM, INC.
Notes to Financial Statements
Note 1. Nature of Business and Significant Accounting Policies
From January 15, 1997, date of inception, to February 1, 1997, the
Corporation operated as a general partnership between Sy Robert
Picone, Chief Executive Officer of Syconet.com, Inc. ("SyCo" or the
"Corporation"), and William Spears, President of SyCo. From February
1, 1997 to June 30, 1997, the Corporation operated as a limited
partnership which included nine separate partners and on June 30,
1997, the Corporation was incorporated in the State of Delaware under
the name Syco Comics & Distribution. The Company changed its name in
early 1999 to Syconet.com.
From the date of inception to December 31, 1997, the Corporation
primarily operated as a distributor of comic books, trading cards and
collectible toys to independent retailers nationwide. Subsequent to
1997, the Corporation replaced the distribution of comic books with
the distribution of Japanese anime videos. Sales are made in the
United States and internationally through several websites on the
internet, the publication of a catalog and attendance at conventions
across the United States.
A summary of the Corporation's accounting policies are as follows:
Cash and Cash Equivalents
For purposes of reporting the statements of cash flows, the
Corporation includes all cash accounts, which are not
subject to withdrawal restrictions or penalties, and all
highly liquid debt instruments purchased with a maturity of
three months or less as cash and cash equivalents on the
accompanying balance sheets.
Accounts Receivable
Accounts receivable are shown net of related allowance for
doubtful accounts. The allowance for doubtful accounts is
$8,202 and $910 for December 31, 1998 and 1997,
respectively.
Inventories
Inventories are stated at the lower of cost (first-in,
first-out method) or market. Inventories at December 31,
1998 consisted of goods, primarily anime videos, purchased
for redistribution. With the change to the anime video
distribution at the end of 1997, the remaining comic book
inventory was abandoned and written off.
6
<PAGE>
Notes to Financial Statements
Property and Equipment
Property and equipment, principally computer hardware and
software, are stated at historical cost less accumulated
depreciation. The costs of additions and improvements are
capitalized, while maintenance and repairs are charged to
expense. Depreciation is provided using the straight-line
method over a three to five-year estimated life.
Depreciation expense totaled $4,552 and $923 for the year
ended December 31, 1998 and the period from January 15,
1997, date of inception, through December 31, 1997,
respectively.
Earnings Per Share
Per Financial Accounting Standards Board Statement No. 128,
"Earnings Per Share," basic earnings per share is computed
on the weighted average number of shares outstanding and
excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is
computed in a manner similar to basic EPS, except for
certain adjustments to the numerator and the denominator.
Diluted EPS gives effect to all dilutive potential common
shares that were outstanding during the period. Dilution
reduces EPS and results from the assumption that convertible
securities were converted, that options or warrants were
exercised, or that other shares were issued upon the
satisfaction of certain conditions. Common equivalent shares
are excluded from the computation if their effect is
antidilutive.
Revenue Recognition
Sales are recorded net of discounts, which range from 28% to
50%. Right of return is granted in exchange for cash refund
or merchandise exchange contingent upon receipt of the
returned inventory.
Advertising Costs
Advertising costs are expensed as incurred. Advertising
costs were $17,030 and $12,012 for the year ended December
31, 1998 and the period from January 15, 1997, date of
inception, through December 31, 1997, respectively.
Income Taxes
Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards
and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the
differences between the reported amounts of asset and
liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of
enactment.
7
<PAGE>
Notes to Financial Statements
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and 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.
Note 2. Accounts Payable and Accrued Expenses
The Corporation's accounts payable and accrued expenses consist of the
following:
December 31,
----------------------------
1998 1997
-------- --------
Accounts payable $160,686 $ 26,009
Legal 54,813 11,270
Payroll 1,630 1,783
Interest 1,727 759
Sales taxes 78 192
-------- --------
$218,934 $ 40,013
======== ========
Note 3. Long-Term Debt
The Corporation's long-term debt is as follows:
December 31,
-----------------------
1998 1997
------- -------
Note payable, due in monthly
installments of $1,517, interest
at 9.25%, uncollateralized $38,341 $48,630
Less current maturities 22,483 16,840
------- -------
$15,858 $31,790
======= =======
Aggregate maturities of long-term debt are 1999, $22,483 and 2000,
$15,858.
8
<PAGE>
Notes to Financial Statements
Note 4. Payroll Taxes Payable
During 1997 and the first three quarters of 1998, the Corporation was
in compliance with payroll tax reporting requirements but was not able
to remit the related tax amounts. Consequently, the Corporation
entered into an installment payment agreement with the IRS and began
making payments to cover the back taxes and penalties. The payroll tax
liability was $28,616, plus penalties and interest of $272 at December
31, 1997 and at December 31, 1998, the payroll tax liability was
$64,768, plus penalties and interest of $17,600. The Corporation paid
off its back taxes in 1999, and is now current with its payroll tax
obligations.
Note 5. Credit Risk
The Corporation maintains its cash accounts at a commercial bank in
Virginia. The amount on deposit at December 31, 1997 that was not
covered by the Federal Deposit Insurance Corporation (FDIC) was
$7,873. At December 31, 1998, all deposits were covered by the FDIC.
Note 6. Related Party Transactions
The amounts due from employees and loans due to stockholders represent
short-term cash advances. There were no such transactions at December
31, 1997. At December 31, 1998, the Corporation had $2,000 due from an
employee and $10,000 due to officers.
Note 7. Loss Per Share
The following table shows the weighted average number of shares used
in computing the loss per share. The effect on weighted average number
of shares of diluted potential common stock are not included in the
computation if their inclusion would have an antidilutive effect
(reduce the loss per common share) applicable to the loss from
operations for the year ended December 31, 1998 and the period from
January 15, 1997, date of inception, through December 31, 1997.
1998 1997
----------- -----------
Basic loss per share:
Net income (loss) $ (661,029) $ (489,735)
Weighted average shares outstanding 5,625,507 5,153,058
----------- -----------
$ (0.12) $ (0.10)
=========== ===========
9
<PAGE>
Notes to Financial Statements
Options of 5,471,000 and 5,400,000 shares were not included in
computing loss per share assuming dilution for the year ended December
31, 1998 and the period from January 15, 1997, date of inception,
through December 31, 1997, respectively, because their effects were
antidilutive.
Note 8. Stock Options
The Corporation authorized the grant of 5,400,000 non-qualified stock
options in 1997 and 86,000 non-qualified stock options in 1998 to key
employees or directors of the Corporation. Financial Accounting
Standards Board ("SFAS") Statement No. 123, "Accounting for Stock
Based Compensation," provides for a fair value method of accounting
for employee options and measures compensation expense using an option
valuation model that takes into account, as of the grant date, the
exercise price and expected life of the options, the current price of
the underlying stock, and the risk-free interest rate for the expected
term of the option. The Corporation has elected to continue accounting
for employee stock-based compensation under Accounting Principles
Board Opinion ("APB") No. 25 and related interpretations, which
generally requires that compensation cost be recognized for the
difference, if any, between the quoted market price of the stock and
the amount an employee must pay to acquire the stock.
Prior to October, 1998, the Corporation's stock was not readily
marketable and had no determinable fair value. Under APB No. 25,
because the exercise price of all outstanding options was equal to or
greater than the fair value of the underlying stock on the date of
grant, no compensation expense was recognized during the year ended
December 31, 1998 and the period from January 15, 1997, date of
inception, through December 31, 1997. If the fair value method of
accounting for stock options under SFAS 123 had been applied there
would have been no expense relating to the stock options for 1998 and
1997 since there was no determinable fair value for the related stock
at the grant date of the stock options.
A summary of the status of the outstanding options at December 31,
1998 and 1997 and changes during the periods ended on those dates is
as follows:
10
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------------- ---------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 5,400,000 $ 0.01 -- $ --
Granted 86,000 0.14 5,400,000 0.01
Exercised 15,000 0.01 -- --
---------- ----------
Outstanding at end of year 5,471,000 5,400,000 0.01
========== ==========
Excercisable at end of year 5,446,000 5,400,000
Weighted-average fair value per option
of options granted during the year $ 0.05 $ 0.01
</TABLE>
At December 31, 1998, the range of exercise prices for all options is
between $0.01 and $0.50, with a weighted average remaining contractual
life of 4.4 years, with the exception of 5,400,000 options which do
not expire. There were 5,446,000 options exercisable at December 31,
1998.
Note 9. Operating Leases
The Corporation leases office and warehousing space and certain office
equipment and automobiles under various operating leases. Scheduled
payments under these leases are as follows:
Year ended December 31,
1999 $ 39,309
2000 7,494
2001 691
--------
$ 47,494
========
The total rental expense included in the statements of operations for
the for the year ended December 31, 1998 and the period from January
15, 1997, date of inception, through December 31, 1997 was $53,314 and
$8,857, respectively.
11
<PAGE>
Notes to Financial Statements
Note 10. Income Tax Matters
Net deferred tax assets consist of the following components as of
December 31, 1998 and 1997:
1998 1997
--------- ---------
Deferred tax assets:
Loss carryforwards $ 377,400 $ 192,000
Less valuation allowance (377,400) (192,000)
--------- ---------
$ -- $ --
========= =========
During the year ended December 31, 1998 and the period from January
15, 1997, date of inception, through December 31, 1997, the
Corporation recorded a valuation allowance of $377,400 and $192,000 on
the deferred tax assets to reduce the total to an amount that
management believes will ultimately be realized. Realization of
deferred tax assets is dependent upon sufficient future taxable income
during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable income.
There was no other activity in the valuation allowance account during
1998 or 1997.
Loss carryforwards for tax purposes as of December 31, 1998 have the
following expiration dates:
Expiration Date Amount
--------------- ------
2017 $ 480,000
2018 630,000
-------------
$ 1,110,000
=============
The income tax provision differs from the amount of income tax
determined by applying the U.S. Federal income tax rate to pretax
income (loss) from continuing operations for the years ended December
31, 1998 and 1997 due to nondeductible expenses and the valuation
allowance.
Note 11. Subsequent Events
Additional Sources of Capital
The Corporation has funded its operations primarily through
private equity financing pursuant to Regulation D, which is a
limited offer and sale of securities without registration under
the Securities Act of 1933. Additional funds were raised through
various private placements during 1999 totaling in excess of
$1 million.
New Line of Credit
The Corporation has signed a Letter of Intent for a $5 million
line of credit with a venture capital firm that has funded
numerous emerging growth companies.
12
<PAGE>
PART III
Item 1. Index to Exhibits.
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation
3.1a Certificate of Amendment of the Certificate
of Incorporation, dated March 11, 1998
3.1b Certificate of Amendment of Certificate
of Incorporation, dated February 17, 1999
3.2 By-Laws
10.1 Funding Agreement with Alliance Equities, Inc.,
dated December 16, 1999
10.2 Lease Agreement with John G. and Mary Immer, dated
November 15, 1997
10.3 Lease Amendment, dated January 4, 2000
21 Subsidiaries
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
SYCONET.COM, INC.
Date: January 25, 2000 By: /s/ Sy R. Picon
------------------------------
Sy R. Picon
Chief Executive Officer
CERTIFICATE OF INCORPORATION
OF
SYCO COMICS AND DISTRIBUTION, INC.
The undersigned, desiring to form a corporation pursuant to Section 103 of
the General Corporation Law of the State of Delaware, does hereby certify, as
follows:
FIRST: The name of the corporation is SYCO COMICS AND DISTRIBUTION, INC.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is c/o UNITED CORPORATE SERVICES, INC., 15 East North
Street, in the City of Dover, County of Kent, State of Delaware,
19901. The name of the registered agent at such address is United
Corporate Services, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is Eight Million (8,000,000) shares, of which
Seven Million Five Hundred Thousand (7,500,000) shares shall be
designated common stock and shall have a par value of $.0001 per
share and Five Hundred Thousand (500,000) shares shall be
designated preferred stock and shall have a par value of $.0001
per share.
The Corporation's Board of Directors is authorized, subject to
the limitations prescribed by law and the provisions of this
Article "FOURTH", to provide for the issuance of the above
authorized preferred stock in series, and by filing a certificate
of designations pursuant to section 151 of the General
Corporation Law of the State of Delaware, as the same may be
amended, to establish from time to time the number of shares to
be included in each such series and to fix the designation,
powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the
following:
1
<PAGE>
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate, if any, on the shares of that series,
whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of
payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the
terms of such voting rights;
(d) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate upon
such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(f) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, and the relative rights of priority of
payment of shares of that series; and
(g) Any other relative rights, preferences and limitations
of that series.
Dividends on outstanding shares of preferred stock shall be paid
or declared and set apart for payment before any dividends shall
be paid or declared and set apart for payment on common shares
with respect to the same dividend period.
FIFTH: The name and mailing address of the incorporator of the
Corporation is as follows:
Richard G. Klein
c/o Hofheimer Gartlir & Gross, LLP
633 Third Avenue
New York, New York 10017
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The number of directors which shall constitute the whole Board of
Directors of the Corporation shall be designated in the By-Laws
of the Corporation. Election of directors need not be by written
ballot unless the By-Laws so provide.
2
<PAGE>
EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make,
alter or repeal the By- laws of the Corporation, without the need
for shareholder approval.
NINTH: In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of the General Corporation Law of
the State of Delaware, this Certificate of Incorporation, and any
By-Laws adopted by the stockholders; provided,however, that no
By-Laws hereafter adopted by the stockholders shall invalidate
any prior act of the directors which would have been valid if
such By-Laws had not been adopted.
TENTH: To the fullest extent permitted by the General Corporation Law of
the State of Delaware, as the same exists or as it may hereafter
be amended, no director of the Corporation shall be personally
liable for monetary damages for breach of his/her fiduciary duty
as a director. The Corporation shall indemnify each officer and
director of the Corporation to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended from time to time. Any
repeal or modification of this Article TENTH by the stockholders
of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification.
ELEVENTH: Meetings of stockholders of the Corporation may be held within or
without the State of Delaware, as the By-laws may provide. The
books of the Corporation may be kept (subject to any contrary
provision contained in the General Corporation Law of the State
of Delaware) outside of the State of Delaware at such place or
places as may be designated from time to time by the Board of
Directors or in the By-laws of the Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
3
<PAGE>
The effective time of this Certificate of Incorporation of the Corporation
and the time when the existence of the Corporation shall commence is upon the
filing hereof.
Dated: June 26, 1997 /s/ Richard G. Klein
-----------------------------
Richard G. Klein,
Incorporator
4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SYCO COMICS AND DISTRIBUTION, INC.
(under Section 242 of the General Corporation Law)
The undersigned corporation, in order to amend its Certificate of
Incorporation, hereby certifies as follows:
FIRST: The name of the corporation is: SYCO COMICS AND DISTRIBUTION, INC.
SECOND: The corporation's Certificate of Incorporation was originally filed with
the Secretary of State on June 30, 1997.
THIRD: The corporation hereby amends its Certificate of Incorporation as
follows:
Paragraph FOURTH of the Certificate of Incorporation, relating to the
Corporation's authorized shares of capital stock, is hereby amended to read
as follows:
"FOURTH: The aggregate number of shares which the Corporation shall
have authority to issue is Fifteen Million (15,000,000) shares, of
which Fourteen Million Five Hundred Thousand (14,500,000) shares shall
be designated common stock and shall have a par value of $.0001 per
share and Five Hundred Thousand (500,000) shares shall be designated
preferred stock and shall have a par value of $.0001 per share.
FOURTH: The amendment effected herein was authorized by written consent of the
holders of a majority of the outstanding shares entitled to vote thereon;
written notice of this corporate action has been given to all shareholders
entitled to vote thereon who did not consent in writing to such action pursuant
to Sections 228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that the statements
made herein are true under the penalties of perjury, this 11th day of March,
1998.
/s/ Sy Robert Picon
------------------------------
Sy Robert Picon
Chairman of the Board and
Chief Executive Officer
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SYCO COMICS AND DISTRIBUTION, INC.
The undersigned corporation, in order to amend its Certificate of
Incorporation, hereby certifies as follows:
FIRST: The name of the corporation is: SYCO COMICS AND DISTRIBUTION, INC.
SECOND: The corporation hereby amends its Certificate of Incorporation as
follows:
Paragraph FIRST of the Certificate of Incorporation, relating to the name
of the corporation, is hereby amended to read as follows:
"FIRST: The name of the Corporation is: SYCONET.COM, INC."
THIRD: The amendment effected herein was authorized by the consent in
writing, setting forth the action so taken, signed by the holders of at least a
majority of the outstanding shares entitled to vote thereon; and due notice so
taken has been given to those shareholders who have not consented in writing
pursuant to Sections 222 and 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that the statements
made herein are true under the penalties of perjury, this 17th day of February,
1999.
/s/ Sy R. Picon
-------------------------------
Sy R. Picon, President
EXHIBIT 3.2
BY-LAWS
OF
SYCO COMICS AND DISTRIBUTION, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. - The registered office shall be established
and maintained at c/o United Corporate Services, Inc., 15 East North Street,
Dover, Delaware 19901 and United Corporate Services, Inc. shall be the
registered agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES. - The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of meeting. In the event the
Board of Directors fails to so determine the time, date and place of meeting,
the annual meeting of stockholders shall be held at the registered office of the
corporation in Delaware.
If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
SECTION 3. VOTING. - Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By- Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held
<PAGE>
by such stockholder, but no proxy shall be voted after three years from its date
unless such proxy provides for a longer period. Upon the demand of any
stockholder, the vote for directors and the vote upon any question before the
meeting, shall be by ballot. All elections for directors shall be decided by
plurality vote; all other questions shall be decided by majority vote except as
otherwise provided by the Certificate of Incorporation or the laws of the State
of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM . - Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.
SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. - Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than fifty days before the date of the meeting. No business other than that
stated in the notice shall be transacted at any meeting without the unanimous
consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. - Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the
-2-
<PAGE>
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. - The number of directors shall be seven (7).
At any time that there are less than three (3) directors, the number of
directors may not be less than the number of shareholders. The directors shall
be elected at the annual meeting of the stockholders and each director shall be
elected to serve until his successor shall be elected and shall qualify. A
director need not be a stockholder.
SECTION 2. RESIGNATIONS. - Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. - If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 4. REMOVAL. - Any director or directors may be removed either for
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
SECTION 5. INCREASE OF NUMBER. The number of directors may be increased by
amendment of these By-Laws by the affirmative vote of a majority of the
directors, though less than a quorum, or, by the affirmative vote of a majority
in interest of the stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional directors may be chosen
at such meeting to hold office until the next annual election and until their
successors are elected and qualify.
SECTION 6. POWERS. - The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders.
SECTION 7. COMMITTEES. - The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or
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<PAGE>
disqualified member at any meeting of the committee. In the absence or
disqualification of any member or such committee or committees, the member or
members thereof present at any such meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these By-Laws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power of authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 8. MEETINGS. - The newly elected Board of Directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent, in
writing, of all the directors.
Unless restricted by the incorporation document or elsewhere in these
By-Laws, members of the Board of Directors or any committee designated by such
Board may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at such meeting.
Regular meetings of the Board of Directors may be scheduled by a resolution
adopted by the Board. The Chairman of the Board or the President or Secretary
may call, and if requested by any two directors, must call special meeting of
the Board and give five days' notice by mail, or two days' notice personally or
by telegraph or cable to each director. The Board of Directors may hold an
annual meeting, without notice, immediately after the annual meeting of
shareholders.
SECTION 9. QUORUM. - A majority of the directors shall constitute a quorum
for the transaction of business. If at any meeting of the board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum is obtained, and no further notice thereof need
be given other than by announcement at the meeting which shall be so adjourned.
SECTION 10. COMPENSATION. - Directors shall not receive any stated salary
for their services as directors or as members of committees, but by resolution
of the board a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein
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<PAGE>
contained shall be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent or otherwise, and
receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. - Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee therof,
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the board, or of such committee as the case
may be, and such written consent is filed with the minutes of proceedings of the
board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. - The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one or
more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the corporation need be directors.
The officers shall be elected at the first meeting of the Board of Directors
after each annual meeting. More than two offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION3. CHAIRMAN. - The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 4. PRESIDENT. - The President shall be the chief executive officer
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of President of a corporation. He
shall preside at all meetings of the stockholders if present thereat, and in the
absence or non-election of the Chairman of the Board of Directors, at all
meetings of the Board of Directors, and shall have general supervision,
direction and control of the business of the corporation. Except as the Board of
Directors shall authorize the execution thereof in some other manner, he shall
execute bonds, mortgages and other contracts in behalf of the corporation, and
shall cause the seal to be affixed to any instrument requiring it and when so
affixed the seal shall be attested by the signature of the Secretary or the
Treasurer or Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
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<PAGE>
SECTION 6. TREASURER. - The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered
by the Board of Directors, or the President, taking proper vouchers for such
disbursements. He shall render to the President and Board of Directors at the
regular meetings of the Board of Directors, or whenever they may request it, an
account of all his transactions as Treasurer and of the financial condition of
the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 7. SECRETARY. - The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by the law or by these By-Laws, and in case of his absence or refusal
or neglect so to do, any such notice may be given by any person thereunto
directed by the President, or by the directors, or stockholders, upon whose
requisition the meeting is called as provided in these By-Laws. He shall record
all the proceedings of the meetings of the corporation and of the directors in a
book to be kept for that purpose, and shall perform such other duties as may be
assigned to him by the directors or the President. He shall have the custody of
the seal of the corporation and shall affix the same to all instruments
requiring it, when authorized by the directors or the President, and attest the
same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. - Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V.
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock, signed by the
Chairman or Vice-Chairman of the Board of Directors, if they be elected,
President or Vice- President, and the Treasurer or an Assistant Treasurer, or
Secretary or Assistant Secretary, shall be issued to each stockholder certifying
the number of shares owned by him in the corporation. When such certificates are
countersigned (1) by a transfer agent other than the corporation or its
employee, or, (2) by a registrar other than the corporation or its employee, the
signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. - A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the corporation a bond, in such sum as they may
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<PAGE>
direct, not exceeding double the value of the stock, to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss of any such certificate, or the issuance of any such new
certificate.
SECTION 3. TRANSFER OF SHARES. - The shares of stock of the corporation
shall be transferrable only upon its books by the holders thereof in person or
by their duly authorized attorneys or legal representatives, and upon such
transfer the old certificate shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be cancelled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. - In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any date, which shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjournment meeting.
SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. - The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"Corporate Seal, Delaware, 1900". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. - The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS. - All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
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<PAGE>
SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage, prepaid, addressed to
the person entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by Statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation of these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof if notice
of the proposed alteration or repeal of By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws
to be made, be contained in the notice of such special meeting.
ARTICLE VII
INDEMNIFICATION
No director shall be liable to the corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director, except with
respect to (1) a breach of the director's duty of loyalty to the corporation or
its stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability which may be
specifically defined by law or (4) a transaction from which the director derived
an improper personal benefit, it being the intention of the foregoing provision
to eliminate the liability of the corporation's directors to the corporation or
its stockholders to the fullest extent permitted by law. The corporation shall
indemnify to the fullest extent permitted by law each person that such law
grants the corporation the power to indemnify.
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FUNDING AGREEMENT
AGREEMENT, made as of December 16, 1999, by and between SYCONET.COM, INC.
("SYCD"), a Delaware corporation having its principal offices at 9208A Venture
Court, Manassas Park, Virginia 20111, and ALLIANCE EQUITIES, INC., a Florida
corporation having its principal offices at 12147 N.W. 9th Drive, Coral Springs,
Florida 33071, ("Alliance").
WHEREAS, SYCD is desirous of receiving short term financing, and Alliance
is willing and able to provide such financing, on the terms and conditions set
forth below:
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Financing Commitment. Alliance agrees to provide to SYCD an aggregate of
$2,000,000.00 in loans (the "Loans"), each loan to be an unsecured SYCD
obligation bearing interest at an annual rate of 12% per annum and repayable by
SYCD by SYCD issuing to Alliance that number of shares of SYCD common stock (the
"Shares") registered under the Securities Act of 1933, as amended (the
"Securities Act"), equal to principal plus interest accrued to the payment date,
each share to be valued at the lower of $0.98 or the average of the closing bid
price of SYCD's common stock as reported on YAHOO for the 20 days prior to the
declaration by the Securities
<PAGE>
and Exchange Commission of the effectiveness of the SYCD Registration Statement
on Form SB-2 (the "SB-2") registering under the Securities Act the Shares and
the 600,000 warrants described in Section 3 below.
2. Loan Schedule. Alliance shall make the Loans to SYCD by making a loan to
SYCD of $500,000.00 principal amount on each of the following four dates:
a. the date on which SYCD files with the SEC a Registration
Statement on Form 10;
b. the date on which the SEC declares effective SYCD's SB-2;
C. 60 days following the effectiveness of the SB-2; and
d. 120 days following the effectiveness of the SB-2.
3. Inducement Fee. SYCD agrees that upon the closing of the initial
$500,000.00 Loan (a) SYCD will issue to Alliance warrants (the "Warrants")
entitling Alliance to purchase 600,000 shares of SYCD common stock of a price of
$.01 per share for five years, and (b) SYCD will pay to Alliance in cash a Loan
administration fee of $30,000.00. SYCD agrees to register under the Securities
Act and include in the SB-2 the shares of SYCD common stock issuable upon
exercise of the Warrants.
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<PAGE>
4. Amendment; Breach and Waiver. This Agreement may not be amended or
modified in any manner, except by an instrument in writing signed by both
parties hereto. The failure of either party hereto to enforce at any time any of
the provisions of this Agreement shall in no way be construed to be a waiver of
any such provision or any other provision, or of the right of such party
thereafter to enforce each and every such provision or other provision in the
event of a subsequent breach.
5. Agreement Binding Upon Successors. This Agreement shall inure to the
benefit of and shall be binding upon SYCD, its successors and assigns, and upon
Alliance and its successors and assigns.
6. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original but both of which together shall
constitute one and the same instrument.
7. Choice of Law and Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, exclusive of its
choice-of-law principles. Each party hereby irrevocably submits to the
jurisdiction of any state or Federal court sitting in New York County, New York
in any action or proceeding arising out of or relating to this Agreement, and
each party hereby irrevocably waives the defenses of improper venue or
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<PAGE>
an inconvenient forum for the maintenance of any such action or proceeding to
the fullest extent permitted by law.
8. Section Headings. Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof, and there
are no agreements, undertakings, restrictions, warranties, promises or
representations between the parties with respect to the subject matter hereof
other than those set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SYCONET.COM, INC.
By: /s/ Sy Robert Picon
---------------------------
Sy Robert Picon, Chairman
ALLIANCE EQUITIES, INC.
By: /s/ Richard Epstein
--------------------------
Richard Epstein
-------------------------------
(Print Name)
President
-------------------------------
(Title)
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COMMERCIAL AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE made and entered into this 15th day of November in
the year 1997, by and between Syco Inc (herein referred to as Tenant) and John
G. and Mary G. Immer (herein referred to as Landlord)
WITNESSETH: That for and in consideration of the rent hereinafter reserved
and the covenants herein contained, the Landlord does hereby lease and demise
unto the Tenant the premises situated in 9208 (A1 and A2) Venture Court,
Manassas Park, VA, 22110. Commencing on the 1st day of January, 1998 and ending
on the 30th day of December 1999 for the sum of twenty-six thousand four hundred
and no/100 ($26,400.00) dollars per annum, payable to John Immer in monthly
installments of two thousand two hundred and no/100 ($2,200) dollars,
hereinafter sometimes referred to as the basic monthly rental, in advance on the
1st day of each month, the first month's rent to be paid at time of execution of
this lease. (2 years lease at $30,000 per year--no escalations)--tenant to have
right for additional 2 years extension on this lease.
1. Tenant takes and holds the said premises as tenant for the term and
subject to the conditions as herein provided, at the rent payable as
aforesaid, and the said Tenant will, without previous demand, pay the
rent specified at the time, place and in the manner herein provided.
2. Tenant will not assign this lease, or any portion of the term of this
lease, or sublet the leased premises, or any portion thereof, without
the written consent of the Landlord first had and obtained, nor shall
any subletting or assignment hereof be effected by operation of Law or
otherwise than by the written consent of the Landlord first had and
obtained.
3. Tenant will pay all bills for electricity, gas, and water used in the
within premises, and any sewer charges, as well as any public space
rent, if any, during the term of this lease, as they become due and
payable.
4. Tenant will comply with all the rules and regulations now in effect or
that may hereafter be enacted by the Municipal, County, State or
Federal Government, insofar as the same pertain to the conduct of his
business in the demised premises. Tenant will not use, permit or
suffer to be used, said leased premises for any disorderly or unlawful
purpose, or for any other purpose than that of storage, sale and
promotion of films, books, etc., and all processes the tenant feels
necessary to operate his business.
5. Tenant will furnish heat, hot water and air-conditioning, if any, at
his own cost and expense. Landlord warrants the plumbing,
air-conditioning and heating systems in and for the demised premises
to be in good working order as of the date upon which possession of
the demised premises is delivered to the Tenant, and agrees to keep
the plumbing, heating and air conditioning systems in good order and
repair; to make replacements thereto whether said repairs or
replacements be necessitated, together with all other rent provided
for under terms of this lease.
<PAGE>
6. Tenant will make any and all repairs and replacements to the premises
hereby leased during the term of this lease, except repairs to the
roof, downspouts, and gutters, and exterior walls which Landlord
agrees to make, unless damage to said roof, downspouts, gutters,
and/or exterior walls is caused by the negligence of the Tenant or his
agents.
7. Landlord assumes no liability or responsibility whatever in respect to
the conduct and operation of the business to be conducted in said
leased premises by the Tenant, nor for any damage of whatsoever kind,
or by whomsoever caused, to person or property of the Tenant or to
anyone on or about the premises by consent of the Tenant, however
caused and whether due in whole or in part to acts of negligence on
the part of the Landlord, his agents or servants, whether such acts be
active or passive, and the Tenant agrees to hold the Landlord harmless
against such damage claims.
8. All goods and personal property of every kind, in and upon the said
leased premises, shall be at the sole risk and hazard of the Tenant,
or those claiming by, through or under him, or the owner thereof.
9. Tenant will not move into the said building any safe or safes or heavy
furniture, fixtures, or material, without the written consent of the
Landlord first had and obtained. All damage done to the building by
taking a safe, or heavy furniture, fixtures of materials in and out,
or due to its being on the premises, shall be repaired at the expense
of the Tenant.
10. If the demised premises shall be partially damaged by fire or other
unavoidable casualty, without the fault or neglect of the Tenant,
tenant's servants, employees, agents, visitors or licensees, the
damages shall be repaired by and at the expense of the Landlord, and
then rent until such repairs be made shall be apportioned according to
the part of the demised premises which is usable by the Tenant. Due
allowance shall be made for reasonable delay which may arise by reason
of adjustment of fire insurance on the part of the Landlord and/or the
Tenant, and for reasonable delay on account of "Labor troubles" or any
other cause beyond the Landlord's control. But if the demised premises
are rendered wholly untenantable by fire or other unavoidable
casualty, and the Landlord shall decide not to rebuild the same, or if
the building shall be so damaged that the Landlord shall decide to
demolish it or to rebuild it, then or in any of such events the
Landlord may, at the Landlord's option, give the Tenant a notice in
writing of such decision, and thereupon the term of this lease shall
expire by lapse of time upon the third day after such notice is given
and the Tenant shall vacate the demised premises and surrender the
same to the Landlord, but in neither of the certain contingencies in
this paragraph mentioned shall there be any liability on the part of
the Landlord to the Tenant, his successors or assigns, covering or in
respect of any period during which the occupation of said leased
premises by the Tenant, because of the matters hereinabove stated, may
not be possible.
11. Tenant will keep the said demised premises in substantial condition
and good repair, clean and in proper sanitary condition, and will at
the end of his tenancy surrender the same in good order and condition
as the same were at the commencement of his original tenancy, the acts
of God, ordinary wear and tear, and loss or damage by fire or other
unavoidable casualty excepted.
<PAGE>
12. If the whole or any part of the demised premises except vault space,
if any, shall be taken or condemned by any competent authority for any
public or quasi public use or purpose, then, and in that event, the
term of this lease shall cease and terminate from the date when the
possession of the part so taken shall be required for such use or
purpose and without apportionment of the award. The current rental,
however, shall in any such case be apportioned. The taking of vault
space shall not entitle Tenant to any reduction in amount of rent
payable hereunder.
13. Tenant at his own cost and expense agrees that he will keep the
sidewalks in front of said demised premises free from obstructions of
any and all nature, will promptly remove all snow and ice from said
sidewalks, will keep the premises clean, will maintain suitable
receptacles for trash and refuse, and will promptly remove from the
demised premises all accumulations of trash and refuse. In the event
Tenant fails to perform any of said covenants contained in this
paragraph, then and in that event, Landlord, at its option, may cause
the work provided for herein to be performed at the cost and expense
of Tenant, who agrees to reimburse Landlord for the cost so incurred
as additional rent upon the next date rent is due and payable
hereunder.
14. This lease is subject and subordinate to all ground or underlying
leases and mortgages and/or deeds of trust which may now or hereafter
affect the real estate of which the demised premises form a part, and
to all renewals and extensions thereof. In confirmation of such
subordination, the Tenant shall execute promptly any certificate that
the Landlord may request. The Tenant hereby constitutes and appoints
the Landlord as tenant's attorney in fact to execute any such
certificate or certificates for or on behalf of the Tenant.
15. Tenant will not do or permit anything in said premises, or bring or
keep anything therein, that shall, in any way, increase the rate of
fire insurance on said building, or the property therein, or conflict
with the regulations of the Fire Department or the fire laws, or with
the terms of any insurance policy upon said building, or any part
thereof, or which make void or voidable any insurance on the said
premises or building against fire. It is further understood and agreed
that in the event that the rate of fire insurance on the premises (the
term "the rate" meaning the normal basic rate promulgated by the
Underwriters Association of the District of Columbia or the stock
company rating bureau having jurisdiction over the demised premises
for the kind of occupancy allowed by the lease) is increased due to
neglect of the Tenant, then any resulting increase in the cost of said
insurance for the building which is said premises or in which said
premises are located shall be paid by said Tenant as additional rental
hereunder, upon demand of the Landlord.
16. Landlord or his Agents shall have access to said demised premises at
any and all reasonable times for the purpose of protecting the said
leased premises against fire, for the prevention of damage and injury
to the said leased premises, or for the purpose of inspecting the
same, or exhibiting the same to prospective tenant during the last 60
days of the term of this lease.
17. If at any time during the term hereby demised, a petition shall be
filed, either by or against the Tenant, in any court of pursuant to
any statute either of the United States or of the State or District
where said premises are located, whether in
<PAGE>
bankruptcy, insolvency, for the appointment of a receiver of the
Tenant's property or because of any general assignment made by Tenant
of the Tenant's property for the benefit of the Tenant's creditors,
then immediately upon the happening of any such event, and without any
entry or other act by the Landlord, this lease shall expire ipso
facto, cease and come to an end with the same force and effect as if
the date of the happening of any such event were the date herein fixed
for the expiration of the term of this lease. It is further stipulated
and agreed that, in the event of the termination of the term of this
lease by the happening of any such event, the Landlord shall
forthwith, upon such termination, and any other provisions of this
lease to the contrary notwithstanding, become entitled to recover as
and for liquidated damages caused by such breach of the provisions of
this lease an amount equal to the difference between the then cash
value of the rent reserved hereunder for the unexpired portion of the
term hereby demised, unless the statute which governs or shall govern
the proceeding in which such damages are to be proved limits or shall
limit the amount of such claim capable of being so proved, in which
case the Landlord shall be entitled to prove as and for liquidated
damages an amount equal to that allowed by or under any such statute.
The provisions of this paragraph of this lease shall be without
prejudice to the Landlord's right to prove in full damages for rent
accrued prior to the termination of this lease, but not paid. This
provision of this lease shall be without prejudice to any rights given
to the Landlord by any pertinent statute to prove for any amounts
allowed thereby.
18. In making any such computation, the then cash rental value of the
demised premises, shall be deemed prima facie to be the rental
realized upon any reletting, if such reletting can be accomplished by
the Landlord within a reasonable time after such termination of this
lease, and the then present cash value of the future rents hereunder
reserved to the Landlord for the unexpired portion of the term hereby
demised shall be deemed to be such sum, if invested at four per centum
(4%) simple interest, as will produce the future rent over the period
of time in question.
19. PROVIDED, always that if the rent aforesaid, or any installment
thereof, shall not be paid within five (5) days after the same shall
become due and payable, as aforesaid, although no demand shall have
been made for the same; or if the Tenant shall fail or neglect to keep
and perform each and every of the covenants, conditions and agreements
herein contained, ...the part of said Tenant to be kept and performed,
or if the same or any part of them shall be broken then ...in each
...every case from thenceforth, and all times hereafter, at the option
of the Landlord, his successors or assigns, the Tenant's right of
possession shall thereupon cease and determine, and the Landlord, his
successors or assigns shall be entitled to the possession of said
leased premises and to re-enter the same without demand of rent or
demand of possession of said premises, and may forthwith proceed to
recover possession of the said leased premise by process of law, any
notice to quit, or of intention to re-enter the same being hereby
expressly waived by the Tenant.
20. If the demised premises shall be abandoned or become vacant during the
term of this lease without Tenant having paid in full the rent for the
entire term, or if
<PAGE>
Landlord shall recover possession subsequent or pursuant to landlord
and tent proceedings, then in the happening of either of said events,
Landlord shall have the right, at his option, to take possession of
the demised premises, to let the same as agent of Tenant and apply the
proceeds received from such letting toward the payment of the rent of
Tenant under this lease, and such re-entry and re-letting shall not
discharge Tenant from liability for rent to date of such retaking and
for any loss of rent sustained by Landlord in respect of the balance
of the term; any such loss of rent for the balance of the term shall
be payable monthly by Tenant in advance in the same manner that rent
hereunder is to be paid, and Landlord shall have the right to recover
any such loss of rent monthly whether or not said premises had been
relet.
21. And it is further provided that if, under the provision hereof, a
seven (7) days' summons or other applicable summary process shall be
served, and a compromise or settlement thereof shall be made, it shall
not be constituted as a waiver of any covenant herein contained; and
that no waiver of any breach of any covenant, condition or agreement
herein contained shall operate as a waiver of the covenant, condition
or agreement itself, or of any subsequent breach thereof.
22. In the event that the Tenant shall not immediately surrender said
premises on the day after the end of the term hereby created, then the
Tenant shall, by virtue of this agreement, become a tenant by the
month at the rental per month of the monthly installments of rent
agreed by the said Tenant to be paid as aforesaid, commencing said
monthly tenancy with the first day next after the end of the term
above demised; and the said Tenant, as a monthly tenant, shall be
subject to all of the conditions and covenants of this lease as though
the same had originally been a monthly tenancy; and said Tenant shall
give to the Landlord at least thirty (30) days' written notice of any
intention to quit said premises, and said Tenant shall be entitled to
thirty (30) days' written notice to quit said premises, except in the
event of nonpayment of rent in advance or of the breach of any other
covenant by the said Tenant, in which event the said Tenant shall not
be entitled to any notice to quit, the usual thirty (30) days' notice
to quit being hereby expressly waived; PROVIDED, however, that in the
event that the Tenant shall hold over after the expiration of the term
hereby created, and if the said Landlord shall desire to regain
possession of said premises promptly at the expiration of the term
aforesaid, then at any time prior to the payment of rent by the Tenant
as a monthly tenant hereunder, the said Landlord, at its election or
option, may re-enter and take possession of said premises, forthwith,
without process or by any legal process in force in the State or
District said premises are located.
23. If, for any reason whatsoever, the Landlord does not deliver
possession of the demised premises according to the terms of this
lease, the rent shall be abated until such date as possession of the
demised premises is tendered by the Landlord. In no event shall the
Landlord, its Agents or employees be liable in damages for failure to
deliver possession under the terms of this lease, except for willful
failure so to do.
24. The Landlord in appointing no rental agent herein, does so for and in
consideration of its services securing the Tenant hereunder and in
negotiation of this agreement, and agrees to pay said Agent a
commission of 6%
<PAGE>
of all rents paid during the full term of this agreement and any
renewal or extension hereof even though the premises hereby demised
shall be sold during the term of this lease or any extension or
renewal thereof. Cancellation of this lease or any portion of the
term, or any extended term hereof, by agreement of the landlord and
tenant without the consent of N/A , shall not relieve Landlord of the
obligation to pay N/A the full commission due hereunder for the full
term of this lease and any extension or renewal hereof if this lease
is extended or renewed.
25. It is further understood and agreed that all advertising and all
display on or about the within-mentioned premises is subject to the
approval of the Landlord and that no advertising on display on or
about the within-mentioned premises shall be made or exhibited by the
Tenant if the said landlord shall make reasonable objection thereto,
and that no signs are to be nailed or attached to the exterior of the
building and no exterior painting done without the written consent of
the Landlord first had and obtained.
26. In the event the Tenant does not renew this lease, he hereby gives
permission to the Landlord to show the premises to prospective new
tenants and to put up a "For Rent" sign advertising said space as
being available for rent. Tenant shall give the Landlord at least
sixty (60) days' notice in writing of his intention to remove, at the
expiration of this lease.
27. Tenant shall not make alterations, additions or improvements to the
demised premises without the written consent of the Landlord, and if
such consent is given and alterations, additions or improvements have
been made by the Tenant, at Tenant's expense, then at the option of the
Landlord such alterations, additions and improvements shall at the
option of the Landlord either remain upon the premises at the
expiration of the lease and become the property of the Landlord, or at
the option of the Landlord be removed by and at the expense of the
Tenant on or before the expiration of the term, and all damage caused
to said premises by such removal shall be repaired by the Tenant at
Tenant's expense on or before the expiration of said term.
28. Tenant will be responsible for all damage to and breakage of plate
glass in said premises and will carry during the term of this lease in
a standard insurance company satisfactory to Landlord, full coverage
insurance on all plate glass in aforementioned premises, and cause
same to be replaced if damaged or broken; said insurance to be carried
in the name of Landlord, the policy or policies for which are to be
deposited with Landlord or Landlord's agents.
29. Tenant agrees to protect, indemnify and save harmless Landlord, John
G. and Mary G. Immer when required, of and from any and all claims for
injury to personal property by reason of any accident, or happening
in, upon, or about the demised premises, and Tenant agrees to carry
public liability and property damage insurance with limits of at least
five hundred thousand and no/100 ($500,000.00) covering personal
injury and covering property damage in the name of Landlord, when
required and Tenant, and to furnish Landlord, with a certificate, or
copy of policy if required, showing such insurance to be in force.
30. If the Landlord shall incur any charge or expense on behalf of the
Tenant under
<PAGE>
the terms of this lease such charge or expense shall be considered
additional rent hereunder; in addition to and not in limitation of any
other rights and remedies which the Landlord may have in case of the
failure by the Tenant to pay such sums when due, such non-payment
shall entitle the Landlord to the remedies available to it hereunder
for non-payment of rent. All such charges or expenses shall be paid to
the Landlord at the office of or at such other place as the Landlord
may designate in writing.
31. Should Tenant, directly or indirectly, purchase the demised premises,
or the property of which the demised premises are a part, during the
terms of this lease, or any renewal or extension thereof or within one
year after the termination of his tenancy of the demised presmises
upon any terms, or should Tenant acquire the demised property, or the
property of which the demised premises are a part, during the term of
this lease, or any renewal or extention thereof or within one year
after the termination of his tenancy of the demised premises by trade
or exchange, its successor or assign shall be deemed the procuring
agent in the transaction and will be paid by the Landlord at
settlement from proceeds of sale or exchange, a commission of six per
cent (6%). Split 50/50 between Debbi Bankert/Remax and William
Myers/Weichert Realtor.
32. This agreement shall bind the administrators, executors, successors,
and assigns of the respective parties hereto.
33. Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular
number, in any place or places in which the context may require such
substitution or substitutions.
34. In the event of the employment of an attorney by the Landlord because
of the violation by the Tenant of any term of provision of this lease,
including non- payment of rent as due, the Tenant shall pay and hereby
agrees to pay reasonable attorney's fees and all other costs incurred
therein by the Landlord.
35. This lease contains the entire and final agreement of and between the
parties hereto, and they shall not be bound by any statements,
conditions, representations, inducements or warranties, oral or
written, not herein contained, unless there is written amendment
thereto signed by all the parties hereto.
36. In addition to the first month's rent, the Landlord herewith
acknowledges the receipt of four thousand four hundred and no/100
($4,400.00) Dollars, which he is to retain as security for faithful
performance of all of the covenants, conditions, and agreements of
this lease, but in no event shall the Landlord be obliged to apply the
same on rents or other charges in arrears or on damages for the
Tenant's failure to perform the said covenants, conditions, and
agreements; the Landlord may so apply the security at his option; and
the Landlord's right to the possession of the premises for nonpayment
of rent or for any other reason shall not in any event be affected by
reason of the fact that the Landlord holds this security. The said sum
if not applied toward the payment of rent in arrears or toward the
payment of damages suffered by the Landlord by reason of the
defendant's breach of the covenants, conditions, and agreements of
this lease is to be returned to the Tenant when this lease is
terminated, according to these terms, and in no event is the said
security to be returned until the Tenant has vacated the premises and
delivered possession to the Landlord. In the event that the Landlord
repossesses
<PAGE>
himself of the said premises because of the Tenant's default or
because of the Tenant's failure to carry out the covenants,
conditions, and agreements of this lease, the Landlord may apply the
said security on all damages suffered to the date of said repossession
and may retain the said security to apply on such damages as may be
suffered or shall accrue thereafter by reason of the Tenant's default
or breach. The Landlord shall not be obliged to keep the said security
as a separate fund, but may mix the said security with his own funds.
37. The basic monthly rental shall be adjusted for each lease year of the
term hereof by any change in the Index now known as "United States
Bureau of Labor Statistics, Consumer Price Index for Urban Wage
Earners and Clerical Workers, all items for Washington, D. C. SMSA
(BASE: 1967=100.0) (hereinafter referred to as the "Index") provided
however, that that the amount payable by the Tenant under this lease
as rental shall not be less than the rental payment schedule as
outlined in this lease, nor shall the rental payment be less than any
rental previously established pursuant to a Consumer Price Index
increase. Such adjustment shall be accomplished by multiplying the
aforementioned basic monthly rental by a fraction, the numerator of
which shall be the most recently published monthly Index preceding the
first day of the lease year for which such annual adjustment is to be
made, and the denominator of which fraction shall be the corresponding
monthly Index immediately preceding the commencement date of the term
of this lease. If such Index shall be discontinued with no successor
or comparable successor Index, the parties shall attempt to agree upon
a substitute formula, but if the parties are unable to agree upon a
substitute formula, then the matter shall be determined by arbitration
in accordance with the rules of the American Arbitration Association
then prevailing.
38. Paragraph headings in margins are for purpose of convenience only and
not to be considered a part of this lease.
39. Landlord agrees to provide a personal door at top of stair connecting
both units. Also to install personal door between two drive in bays on
lower level. Also to clean carpets and walls (or paint walls if
cleaning is insufficient) at no cost to Tenant.
40. Tenant to have power and all utilities placed in his name prior to
January 1st, 1998 and to have right of pre-occupancy December 5, 1997
for fit out and setup.
41. Prior to January 1, 1998, Tenant to have air conditioning and HVAC
inspected and Landlord to make any repairs and have systems serviced
if necessary, prior to Tenant taking occupancy.
42. Tenant to have first right to purchase the above described property.
43. Tenant to have until November 21, 1997 to withdraw this offer and
receive prompt return of his deposit.
<PAGE>
IN WITNESS WHEREOF the said parties have hereunto signed their names and
affixed their seals, on the day and year first hereinbefore written.
WITNESS/ATTEST LANDLORD:
____________________________________ ___________________________(SEAL)
____________________________________ ___________________________(SEAL)
____________________________________ ___________________________(SEAL)
____________________________________ ___________________________(SEAL)
WITNESS/ATTEST TENANT:
____________________________________ ___________________________(SEAL)
____________________________________ ___________________________(SEAL)
____________________________________ ___________________________(SEAL)
____________________________________ ___________________________(SEAL)
Flaherty Immer, agent
Immer Condo Account PH 301-791-6871
1020 Oak Hill Avenue FAX 301-791-7947
Hagerstown, Maryland 21742
Tuesday, January 04, 2000
Sy Picon
Syco Distribution
P.O. Box 676
Manassas, Virginia 20113-0676
Dear Sy,
The Immers propose to extend your present lease for their property at 9208-A
Venture Court, Manassas Park, Virginia at the reduced rent of $2325.00 per month
for a period of 8-months. We require certain conditions for that extension and
rent reduction. They are: That we be allowed to actively market and show the
property during the entire lease extension period. That we may cancel the lease
upon sale of the property and after 60 days notice to Syco. That if Syco wishes
to cancel the lease they may do so before the 8-month extension period upon the
same 60-day notice to the Immers provided that the reduced rent revert to
$2600.00 per month for the entire period of your tenancy if less than 8-months
occupancy. Your immediate attention and response is required.
THANK YOU,
FLAHERTY IMMER, AGENT
Concur:
Sy Picon, CEO
EXHIBIT 21
SUBSIDIARIES
1. Animedepot.com, Inc., a Delaware corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SyCoNet.Com,
Inc. financial statements for the nine months ended September 30, 1999
(unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-21-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 99,969
<SECURITIES> 0
<RECEIVABLES> 57,757
<ALLOWANCES> 8,202
<INVENTORY> 366,869
<CURRENT-ASSETS> 516,393
<PP&E> 25,703
<DEPRECIATION> 9,330
<TOTAL-ASSETS> 537,766
<CURRENT-LIABILITIES> 293,242
<BONDS> 0
0
0
<COMMON> 1,078
<OTHER-SE> 243,446
<TOTAL-LIABILITY-AND-EQUITY> 537,766
<SALES> 773,134
<TOTAL-REVENUES> 773,134
<CGS> 598,527
<TOTAL-COSTS> 1,185,048
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,316
<INCOME-PRETAX> (414,230)
<INCOME-TAX> 0
<INCOME-CONTINUING> (414,230)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (414,230)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
